UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549  FORM N-CSR  Investment Company Act file number
        811-2743
  DWS Strategic Income Fund (Exact Name of Registrant as Specified in Charter)  222 South Riverside Plaza Chicago, IL  60606 (Address of principal executive offices)             (Zip code)  Registrants Telephone Number, including Area Code:(212) 454-7190  Paul Schubert 345 Park Avenue New York, NY 10154 (Name and Address of Agent for Service)  Date of fiscal year end:
        10/31
  Date of reporting period:
        10/31/07
   ITEM 1.REPORT TO STOCKHOLDERS


OCTOBER 31, 2007

# Annual Report
to Shareholders

DWS Strategic Income Fund

|sif_cover330
|------------

Contents

click herePerformance Summary

click hereInformation About Your Fund's Expenses

click herePortfolio Management Review

click herePortfolio Summary

click hereInvestment Portfolio

click hereFinancial Statements

click hereFinancial Highlights

click hereNotes to Financial Statements

click hereReport of Independent Registered Public Accounting Firm

click hereTax Information

click hereInvestment Management Agreement Approval

click hereSummary of Management Fee Evaluation by Independent
Fee Consultant

click hereTrustees and Officers

click hereAccount Management Resources

This report must be preceded or accompanied by a prospectus. To obtain a
prospectus for any of our funds, refer to the Account Management Resources
information provided in the back of this booklet. We advise you to consider the
fund's objectives, risks, charges and expenses carefully before investing. The
prospectus contains this and other important information about the fund. Please
read the prospectus carefully before you invest.

Investments in mutual funds involve risk. Some funds have more risk than others. The
fund invests in individual bonds whose yields and market values fluctuate so that your
investment may be worth more or less than its original cost. Bond investments are
subject to interest-rate risk such that when interest rates rise, the prices of the bonds,
and thus the value of the bond fund, may decline and the investor may lose principal
value. Additionally, investments by the portfolio in lower-rated bonds present greater
risk to principal and income than investments in higher-quality securities. Finally,
investing in foreign securities and emerging markets presents certain unique risks not
associated with domestic investments, such as currency fluctuation, political and
economic changes and market risks. All of these factors may result in greater share
price volatility. Please read this fund's prospectus for specific details regarding its
investments and risk profile.

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, Deutsche Bank Trust
Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust
Company.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Performance SummaryOctober 31, 2007

Classes A, B and C

All performance shown is historical, assumes reinvestment of all dividend and
capital gain distributions, and does not guarantee future results. Investment
return and principal value fluctuate with changing market conditions so that,
when redeemed, shares may be worth more or less than their original cost.
Current performance may be lower or higher than the performance quoted.
Please visit www.dws-scudder.com for the Fund's most recent month-end
performance.

The maximum sales charge for Class A shares is 4.5%. For Class B shares, the
maximum contingent deferred sales charge (CDSC) is 4% within the first year
after purchase, declining to 0% after six years. Class C shares have no adjustment
for front-end sales charges but redemptions within one year of purchase may be
subject to a CDSC of 1%. Unadjusted returns do not reflect sales charges and
would have been lower if they had.

The total annual fund operating expense ratios, gross of any fee waivers or
expense reimbursements, as stated in the fee table of the prospectus dated
February 1, 2007 are 1.11%, 1.92% and 1.83% for Class A, Class B and Class C
shares, respectively. Please see the Information About Your Fund's Expenses, the
Financial Highlights and Notes to the Financial Statements (Note C, Related
Parties) sections of this report for gross and net expense related disclosure for
the period ended October 31, 2007.

To discourage short-term trading, the Fund imposes a 2% redemption fee on
shareholders redeeming shares held less than 15 days, which has the effect of
lowering total return.

Returns and rankings during all periods shown reflect a fee waiver and/or expense
reimbursement. Without this waiver/reimbursement, returns and rankings would have
been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares. Returns and rankings may differ
by share class.

|Average Annual Total Returns(Unadjusted for Sales Charge) as of 10/31/07
|------------------------------------------------------------------------
|DWS Strategic Income Fund                                               
|Class A                                                                 
|Class B                                                                 
|Class C                                                                 
|Lehman Brothers US Government/Credit Index+                             

Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.

|Net Asset Value and Distribution Information                           
|-----------------------------------------------------------------------
|                                                                       
|Net Asset Value:
10/31/07                                              
|10/31/06                                                               
|Distribution Information:
Twelve Months as of 10/31/07:Income Dividends
|Capital Gain Distributions                                             
|October Income Dividend                                                
|SEC 30-day Yield as of 10/31/07++                                      
|Current Annualized Distribution Rate as of
10/31/07++                  

|Class A Lipper Rankings  Multi-Sector Income Fundsas of 10/31/07
|-----------------------------------------------------------------
|Period                                                           
|1-Year                                                           
|3-Year                                                           
|5-Year                                                           
|10-Year                                                          

Source: Lipper Inc. Rankings are historical and do not guarantee future results.
Rankings are based on total return unadjusted for sales charges with distributions
reinvested. If sales charges had been included, results might have been less favorable.
Rankings are for Class A shares; other share classes may vary.

|Growth of an Assumed $10,000 Investment(Adjusted for Maximum Sales Charge)         
|-----------------------------------------------------------------------------------
|[]DWS Strategic Income Fund  Class A
[]Lehman Brothers US Government/Credit Index+
|sif_g10k2e0                                                                        
|Yearly periods ended October 31                                                    

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum
sales charge of 4.50%. This results in a net initial investment of $9,550.

|Comparative Results(Adjusted for Maximum Sales Charge) as of 10/31/07
|---------------------------------------------------------------------
|DWS Strategic Income Fund                                            
|Class A                                                              
|Average annual total return                                          
|Class B                                                              
|Average annual total return                                          
|Class C                                                              
|Average annual total return                                          
|Lehman Brothers US
Government/Credit
Index+                          
|Average annual total return                                          

The growth of $10,000 is cumulative.

Class S

Class S shares are generally not available to new investors except under certain
circumstances. (Please refer to the Fund's Statement of Additional Information.)

All performance shown is historical, assumes reinvestment of all dividend and
capital gain distributions, and does not guarantee future results. Investment
return and principal value fluctuate with changing market conditions so that,
when redeemed, shares may be worth more or less than their original cost.
Current performance may be lower or higher than the performance quoted.
Please visit www.dws-scudder.com for the Fund's most recent month-end
performance.

The total annual fund operating expense ratio, gross of any fee waivers or
expense reimbursements, as stated in the fee table of the prospectus dated
February 1, 2007 is 0.95% for Class S shares. Please see the Information About
Your Fund's Expenses, the Financial Highlights and Notes to the Financial
Statements (Note C, Related Parties) sections of this report for gross and net
expense related disclosure for the period ended October 31, 2007.

To discourage short-term trading, the Fund imposes a 2% redemption fee on
shareholders redeeming shares held less than 15 days, which has the effect of
lowering total return.

Returns and rankings during all periods shown reflect a fee waiver and/or expense
reimbursement. Without this waiver/reimbursement, returns and rankings would have
been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemptions of fund shares. Returns may differ by share
class.

|Average Annual Total Returnsas of 10/31/07 
|-------------------------------------------
|DWS Strategic Income Fund                  
|Class S                                    
|Lehman Brothers US Government/Credit Index+

Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.

|Net Asset Value and Distribution Information                           
|-----------------------------------------------------------------------
|                                                                       
|Net Asset Value:
10/31/07                                              
|10/31/06                                                               
|Distribution Information:
Twelve Months as of 10/31/07:Income Dividends
|Capital Gain Distributions                                             
|October Income Dividend                                                
|SEC 30-day Yield as of 10/31/07++                                      
|Current Annualized Distribution Rate as of 10/31/07++                  

|Class S Lipper Rankings  Multi-Sector Income Fundsas of 10/31/07
|-----------------------------------------------------------------
|Period                                                           
|1-Year                                                           

Source: Lipper Inc. Rankings are historical and do not guarantee future results.
Rankings are based on total return with distributions reinvested. Rankings are for
Class S shares; other share classes may vary.

|Growth of an Assumed $10,000 Investment                                            
|-----------------------------------------------------------------------------------
|[]DWS Strategic Income Fund  Class S
[]Lehman Brothers US Government/Credit Index+
|sif_g10k2d0                                                                        
|                                                                                   

|Comparative Resultsas of 10/31/07          
|-------------------------------------------
|DWS Strategic Income Fund                  
|Class S                                    
|Average annual total return                
|Lehman Brothers US
Government/Credit Index+
|Average annual total return                

The growth of $10,000 is cumulative.

Information About Your Fund's Expenses

As an investor of the Fund, you incur two types of costs: ongoing
expenses and transaction costs. Ongoing expenses include management
fees, distribution and service (12b-1) fees and other Fund expenses.
Examples of transaction costs include sales charges (loads), redemption
fees and account maintenance fees, which are not shown in this section.
The following tables are intended to help you understand your ongoing
expenses (in dollars) of investing in the Fund and to help you compare
these expenses with the ongoing expenses of investing in other mutual
funds. In the most recent six-month period, the Fund limited these
expenses; had it not done so, expenses would have been higher. The
example in the table is based on an investment of $1,000 invested at the
beginning of the six-month period and held for the entire period(May 1, 2007 to October 31, 2007).

The tables illustrate your Fund's expenses in two ways:

Actual Fund Return. This helps you estimate the actual dollar amount
of ongoing expenses (but not transaction costs) paid on a $1,000
investment in the Fund using the Fund's actual return during the
period. To estimate the expenses you paid over the period, simply
divide your account value by $1,000 (for example, an $8,600 account
value divided by $1,000 = 8.6), then multiply the result by the number
in the "Expenses Paid per $1,000" line under the share class you hold.

Hypothetical 5% Fund Return. This helps you to compare your Fund's
ongoing expenses (but not transaction costs) with those of other
mutual funds using the Fund's actual expense ratio and a hypothetical
rate of return of 5% per year before expenses. Examples using a 5%
hypothetical fund return may be found in the shareholder reports of
other mutual funds. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or
expenses you paid for the period.

Please note that the expenses shown in these tables are meant to
highlight your ongoing expenses only and do not reflect any transaction
costs. The "Expenses Paid per $1,000" line of the tables is useful in
comparing ongoing expenses only and will not help you determine the
relative total expense of owning different funds. An account maintenance
fee of $6.25 per quarter for Class S shares may apply for certain accounts
whose balances do not meet the applicable minimum initial investment.
This fee is not included in these tables. If it was, the estimate of
expenses paid for Class S shares during the period would be higher, and
account value during the period would be lower, by this amount.

|Expenses and Value of a $1,000 Investmentfor the six months ended October 31, 2007
|----------------------------------------------------------------------------------
|Actual Fund Return                                                                
|Beginning Account Value 5/1/07                                                    
|Ending Account Value 10/31/07                                                     
|Expenses Paid per $1,000*                                                         
|Hypothetical 5% Fund Return                                                       
|Beginning Account Value 5/1/07                                                    
|Ending Account Value 10/31/07                                                     
|Expenses Paid per $1,000*                                                         

|Annualized Expense Ratios | Class A | Class B | Class C | Class S
|------------------------- | ------- | ------- | ------- | -------
|DWS Strategic Income Fund | 1.04%   | 1.75%   | 1.81%   | .91%   

For more information, please refer to the Fund's prospectus.

Portfolio Management Review

DWS Strategic Income Fund: A Team Approach to Investing

Deutsche Investment Management Americas Inc. ("DIMA" or the
"Advisor"), which is part of Deutsche Asset Management, is the
investment advisor for DWS Strategic Income Fund. DIMA and its
predecessors have more than 80 years of experience managing mutual
funds and DIMA provides a full range of investment advisory services to
institutional and retail clients.

Deutsche Asset Management is a global asset management organization
that offers a wide range of investing expertise and resources. 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 funds, retail, private and commercial banking, investment banking
and insurance.

Portfolio Management Team

Gary Sullivan, CFA

Managing Director of Deutsche Asset Management and Lead Portfolio Manager of the fund

Joined Deutsche Asset Management in 1996 and the fund in 2006. Served as the head
of the High Yield group in Europe and as an Emerging Markets portfolio manager.

Prior to that, four years at Citicorp as a research analyst and structurer of collateralized
mortgage obligations. Prior to Citicorp, served as an officer in the US Army from 1988 to
1991.

BS, United States Military Academy (West Point); MBA, New York University, Stern
School of Business

William Chepolis, CFA

Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.

Joined Deutsche Asset Management in 1998 after 13 years of experience as vice
president and portfolio manager for Norwest Bank where he managed the bank's fixed
income and foreign exchange portfolios.

Portfolio Manager for Retail Mortgage Backed Securities: New York.

Joined the fund in 2005.

BIS, University of Minnesota.

Matthew F. MacDonald

Director of Deutsche Asset Management and Portfolio Manager of the fund.

Joined Deutsche Asset Management and the fund in 2006 after 14 years of fixed
income experience at Bank of America Global Structured Products and PPM America,
Inc., where he was portfolio manager for public fixed income, including MBS, ABS,
CDOs and corporate bonds; earlier, as an analyst for MBS, ABS and money markets;
and originally, at Duff & Phelps Credit Rating Company.

Portfolio Manager for Retail Mortgage Backed Securities: New York.

BA, Harvard University; MBA, University of Chicago Graduate School of Business.

Thomas Picciochi

Director of Deutsche Asset Management and Portfolio Manager of the fund.

Senior portfolio manager for Quantitative Strategies: New York.

Joined Deutsche Asset Management in1999, formerly serving as portfolio manager for
Absolute Return Strategies, after 13 years of experience in various research and analysis
positions at State Street Global Advisors, FPL Energy, Barnett Bank, Trade Finance
Corporation and Reserve Financial Management.

Joined the fund in 2007.

BA and MBA, University of Miami.

Robert Wang

Managing Director of Deutsche Asset Management and Portfolio manager of the fund.

Joined Deutsche Asset Management in1995 as portfolio manager for asset allocation
after 13 years of experience of trading fixed income, foreign exchange and derivative
products at J.P. Morgan.

Global Head of Quantitative Strategies Portfolio Management: New York.

Joined the fund in 2007.

BS, The Wharton School, University of Pennsylvania.

In the following interview, Portfolio Managers Bill Chepolis and
Gary Sullivan discuss market conditions and DWS Strategic Income
Fund's investment strategy during the annual period ended
October 31, 2007.

The views expressed in the following discussion reflect those of the portfolio managers only
through the end of the period of the report as stated on the cover. The management team's
views are subject to change at any time based on market and other conditions and should
not be construed as a recommendation. Past performance is no guarantee of future results.

Q: How did the bond market perform during the 12-month
reporting period?

A:The past year can be divided into two distinct periods  the
first covering the interval from the beginning of November
through the end of June; the second consisting of July through
October. The first phase was characterized by continued strength
in the global economy, rate increases from central banks
worldwide, and a strong appetite for risk among investors. This
backdrop resulted in underperformance for the sovereign bonds
of the developed nations and substantial outperformance for
high-yield bonds and emerging-markets debt.

This environment changed rapidly during the summer, setting the
stage for an entirely different set of results within the bond
market. The catalyst for this shift was US housing market
weakness and the rapid rise in defaults in the subprime segment
of the US mortgage market. Investors rapidly re-priced the risk in
securities tied to subprime mortgages, causing the value of these
investments to collapse. This development, in turn, caused risk
aversion to soar and prompted investors to hoard cash. The
resulting credit crunch sparked a "flight to quality" in which
investors sold higher-risk securities  such as high-yield and
emerging-markets debt  and moved their money into
government bonds, reversing the performance trends that
characterized the first eight months of the reporting period.

These events prompted aggressive action from global central
banks, which stepped in to inject additional liquidity into the
financial system in order to restore confidence. Most prominent
among the central bank moves was the US Federal Reserve
Board's (the Fed's) decision to cut its discount rate  or the rate
at which banks lend to one another  by a full percentage point,
along with its reduction of the benchmark federal funds rate by a
half-point. Investors quickly regained confidence as a result,
leading to a rally in high-yield and emerging debt and reversing the
flight to quality that occurred in the summer. While the higher-risk
segments of the bond market recovered a great deal of lost
ground in this rebound, the market environment remained
characterized by a higher level of uncertainty and a heightened
focus on risk among investors.

Q: How did the fund perform over the annual period?

A:The total return of the fund's Class A shares for the twelve
months ended October 31, 2007 was 7.01%. (Returns are
unadjusted for sales charges. If sales charges had been included,
returns would have been lower. Past performance is no guarantee
of future results. Please see pages 4 through 9 for the
performance of other share classes and more complete
performance information.)

The fund outperformed both the 5.37% return of its benchmark,
the Lehman Brothers US Government/Credit Index and the 6.49%
average return of the 123 funds in its Lipper peer group,
Multi-Sector Income Funds.1,2 The fund has also outpaced both
its benchmark and peer group over the three- and five-year
periods.

Q: Please discuss the fund's performance and positioning in
high-yield.

A:The fund was overweight in high-yield bonds through the first
half of the period. This was a positive for returns given the
outperformance of the asset class.3 During the spring, we opted
to reduce the fund's weighting in high-yield bonds to neutral given
that yield spreads had moved to historically low levels.4 Given the
subsequent downturn in the sector, this move proved well timed.
As of the close of the reporting period, 33.8% of the portfolio was
invested in high-yield bonds.

Individual security selection was the primary driver of returns in
this portion of the fund. A notable contribution to performance
came from an underweight in housing/real estate development
issues, an area of the market that underperformed. Specific
contributors in this sector included our decisions to underweight
Realogy Corp. and hold no exposure in Technical Olympic USA.
Also aiding performance was the fund's position in Doral Financial
Corp.*, a mortgage banker based in Puerto Rico, as well as our
lack of exposure to Delphi Corp., which lagged the benchmark.
Telenet, a cable operator based in the Netherlands, added to
returns due to the company's decision to make a tender offer 
at a premium  for its outstanding debt. Other top contributors
include Resorts International Ltd., whose bonds were called at a
premium; the cable company IESY;* the aluminum rolled products
producer Novelis, Inc., whose bonds we elected to sell at a gain
after the company was purchased by the Indian metals company
Hindalco; and XM Satellite Radio, Inc.

Key detractors included a position in Alliance Mortgage, a
mortgage originator that filed for Chapter 11 bankruptcy due to a
lack of bank funding, as well as an overweight in the home builder
K. Hovanian Enterprises, Inc.*, whose bonds lost ground amid
concerns about the US housing market. In addition, the fund was
hurt by holding no positions in bonds issued by Adelphia, Calpine
and Federal Mogul Corp., all of which outperformed. An
underweight in Freeport-McMoRan Copper & Gold, Inc., whose
finances gained a boost from the rising price of copper, was also a
notable detractor.

Q: How is the fund positioned in the emerging markets?

A:The fund remains overweight in emerging-markets bonds,
where we believe fundamentals remain strong. This overweight
added value over the majority of the period, but it detracted from
returns during the July-August downturn. While further bouts of
volatility related to credit concerns in developed markets cannot
be ruled out, we continue to believe that a moderate slowdown in
the US economy should have a limited impact on the emerging
markets. The reason for this is that the global economy continues
to decouple from the United States due largely to the continued
vibrant growth in China. As of the end of the annual period, the
fund held no position in some of the more volatile countries in the
asset class  such as Lebanon, Iraq and Pakistan  in favor of
more stable credits. We continue to have a positive outlook on
Brazil and have a large overweight position in that country.
Overall, 18.3% of the portfolio was invested in emerging-markets
bonds as of October 31, 2007.

Q: How has the fund been positioned in the developed markets?

A:In the United States, our primary emphasis has been on
Treasuries. This reflects our decision to give up yield in favor of
enhanced portfolio diversification. This was also a reflection of
historically tight yield compensation for purchasing investments
which were not US government guaranteed. With the recent
widening in spreads we have sought to add yield in the form of
CMBS (commercial mortgage backed securities) and some
corporate bonds. We have added to the fund's position in the
United States in recent months, redeploying a portion of the
assets that had previously been invested in the developed
international markets. At the close of the period, 28% of the
portfolio was allocated to the "domestic" sleeve (US Treasury,
agencies, CMBS and corporate bonds) compared with 23% six
months ago. At the same time, the fund's developed international
weighting has fallen from 15% to 10%. This shift reflects our view
that the US economy is slowing more quickly than its developed
market peers, which will typically precede lower interest rates and
higher bond prices. Another notable change in the composition of
our US-based portfolio was the addition of AAA-rated commercial
mortgage-backed securities during the third quarter.5 The yield
spread on these assets had widened signficantly in relation to
Treasuries, creating what we believed was a value opportunity.

Outside of the United States, we have looked for investments in
higher-yielding countries given the generally low level of rates
worldwide. For example, we held a large position in Canada and,
within Europe, bonds issued by Greece and Spain versus slightly
lower yields available in Germany. In the United Kingdom, we
have overweighted the short end of the yield curve to take
advantage of the high yields in shorter-maturity bonds relative to
their longer-term counterparts.6 More recently, we have added to
Japan in anticipation of further slowing in that economy. In
currencies, we added value by underweighting the dollar  which
performed poorly  for most of this year in favor of the euro,
Japanese yen and Canadian dollar.

Q: How did the DWS asset allocation strategy affect
performance?

A:In addition to the fund's fixed-income investments, we also
use Deutsche Asset Management's global asset allocation
strategy in an effort to enhance the fund's return. This strategy,
which involves a highly structured and disciplined approach to
identify short- and medium-term disparities in the global bond and
currency markets, is intended to generate returns for the fund
that exceed those that could be achieved without its use. This
strategy's return is far above our annual target for this portion of
the fund, indicating that the strategy was very successful during
the annual period.

Q: Do you have any closing thoughts for investors?

A:We are pleased that the fund outperformed its benchmark
during a year that featured periods of both high investor optimism
and, during the summer months, the sudden re-emergence of
extreme volatility. In our view, a key reason for the fund's strong
showing in this shifting environment was the fact that the Fund
seeks to maintain a diversified portfolio (of course, diversification
does not eliminate risk). While some funds in our peer group are
focused on single asset classes, we seek to deliver returns by
investing across the entire range of opportunities in the bond
market.

We will continue to monitor the global economy as well as the
relative value provided by sovereign, emerging markets and
high-yield issuers.

Portfolio Summary

|Asset Allocation(As a % of Investment Portfolio
excluding Securities Lending Collateral) | 10/31/07 | 10/31/06
|---------------------------------------------------------------------------------------- | -------- | --------
|                                                                                         |          |         
|Government & Agency Obligations                                                          | 47%      | 48%     
|Corporate Bonds                                                                          | 37%      | 38%     
|Cash Equivalents                                                                         | 8%       | 14%     
|Commerical and Non-Agency Mortgage-Backed Securities                                     | 4%       |        
|Senior Bank Notes                                                                        | 2%       |        
|Open End Investment Companies                                                            | 1%       |        
|Asset Backed                                                                             | 1%       |        
|                                                                                         | 100%     | 100%    

|Quality(Excludes Securities Lending Collateral) | 10/31/07 | 10/31/06
|----------------------------------------------- | -------- | --------
|                                                |          |         
|AAA*                                            | 30%      | 27%     
|AA                                              | 1%       | 1%      
|A                                               | 3%       | 5%      
|BBB                                             | 5%       | 5%      
|BB                                              | 18%      | 16%     
|B                                               | 22%      | 25%     
|CCC and CC                                      | 9%       | 8%      
|Not Rated                                       | 12%      | 13%     
|                                                | 100%     | 100%    

|Interest Rate Sensitivity | 10/31/07  | 10/31/06 
|------------------------- | --------- | ---------
|                          |           |          
|Effective maturity        | 6.5 years | 7.1 years
|Average duration          | 5.4 years | 5.1 years

Asset allocation, quality and interest rate sensitivity are subject to change.

The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P
represent their opinions as to the quality of the securities they rate. Ratings are relative and
subjective and are not absolute standards of quality. The Fund's credit quality does not
remove market risk.

For more complete details about the Fund's investment portfolio, see page 21. A quarterly
Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund
as of month end will be posted to www.dws-scudder.com on or after the last day of the
following month. Please see the Account Management Resources section for contact
information.

Following the Fund's fiscal first and third quarter-end, a complete portfolio
holdings listing is filed with the SEC on Form N-Q. The form will be
available on the SEC's Web site at www.sec.gov, and it also may be
reviewed and copied 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.

Investment Portfolioas of October 31, 2007

|                                                                                                       | Principal
Amount ($)(a) | Value ($) 
|------------------------------------------------------------------------------------------------------ | ----------------------- | ----------
|                                                                                                       |                        
|Corporate Bonds 35.9%                                                                                 
|Consumer Discretionary 8.2%                                                                           
|AAC Group Holding Corp., 14.75%, 10/1/2012 (PIK)                                                       | 172,344                 | 166,312   
|Affinia Group, Inc., 9.0%, 11/30/2014                                                                  | 335,000                 | 313,225   
|AMC Entertainment, Inc., 8.0%, 3/1/2014                                                                | 500,000                 | 488,750   
|American Achievement Corp., 8.25%, 4/1/2012                                                            | 115,000                 | 115,000   
|American Media Operations, Inc., Series B,
10.25%, 5/1/2009 (b)                                        | 165,000                 | 157,988   
|Asbury Automotive Group, Inc.:                                                                         |                         |           
|7.625%, 3/15/2017                                                                                      | 270,000                 | 252,450   
|8.0%, 3/15/2014 (b)                                                                                    | 115,000                 | 112,125   
|Ashtead Holdings PLC, 144A, 8.625%, 8/1/2015                                                           | 185,000                 | 176,675   
|Buffets, Inc., 12.5%, 11/1/2014                                                                        | 280,000                 | 181,300   
|Burlington Coat Factory Warehouse Corp., 11.125%,
4/15/2014                                            | 230,000                 | 209,300   
|Cablevision Systems Corp., Series B, 
9.644%**, 4/1/2009                                               | 90,000                  | 92,475    
|Caesars Entertainment, Inc., 8.875%, 9/15/2008                                                         | 245,000                 | 248,369   
|CanWest MediaWorks LP, 144A, 9.25%, 8/1/2015 (b)                                                       | 190,000                 | 192,850   
|Carrols Corp., 9.0%, 1/15/2013                                                                         | 120,000                 | 114,600   
|Charter Communications Holdings LLC:                                                                   |                         |           
|10.25%, 9/15/2010                                                                                      | 1,080,000               | 1,101,600 
|Series B, 10.25%, 9/15/2010                                                                            | 275,000                 | 279,812   
|11.0%, 10/1/2015 (b)                                                                                   | 1,002,000               | 971,940   
|Cirsa Capital Luxembourg, 144A, 7.875%, 7/15/2012      EUR                                             | 165,000                 | 228,255   
|Claire's Stores, Inc., 144A, 9.25%, 6/1/2015                                                           | 120,000                 | 102,300   
|Cooper-Standard Automotive, Inc., 
8.375%, 12/15/2014 (b)                                              | 165,000                 | 146,850   
|CSC Holdings, Inc.:                                                                                    |                         |           
|7.25%, 7/15/2008                                                                                       | 170,000                 | 170,425   
|7.875%, 12/15/2007                                                                                     | 590,000                 | 590,737   
|Series B, 8.125%, 7/15/2009                                                                            | 220,000                 | 224,400   
|Series B, 8.125%, 8/15/2009                                                                            | 435,000                 | 443,700   
|Denny's Corp. Holdings, Inc., 10.0%, 10/1/2012                                                         | 80,000                  | 82,200    
|Dex Media East LLC/Financial, 12.125%, 11/15/2012                                                      | 1,625,000               | 1,728,594 
|Dollar General Corp., 144A, 10.625%, 7/15/2015 (b)                                                     | 230,000                 | 220,800   
|Dollarama Group LP, 144A, 11.16%**, 8/15/2012                                                          | 176,000                 | 176,000   
|EchoStar DBS Corp.:                                                                                    |                         |           
|6.625%, 10/1/2014                                                                                      | 335,000                 | 341,700   
|7.125%, 2/1/2016                                                                                       | 260,000                 | 271,700   
|Fontainebleau Las Vegas Holdings LLC, 144A,
10.25%, 6/15/2015                                          | 315,000                 | 294,525   
|Foot Locker, Inc., 8.5%, 1/15/2022                                                                     | 80,000                  | 76,000    
|French Lick Resorts & Casinos LLC, 144A,
10.75%, 4/15/2014                                             | 790,000                 | 628,050   
|General Motors Corp.:                                                                                  |                         |           
|7.2%, 1/15/2011                                                                                        | 785,000                 | 751,637   
|7.4%, 9/1/2025                                                                                         | 195,000                 | 161,850   
|8.375%, 7/15/2033                                                                                      | 545,000                 | 495,950   
|Goodyear Tire & Rubber Co., 11.25%, 3/1/2011                                                           | 1,255,000               | 1,342,850 
|Great Canadian Gaming Corp., 144A, 7.25%, 2/15/2015                                                    | 235,000                 | 233,825   
|Group 1 Automotive, Inc., 8.25%, 8/15/2013 (b)                                                         | 115,000                 | 115,000   
|Hanesbrands, Inc., Series B, 8.784%**, 12/15/2014                                                      | 350,000                 | 351,750   
|Hertz Corp.:                                                                                           |                         |           
|8.875%, 1/1/2014                                                                                       | 480,000                 | 494,400   
|10.5%, 1/1/2016 (b)                                                                                    | 115,000                 | 123,625   
|Idearc, Inc., 8.0%, 11/15/2016                                                                         | 1,145,000               | 1,147,862 
|Indianapolis Capital LLC, 144A, 11.0%, 11/1/2012                                                       | 155,000                 | 155,775   
|ION Media Networks, Inc., 144A, 11.493%**, 1/15/2013                                                   | 195,000                 | 198,413   
|Isle of Capri Casinos, Inc., 7.0%, 3/1/2014                                                            | 370,000                 | 328,375   
|Jacobs Entertainment, Inc., 9.75%, 6/15/2014                                                           | 385,000                 | 388,850   
|Jarden Corp., 7.5%, 5/1/2017                                                                           | 190,000                 | 180,500   
|Kabel Deutschland GmbH, 10.625%, 7/1/2014                                                              | 185,000                 | 200,725   
|Lamar Media Corp., 144A, 6.625%, 8/15/2015                                                             | 155,000                 | 148,413   
|Liberty Media LLC:                                                                                     |                         |           
|5.7%, 5/15/2013                                                                                        | 30,000                  | 28,122    
|8.25%, 2/1/2030                                                                                        | 190,000                 | 186,774   
|8.5%, 7/15/2029 (b)                                                                                    | 310,000                 | 309,083   
|Majestic Star Casino LLC, 9.5%, 10/15/2010                                                             | 40,000                  | 39,400    
|McDonald's Corp., Series I, 6.3%, 10/15/2037                                                           | 490,000                 | 499,987   
|Mediacom Broadband LLC, 8.5%, 10/15/2015                                                               | 10,000                  | 9,850     
|MediMedia USA, Inc., 144A, 11.375%, 11/15/2014                                                         | 120,000                 | 125,400   
|Metaldyne Corp.:                                                                                       |                         |           
|10.0%, 11/1/2013                                                                                       | 155,000                 | 144,150   
|11.0%, 6/15/2012 (b)                                                                                   | 75,000                  | 64,125    
|MGM MIRAGE:                                                                                            |                         |           
|6.75%, 9/1/2012                                                                                        | 95,000                  | 93,575    
|8.375%, 2/1/2011 (b)                                                                                   | 200,000                 | 209,000   
|Michaels Stores, Inc., 10.0%, 11/1/2014                                                                | 335,000                 | 337,512   
|MTR Gaming Group, Inc., Series B, 9.75%, 4/1/2010                                                      | 335,000                 | 343,375   
|Norcraft Holdings LP, Step-up Coupon, 0% to 9/1/2008,
9.75% to 9/1/2012                                | 565,000                 | 502,850   
|OSI Restaurant Partners, Inc., 144A, 10.0%, 6/15/2015                                                  | 260,000                 | 223,600   
|Penske Automotive Group, Inc., 7.75%, 12/15/2016                                                       | 575,000                 | 559,187   
|Pinnacle Entertainment, Inc., 8.75%, 10/1/2013                                                         | 240,000                 | 249,600   
|Quebecor Media, Inc., 144A, 7.75%, 3/15/2016                                                           | 160,000                 | 154,400   
|Quebecor World, Inc., 144A, 9.75%, 1/15/2015                                                           | 180,000                 | 175,500   
|Quiksilver, Inc., 6.875%, 4/15/2015                                                                    | 330,000                 | 307,725   
|Reader's Digest Association, Inc., 144A, 9.0%, 2/15/2017                                               | 155,000                 | 138,144   
|Sabre Holdings Corp., 8.35%, 3/15/2016                                                                 | 200,000                 | 181,500   
|Seminole Hard Rock Entertainment, Inc., 144A,
8.194%**, 3/15/2014                                      | 275,000                 | 268,813   
|Shingle Springs Tribal Gaming Authority, 144A,
9.375%, 6/15/2015                                       | 190,000                 | 190,950   
|Simmons Co.:                                                                                           |                         |           
|Step-up Coupon, 0% to 12/15/2009, 
10.0% to 12/15/2014                                                 | 725,000                 | 585,437   
|7.875%, 1/15/2014                                                                                      | 150,000                 | 143,625   
|Sinclair Television Group, Inc., 8.0%, 3/15/2012 (b)                                                   | 115,000                 | 118,163   
|Sirius Satellite Radio, Inc., 9.625%, 8/1/2013                                                         | 335,000                 | 332,906   
|Six Flags, Inc., 9.75%, 4/15/2013                                                                      | 105,000                 | 86,363    
|Sonic Automotive, Inc., Series B, 8.625%, 8/15/2013                                                    | 225,000                 | 227,250   
|Station Casinos, Inc., 6.5%, 2/1/2014                                                                  | 490,000                 | 409,150   
|The Bon-Ton Stores, Inc., 10.25%, 3/15/2014                                                            | 170,000                 | 148,750   
|Toys "R" Us, Inc., 7.375%, 10/15/2018                                                                  | 185,000                 | 144,300   
|Travelport LLC:                                                                                        |                         |           
|9.875%, 9/1/2014                                                                                       | 95,000                  | 97,850    
|10.246%**, 9/1/2014                                                                                    | 170,000                 | 170,850   
|11.875%, 9/1/2016 (b)                                                                                  | 95,000                  | 102,600   
|Trump Entertainment Resorts, Inc., 8.5%, 6/1/2015                                                      | 500,000                 | 423,750   
|TRW Automotive, Inc., 144A, 7.0%, 3/15/2014                                                            | 130,000                 | 126,750   
|United Components, Inc., 9.375%, 6/15/2013                                                             | 40,000                  | 40,800    
|Unity Media GmbH, 144A, 10.375%, 2/15/2015                                                             | 175,000                 | 183,750   
|Univision Communications, Inc., 144A,
9.75%, 3/15/2015 (PIK)                                           | 875,000                 | 857,500   
|UPC Holding BV:                                                                                        |                         |           
|144A, 7.75%, 1/15/2014 EUR                                                                             | 235,000                 | 340,409   
|144A, 8.0%, 11/1/2016  EUR                                                                             | 120,000                 | 172,522   
|Vitro SAB de CV:                                                                                       |                         |           
|8.625%, 2/1/2012 (b)                                                                                   | 150,000                 | 149,625   
|9.125%, 2/1/2017                                                                                       | 300,000                 | 296,250   
|Series A, 11.75%, 11/1/2013                                                                            | 85,000                  | 92,013    
|Wheeling Island Gaming, Inc., 10.125%, 12/15/2009                                                      | 155,000                 | 154,613   
|XM Satellite Radio, Inc., 9.75%, 5/1/2014 (b)                                                          | 440,000                 | 444,400   
|Young Broadcasting, Inc., 8.75%, 1/15/2014                                                             | 1,055,000               | 909,937   
|Yum! Brands, Inc.:                                                                                     |                         |           
|6.25%, 3/15/2018                                                                                       | 720,000                 | 721,656   
|6.875%, 11/15/2037                                                                                     | 1,680,000               | 1,678,703 
|                                                                                                       | 32,223,351             
|Consumer Staples 1.7%                                                                                 
|Alliance One International, Inc., 8.5%, 5/15/2012                                                      | 120,000                 | 119,400   
|Belvedere SA, 144A, 7.756%**, 5/15/2013        EUR                                                     | 120,000                 | 175,564   
|Del Laboratories, Inc., 8.0%, 2/1/2012                                                                 | 195,000                 | 187,200   
|Delhaize America, Inc.:                                                                                |                         |           
|8.05%, 4/15/2027                                                                                       | 75,000                  | 80,724    
|9.0%, 4/15/2031                                                                                        | 510,000                 | 617,302   
|General Nutrition Centers, Inc.,
10.009%**, 3/15/2014 (PIK) (b)                                        | 260,000                 | 250,250   
|Harry & David Holdings, Inc., 10.621%**, 3/1/2012                                                      | 240,000                 | 233,400   
|North Atlantic Trading Co., 144A, 10.0%, 3/1/2012                                                      | 873,750                 | 821,325   
|Pierre Foods, Inc., 9.875%, 7/15/2012                                                                  | 140,000                 | 116,200   
|Pilgrim's Pride Corp., 7.625%, 5/1/2015                                                                | 100,000                 | 100,500   
|Reynolds American, Inc., 6.75%, 6/15/2017                                                              | 2,400,000               | 2,473,454 
|Rite Aid Corp., 7.5%, 3/1/2017                                                                         | 385,000                 | 358,050   
|Smithfield Foods, Inc., 7.75%, 7/1/2017 (b)                                                            | 260,000                 | 267,800   
|Tereos Europe SA, 144A, 6.375%, 4/15/2014      EUR                                                     | 105,000                 | 141,831   
|Viskase Companies, Inc., 11.5%, 6/15/2011                                                              | 840,000                 | 840,000   
|                                                                                                       | 6,783,000              
|Energy 2.9%                                                                                           
|Belden & Blake Corp., 8.75%, 7/15/2012                                                                 | 940,000                 | 958,800   
|Chaparral Energy, Inc., 8.5%, 12/1/2015                                                                | 270,000                 | 251,775   
|Chesapeake Energy Corp.:                                                                               |                         |           
|6.25%, 1/15/2018                                                                                       | 145,000                 | 139,925   
|6.875%, 1/15/2016                                                                                      | 635,000                 | 631,825   
|7.75%, 1/15/2015 (b)                                                                                   | 105,000                 | 107,625   
|Cimarex Energy Co., 7.125%, 5/1/2017                                                                   | 185,000                 | 184,769   
|Complete Production Services, Inc., 
8.0%, 12/15/2016                                                  | 340,000                 | 329,800   
|Delta Petroleum Corp., 7.0%, 4/1/2015                                                                  | 490,000                 | 423,850   
|Dynegy Holdings, Inc.:                                                                                 |                         |           
|6.875%, 4/1/2011                                                                                       | 75,000                  | 73,125    
|8.375%, 5/1/2016                                                                                       | 410,000                 | 411,025   
|Energy Partners Ltd., 9.75%, 4/15/2014                                                                 | 200,000                 | 198,000   
|Frontier Oil Corp., 6.625%, 10/1/2011                                                                  | 180,000                 | 179,100   
|Gaz Capital (Gazprom), 144A, 6.51%, 3/7/2022                                                           | 785,000                 | 769,300   
|Mariner Energy, Inc.:                                                                                  |                         |           
|7.5%, 4/15/2013                                                                                        | 75,000                  | 72,938    
|8.0%, 5/15/2017                                                                                        | 150,000                 | 148,125   
|OPTI Canada, Inc.:                                                                                     |                         |           
|144A, 7.875%, 12/15/2014                                                                               | 285,000                 | 282,863   
|144A, 8.25%, 12/15/2014                                                                                | 230,000                 | 230,575   
|Pemex Project Funding Master Trust, Series REG S,
6.375%, 8/5/2016        EUR                          | 100,000                 | 154,806   
|Petrobras International Finance Co., 
5.875%, 3/1/2018                                                 | 330,000                 | 326,040   
|Petronas Capital Ltd., Series REG S, 
7.875%, 5/22/2022                                                | 290,000                 | 354,332   
|Plains Exploration & Production Co., 7.0%, 3/15/2017                                                   | 115,000                 | 109,250   
|Quicksilver Resources, Inc., 7.125%, 4/1/2016                                                          | 155,000                 | 152,675   
|Sabine Pass LNG LP:                                                                                    |                         |           
|7.25%, 11/30/2013                                                                                      | 100,000                 | 98,000    
|7.5%, 11/30/2016                                                                                       | 620,000                 | 607,600   
|Stone Energy Corp., 6.75%, 12/15/2014                                                                  | 650,000                 | 600,437   
|Tennessee Gas Pipeline Co., 7.625%, 4/1/2037                                                           | 190,000                 | 207,792   
|Tesoro Corp., 144A, 6.5%, 6/1/2017                                                                     | 295,000                 | 291,312   
|VeraSun Energy Corp., 144A, 9.375%, 6/1/2017 (b)                                                       | 150,000                 | 123,375   
|Whiting Petroleum Corp.:                                                                               |                         |           
|7.0%, 2/1/2014                                                                                         | 225,000                 | 221,344   
|7.25%, 5/1/2012                                                                                        | 350,000                 | 345,625   
|7.25%, 5/1/2013                                                                                        | 75,000                  | 73,688    
|Williams Companies, Inc.:                                                                              |                         |           
|8.125%, 3/15/2012                                                                                      | 695,000                 | 748,862   
|8.75%, 3/15/2032                                                                                       | 1,090,000               | 1,269,850 
|Williams Partners LP, 7.25%, 2/1/2017                                                                  | 190,000                 | 195,938   
|                                                                                                       | 11,274,346             
|Financials 7.3%                                                                                       
|Algoma Acquisition Corp., 144A, 9.875%, 6/15/2015                                                      | 625,000                 | 553,125   
|Ashton Woods USA LLC, 9.5%, 10/1/2015                                                                  | 540,000                 | 402,300   
|Buffalo Thunder Development Authority, 144A,
9.375%, 12/15/2014                                        | 115,000                 | 107,525   
|CEVA Group PLC, 144A, 8.5%, 12/1/2014  EUR                                                             | 180,000                 | 228,146   
|Conproca SA de CV, Series REG S, 12.0%, 6/16/2010                                                      | 885,000                 | 982,350   
|Countrywide Home Loans, Inc., Series K,
4.25%, 12/19/2007                                              | 4,000,000               | 3,952,596 
|Diageo Capital PLC, 4.375%, 5/3/2010                                                                   | 1,600,000               | 1,582,314 
|E*TRADE Financial Corp.:                                                                               |                         |           
|7.375%, 9/15/2013                                                                                      | 130,000                 | 121,550   
|7.875%, 12/1/2015                                                                                      | 550,000                 | 522,500   
|8.0%, 6/15/2011                                                                                        | 305,000                 | 289,750   
|Ford Motor Credit Co., LLC:                                                                            |                         |           
|7.25%, 10/25/2011                                                                                      | 1,395,000               | 1,297,644 
|7.375%, 10/28/2009                                                                                     | 2,680,000               | 2,584,737 
|7.875%, 6/15/2010                                                                                      | 685,000                 | 660,363   
|7.993%**, 1/13/2012                                                                                    | 175,000                 | 162,011   
|GMAC LLC:                                                                                              |                         |           
|6.875%, 9/15/2011                                                                                      | 2,960,000               | 2,727,972 
|8.0%, 11/1/2031                                                                                        | 444,000                 | 410,397   
|Hawker Beechcraft Acquisition Co., LLC:                                                                |                         |           
|144A, 8.5%, 4/1/2015                                                                                   | 400,000                 | 407,000   
|144A, 8.875%, 4/1/2015 (PIK)                                                                           | 350,000                 | 352,625   
|144A, 9.75%, 4/1/2017                                                                                  | 275,000                 | 279,813   
|Hexion US Finance Corp., 9.75%, 11/15/2014                                                             | 230,000                 | 252,425   
|Hub International Holdings, Inc., 144A, 
9.0%, 12/15/2014                                              | 150,000                 | 144,000   
|Inmarsat Finance PLC, Step-up Coupon, 0% to
11/15/2008, 10.375% to 11/15/2012                          | 230,000                 | 221,950   
|iPayment, Inc., 9.75%, 5/15/2014                                                                       | 165,000                 | 158,400   
|KAR Holdings, Inc.:                                                                                    |                         |           
|144A, 8.75%, 5/1/2014 (b)                                                                              | 205,000                 | 197,825   
|144A, 10.0%, 5/1/2015                                                                                  | 165,000                 | 157,575   
|Kreditanstalt fuer Wiederaufbau:                                                                       |                         |           
|2.05%, 9/21/2009       JPY                                                                             | 425,000,000             | 3,760,490 
|2.05%, 2/16/2026       JPY                                                                             | 140,000,000             | 1,185,021 
|Local TV Finance LLC, 144A, 9.25%, 6/15/2015 (PIK)                                                     | 185,000                 | 177,138   
|New ASAT (Finance) Ltd., 9.25%, 2/1/2011                                                               | 200,000                 | 162,000   
|Nuveen Investments, Inc., 144A, 10.5%, 11/15/2015                                                      | 400,000                 | 400,000   
|Petroplus Finance Ltd.:                                                                                |                         |           
|144A, 6.75%, 5/1/2014                                                                                  | 200,000                 | 190,000   
|144A, 7.0%, 5/1/2017                                                                                   | 180,000                 | 169,200   
|Pinnacle Foods Finance LLC, 144A, 
9.25%, 4/1/2015 (b)                                                 | 150,000                 | 142,500   
|Realogy Corp., 144A, 12.375%, 4/15/2015 (b)                                                            | 150,000                 | 109,500   
|Residential Capital LLC:                                                                               |                         |           
|6.125%, 11/21/2008                                                                                     | 395,000                 | 332,787   
|6.224%**, 6/9/2008                                                                                     | 80,000                  | 71,600    
|7.8%**, 11/21/2008                                                                                     | 610,000                 | 513,925   
|Triad Acquisition Corp., Series B, 11.125%, 5/1/2013                                                   | 140,000                 | 116,200   
|Tropicana Entertainment LLC, 144A, 
9.625%, 12/15/2014 (b)                                             | 990,000                 | 742,500   
|U.S.I. Holdings Corp.:                                                                                 |                         |           
|144A, 9.433%**, 11/15/2014                                                                             | 110,000                 | 102,300   
|144A, 9.75%, 5/15/2015                                                                                 | 150,000                 | 132,375   
|UCI Holdco, Inc., 144A, 12.694%**, 12/15/2013 (PIK)                                                    | 251,099                 | 246,077   
|Universal City Development Partners, 11.75%, 4/1/2010                                                  | 955,000                 | 1,002,750 
|Yankee Acquisition Corp.:                                                                              |                         |           
|Series B, 8.5%, 2/15/2015                                                                              | 160,000                 | 150,000   
|Series B, 9.75%, 2/15/2017 (b)                                                                         | 115,000                 | 106,375   
|                                                                                                       | 28,569,631             
|Health Care 1.6%                                                                                      
|Advanced Medical Optics, Inc., 7.5%, 5/1/2017                                                          | 320,000                 | 301,600   
|Bausch & Lomb, Inc., 144A, 9.875%, 11/1/2015 (b)                                                       | 335,000                 | 345,050   
|Boston Scientific Corp., 6.0%, 6/15/2011                                                               | 200,000                 | 194,000   
|Community Health Systems, Inc., 144A, 
8.875%, 7/15/2015                                               | 1,530,000               | 1,549,125 
|HCA, Inc.:                                                                                             |                         |           
|6.5%, 2/15/2016                                                                                        | 385,000                 | 328,694   
|9.125%, 11/15/2014                                                                                     | 305,000                 | 315,675   
|9.25%, 11/15/2016                                                                                      | 695,000                 | 731,487   
|HEALTHSOUTH Corp., 10.75%, 6/15/2016                                                                   | 270,000                 | 284,850   
|IASIS Healthcare LLC, 8.75%, 6/15/2014                                                                 | 160,000                 | 161,600   
|Omnicare, Inc., 6.125%, 6/1/2013                                                                       | 75,000                  | 70,500    
|Psychiatric Solutions, Inc., 7.75%, 7/15/2015                                                          | 185,000                 | 188,238   
|Sun Healthcare Group, Inc., 9.125%, 4/15/2015                                                          | 185,000                 | 190,087   
|Surgical Care Affiliates, Inc., 144A, 8.875%, 7/15/2015 (PIK)                                          | 225,000                 | 214,875   
|Tenet Healthcare Corp., 9.25%, 2/1/2015                                                                | 265,000                 | 233,200   
|The Cooper Companies, Inc., 7.125%, 2/15/2015                                                          | 385,000                 | 381,150   
|Universal Hospital Services, Inc., 144A, 8.5%, 6/1/2015 (PIK)                                          | 130,000                 | 132,275   
|Vanguard Health Holding Co. I, LLC, Step-up Coupon, 0% to
10/1/2009, 11.25% to 10/1/2015 (b)           | 195,000                 | 152,100   
|Vanguard Health Holding Co. II, LLC, 9.0%, 10/1/2014 (b)                                               | 590,000                 | 575,250   
|                                                                                                       | 6,349,756              
|Industrials 3.8%                                                                                      
|Actuant Corp., 144A, 6.875%, 6/15/2017                                                                 | 150,000                 | 150,000   
|Aleris International, Inc., 9.0%, 12/15/2014 (PIK)                                                     | 270,000                 | 243,675   
|Allied Security Escrow Corp., 11.375%, 7/15/2011                                                       | 300,000                 | 286,500   
|Allison Transmission, 144A, 11.0%, 11/1/2015 (b)                                                       | 400,000                 | 407,500   
|American Color Graphics, Inc., 10.0%, 6/15/2010                                                        | 285,000                 | 194,513   
|American Railcar Industries, Inc., 7.5%, 3/1/2014 (b)                                                  | 215,000                 | 212,312   
|ARAMARK Corp.:                                                                                         |                         |           
|8.5%, 2/1/2015 (b)                                                                                     | 300,000                 | 303,750   
|8.856%**, 2/1/2015                                                                                     | 260,000                 | 261,300   
|Baldor Electric Co., 8.625%, 2/15/2017                                                                 | 195,000                 | 203,287   
|Belden, Inc., 7.0%, 3/15/2017                                                                          | 195,000                 | 197,925   
|Bombardier, Inc.:                                                                                      |                         |           
|144A, 6.3%, 5/1/2014                                                                                   | 220,000                 | 215,050   
|144A, 6.75%, 5/1/2012                                                                                  | 100,000                 | 100,750   
|144A, 8.0%, 11/15/2014                                                                                 | 145,000                 | 150,800   
|Bristow Group, Inc., 144A, 7.5%, 9/15/2017                                                             | 225,000                 | 231,750   
|Browning-Ferris Industries, Inc., 7.4%, 9/15/2035                                                      | 540,000                 | 507,600   
|Building Materials Corp. of America, 7.75%, 8/1/2014                                                   | 260,000                 | 223,600   
|Cenveo Corp., 7.875%, 12/1/2013                                                                        | 480,000                 | 450,000   
|Congoleum Corp., 8.625%, 8/1/2008*                                                                     | 480,000                 | 410,400   
|DRS Technologies, Inc.:                                                                                |                         |           
|6.625%, 2/1/2016                                                                                       | 105,000                 | 103,950   
|6.875%, 11/1/2013                                                                                      | 525,000                 | 525,000   
|7.625%, 2/1/2018                                                                                       | 635,000                 | 649,287   
|Education Management LLC, 8.75%, 6/1/2014                                                              | 160,000                 | 165,200   
|Esco Corp.:                                                                                            |                         |           
|144A, 8.625%, 12/15/2013                                                                               | 360,000                 | 366,300   
|144A, 9.569%**, 12/15/2013                                                                             | 285,000                 | 285,000   
|General Cable Corp.:                                                                                   |                         |           
|7.125%, 4/1/2017                                                                                       | 195,000                 | 195,000   
|7.606%**, 4/1/2015                                                                                     | 305,000                 | 301,187   
|Great Lakes Dredge & Dock Co., 7.75%, 12/15/2013                                                       | 145,000                 | 140,650   
|Harland Clarke Holdings Corp., 9.5%, 5/15/2015 (b)                                                     | 185,000                 | 168,350   
|Iron Mountain, Inc., 8.75%, 7/15/2018 (b)                                                              | 130,000                 | 136,500   
|K. Hovnanian Enterprises, Inc.:                                                                        |                         |           
|6.25%, 1/15/2016                                                                                       | 590,000                 | 454,300   
|8.875%, 4/1/2012                                                                                       | 665,000                 | 485,450   
|Kansas City Southern de Mexico SA de CV:                                                               |                         |           
|144A, 7.375%, 6/1/2014                                                                                 | 150,000                 | 150,000   
|7.625%, 12/1/2013                                                                                      | 520,000                 | 530,400   
|9.375%, 5/1/2012                                                                                       | 395,000                 | 418,700   
|Kansas City Southern Railway Co.:                                                                      |                         |           
|7.5%, 6/15/2009                                                                                        | 105,000                 | 106,313   
|9.5%, 10/1/2008                                                                                        | 1,225,000               | 1,252,562 
|Mobile Services Group, Inc., 144A, 9.75%, 8/1/2014                                                     | 370,000                 | 371,850   
|Navios Maritime Holdings, Inc., 9.5%, 12/15/2014                                                       | 290,000                 | 306,675   
|Panolam Industries International, Inc., 144A,
10.75%, 10/1/2013                                        | 120,000                 | 114,000   
|R.H. Donnelley Corp., 144A, 8.875%, 10/15/2017                                                         | 750,000                 | 750,000   
|Rainbow National Services LLC, 144A, 10.375%, 9/1/2014                                                 | 39,000                  | 42,900    
|RBS Global & Rexnord Corp., 9.5%, 8/1/2014                                                             | 170,000                 | 175,525   
|Saint Acquisition Corp., 144A, 12.5%, 5/15/2017 (b)                                                    | 155,000                 | 98,813    
|Sally Holdings LLC, 9.25%, 11/15/2014                                                                  | 225,000                 | 226,125   
|Ship Finance International Ltd., 8.5%, 12/15/2013                                                      | 180,000                 | 184,050   
|Terex Corp., 7.375%, 1/15/2014                                                                         | 105,000                 | 105,525   
|Titan International, Inc., 8.0%, 1/15/2012                                                             | 675,000                 | 675,000   
|TransDigm, Inc., 7.75%, 7/15/2014                                                                      | 115,000                 | 117,013   
|U.S. Concrete, Inc., 8.375%, 4/1/2014 (b)                                                              | 210,000                 | 191,100   
|United Rentals North America, Inc., 7.0%, 2/15/2014                                                    | 385,000                 | 408,100   
|Xerox Capital Trust I, 8.0%, 2/1/2027                                                                  | 120,000                 | 118,151   
|                                                                                                       | 15,069,688             
|Information Technology 1.2%                                                                           
|Alion Science & Technology Corp., 10.25%, 2/1/2015                                                     | 155,000                 | 144,925   
|First Data Corp., 144A, 9.875%, 9/24/2015                                                              | 440,000                 | 421,300   
|Freescale Semiconductor, Inc., 8.875%, 12/15/2014                                                      | 180,000                 | 170,325   
|L-3 Communications Corp.:                                                                              |                         |           
|5.875%, 1/15/2015                                                                                      | 625,000                 | 609,375   
|Series B, 6.375%, 10/15/2015                                                                           | 270,000                 | 270,000   
|Lucent Technologies, Inc., 6.45%, 3/15/2029                                                            | 1,010,000               | 843,350   
|MasTec, Inc., 7.625%, 2/1/2017                                                                         | 270,000                 | 261,900   
|Sanmina-SCI Corp.:                                                                                     |                         |           
|8.125%, 3/1/2016                                                                                       | 125,000                 | 109,687   
|144A, 8.444%**, 6/15/2010                                                                              | 155,000                 | 155,000   
|Seagate Technology HDD Holdings, 6.8%, 10/1/2016                                                       | 380,000                 | 373,350   
|SunGard Data Systems, Inc., 10.25%, 8/15/2015 (b)                                                      | 650,000                 | 677,625   
|Unisys Corp., 7.875%, 4/1/2008                                                                         | 420,000                 | 417,900   
|Vangent, Inc., 144A, 9.625%, 2/15/2015                                                                 | 155,000                 | 143,375   
|                                                                                                       | 4,598,112              
|Materials 3.8%                                                                                        
|Appleton Papers, Inc., Series B, 8.125%, 6/15/2011                                                     | 110,000                 | 109,175   
|ARCO Chemical Co., 9.8%, 2/1/2020                                                                      | 1,740,000               | 1,705,200 
|Associated Materials, Inc., Step-up Coupon, 0% to
3/1/2009, 11.25% to 3/1/2014                         | 365,000                 | 242,725   
|Cascades, Inc., 7.25%, 2/15/2013                                                                       | 560,000                 | 543,200   
|Chemtura Corp., 6.875%, 6/1/2016                                                                       | 350,000                 | 334,250   
|Clondalkin Acquisition BV:                                                                             |                         |           
|144A, 6.73%**, 12/15/2013      EUR                                                                     | 50,000                  | 69,892    
|144A, 7.694%**, 12/15/2013                                                                             | 215,000                 | 205,863   
|CPG International I, Inc.:                                                                             |                         |           
|10.5%, 7/1/2013                                                                                        | 530,000                 | 530,000   
|12.13%**, 7/1/2012                                                                                     | 120,000                 | 120,000   
|Equistar Chemical LP, 10.625%, 5/1/2011                                                                | 229,000                 | 239,305   
|Exopack Holding Corp., 11.25%, 2/1/2014                                                                | 580,000                 | 587,250   
|Freeport-McMoRan Copper & Gold, Inc., 
8.375%, 4/1/2017                                                | 310,000                 | 339,450   
|GEO Specialty Chemicals, Inc., 144A, 13.728%**,
12/31/2009 (f)                                         | 1,097,000               | 899,540   
|Georgia-Pacific Corp., 144A, 7.125%, 1/15/2017                                                         | 130,000                 | 126,750   
|Gibraltar Industries, Inc., Series B, 8.0%, 12/1/2015                                                  | 195,000                 | 183,300   
|Hexcel Corp., 6.75%, 2/1/2015                                                                          | 790,000                 | 776,175   
|Huntsman LLC, 11.625%, 10/15/2010                                                                      | 892,000                 | 945,520   
|Innophos, Inc., 8.875%, 8/15/2014                                                                      | 90,000                  | 90,675    
|Jefferson Smurfit Corp., 8.25%, 10/1/2012                                                              | 295,000                 | 295,000   
|Koppers Holdings, Inc., Step-up Coupon, 0% to
11/15/2009, 9.875% to 11/15/2014                         | 520,000                 | 445,900   
|Lyondell Chemical Co.:                                                                                 |                         |           
|6.875%, 6/15/2017 (b)                                                                                  | 915,000                 | 1,006,500 
|10.5%, 6/1/2013 (b)                                                                                    | 130,000                 | 140,075   
|Massey Energy Co.:                                                                                     |                         |           
|6.625%, 11/15/2010                                                                                     | 65,000                  | 63,375    
|6.875%, 12/15/2013 (b)                                                                                 | 285,000                 | 269,325   
|Metals USA Holdings Corp., 144A,
11.231%**, 7/1/2012 (PIK)                                             | 265,000                 | 245,125   
|Millar Western Forest Products Ltd., 
7.75%, 11/15/2013                                                | 100,000                 | 77,500    
|Momentive Performance Materials, Inc., 144A,
9.75%, 12/1/2014                                          | 235,000                 | 229,125   
|Mueller Water Products, Inc., 7.375%, 6/1/2017                                                         | 185,000                 | 172,050   
|Neenah Foundry Co., 9.5%, 1/1/2017                                                                     | 60,000                  | 55,200    
|NewMarket Corp., 7.125%, 12/15/2016                                                                    | 455,000                 | 456,137   
|OI European Group BV, 144A, 6.875%, 3/31/2017  EUR                                                     | 220,000                 | 309,120   
|Pliant Corp., 11.625%, 6/15/2009 (PIK)                                                                 | 5                       | 5         
|Radnor Holdings Corp., 11.0%, 3/15/2010*                                                               | 100,000                 | 750       
|Rhodia SA, 144A, 7.482%**, 10/15/2013  EUR                                                             | 280,000                 | 405,087   
|Smurfit-Stone Container Enterprises, Inc.:                                                             |                         |           
|8.0%, 3/15/2017                                                                                        | 375,000                 | 372,656   
|8.375%, 7/1/2012                                                                                       | 185,000                 | 185,000   
|Steel Dynamics, Inc.:                                                                                  |                         |           
|144A, 6.75%, 4/1/2015                                                                                  | 295,000                 | 282,463   
|144A, 7.375%, 11/1/2012                                                                                | 275,000                 | 75,000    
|Terra Capital, Inc., Series B, 7.0%, 2/1/2017                                                          | 615,000                 | 615,000   
|The Mosaic Co., 144A, 7.375%, 12/1/2014                                                                | 350,000                 | 370,125   
|TriMas Corp., 9.875%, 6/15/2012                                                                        | 421,000                 | 432,578   
|Witco Corp., 6.875%, 2/1/2026                                                                          | 135,000                 | 110,869   
|Wolverine Tube, Inc., 10.5%, 4/1/2009                                                                  | 325,000                 | 313,625   
|                                                                                                       | 14,975,860             
|Telecommunication Services 2.4%                                                                       
|American Cellular Corp., Series B, 10.0%, 8/1/2011                                                     | 44,000                  | 46,200    
|BCM Ireland Preferred Equity Ltd., 144A,
11.574%**, 2/15/2017 (PIK) EUR                                | 195,376                 | 277,417   
|Cell C Property Ltd., 144A, 11.0%, 7/1/2015                                                            | 775,000                 | 635,500   
|Centennial Communications Corp.:                                                                       |                         |           
|10.0%, 1/1/2013 (b)                                                                                    | 450,000                 | 477,000   
|10.125%, 6/15/2013                                                                                     | 145,000                 | 154,063   
|Cincinnati Bell, Inc.:                                                                                 |                         |           
|7.25%, 7/15/2013                                                                                       | 400,000                 | 401,000   
|8.375%, 1/15/2014                                                                                      | 220,000                 | 220,550   
|Cricket Communications, Inc., 144A, 
9.375%, 11/1/2014                                                 | 475,000                 | 471,437   
|Dobson Cellular Systems, 9.875%, 11/1/2012                                                             | 295,000                 | 319,338   
|Embratel, Series B, 11.0%, 12/15/2008                                                                  | 79,000                  | 83,566    
|Grupo Iusacell SA de CV, Series B, 10.0%, 7/15/2004*                                                   | 115,000                 | 114,425   
|Insight Midwest LP, 9.75%, 10/1/2009 (b)                                                               | 122,000                 | 122,153   
|Intelsat Bermuda Ltd.:                                                                                 |                         |           
|8.886%**, 1/15/2015                                                                                    | 40,000                  | 40,600    
|9.25%, 6/15/2016                                                                                       | 110,000                 | 114,125   
|11.25%, 6/15/2016                                                                                      | 310,000                 | 333,250   
|Intelsat Corp., 9.0%, 6/15/2016                                                                        | 130,000                 | 132,925   
|Intelsat Ltd., 5.25%, 11/1/2008                                                                        | 145,000                 | 143,006   
|Intelsat Subsidiary Holding Co., Ltd., 8.25%, 1/15/2013                                                | 410,000                 | 413,075   
|iPCS, Inc., 7.481%**, 5/1/2013                                                                         | 100,000                 | 97,500    
|MetroPCS Wireless, Inc., 144A, 9.25%, 11/1/2014                                                        | 430,000                 | 426,775   
|Millicom International Cellular SA, 10.0%, 12/1/2013                                                   | 825,000                 | 887,906   
|Nortel Networks Ltd.:                                                                                  |                         |           
|144A, 9.493%**, 7/15/2011                                                                              | 345,000                 | 340,688   
|144A, 10.125%, 7/15/2013                                                                               | 85,000                  | 86,700    
|Orascom Telecom Finance, 144A, 7.875%, 2/8/2014                                                        | 140,000                 | 133,875   
|Qwest Corp., 7.25%, 9/15/2025                                                                          | 70,000                  | 69,650    
|Rural Cellular Corp., 9.875%, 2/1/2010                                                                 | 350,000                 | 364,875   
|Stratos Global Corp., 9.875%, 2/15/2013 (b)                                                            | 150,000                 | 157,500   
|SunCom Wireless Holdings, Inc., 8.5%, 6/1/2013                                                         | 438,000                 | 459,352   
|US Unwired, Inc., Series B, 10.0%, 6/15/2012                                                           | 455,000                 | 486,670   
|Virgin Media Finance PLC:                                                                              |                         |           
|8.75%, 4/15/2014       EUR                                                                             | 335,000                 | 492,543   
|8.75%, 4/15/2014                                                                                       | 475,000                 | 490,437   
|West Corp., 9.5%, 10/15/2014                                                                           | 220,000                 | 226,050   
|                                                                                                       | 9,220,151              
|Utilities 3.0%                                                                                        
|AES Corp.:                                                                                             |                         |           
|144A, 8.0%, 10/15/2017                                                                                 | 395,000                 | 398,456   
|144A, 8.75%, 5/15/2013                                                                                 | 1,800,000               | 1,903,500 
|Allegheny Energy Supply Co., LLC, 144A, 
8.25%, 4/15/2012                                              | 1,360,000               | 1,475,600 
|CMS Energy Corp., 8.5%, 4/15/2011                                                                      | 880,000                 | 943,576   
|Edison Mission Energy, 144A, 7.0%, 5/15/2017                                                           | 335,000                 | 327,463   
|Energy Future Holdings Corp., 144A, 
10.875%, 11/1/2017                                                | 600,000                 | 606,750   
|Intergas Finance BV, Series REG S, 
6.875%, 11/4/2011                                                  | 1,145,000               | 1,133,184 
|Mirant Americas Generation LLC, 8.3%, 5/1/2011                                                         | 310,000                 | 313,488   
|Mirant North America LLC, 7.375%, 12/31/2013                                                           | 150,000                 | 152,063   
|NRG Energy, Inc.:                                                                                      |                         |           
|7.25%, 2/1/2014                                                                                        | 550,000                 | 550,000   
|7.375%, 2/1/2016                                                                                       | 1,285,000               | 1,281,787 
|PSE&G Energy Holdings LLC, 10.0%, 10/1/2009                                                            | 735,000                 | 782,750   
|Regency Energy Partners LP, 8.375%, 12/15/2013                                                         | 257,000                 | 270,493   
|Reliant Energy, Inc., 7.875%, 6/15/2017 (b)                                                            | 370,000                 | 373,237   
|Sierra Pacific Resources:                                                                              |                         |           
|6.75%, 8/15/2017                                                                                       | 470,000                 | 454,659   
|8.625%, 3/15/2014                                                                                      | 80,000                  | 84,584    
|Texas Competitive Electric Holdings Co., LLC, 144A,
10.25%, 11/1/2015                                  | 875,000                 | 879,375   
|                                                                                                       | 11,930,965             
|Total Corporate Bonds (Cost $142,951,521)                                                              | 140,994,860            
|                                                                                                      
|Asset Backed 1.0%                                                                                     
|Credit Card Receivables                                                                               
|Washington Mutual Master Note Trust, "C1",
Series 2007-C1, 144A, 5.491%**, 5/15/2014
(Cost $3,625,734) | 3,800,000               | 3,735,875 
|                                                                                                      
|Commercial and Non-Agency Mortgage-Backed Securities 3.7%                                             
|Credit Suisse Mortgage Capital Certificates, "A2",
Series 2007-C1, 5.268%, 2/15/2040                   | 3,719,000               | 3,700,536 
|Greenwich Capital Commercial Funding Corp., "A4",
Series 2007-GG9, 5.444%, 1/10/2017                   | 5,100,000               | 5,021,359 
|Morgan Stanley Capital I Trust, "A4", Series 2007-HQ11,
5.447%, 2/12/2044                              | 2,280,000               | 2,241,581 
|Wachovia Bank Commercial Mortgage Trust, "A2",
Series 2007-C32, 5.736%**, 6/15/2049                    | 3,600,000               | 3,643,099 
|Total Commercial and Non-Agency Mortgage-Backed Securities
(Cost $14,748,555)                          | 14,606,575             
|                                                                                                      
|Government & Agency Obligations 46.6%                                                                 
|Sovereign Bonds 29.5%                                                                                 
|Aries Vermogensverwaltung GmbH, Series C, REG S,
9.6%, 10/25/2014                                      | 2,250,000               | 2,812,500 
|Bundesrepublic Deutschland, Series 94, 
6.25%, 1/4/2024         EUR                                    | 2,700,000               | 4,705,580 
|Dominican Republic:                                                                                    |                         |           
|144A, 8.625%, 4/20/2027                                                                                | 125,000                 | 143,750   
|Series REG S, 9.5%, 9/27/2011                                                                          | 851,929                 | 909,435   
|Egypt Government AID Bonds, 4.45%, 9/15/2015                                                           | 13,800,000              | 13,437,612
|Federative Republic of Brazil:                                                                         |                         |           
|6.0%, 1/17/2017                                                                                        | 4,745,000               | 4,849,390 
|7.125%, 1/20/2037 (b)                                                                                  | 1,045,000               | 1,206,975 
|7.875%, 3/7/2015                                                                                       | 1,045,000               | 1,187,120 
|8.75%, 2/4/2025                                                                                        | 830,000                 | 1,087,300 
|8.875%, 10/14/2019                                                                                     | 950,000                 | 1,199,375 
|11.0%, 1/11/2012 (b)                                                                                   | 2,270,000               | 2,776,210 
|11.0%, 8/17/2040 (b)                                                                                   | 2,295,000               | 3,083,332 
|12.5%, 1/5/2016        BRL                                                                             | 1,155,000               | 729,928   
|Government of Malaysia, Series 1/04, 
4.305%, 2/27/2009       MYR                                      | 5,605,000               | 1,698,110 
|Government of Ukraine:                                                                                 |                         |           
|Series REG S, 4.95%, 10/13/2015   EUR                                                                  | 620,000                 | 835,233   
|Series REG S, 7.65%, 6/11/2013                                                                         | 785,000                 | 843,482   
|Kingdom of Spain, 3.15%, 1/31/2016     EUR                                                             | 3,600,000               | 4,801,192 
|Nigeria, Promissory Note, Series RC, 
5.092%, 1/5/2010                                                 | 32,000                  | 5,392     
|Province of Ontario, 4.7%, 6/2/2037    CAD                                                             | 4,100,000               | 4,215,884 
|Province of Quebec, Series PO, 1.6%, 5/9/2013  JPY                                                     | 470,000,000             | 4,132,765 
|Republic of Argentina:                                                                                 |                         |           
|Step-up Coupon, 1.33% to 3/31/2009,
2.5% to 3/31/2019, 3.75% to 3/31/2029, 
5.25% to 12/31/2038        | 510,000                 | 238,425   
|5.389%**, 8/3/2012 (PIK)                                                                               | 2,053,125               | 1,868,163 
|5.83%, 12/31/2033 (PIK)        ARS                                                                     | 419                     | 147       
|7.82%, 12/31/2033 (PIK)        EUR                                                                     | 2,533,175               | 3,249,279 
|Republic of Colombia:                                                                                  |                         |           
|8.25%, 12/22/2014                                                                                      | 85,000                  | 97,070    
|10.0%, 1/23/2012 (b)                                                                                   | 1,245,000               | 1,450,425 
|10.75%, 1/15/2013                                                                                      | 335,000                 | 412,218   
|Republic of El Salvador, 144A, 7.65%, 6/15/2035                                                        | 2,245,000               | 2,604,200 
|Republic of Ghana, 144A, 8.5%, 10/4/2017                                                               | 125,000                 | 128,375   
|Republic of Greece, 3.6%, 7/20/2016    EUR                                                             | 3,500,000               | 4,752,291 
|Republic of Indonesia, 144A, 6.875%, 3/9/2017 (b)                                                      | 1,470,000               | 1,547,175 
|Republic of Panama:                                                                                    |                         |           
|7.125%, 1/29/2026                                                                                      | 630,000                 | 694,575   
|9.375%, 1/16/2023                                                                                      | 2,075,000               | 2,718,250 
|Republic of Peru:                                                                                      |                         |           
|6.55%, 3/14/2037                                                                                       | 1,600,000               | 1,684,000 
|7.35%, 7/21/2025 (b)                                                                                   | 3,805,000               | 4,366,237 
|Republic of Philippines:                                                                               |                         |           
|7.75%, 1/14/2031                                                                                       | 295,000                 | 336,300   
|8.0%, 1/15/2016 (b)                                                                                    | 1,955,000               | 2,214,037 
|8.375%, 2/15/2011                                                                                      | 465,000                 | 502,200   
|9.375%, 1/18/2017                                                                                      | 490,000                 | 606,375   
|Republic of Serbia, 144A, Step-up Coupon, 3.75% to
11/1/2009, 6.75% to 11/1/2024                       | 395,000                 | 377,225   
|Republic of Turkey:                                                                                    |                         |           
|7.0%, 9/26/2016                                                                                        | 1,690,000               | 1,768,247 
|7.25%, 3/15/2015                                                                                       | 360,000                 | 381,168   
|11.75%, 6/15/2010                                                                                      | 2,045,000               | 2,361,975 
|12.375%, 6/15/2009                                                                                     | 1,020,000               | 1,137,300 
|Republic of Uruguay:                                                                                   |                         |           
|7.625%, 3/21/2036                                                                                      | 605,000                 | 676,087   
|8.0%, 11/18/2022                                                                                       | 955,000                 | 1,088,700 
|9.25%, 5/17/2017                                                                                       | 735,000                 | 889,350   
|Republic of Venezuela, 10.75%, 9/19/2013                                                               | 3,250,000               | 3,635,125 
|Russian Federation, Series REG S, 7.5%, 3/31/2030                                                      | 4,930,200               | 5,553,377 
|Russian Ministry of Finance, Series VII, 
3.0%, 5/14/2011                                              | 310,000                 | 285,414   
|Socialist Republic of Vietnam, 144A, 
6.875%, 1/15/2016 (b)                                            | 2,050,000               | 2,183,250 
|United Kingdom Treasury Bond:                                                                          |                         |           
|5.0%, 3/7/2008 GBP                                                                                     | 2,300,000               | 4,772,109 
|5.75%, 12/7/2009       GBP                                                                             | 2,700,000               | 5,685,972 
|United Mexican States:                                                                                 |                         |           
|5.625%, 1/15/2017                                                                                      | 499,000                 | 506,236   
|Series A, 6.75%, 9/27/2034                                                                             | 318,000                 | 355,683   
|                                                                                                       | 115,787,525            
|US Government Sponsored Agencies 3.1%                                                                 
|Farmer Mac Guarenteed Trust, Series 2007-1, 144A,
5.125%, 4/19/2017                                    | 6,100,000               | 6,181,923 
|Tennessee Valley Authority, Series A, 6.79%, 5/23/2012                                                 | 5,750,000               | 6,263,470 
|                                                                                                       | 12,445,393             
|US Treasury Obligations 14.0%                                                                         
|US Treasury Bill, 3.7%***, 1/17/2008 (c)                                                               | 2,260,000               | 2,241,567 
|US Treasury Bond, 5.0%, 5/15/2037                                                                      | 1,000,000               | 1,039,766 
|US Treasury Notes:                                                                                     |                         |           
|3.875%, 10/31/2012                                                                                     | 1,600,000               | 1,579,501 
|4.0%, 8/31/2009                                                                                        | 19,640,000              | 19,653,807
|4.125%, 8/31/2012                                                                                      | 27,000,000              | 26,972,568
|4.75%, 8/15/2017                                                                                       | 3,330,000               | 3,403,363 
|                                                                                                       | 54,890,572             
|Total Government & Agency Obligations (Cost $178,845,613)                                              | 183,123,490            
|                                                                                                      
|Senior Bank Loans** 2.0%                                                                              
|Advanced Medical Optics, Inc. Term Loan B, LIBOR plus
1.75%, 6.388%, 4/2/2014                          | 109,725                 | 106,433   
|Aleris International, Inc., Term Loan B, LIBOR plus 2.375%,
7.013%, 12/19/2013                         | 160,000                 | 152,880   
|Bausch & Lomb, Inc., Term Loan B, LIBOR plus 3.25%,
7.888%, 10/26/2015                                 | 320,000                 | 320,981   
|Buffets, Inc.:                                                                                         |                         |           
|Letter of Credit, 7.7%, 5/1/2013                                                                       | 38,000                  | 34,504    
|Term Loan B, 7.74%, 11/1/2013                                                                          | 282,000                 | 256,056   
|Dollar General Corp., Term Loan B1, LIBOR plus 2.75%,
7.388%, 7/6/2014                                 | 200,000                 | 192,792   
|Energy Future Holdings Corp.:                                                                          |                         |           
|Term Loan B1, LIBOR plus 3.5%, 8.138%, 10/10/2014                                                      | 1,830,000               | 1,830,000 
|Term Loan B3, LIBOR plus 3.5%, 8.138%, 10/10/2014                                                      | 1,195,000               | 1,195,753 
|Export-Import Bank of Ukraine, 6.8%, 10/4/2012                                                         | 690,000                 | 672,198   
|First Data Corp., Term Loan B1, LIBOR plus 2.75%, 7.388%,
9/24/2014                                    | 635,000                 | 612,289   
|General Nutrition Centers, Inc., Term Loan B, LIBOR plus
2.25%, 6.888%, 9/16/2013                      | 120,000                 | 116,400   
|Golden Nugget, Inc., 8.3%, 6/16/2014                                                                   | 230,000                 | 216,775   
|HCA, Inc., Term Loan A1, 7.19%, 11/18/2012                                                             | 658,057                 | 637,325   
|Local TV On Satellite LLC, Term Loan B, LIBOR plus 2.25%,
6.888%, 5/7/2013                             | 119,700                 | 116,109   
|Longview Power LLC:                                                                                    |                         |           
|Demand Draw, 7.125%, 4/1/2014                                                                          | 24,227                  | 23,742    
|Letter of Credit, 7.5%, 4/1/2014                                                                       | 15,333                  | 15,027    
|Term Loan B, 8.0%, 4/1/2014                                                                            | 46,000                  | 45,080    
|Sabre, Inc., Term Loan B, LIBOR plus 2.25%,
6.888%, 9/30/2014                                          | 179,784                 | 171,132   
|Symbion, Inc.:                                                                                         |                         |           
|Term Loan A, 8.003%, 8/23/2013                                                                         | 100,000                 | 97,250    
|Term Loan B, 8.003%, 8/23/2014                                                                         | 100,000                 | 97,125    
|Telesat Canada, Inc.:                                                                                  |                         |           
|Delay Draw, LIBOR plus 3.0%, 7.638%, 2/14/2008                                                         | 548,150                 | 544,282   
|Term Loan B, LIBOR plus 3.0%, 7.638%, 10/31/2014                                                       | 595,000                 | 581,612   
|Tribune Co., Term Loan B, 8.244%, 5/24/2014                                                            | 369,070                 | 343,730   
|Total Senior Bank Loans (Cost $8,406,999)                                                              | 8,379,475              

|                                                                  | Shares | Value ($)
|----------------------------------------------------------------- | ------ | ---------
|                                                                  |       
|Warrants 0.0%                                                    
|Dayton Superior Corp., 144A, Expiration Date 6/15/2009*           | 40     | 0        
|DeCrane Aircraft Holdings, Inc., 144A, Expiration
Date 9/30/2008* | 2,740  | 0        
|Total Warrants (Cost $0)                                          | 0     

|                                                                                                    | Units   | Value ($)
|--------------------------------------------------------------------------------------------------- | ------- | ---------
|                                                                                                    |        
|Other Investments 0.2%                                                                             
|Hercules, Inc., (Bond Unit), 6.5%, 6/30/2029                                                        | 315,000 | 274,050  
|IdleAire Technologies Corp. (Bond Unit), 144A, Step-up
Coupon, 0% to 6/15/2008, 13.0% to 12/15/2012 | 560,000 | 324,800  
|Total Other Investments (Cost $724,515)                                                             | 598,850

|                                                                   | Shares     | Value ($) 
|------------------------------------------------------------------ | ---------- | ----------
|                                                                   |           
|Common Stocks 0.0%                                                
|GEO Specialty Chemicals, Inc.*                                     | 10,608     | 9,017     
|GEO Specialty Chemicals, Inc. 144A*                                | 966        | 821       
|Total Common Stocks (Cost $131,041)                                | 9,838     
|                                                                  
|Convertible Preferred Stocks 0.0%                                 
|Consumer Discretionary                                            
|ION Media Networks, Inc., 144A, 12.0% (Cost $13,911)               | 1          | 6,050     
|                                                                  
|Open End Investment Companies 1.3%                                
|DWS Floating Rate Plus Fund, "Institutional"
(Cost $5,025,667) (g) | 515,965    | 5,087,423 
|                                                                  
|Securities Lending Collateral 6.7%                                
|Daily Assets Fund Institutional, 5.26% (d) (e)
(Cost $26,199,103)  | 26,199,103 | 26,199,103
|                                                                  
|Cash Equivalents 7.9%                                             
|Cash Management QP Trust, 5.06% (d) (Cost $31,134,351)             | 31,134,351 | 31,134,351

|                                               | % of Net
Assets | Value ($)   
|---------------------------------------------- | --------------- | ------------
|                                               |                
|Total Investment Portfolio(Cost $411,807,010)+ | 105.3           | 413,875,890 
|Other Assets and Liabilities, Net              | (5.3)           | (20,856,537)
|Net Assets                                     | 100.0           | 393,019,353 

|Securities              | Coupon | Maturity
Date | Principal
Amount ($) | Acquisition
Cost ($) | Value ($)
|----------------------- | ------ | ------------- | -------------------- | -------------------- | ---------
|Congoleum Corp.         | 8.625% | 8/1/2008      | 480,000              | USD                  | 451,750  
|Grupo Iusacell SA de
CV | 10.0%  | 7/15/2004     | 115,000              | USD                  | 72,462   
|Radnor Holdings
Corp.   | 11.0%  | 3/15/2010     | 100,000              | USD                  | 91,474   
|                        |        |               |                      |                      | 615,686  

144A: Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers.

LIBOR: Represents the London InterBank Offered Rate.

PIK: Denotes that all or a portion of the income is paid in-kind.

At October 31, 2007, the Fund had unfunded loan commitments of $153,841, which could
be extended at the option of the borrower, pursuant to the following loan agreement:

|Borrower                                          | Unfunded
Loan
Commitment | Value ($) | Unrealized
Appreciation ($)
|------------------------------------------------- | ------------------------ | --------- | ---------------------------
|Bausch & Lomb, Inc., Term Delay Draw,
4/11/2015   | 79,800                   | 80,250    | 450                        
|Longview Power LLC, Term Delay Draw,
4/1/2014     | 28,128                   | 28,851    | 723                        
|Telesat Canada, Inc., Term Delay Draw,
10/31/2014 | 45,913                   | 46,520    | 607                        
|Total                                             | 153,841                  | 155,621   | 1,780                      

At October 31, 2007, open futures contracts purchased were as follows:

|Futures                          | Expiration
Date | Contracts | Aggregated
Face
Value ($) | Value ($)  | Unrealized
Appreciation ($)
|-------------------------------- | --------------- | --------- | ------------------------- | ---------- | ---------------------------
|10 Year Canadian
Government
Bond | 12/18/2007      | 151       | 17,908,008                | 18,029,207 | 121,119                    
|10 Year Japanese
Government
Bond | 12/11/2007      | 12        | 14,079,086                | 14,145,365 | 66,279                     
|10 Year US
Treasury Note         | 12/19/2007      | 445       | 48,474,587                | 48,956,953 | 482,366                    
|United Kingdom
Treasury Bond     | 12/27/2007      | 99        | 22,018,653                | 22,087,784 | 69,131                     
|Total unrealized appreciation    | 738,895        

At October 31, 2007, open futures contracts sold were as follows:

|Futures                             | Expiration
Date | Contracts | Aggregated
Face
Value ($) | Value ($)  | Unrealized
Appreciation ($)
|----------------------------------- | --------------- | --------- | ------------------------- | ---------- | ---------------------------
|10 Year
Australian Bond             | 12/17/2007      | 199       | 18,741,936                | 18,281,950 | 459,986                    
|10 Year Federal
Republic of
Germany | 12/6/2007       | 303       | 49,800,369                | 49,741,709 | 58,660                     
|Total unrealized appreciation       | 518,646        

At October 31, 2007, open credit default swap contract sold was as follows:

|Effective/
Expiration
Date                                                                                                                          | Notional
Amount ($) | Cash Flows
Received by the
Fund | Underlying Debt
Obligation              | Unrealized
Appreciation/
(Depreciation) ($)
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------- | --------------------------------------- | -------------------------------------------
|10/4/2007
12/20/2008                                                                                                                                | 200,0001            | Fixed  3.10%                   | Ford Motor Co.,
6.5%, 8/1/2018          | (52)                                       
|10/5/2007
12/20/2008                                                                                                                                | 120,0002            | Fixed  3.15%                   | Ford Motor Co.,
6.5%, 8/1/2018          | 29                                         
|10/22/2007
12/20/2008                                                                                                                               | 395,0003            | Fixed  3.05%                   | Ford Motor Co.,
6.5%, 8/1/2018          | (762)                                      
|10/13/2007
12/20/2009                                                                                                                               | 225,0004            | Fixed  3.85%                   | Ford Motor Co.,
6.5%, 8/1/2018          | (2,251)                                    
|10/4/2007
12/20/2008                                                                                                                                | 210,0005            | Fixed  2.60%                   | General Motors Corp.,
7.125%, 7/15/2013 | 227                                        
|10/22/2007
12/20/2008                                                                                                                               | 395,0003            | Fixed  3.06%                   | General Motors Corp.,
7.125%, 7/15/2013 | 2,097                                      
|10/3/2007
12/20/2008                                                                                                                                | 200,0002            | Fixed  3.20%                   | General Motors Corp.,
7.125%, 7/15/2013 | 1,676                                      
|Total net unrealized appreciation                                                                                                                   | 964                
|Counterparties:1Goldman Sachs and Co.2JPMorgan Chase3Lehman Brothers, Inc.4Merrill Lynch Government Securities, Inc.5Citigroup Global Markets, Inc.

As of October 31, 2007, the Fund had the following open forward foreign currency exchange
contracts:

|Contracts to Deliver          |               | In Exchange For |     | Settlement
Date | Unrealized
Appreciation ($)
|----------------------------- | ------------- | --------------- | --- | --------------- | ---------------------------
|USD                           | 57,708        |                 | EUR | 40,000          |                            
|USD                           | 1,814,430     |                 | CAD | 1,750,000       |                            
|USD                           | 10,069,717    |                 | EUR | 7,100,000       |                            
|USD                           | 5,217,028     |                 | JPY | 600,000,000     |                            
|JPY                           | 200,000,000   |                 | USD | 1,748,252       |                            
|USD                           | 1,819,411     |                 | AUD | 2,179,000       |                            
|USD                           | 1,141,554     |                 | AUD | 1,291,000       |                            
|USD                           | 10,127,314    |                 | CAD | 10,516,000      |                            
|USD                           | 2,471,786     |                 | CAD | 2,464,000       |                            
|USD                           | 24,178,676    |                 | EUR | 17,385,000      |                            
|USD                           | 33,266,592    |                 | GBP | 16,420,000      |                            
|USD                           | 4,487,511     |                 | GBP | 2,203,000       |                            
|USD                           | 65,707        |                 | SEK | 427,000         |                            
|USD                           | 19,996,074    |                 | SGD | 30,047,000      |                            
|USD                           | 3,108,534     |                 | SGD | 4,578,000       |                            
|JPY                           | 3,185,130,000 |                 | USD | 28,211,957      |                            
|Total unrealized appreciation | 4,731,035    

|Contracts to Deliver          |             | In Exchange For |     | Settlement
Date | Unrealized
Depreciation ($)
|----------------------------- | ----------- | --------------- | --- | --------------- | ---------------------------
|EUR                           | 40,000      |                 | USD | 57,696          |                            
|EUR                           | 2,839,515   |                 | USD | 4,035,905       |                            
|EUR                           | 1,684,230   |                 | USD | 2,393,857       |                            
|EUR                           | 122,410     |                 | USD | 173,812         |                            
|CAD                           | 5,000,000   |                 | USD | 4,999,450       |                            
|EUR                           | 3,500,000   |                 | USD | 5,002,655       |                            
|GBP                           | 3,400,000   |                 | USD | 6,933,790       |                            
|CHF                           | 39,880,000  |                 | USD | 33,892,543      |                            
|CHF                           | 3,853,000   |                 | USD | 3,290,013       |                            
|SEK                           | 10,486,000  |                 | USD | 1,571,525       |                            
|Total unrealized depreciation | (1,328,074)

|Currency Abbreviations                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|AUD     Australian DollarARS     Argentine PesoBRL     Brazilian RealCAD     Canadian DollarCHF     Swiss FrancEUR     EuroGBP     British PoundJPY     Japanese YenMYR     Malaysian RinggitSEK     Swedish KronaSGD     Singapore DollarUSD     United States Dollar

The accompanying notes are an integral part of the financial statements.

Financial Statements

|Statement of Assets and Liabilitiesas of October 31, 2007                                                       
|----------------------------------------------------------------------------------------------------------------
|Assets                                                                                                          
|Investments:Investments in securities, at value (cost $349,447,889)  including
$25,006,397 of securities loaned
|Investment in DWS Floating Rate Plus Fund (cost $5,025,667)                                                     
|Investment in Daily Assets Fund Institutional (cost $26,199,103)*                                               
|Investment in Cash Management QP Trust (cost $31,134,351)                                                       
|Total investments, at value (cost $411,807,010)                                                                 
|Cash                                                                                                            
|Foreign currency, at value (cost $3,158,957)                                                                    
|Receivable for investments sold                                                                                 
|Interest receivable                                                                                             
|Receivable for Fund shares sold                                                                                 
|Net receivable on closed forward foreign currency exchange contracts                                            
|Foreign taxes recoverable                                                                                       
|Unrealized appreciation on forward foreign currency exchange contracts                                          
|Unrealized appreciation on credit default swap contracts                                                        
|Unrealized appreciation on unfunded loan commitments                                                            
|Other assets                                                                                                    
|Total assets                                                                                                    
|Liabilities                                                                                                     
|Payable for investments purchased                                                                               
|Payable upon return of securities loaned                                                                        
|Payable for Fund shares redeemed                                                                                
|Unrealized depreciation on forward foreign currency exchange contracts                                          
|Accrued management fee                                                                                          
|Payable for daily variation margin on open futures contracts                                                    
|Other accrued expenses and payables                                                                             
|Total liabilities                                                                                               
|Net assets, at value                                                                                            

The accompanying notes are an integral part of the financial statements.

|Statement of Assets and Liabilitiesas of October 31, 2007 (continued)                                                                                                                                                                       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net Assets Consist of                                                                                                                                                                                                                       
|Undistributed net investment income                                                                                                                                                                                                         
|Net unrealized appreciation (depreciation) on:Investments                                                                                                                                                                                   
|Credit default swaps                                                                                                                                                                                                                        
|Unfunded loan commitments                                                                                                                                                                                                                   
|Futures                                                                                                                                                                                                                                     
|Foreign currency                                                                                                                                                                                                                            
|Accumulated net realized gain (loss)                                                                                                                                                                                                        
|Paid-in capital                                                                                                                                                                                                                             
|Net assets, at value                                                                                                                                                                                                                        
|Net Asset Value                                                                                                                                                                                                                             
|Class A
Net Asset Value and redemption price(a) per share
($345,036,551 ÷ 73,372,832 outstanding shares of beneficial interest,
$.01 par value, unlimited number of shares authorized)                                                      
|Maximum offering price per share (100 ÷ 95.50 of $4.70)                                                                                                                                                                                     
|Class B
Net Asset Value, offering and redemption price(a) (subject to contingent
deferred sales charge) per share ($17,018,864 ÷ 3,617,016 outstanding
shares of beneficial interest, $.01 par value, unlimited number of shares
authorized)
|Class C
Net Asset Value, offering and redemption price(a) (subject to contingent
deferred sales charge) per share ($28,047,850 ÷ 5,924,729 outstanding
shares of beneficial interest, $.01 par value, unlimited number of shares
authorized)
|Class S
Net Asset Value, offering and redemption price(a)per share
($2,916,088 ÷ 619,945 outstanding shares of beneficial interest,
$.01 par value, unlimited number of shares authorized)                                                  

The accompanying notes are an integral part of the financial statements.

|Statement of Operationsfor the year ended October 31, 2007                                               
|---------------------------------------------------------------------------------------------------------
|Investment Income                                                                                        
|Income:Dividends                                                                                         
|Dividends from DWS Floating Rate Plus Fund                                                               
|Interest (net of foreign taxes withheld of $1,118)                                                       
|Interest  Cash Management QP Trust                                                                      
|Securities lending income, including income from Daily Assets Fund
Institutional, net of borrower rebates
|Total Income                                                                                             
|Expenses:Management fee                                                                                  
|Services to shareholders                                                                                 
|Custodian fee                                                                                            
|Distribution and service fees                                                                            
|Professional fees                                                                                        
|Trustees' fees and expenses                                                                              
|Reports to shareholders                                                                                  
|Registration fees                                                                                        
|Other                                                                                                    
|Total expenses before expense reductions                                                                 
|Expense reductions                                                                                       
|Total expenses after expense reductions                                                                  
|Net investment income                                                                                    
|Realized and Unrealized Gain (Loss)                                                                      
|Net realized gain (loss) from:Investments                                                                
|Credit default swaps                                                                                     
|Futures                                                                                                  
|Written options                                                                                          
|Foreign currency                                                                                         
|Payments by affiliates (See Note I)                                                                      
|                                                                                                         
|Change in net unrealized appreciation (depreciation) on:Investments                                      
|Credit default swaps                                                                                     
|Unfunded loan commitments                                                                                
|Futures                                                                                                  
|Foreign currency                                                                                         
|                                                                                                         
|Net gain (loss)                                                                                          
|Net increase (decrease) in net assets resulting from operations                                          

The accompanying notes are an integral part of the financial statements.

|Statement of Changes in Net Assets                                                                                  
|--------------------------------------------------------------------------------------------------------------------
|Increase (Decrease) in Net Assets                                                                                   
|2007                                                                                                                
|Operations:Net investment income                                                                                    
|Net realized gain (loss)                                                                                            
|Change in net unrealized appreciation (depreciation)                                                                
|Net increase (decrease) in net assets resulting from
operations                                                     
|Distributions to shareholders from:Net investment income:Class A                                                    
|Class B                                                                                                             
|Class C                                                                                                             
|Class S                                                                                                             
|Net realized gains:Class A                                                                                          
|Class B                                                                                                             
|Class C                                                                                                             
|Class S                                                                                                             
|Fund share transactions:Proceeds from shares sold                                                                   
|Reinvestment of distributions                                                                                       
|Cost of shares redeemed                                                                                             
|Redemption fees                                                                                                     
|Net increase (decrease) in net assets from Fund share
transactions                                                  
|Increase (decrease) in net assets                                                                                   
|Net assets at beginning of period                                                                                   
|Net assets at end of period (including undistributed
net investment income of $188,113 and $3,539,763,
respectively)

The accompanying notes are an integral part of the financial statements.

Financial Highlights

|Class A
Years Ended October 31,                                                                                                                                                                                             | 2007     | 2006     | 2005     | 2004     | 2003    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | -------- | -------- | -------- | --------
|Selected Per Share Data                                                                                                                                                                                                    
|Net asset value, beginning of period                                                                                                                                                                                        | $   4.68 | $   4.69 | $   4.76 | $   4.53 | $   4.08
|Income (loss) from investment operations:
Net investment incomea                                                                                                                                                            | .25      | .24      | .26      | .28      | .27     
|Net realized and unrealized gain (loss)                                                                                                                                                                                     | .07      | .13      | (.05)    | .25      | .49     
|Total from investment operations                                                                                                                                                                                            | .32      | .37      | .21      | .53      | .76     
|Less distributions from:
Net investment income                                                                                                                                                                              | (.28)    | (.38)    | (.28)    | (.30)    | (.10)   
|Net realized gains                                                                                                                                                                                                          | (.02)    |         |         |         |        
|Tax return of capital                                                                                                                                                                                                       |         |         |         |         | (.21)   
|Total distributions                                                                                                                                                                                                         | (.30)    | (.38)    | (.28)    | (.30)    | (.31)   
|Redemption fees                                                                                                                                                                                                             | .00*     | .00*     | .00*     |         |        
|Net asset value, end of period                                                                                                                                                                                              | $   4.70 | $   4.68 | $   4.69 | $   4.76 | $   4.53
|Total Return (%)b                                                                                                                                                                                                           | 7.01c    | 8.37c    | 4.48     | 12.01    | 19.05   
|Ratios to Average Net Assets and Supplemental Data                                                                                                                                                                         
|Net assets, end of period ($ millions)                                                                                                                                                                                      | 345      | 314      | 320      | 334      | 329     
|Ratio of expenses before expense
reductions (%)                                                                                                                                                                             | 1.08     | 1.14     | 1.16     | 1.05     | 1.12    
|Ratio of expenses after expense
reductions (%)                                                                                                                                                                              | 1.07     | 1.13     | 1.16     | 1.05     | 1.12    
|Ratio of net investment income (%)                                                                                                                                                                                          | 5.30     | 5.24     | 5.53     | 6.01     | 6.11    
|Portfolio turnover rate (%)                                                                                                                                                                                                 | 137      | 175      | 130      | 169      | 180     
|aBased on average shares outstanding during the period.bTotal return does not reflect the effect of any sales charges.cTotal return would have been lower had certain expenses not been reduced.*Amount is less than $.005.

|Class B
Years Ended October 31,                                                                                                                                                                                             | 2007     | 2006     | 2005     | 2004     | 2003    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | -------- | -------- | -------- | --------
|Selected Per Share Data                                                                                                                                                                                                    
|Net asset value, beginning of period                                                                                                                                                                                        | $   4.68 | $   4.69 | $   4.76 | $   4.52 | $   4.08
|Income (loss) from investment operations:
Net investment incomea                                                                                                                                                            | .21      | .20      | .22      | .24      | .23     
|Net realized and unrealized gain (loss)                                                                                                                                                                                     | .08      | .13      | (.05)    | .25      | .48     
|Total from investment operations                                                                                                                                                                                            | .29      | .33      | .17      | .49      | .71     
|Less distributions from:
Net investment income                                                                                                                                                                              | (.24)    | (.34)    | (.24)    | (.25)    | (.08)   
|Net realized gains                                                                                                                                                                                                          | (.02)    |         |         |         |        
|Tax return of capital                                                                                                                                                                                                       |         |         |         |         | (.19)   
|Total distributions                                                                                                                                                                                                         | (.26)    | (.34)    | (.24)    | (.25)    | (.27)   
|Redemption fees                                                                                                                                                                                                             | .00*     | .00*     | .00*     |         |        
|Net asset value, end of period                                                                                                                                                                                              | $   4.71 | $   4.68 | $   4.69 | $   4.76 | $   4.52
|Total Return (%)b                                                                                                                                                                                                           | 6.37c    | 7.45c    | 3.53c    | 11.03    | 18.08   
|Ratios to Average Net Assets and Supplemental Data                                                                                                                                                                         
|Net assets, end of period ($ millions)                                                                                                                                                                                      | 17       | 22       | 29       | 46       | 71      
|Ratio of expenses before expense
reductions (%)                                                                                                                                                                             | 1.86     | 2.16     | 2.22     | 1.94     | 1.94    
|Ratio of expenses after expense
reductions (%)                                                                                                                                                                              | 1.85     | 1.94     | 2.04     | 1.94     | 1.94    
|Ratio of net investment income (%)                                                                                                                                                                                          | 4.52     | 4.43     | 4.65     | 5.12     | 5.29    
|Portfolio turnover rate (%)                                                                                                                                                                                                 | 137      | 175      | 130      | 169      | 180     
|aBased on average shares outstanding during the period.bTotal return does not reflect the effect of any sales charges.cTotal return would have been lower had certain expenses not been reduced.*Amount is less than $.005.

|Class C
Years Ended October 31,                                                                                                                                                                                             | 2007     | 2006     | 2005     | 2004     | 2003    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | -------- | -------- | -------- | --------
|Selected Per Share Data                                                                                                                                                                                                    
|Net asset value, beginning of period                                                                                                                                                                                        | $   4.71 | $   4.72 | $   4.79 | $   4.56 | $   4.11
|Income (loss) from investment operations:
Net investment incomea                                                                                                                                                            | .21      | .20      | .22      | .24      | .24     
|Net realized and unrealized gain (loss)                                                                                                                                                                                     | .07      | .13      | (.05)    | .25      | .49     
|Total from investment operations                                                                                                                                                                                            | .28      | .33      | .17      | .49      | .73     
|Less distributions from:
Net investment income                                                                                                                                                                              | (.24)    | (.34)    | (.24)    | (.26)    | (.09)   
|Net realized gains                                                                                                                                                                                                          | (.02)    |         |         |         |        
|Tax return of capital                                                                                                                                                                                                       |         |         |         |         | (.19)   
|Total distributions                                                                                                                                                                                                         | (.26)    | (.34)    | (.24)    | (.26)    | (.28)   
|Redemption fees                                                                                                                                                                                                             | .00*     | .00*     | .00*     |         |        
|Net asset value, end of period                                                                                                                                                                                              | $   4.73 | $   4.71 | $   4.72 | $   4.79 | $   4.56
|Total Return (%)b                                                                                                                                                                                                           | 6.16c    | 7.41c    | 3.58     | 11.08    | 18.20   
|Ratios to Average Net Assets and Supplemental Data                                                                                                                                                                         
|Net assets, end of period ($ millions)                                                                                                                                                                                      | 28       | 22       | 20       | 20       | 20      
|Ratio of expenses before expense
reductions (%)                                                                                                                                                                             | 1.84     | 1.94     | 2.04     | 1.90     | 1.79    
|Ratio of expenses after expense
reductions (%)                                                                                                                                                                              | 1.84     | 1.93     | 2.04     | 1.90     | 1.79    
|Ratio of net investment income (%)                                                                                                                                                                                          | 4.53     | 4.44     | 4.65     | 5.16     | 5.44    
|Portfolio turnover rate (%)                                                                                                                                                                                                 | 137      | 175      | 130      | 169      | 180     
|aBased on average shares outstanding during the period.bTotal return does not reflect the effect of any sales charges.cTotal return would have been lower had certain expenses not been reduced.*Amount is less than $.005.

|Class S
Years Ended October 31,                                                                                                                                                                                                                                                                    | 2007     | 2006     | 2005a   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | -------- | --------
|Selected Per Share Data                                                                                                                                                                                                                                                                           
|Net asset value, beginning of period                                                                                                                                                                                                                                                               | $   4.68 | $   4.69 | $   4.88
|Income (loss) from investment operations:
Net investment incomeb                                                                                                                                                                                                                                   | .26      | .25      | .20     
|Net realized and unrealized gain (loss)                                                                                                                                                                                                                                                            | .07      | .13      | (.17)   
|Total from investment operations                                                                                                                                                                                                                                                                   | .33      | .38      | .03     
|Less distributions from:
Net investment income                                                                                                                                                                                                                                                     | (.29)    | (.39)    | (.22)   
|Net realized gains                                                                                                                                                                                                                                                                                 | (.02)    |         |        
|Total distributions                                                                                                                                                                                                                                                                                | (.31)    | (.39)    | (.22)   
|Redemption fees                                                                                                                                                                                                                                                                                    | .00***   | .00***   | .00***  
|Net asset value, end of period                                                                                                                                                                                                                                                                     | $   4.70 | $   4.68 | $   4.69
|Total Return (%)                                                                                                                                                                                                                                                                                   | 7.25c    | 8.57c    | .54**   
|Ratios to Average Net Assets and Supplemental Data                                                                                                                                                                                                                                                
|Net assets, end of period ($ millions)                                                                                                                                                                                                                                                             | 3        | 2        | 1       
|Ratio of expenses before expense reductions (%)                                                                                                                                                                                                                                                    | .92      | .96      | 1.01*   
|Ratio of expenses after expense reductions (%)                                                                                                                                                                                                                                                     | .90      | .95      | 1.01*   
|Ratio of net investment income (%)                                                                                                                                                                                                                                                                 | 5.47     | 5.42     | 5.76*   
|Portfolio turnover rate (%)                                                                                                                                                                                                                                                                        | 137      | 175      | 130     
|aFor the period from February 1, 2005 (commencement of operations of Class S shares)
to October 31, 2005.bBased on average shares outstanding during the period.cTotal return would have been lower had certain expenses not been reduced.*Annualized**Not annualized***Amount is less than $.005.

Notes to Financial Statements

A. Significant Accounting Policies

DWS Strategic Income Fund (the ``Fund'') is registered under the
Investment Company Act of 1940, as amended (the ``1940 Act''), as an
open-end, diversified management investment company organized as a
Massachusetts business trust.

The Fund offers multiple classes of shares which provide investors with
different purchase options. Class A shares are offered to investors subject
to an initial sales charge. Class B shares are offered to investors without
an initial sales charge but are subject to higher ongoing expenses than
Class A shares and a contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically convert to Class A
shares six years after issuance. Class C shares are offered to investors
without an initial sales charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales charge payable upon
certain redemptions within one year of purchase. Class C shares do not
convert into another class. Class S shares are not subject to initial or
contingent deferred sales charges and are generally not available to new
investors except under certain circumstances.

Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of all classes of shares,
except that each class bears certain expenses unique to that class such as
distribution and service fees, services to shareholders and certain other
class-specific expenses. Differences in class-level expenses may result in
payment of different per share dividends by class. All shares of the Fund
have equal rights with respect to voting subject to class-specific
arrangements.

The Fund's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
which require the use of management estimates. Actual results could
differ from those estimates. The policies described below are followed
consistently by the Fund in the preparation of its financial statements.

Security Valuation. Investments are stated at value determined as of the
close of regular trading on the New York Stock Exchange on each day the
exchange is open for trading. Debt securities are valued by independent
pricing services approved by the Trustees of the Fund. If the pricing
services are unable to provide valuations, securities are valued at the
most recent bid quotation or evaluated price, as applicable, obtained from
a broker-dealer. Such services may use various pricing techniques which
take into account appropriate factors such as yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other data, as well as
broker quotes.

Equity securities are valued at the most recent sale price or official closing
price reported on the exchange (US or foreign) or over-the-counter market
on which the security is traded most extensively. Securities for which no
sales are reported are valued at the calculated mean between the most
recent bid and asked quotations on the relevant market or, if a mean
cannot be determined, at the most recent bid quotation.

Money market instruments purchased with an original or remaining
maturity of sixty days or less, maturing at par, are valued at amortized
cost. Investments in open-end investment companies and Cash
Management QP Trust are valued at their net asset value each business
day.

Securities and other assets for which market quotations are not readily
available or for which the above valuation procedures are deemed not to
reflect fair value are valued in a manner that is intended to reflect their fair
value as determined in accordance with procedures approved by the
Trustees.

In September 2006, the Financial Accounting Standards Board ("FASB")
released Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("FAS 157"). FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair
value measurements. FAS 157 is effective for fiscal years beginning after
November 15, 2007. As of October 31, 2007, management does not
believe the adoption of FAS 157 will impact the amounts reported in the
financial statements, however, additional disclosures will be required
about the inputs used to develop the measurements of fair value and the
effect of certain of the measurements reported in the statement of
operations for a fiscal period.

Securities Lending. The Fund may lend securities to financial institutions.
The Fund retains beneficial ownership of the securities it has loaned and
continues to receive interest and dividends paid by the issuer of securities
and to participate in any changes in their market value. The Fund requires
the borrowers of the securities to maintain collateral with the Fund
consisting of liquid, unencumbered assets having a value at least equal to
the value of the securities loaned. The Fund may invest the cash collateral
into a joint trading account in an affiliated money market fund pursuant to
Exemptive Orders issued by the SEC. The Fund receives compensation
for lending its securities either in the form of fees or by earning interest
on invested cash collateral net of borrower rebates and fees paid to
lending agent. Either the Fund or the borrower may terminate the loan.
The Fund is subject to all investment risks associated with the value of
any cash collateral received, including, but not limited to, interest rate,
credit and liquidity risk associated with such investments.

Senior Bank Debt.Senior loans are portions of loans originated by banks
and sold in pieces to investors. These US dollar-denominated fixed and
floating rate loans ("Loans") in which the Fund invests, are arranged
through private negotiations between the borrower and one or more
financial institutions ("Lenders"). The Fund invests in such Loans in the
form of participations in Loans ("Participations") or assignments of all or a
portion of loans from third parties ("Assignments"). Participations typically
result in the Fund having a contractual relationship only with the Lender,
not with the borrower. The Fund has the right to receive payments of
principal, interest and any fees to which it is entitled 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 has 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 will not benefit
directly from any collateral supporting the Loan in which it has purchased
the Participation. As a result, the Fund assumes the credit risk of both the
borrower and the Lender that is selling the Participation. Assignments
typically result in the Fund having a direct contractual relationship with the
borrower, and the Fund may enforce compliance by the borrower with the
terms of the loan agreement. All Senior Loans involve interest rate risk,
liquidity risk and credit risk, including the potential default or insolvency of
the borrower.

Credit Default Swap Contracts. A credit default swap is a contract
between a buyer and a seller of protection against a pre-defined credit
event. The Fund may buy or sell credit default swap contracts to seek to
increase the Fund's income, to add leverage to the portfolio, or to hedge
the risk of default on portfolio securities. As a seller in the credit default
swap contract, the Fund would be required to pay the par (or other
agreed-upon) value of the referenced debt obligation to the counterparty
in the event of a default by a third party, such as a US or foreign corporate
issuer, on the debt obligation, which would likely result in a loss to the
Fund. In return, the Fund would receive from the counterparty a periodic
stream of payments over the term of the contract provided that no event
of default has occurred. If no default occurs, the Fund would keep the
stream of payments and would have no payment obligations. The Fund
may also buy credit default swap contracts in order to hedge against the
risk of default of debt securities, in which case the Fund would function as
the counterparty referenced above. This would involve the risk that the
contract may expire worthless. It would also involve credit risk  that the
seller may fail to satisfy its payment obligations to the Fund in the event of
a default. When the Fund sells a credit default swap contract it will
"cover" its commitment. This may be achieved by, among other methods,
maintaining cash or liquid assets equal to the aggregate notional value of
the underlying debt obligations for all outstanding credit default swap
contracts sold by the Fund.

Credit default swap contracts are marked to market daily based upon
quotations from the counterparty and the change in value, if any, is
recorded daily as unrealized gain or loss. An upfront payment made by the
Fund, if any, is recorded as an asset on the statement of assets and
liabilities. An upfront payment received by the Fund, if any, is recorded as
a liability on the statement of assets and liabilities. Under the terms of the
credit default swap contracts, the Fund receives or makes payments
semi-annually based on a specified interest rate on a fixed notional
amount. These payments are recorded as a realized gain or loss on the
statement of operations. Payments received or made as a result of a
credit event or termination of the contract are recognized, net of a
proportional amount of the upfront payment, as realized gains or losses.

Foreign Currency Translations. The books and records of the Fund are
maintained in US dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into US dollars
at the prevailing exchange rates at period end. Purchases and sales of
investment securities, income and expenses are translated into US dollars
at the prevailing exchange rates on the respective dates of the
transactions.

Net realized and unrealized gains and losses on foreign currency
transactions represent net gains and losses between trade and
settlement dates on securities transactions, the disposition of forward
foreign currency exchange contracts and foreign currencies, and the
difference between the amount of net investment income accrued and
the US dollar amount actually received. That portion of both realized and
unrealized gains and losses on investments that results from fluctuations
in foreign currency exchange rates is not separately disclosed but is
included with net realized and unrealized gain/appreciation and
loss/depreciation on investments.

Futures Contracts. A futures contract is an agreement between a buyer or
seller and an established futures exchange or its clearinghouse in which
the buyer or seller agrees to take or make a delivery of a specific amount
of a financial instrument at a specified price on a specific date (settlement
date). The Fund may enter into futures contracts as a hedge against
anticipated interest rate, currency or equity market changes, and for
duration management, risk management and return enhancement
purposes.

Upon entering into a futures contract, the Fund is required to deposit with
a financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund
dependent upon the daily fluctuations in the value of the underlying
security and are recorded for financial reporting purposes as unrealized
gains or losses by the Fund. When entering into a closing transaction, the
Fund will realize a gain or loss equal to the difference between the value
of the futures contract to sell and the futures contract to buy. Futures
contracts are valued at the most recent settlement price.

Certain risks may arise upon entering into futures contracts, including the
risk that an illiquid secondary market will limit the Fund's ability to close
out a futures contract prior to the settlement date and that a change in the
value of a futures contract may not correlate exactly with the changes in
the value of the securities or currencies hedged. When utilizing futures
contracts to hedge, the Fund gives up the opportunity to profit from
favorable price movements in the hedged positions during the term of the
contract.

Forward Foreign Currency Exchange Contracts. A forward foreign
currency exchange contract ("forward currency contract") is a
commitment to purchase or sell a foreign currency at the settlement date
at a negotiated rate. The Fund may enter into forward currency contracts
in order to hedge its exposure to changes in foreign currency exchange
rates on its foreign currency denominated portfolio holdings and to
facilitate transactions in foreign currency denominated securities.

Forward currency contracts are valued at the prevailing forward exchange
rate of the underlying currencies and unrealized gain (loss) is recorded
daily. Sales and purchases of forward currency contracts having the same
settlement date and broker are offset and any gain (loss) is realized on the
date of offset; otherwise, gain (loss) is realized on settlement date.
Realized and unrealized gains and losses which represent the difference
between the value of a forward currency contract to buy and a forward
currency contract to sell are included in net realized and unrealized gain
(loss) from foreign currency related transactions.

Certain risks may arise upon entering into forward currency contracts
from the potential inability of counterparties to meet the terms of their
contracts. Additionally, when utilizing forward currency contracts to
hedge, the Fund gives up the opportunity to profit from favorable
exchange rate movements during the term of the contract.

Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or
sell to (put option), the writer a designated instrument at a specified price
within a specified period of time. Certain options, including options on
indices, will require cash settlement by the Fund if the option is exercised.
The Fund may enter into option contracts in order to hedge against
potential adverse price movements in the value of portfolio assets; as a
temporary substitute for selling selected investments; to lock in the
purchase price of a security or currency which it expects to purchase in
the near future; as a temporary substitute for purchasing selected
investments; and to enhance potential gain.

The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last
sale price or, in the absence of a sale, the mean between the closing bid
and asked prices or at the most recent asked price (bid for purchased
options) if no bid and asked price are available. Over-the-counter written or
purchased options are valued using dealer supplied quotations. Gain or
loss is recognized when the option contract expires or is closed.

If the Fund writes a covered call option, the Fund foregoes, in exchange
for the premium, the opportunity to profit during the option period from an
increase in the value of the underlying security above the exercise price. If
the Fund writes a put option it accepts the risk of a decline in the value of
the underlying security below the exercise price. Over-the-counter options
have the risk of the potential inability of counterparties to meet the terms
of their contracts. The Fund's maximum exposure to purchased options is
limited to the premium initially paid. In addition, certain risks may arise
upon entering into option contracts including the risk that an illiquid
secondary market will limit the Fund's ability to close out an option
contract prior to the expiration date and that a change in the value of the
option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.

Federal Income Taxes. The Fund's policy is to comply with the
requirements of the Internal Revenue Code, as amended, which are
applicable to regulated investment companies, and to distribute all of its
taxable income to its shareholders. Accordingly, the Fund paid no federal
income taxes and no federal income tax provision was required.

At October 31, 2007, the Fund had a net tax basis capital loss
carryforward of approximately $93,950,000 which may be applied against
any realized net taxable capital gains of each succeeding year until fully
utilized or until October 31, 2008 ($25,665,000), October 31, 2009
($20,682,000), October 31, 2010 ($38,904,000), October 31, 2011
($2,469,000), October 31, 2012 ($1,247,000) and October 31, 2014
($4,983,000), the respective expiration dates, whichever occurs first.

During the year ended October 31, 2007, the Fund utilized approximately
$956,000 and lost, through expiration, approximately $15,323,000 of prior
year capital loss carryforward.

In July 2006, FASB issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes  an interpretation of FASB Statement
No. 109" (the "Interpretation"). The Interpretation establishes for the
Fund a minimum threshold for financial statement recognition of the
benefit of positions taken in filing tax returns (including whether the Fund
is taxable in certain jurisdictions), and requires certain expanded tax
disclosures. The Interpretation is effective for fiscal years beginning after
December 15, 2006. On December 22, 2006, the SEC indicated that they
would not object if a Fund implements FIN 48 in the first required financial
statement reporting period for its fiscal year beginning after December 15,
2006. Management is evaluating the application of the Interpretation to
the Fund and is not in a position at this time to estimate the significance
of its impact, if any, on the Fund's financial statements.

Distribution of Income and Gains. Net investment income of the Fund is
declared and distributed to shareholders monthly. Net realized gains from
investment transactions, in excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed, and, therefore, will be
distributed to shareholders at least annually.

The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from accounting principles generally
accepted in the United States of America. These differences primarily
relate to securities sold at a loss, premium amortization on debt
securities, investments in futures, forward currency contracts and
recognition of certain foreign currency gain (loss) as ordinary income. As a
result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting the net asset value of the Fund.

At October 31, 2007, the Fund's components of distributable earnings
(accumulated losses) on a tax-basis were as follows:

|Undistributed ordinary income                             | $      2,870,071   
|--------------------------------------------------------- | -------------------
|Capital loss carryforwards                                | $      (93,950,000)
|Net unrealized appreciation (depreciation) on investments | $      (303,351)   

In addition, the tax character of distributions paid to shareholders by the
Fund are summarized as follows:

|                                    | Years Ended October 31,
|----------------------------------- | -----------------------
|                                    | 2007                   
|Distributions from ordinary income* | $      23,449,870      

Redemption Fees. For the period from November 1, 2006 through
March 11, 2007, the redemption or exchange of shares held for less than
30 days were assessed a fee of 2% of the total amount redeemed or
exchanged. Effective March 12, 2007, the Fund imposes a redemption fee
of 2% of the total redemption amount on all Fund shares redeemed or
exchanged within 15 days of buying them, either by purchase or exchange.
This fee is assessed and retained by the Fund for the benefit of the
remaining shareholders. The redemption fee is accounted for as an
addition to paid-in capital.

Contingencies. In the normal course of business, the Fund may enter into
contracts with service providers that contain general indemnification
clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against
the Fund that have not yet been made. However, based on experience,
the Fund expects the risk of loss to be remote.

Other. Investment transactions are accounted for on a trade date plus one
basis for daily net asset value calculations. However, for financial reporting
purposes, investment transactions are reported on trade date. Interest
income is recorded on the accrual basis net of foreign withholding taxes.
Dividend income is recorded on the ex-dividend date net
of foreign withholding taxes. Certain dividends from foreign securities
may be recorded subsequent to the ex-dividend date as soon as the Fund
is informed of such dividends. Realized gains and losses from investment
transactions are recorded on an identified cost basis. All premiums and
discounts are amortized/accreted for financial reporting purposes, with
the exception of securities in default of principal.

B. Purchases and Sales of Securities

During the year ended October 31, 2007, purchases and sales of
investment securities (excluding short-term investments and US Treasury
securities) aggregated $369,697,712 and $346,229,848, respectively.
Purchases and sales of US Treasury securities aggregated $144,777,703
and $117,529,030, respectively.

For the year ended October 31, 2007, transactions for written options on
securities were as follows:

|                                 | Number of
Contracts | Premium 
|-------------------------------- | ------------------- | --------
|Outstanding, beginning of period |                    | $      
|Options written                  | 980,000             | 1,470   
|Options closed                   | (735,000)           | (1,164) 
|Options expired                  | (245,000)           | (306)   
|Outstanding, end of period       |                    | $      

C. Related Parties

Management Agreement. Under the Investment Management
Agreement with Deutsche Investment Management Americas Inc.
("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of
Deutsche Bank AG, the Advisor directs the investments of the Fund in
accordance with its investment objectives, policies and restrictions. The
Advisor determines the securities, instruments and other contracts
relating to investments to be purchased, sold or entered into by the Fund.
In addition to portfolio management services, the Advisor provides certain
administrative services in accordance with the Investment Management
Agreement.

Under the Investment Management Agreement with the Advisor, the
Fund pays a monthly management fee based on the Fund's average daily
net assets, computed and accrued daily and payable monthly at the
following annual rates:

|First $250 million of the Fund's average daily net assets | .580%
|--------------------------------------------------------- | -----
|Next $750 million of such net assets                      | .550%
|Next $1.5 billion of such net assets                      | .530%
|Next $2.5 billion of such net assets                      | .510%
|Next $2.5 billion of such net assets                      | .480%
|Next $2.5 billion of such net assets                      | .460%
|Next $2.5 billion of such net assets                      | .440%
|Over $12.5 billion of such net assets                     | .420%

The Fund did not impose a portion of its management fees by an amount
equal to the amount of management fee borne by the Fund as a
shareholder of the DWS Floating Rate Plus Fund ("DWS affiliated mutual
fund").

Accordingly, for the year ended October 31, 2007, the Advisor waived a
portion of its management fee pursuant to the Investment Management
Agreement aggregating $3,054 and the amount charged aggregated
$2,134,764 which was equivalent to an annual effective rate of 0.57% of
the Fund's average daily net assets.

For the period from November 1, 2006 through September 30, 2007, the
Advisor had agreed to contractually waive all or a portion of its
management fee and reimburse or pay certain operating expenses of
Class B and C shares (excluding certain expenses such as extraordinary
expenses, taxes, brokerage, interest and organizational and offering
expenses) to the extent necessary to maintain the operating expenses at
1.93% and 1.89%, respectively.

Effective October 1, 2007 through September 30, 2008, the Advisor has
contractually agreed to waive all or a portion of its management fee and
reimburse or pay certain operating expenses of the Fund (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and
interest expenses) to the extent necessary to maintain the operating
expenses of each class as follows:

|Class A | 1.12%
|------- | -----
|Class B | 1.87%
|Class C | 1.87%
|Class S | .87% 

Service Provider Fees. DWS Scudder Investments Service Company
("DWS-SISC"), an affiliate of the Advisor, is the transfer agent,
dividend-paying agent and shareholder service 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 Class S shares of the Fund. Effective April 1,
2007, DWS-SSC merged with DWS-SISC. The Board of the Fund approved
a new transfer agency agreement between the Fund and DWS-SISC. The
new transfer agency agreement is identical in substance to the previous
transfer agency agreement for the Fund, except for the named transfer
agent. Pursuant to a sub-transfer agency agreement among DWS-SISC,
DWS-SSC (through March 31, 2007) and DST Systems, Inc. ("DST"),
DWS-SISC and DWS-SSC have delegated certain transfer agent and
dividend paying agent functions to DST. DWS-SISC and DWS-SSC
compensate DST out of the shareholder servicing fee they receive from
the Fund. For the year ended October 31, 2007, the amounts charged to
the Fund by DWS-SISC and DWS-SSC (through March 31, 2007) were as
follows:

|Service Provider Fee | Total
Aggregated | Waived   | Unpaid at
October 31,
2007
|-------------------- | ---------------- | -------- | --------------------------
|Class A              | $      447,133   | $       | $      76,365             
|Class B              | 28,292           |         | 8,843                     
|Class C              | 32,375           |         | 5,822                     
|Class S              | 4,666            | 395      | 404                       
|                     | $   512,466      | $   395  | $   91,434                

Distribution and Service Fees. Under the Fund's Class B and Class C
12b-1 Plans, DWS Scudder Distributors, Inc. ("DWS-SDI"), an affiliate of
the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily
net assets of each of Class B and C shares. In accordance with the Fund's
Underwriting and Distribution Services Agreement, DWS-SDI enters into
related selling group agreements with various firms at various rates for
sales of Class B and C shares. For the year ended October 31, 2007, the
Distribution Fee was as follows:

|Distribution Fee | Total
Aggregated | Unpaid at
October 31,
2007
|---------------- | ---------------- | --------------------------
|Class B          | $      146,502   | $      10,278             
|Class C          | 187,619          | 17,706                    
|                 | $   334,121      | $   27,984                

In addition, DWS-SDI provides information and administrative services for
a fee ("Service Fee") to Class A, B and C shareholders at an annual rate of
up to 0.25% of average daily net assets for each such class. DWS-SDI in
turn has various agreements with financial services firms that provide
these services and pays these fees based upon the assets of shareholder
accounts the firms service. For the year ended October 31, 2007, the
Service Fee was as follows:

|Service Fee | Total
Aggregated | Unpaid at
October 31,
2007 | Annual
Effective Rate
|----------- | ---------------- | -------------------------- | ---------------------
|Class A     | $      740,792   | $      68,784              | .23%                 
|Class B     | 48,192           | 3,670                      | .25%                 
|Class C     | 61,489           | 6,031                      | .25%                 
|            | $   850,473      | $   78,485                 |                      

Underwriting and Contingent Deferred Sales Charge. DWS-SDI is the
principal underwriter for the Fund. Underwriting commissions paid in
connection with the distribution of Class A shares for the year ended
October 31, 2007 aggregated $50,161.

In addition, DWS-SDI receives any contingent deferred sales charge
("CDSC") from Class B share redemptions occurring within six years of
purchase and Class C share redemptions occurring within one year of
purchase. There is no such charge upon redemption of any share
appreciation or reinvested dividends. The CDSC is based on declining
rates ranging from 4% to 1% for Class B and 1% for Class C, of the value
of the shares redeemed. For the year ended October 31, 2007, the CDSC
for Class B and C shares aggregated $44,987 and $17,509, respectively. A
deferred sales charge of up to 0.85% is assessed on certain redemptions
of Class A shares. For the year ended October 31, 2007, DWS-SDI
received $552 for Class A shares.

Typesetting and Filing Service Fees. Under an agreement with DIMA,
DIMA is compensated for providing typesetting and certain regulatory,
filing services to the Fund. For the year ended October 31, 2007, the
amount charged to the Fund by DIMA included in the Statement of
Operations under "reports to shareholders" aggregated $42,639, of
which $12,446 is unpaid.

Trustees' Fees and Expenses. The Fund paid each Trustee not affiliated
with the Advisor retainer fees plus specific amounts for various
committee services and for the Board Chairperson.

Cash Management QP Trust. Pursuant to an Exemptive Order issued
by the SEC, the Fund may invest in the Cash Management QP Trust
(the "QP Trust") and other affiliated funds managed by the Advisor. The
QP Trust seeks to provide as high a level of current income as is
consistent with the preservation of capital and the maintenance of
liquidity. The QP Trust does not pay the Advisor a management fee for the
affiliated funds' investments in the QP Trust.

D. Fee Reductions

For the year ended October 31, 2007, the Advisor agreed to reimburse the
Fund $5,442, which represents a portion of the fee savings expected to
be realized by the Advisor related to the outsourcing by the Advisor of
certain administrative services to an unaffiliated service provider.

In addition, the Fund has entered into an arrangement with its custodian
and transfer agent whereby credits realized as a result of uninvested cash
balances are used to reduce a portion of the Fund's custodian expenses.
During the year ended October 31, 2007, the Fund's custodian fees were
reduced by $5,223 and $13,772, respectively, for the custody and transfer
agent credits earned.

E. Line of Credit

The Fund and other affiliated funds (the ``Participants'') share in a
$750 million revolving credit facility administered by JPMorgan Chase
Bank, N.A. for temporary or emergency purposes, including the meeting
of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual
commitment fee which is allocated, based upon net assets, among each
of the Participants. Interest is calculated at the Federal Funds Rate plus
0.35 percent. The Fund may borrow up to a maximum of 33 percent of its
net assets under the agreement.

F. Investing in High-Yield Securities

Investing in high-yield securities may involve greater risks and
considerations not typically associated with investing in US Government
bonds and other high quality fixed-income securities. These securities are
non-investment grade securities, often referred to as "junk bonds."
Economic downturns may disrupt the high-yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates would likely have an adverse impact on the value of such
obligations. Moreover, high-yield securities may be less liquid due to the
extent that there is no established retail secondary market and because of
a decline in the value of such securities.

G. Investing in Emerging Markets

Investing in emerging markets may involve special risks and
considerations not typically associated with investing in the United States
of America. These risks include revaluation of currencies, high rates of
inflation, repatriation restrictions on income and capital, and future
adverse political, social and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government
ownership controls or delayed settlements and may have prices more
volatile than those of comparable securities of issuers in the United
States of America.

H. Share Transactions

The following table summarizes share and dollar activity in the Fund:

|                                                               | Year Ended October 31, 2007 | Year Ended October 31, 2006
|-------------------------------------------------------------- | --------------------------- | ---------------------------
|                                                               | Shares                      | Dollars                    
|Shares sold                                                   
|Class A                                                        | 15,141,528                  | $      70,645,230          
|Class B                                                        | 730,944                     | 3,401,588                  
|Class C                                                        | 2,660,083                   | 12,472,733                 
|Class S                                                        | 404,542                     | 1,889,764                  
|                                                               |                             | $   88,409,315             
|Shares issued to shareholders in reinvestment of distributions
|Class A                                                        | 3,210,062                   | $      14,954,294          
|Class B                                                        | 152,724                     | 712,112                    
|Class C                                                        | 201,434                     | 944,367                    
|Class S                                                        | 24,546                      | 114,355                    
|                                                               |                             | $   16,725,128             
|Shares redeemed                                               
|Class A                                                        | (12,057,676)                | $      (56,147,373)        
|Class B                                                        | (2,039,653)                 | (9,494,648)                
|Class C                                                        | (1,534,319)                 | (7,191,030)                
|Class S                                                        | (167,698)                   | (785,402)                  
|                                                               |                             | $   (73,618,453)           
|Redemption fees                                                | $   18,633                  |                            
|Net increase (decrease)                                       
|Class A                                                        | 6,293,914                   | $      29,469,301          
|Class B                                                        | (1,155,985)                 | (5,380,914)                
|Class C                                                        | 1,327,198                   | 6,227,461                  
|Class S                                                        | 261,390                     | 1,218,775                  
|                                                               |                             | $   31,534,623             

I. Payments made by Affiliates

During the year ended October 31, 2007, the Advisor fully reimbursed the
Fund $13,820 for losses incurred on trades executed incorrectly. The
amount of the loss was less than 0.01% of the Fund's average net assets
thus having no impact on the Fund's total return.

Report of Independent Registered
Public Accounting Firm

To the Shareholders and Board of Trustees of
DWS Strategic Income Fund:

We have audited the accompanying statement of assets and liabilities of
DWS Strategic Income Fund (the "Fund"), including the investment
portfolio, as of October 31, 2007, and the related statement of operations
for the year then ended, the statement of changes in net assets for each
of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of
material misstatement. We were not engaged to perform an audit of the
Fund's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Fund's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
financial highlights, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2007, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of DWS
Strategic Income Fund at October 31, 2007, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein, in conformity with U.S. generally accepted
accounting principles.

|Boston, Massachusetts
December 27, 2007 |  | sif_eny0
|--------------------------------------- |  | --------

Tax Information(Unaudited)

For federal income tax purposes, the Fund designates approximately
$29,000, or the maximum amount allowable under tax law, as qualified
dividend income.

Please consult a tax advisor if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have
specific questions about your account, please call (800) 621-1048.

Investment Management Agreement
Approval

The Board of Trustees, including the Independent Trustees, approved
the renewal of your Fund's investment management agreement (the
"Agreement") with Deutsche Investment Management Americas Inc.
("DIMA" or the "Advisor") in September 2007. As part of its review
process, the Board requested and evaluated all information it deemed
reasonably necessary to evaluate the Agreement. Over the course of
several months, the Contract Review Committee, in coordination with the
Fixed-Income Oversight Committee and the Operations Committee of the
Board, reviewed comprehensive materials received from the Advisor,
independent third parties and independent counsel. These materials
included an analysis of the Fund's performance, fees and expenses, and
profitability compiled by an independent fee consultant. The Board also
received extensive information throughout the year regarding
performance and operating results of the Fund. Based on their evaluation
of the information provided, the Committees presented their findings and
recommendations to the Independent Trustees as a group. The
Independent Trustees then reviewed the Committees' findings and
recommendations and presented their recommendations to the full
Board. Throughout their consideration of the Agreement, the Independent
Trustees were advised by their independent legal counsel and by an
independent fee consultant.

In connection with the contract review process, the various Committees
and the Board considered the factors discussed below, among others.
The Board also considered that the Advisor and its predecessors have
managed the Fund since its inception, and the Board believes that a
long-term relationship with a capable, conscientious advisor is in the best
interests of the Fund. The Board considered, generally, that shareholders
invested in the Fund, or approved the investment management
agreement for the Fund, knowing that the Advisor managed the Fund
and knowing the investment management fee schedule. The Board
considered Deutsche Bank's commitment that it will devote to the Advisor
and its affiliates all attention and resources that are necessary to provide
the Fund with top-quality investment management and shareholder,
administrative and product distribution services.

Nature, Quality and Extent of Services. The Board considered the nature,
extent and quality of services provided under the Agreement, including
portfolio management services and administrative services. The Board
considered the experience and skills of senior management and
investment personnel, the resources made available to such personnel,
the ability of the Advisor to attract and retain high-quality personnel, and
the organizational depth and stability of the Advisor. The Board reviewed
the Fund's performance over short-term and long-term periods and
compared those returns to various agreed-upon performance measures,
including market indices and a peer universe compiled by the independent
fee consultant using information supplied by Lipper Inc. ("Lipper"). The
Board considered whether investment results were consistent with the
Fund's investment objective and policies. The Board also noted that it has
put a process into place of identifying "Focus Funds" (e.g., funds
performing poorly relative to their benchmark or a peer group compiled by
Lipper), and receives more frequent reporting and information from the
Advisor regarding such funds, along with the Advisor's remedial plans to
address underperformance. The Board believes this process is an
effective manner of addressing poorly performing funds at this time.

On the basis of this evaluation and the ongoing review of investment
results by the Fixed-Income Oversight Committee, the Board concluded
that the nature, quality and extent of services provided by the Advisor
historically have been and continue to be satisfactory, and that the Fund's
performance over time was satisfactory.

Fees and Expenses. The Board considered the Fund's management fee
rate, operating expenses and total expense ratios, and compared
management fees to a peer group and total expenses to a broader peer
universe based on information and data supplied by Lipper and
supplemented by the independent fee consultant. The information
provided to the Board, which included the effect of an expense cap for
Class B shares that expired on October 1, 2007, showed that the Fund's
management fee rate was at the 25thpercentile of the peer group, and
that the Fund's total expense ratios (excluding any 12b-1 fees) were at the
following percentiles of the peer universe: the 75thpercentile for Class A
shares, the 83rdpercentile for Class B shares, the 75thpercentile for
Class C shares, and the 75thpercentile for Class S shares. The Board also
considered the Fund's management fee rate as compared to fees charged
by the Advisor and certain of its affiliates for comparable mutual funds and
considered differences in fund and fee structures among the DWS Funds.

In light of the expense rankings, the Board recommended caps on total
expenses through September 30, 2008 as follows: 1.116% for Class A
shares, 1.866% for Class B shares, 1.866% for Class C shares and
0.866% for Class S shares. On the basis of the information provided, the
Board concluded that management fees, coupled with the Advisor's
commitment to cap expenses as recommended, were reasonable and
appropriate in light of the nature, quality and extent of services provided
by the Advisor. The Board noted that, although total expense ratios for
each share class were above the median of the peer universe, such total
expense ratios (after the recommended expense caps) were within an
acceptable range of the peer universe and consistent with reasonable
expectations in light of the nature, quality and extent of services provided
by the Advisor.

Profitability. The Board reviewed detailed information regarding revenues
received by the Advisor under the Agreement. The Board considered the
estimated costs and pre-tax profits realized by the Advisor from advising
the DWS Funds, as well as estimates of the pre-tax profits attributable to
managing the Fund in particular. The Board also received information
regarding the estimated enterprise-wide profitability of the DWS Scudder
organization with respect to all fund services in totality and by fund. The
Board reviewed DIMA's methodology in allocating its costs to the
management of the Fund. Although the Board noted the inherently
subjective nature of any allocation methodology, the Board received an
attestation report from an accounting firm affirming that the allocation
methods were consistently applied and were based upon practices
commonly used in the investment management industry. The Board
noted, based on the information provided, that the Advisor operated the
Fund at a loss.

Economies of Scale. The Board considered whether there are economies
of scale with respect to the management of the Fund and whether the
Fund benefits from any economies of scale. The Board considered
whether the management fee schedule under the Agreement is
reasonable in relation to the asset size of the Fund. The Board noted that
the management fee schedule included seven breakpoints, designed to
share economies of scale with Fund shareholders. The Board concluded
that the management fee schedule, together with the expense caps,
reflects an appropriate level of sharing of any economies of scale.

Other Benefits to DIMA and Its Affiliates.The Board also considered the
character and amount of other incidental benefits received by DIMA and
its affiliates, including any fees received by the Advisor for administrative
services provided to the Fund and any fees received by an affiliate of the
Advisor for distribution services. The Board also considered benefits to
DIMA related to brokerage and soft-dollar allocations, which pertain
primarily to funds investing in equity securities, along with the incidental
public relations benefits to DIMA related to DWS Funds advertising and
cross-selling opportunities among DeAM products and services. The
Board concluded that management fees were reasonable in light of these
fallout benefits.

Based on all of the information considered and the conclusions reached,
the Board (including a majority of the Independent Trustees) determined
that the terms of the Agreement continue to be fair and reasonable and
that the continuation of the Agreement is in the best interests of the
Fund. No single factor was determinative in the Board's analysis.

Summary of Management Fee Evaluation
by Independent Fee Consultant

October 26, 2007

Pursuant to an Order entered into by Deutsche Investment Management
Americas and affiliates (collectively, "DeAM") with the Attorney General
of New York, I, Thomas H. Mack, have been appointed the Independent
Fee Consultant for the DWS Scudder Funds. My duties include preparing
an annual written evaluation of the management fees DeAM charges the
Funds, considering among other factors the management fees charged by
other mutual fund companies for like services, management fees DeAM
charges other clients for like services, DeAM's costs of supplying services
under the management agreements and related profit margins, possible
economies of scale if a Fund grows larger, and the nature and quality of
DeAM's services, including fund performance. This report summarizes my
evaluation for 2007, including my qualifications, the evaluation process for
each of the DWS Scudder Funds, consideration of certain complex-level
factors, and my conclusions.

Qualifications

For more than 30 years I have served in various professional capacities
within the investment management business. I have held investment
analysis and advisory positions, including securities analyst, portfolio
strategist and director of investment policy with a large investment firm. I
have also performed business management functions, including business
development, financial management and marketing research and analysis.

Since 1991, I have been an independent consultant within the asset
management industry. I have provided services to over 125 client
organizations, including investment managers, mutual fund boards,
product distributors and related organizations. Over the past several years
I have completed a number of assignments for mutual fund boards,
specifically including assisting boards with management contract renewal.

I hold a Master of Business Administration degree, with highest honors,
from Harvard University; and Master of Science and Bachelor of Science
(highest honors) degrees from the University of California at Berkeley. I
am an independent director and audit committee financial expert for two
closed-end mutual funds, serve on the board of directors of a private
market research company, and have served in various leadership and
financial oversight capacities with non-profit organizations.

Evaluation of Fees for each DWS Scudder Fund

My work focused primarily on evaluating, fund-by-fund, the fees charged
to each of the 136 Fund portfolios in the DWS Scudder Fund family. For
each Fund, I considered each of the key factors mentioned above, as well
as any other relevant information. In doing so I worked closely with the
Funds' Independent Directors in their annual contract renewal process, as
well as in their approval of contracts for several new funds (documented
separately).

In evaluating each Fund's fees, I reviewed comprehensive materials
provided by or on behalf of DeAM, including expense information
prepared by Lipper Analytical, comparative performance information,
profitability data, manager histories, and other materials. I also accessed
certain additional information from the Lipper, Strategic Insight, and
Morningstar databases and drew on my industry knowledge and
experience.

To facilitate evaluating this considerable body of information, I prepared
for each Fund a document summarizing the key data elements in each
area as well as additional analytics discussed below. This made it possible
to consider each key data element in the context of the others.

In the course of contract renewal, DeAM agreed to implement a number
of fee and expense adjustments requested by the Independent Directors
which will favorably impact future fees and expenses, and my evaluation
includes the effects of these changes.

Fees and Expenses Compared with Other Funds

The competitive fee and expense evaluation for each fund focused on two
primary comparisons:

The Fund's contractual management fee (the advisory fee plus the
administration fee where applicable) compared with those of a group of
typically 12-15 funds in the same Lipper investment category (e.g.
Large Capitalization Growth) having similar distribution arrangements
and being of similar size.

The Fund's total expenses compared with a broader universe of funds
from the same Lipper investment category and having similar
distribution arrangements.

These two comparisons provide a view of not only the level of the fee
compared with funds of similar scale but also the total expense the Fund
bears for all the services it receives, in comparison with the investment
choices available in the Fund's investment category and distribution
channel. The principal figure-of-merit used in these comparisons was the
subject Fund's percentile ranking against peers.

DeAM's Fees for Similar Services to Others

DeAM provided management fee schedules for all of its US domiciled
fund and non-fund investment management accounts in any of the
investment categories where there is a DWS Scudder Fund. These similar
products included the other DWS Scudder Funds, non-fund pooled
accounts, institutional accounts and sub-advisory accounts. Using this
information, I calculated for each Fund the fee that would be charged to
each similar product, at the subject Fund's asset level.

Evaluating information regarding non-fund products is difficult because
there are varying levels of services required for different types of
accounts, with mutual funds generally requiring considerably more
regulatory and administrative types of service as well as having more
frequent cash flows than other types of accounts. Also, while mutual fund
fees for similar fund products can be expected to be similar, there will be
some differences due to different pricing conditions in different
distribution channels (e.g. retail funds versus those used in variable
insurance products), differences in underlying investment processes and
other factors.

Costs and Profit Margins

DeAM provided a detailed profitability analysis for each Fund. After
making some adjustments so that the presentation would be more
comparable to the available industry figures, I reviewed profit margins
from investment management alone, from investment management plus
other fund services (excluding distribution) provided to the Funds by
DeAM (principally shareholder services), and DeAM profits from all
sources, including distribution. A later section comments on overall
profitability.

Economies of Scale

Economies of scale  an expected decline in management cost per dollar
of fund assets as fund assets grow  are very rarely quantified and
documented because of inherent difficulties in collecting and analyzing
relevant data. However, in virtually every investment category that I
reviewed, larger funds tend to have lower fees and lower total expenses
than smaller funds. To see how each DWS Scudder Fund compares with
this industry observation, I reviewed:

The trend in Fund assets over the last five years and the accompanying
trend in total expenses. This shows if the Fund has grown and, if so,
whether total expense (management fees as well as other expenses)
have declined as a percent of assets.

Whether the Fund has break-points in its management fee schedule,
the extent of the fee reduction built into the schedule and the asset
levels where the breaks take effect, and in the case of a sub-advised
Fund how the Fund's break-points compare with those of the
sub-advisory fee schedule.

How the Fund's contractual fee schedule compares with trends in the
industry data. To accomplish this, I constructed a chart showing how
actual latest-fiscal-year contractual fees of the Fund and of other similar
funds relate to average fund assets, with the subject Fund's contractual
fee schedule superimposed.

Quality of Service  Performance

The quality-of-service evaluation focused on investment performance,
which is the principal result of the investment management service. Each
Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as
applicable, and compared with that of other funds in the same investment
category and with a suitable market index.

In addition, I calculated and reviewed risk-adjusted returns relative to an
index of similar mutual funds' returns and a suitable market index. The
risk-adjusted returns analysis provides a way of determining the extent to
which the Fund's return comparisons are mainly the product of investment
value-added (or lack thereof) or alternatively taking considerably more or
less risk than is typical in its investment category.

I also received and considered the history of portfolio manager changes
for each Fund, as this provided an important context for evaluating the
performance results.

Complex-Level Considerations

While this evaluation was conducted mainly at the individual fund level,
there are some issues relating to the reasonableness of fees that can
alternatively be considered across the whole fund complex:

I reviewed DeAM's profitability analysis for all DWS Scudder funds,
with a view toward determining if the allocation procedures used were
reasonable and how profit levels compared with public data for other
investment managers.

I considered whether DeAM and affiliates receive any significant
ancillary or "fall-out" benefits that should be considered in interpreting
the direct profitability results. These would be situations where serving
as the investment manager of the Funds is beneficial to another part of
the Deutsche Bank organization.

I considered how aggregated DWS Scudder Fund expenses had varied
over the years, by asset class and in the context of trends in asset
levels.

I reviewed the structure of the DeAM organization, trends in staffing
levels, and information on compensation of investment management
and other professionals compared with industry data.

Findings

Based on the process and analysis discussed above, which included
reviewing a wide range of information from management and external
data sources and considering among other factors the fees DeAM
charges other clients, the fees charged by other fund managers, DeAM's
costs and profits associated with managing the Funds, economies of
scale, possible fall-out benefits, and the nature and quality of services
provided, in my opinion the management fees charged the DWS Scudder
Funds are reasonable.

sif_sigmack0Thomas H. Mack

Trustees and Officers

The following table presents certain information regarding the Board
Members and Officers of the fund as of October 31, 2007. Each
individual's year of birth is set forth in parentheses after his or her name.
Unless otherwise noted; (i) each individual 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
individual is c/o Deutsche Asset Management, 222 South Riverside Plaza,
Chicago, Illinois 60606. Each Board Member's term of office extends until
the next shareholders' meeting called for the purpose of electing such
Board Members and until the election and qualification of a successor, or
until such Board Member sooner dies, retires, resigns or is removed as
provided in the governing documents of the fund.

|Independent Board Members                                                     
|------------------------------------------------------------------------------
|Name, Year of
Birth, Position(s)
Held with the
Fund and Length
of Time Served1
|Paul K. Freeman
(1950)Chairperson since
2007, and Board
Member,
2002-present  
|John W. Ballantine
(1946)Board Member,
1999-present                           
|Donald L. Dunaway
(1937)Board Member,
1980-present                            
|James R. Edgar
(1946)Board Member,
1999-present                               
|Robert B. Hoffman
(1936)Board Member,
1981-present                            
|William McClayton
(1944)Board Member,
2004-present                            
|Shirley D. Peterson
(1941)Board Member,
1995-present                          
|Robert H.
Wadsworth(1940)Board Member,
2004-present                           

|Officers2                                                                           
|------------------------------------------------------------------------------------
|Name, Year of
Birth, Position(s)
Held with the
Fund and Length
of Time Served1      
|Michael G. Clark4
(1965)President,
2006-present                                     
|Philip J. Collora
(1945)Vice President and
Assistant Secretary,
1986-present        
|Paul H. Schubert4
(1963)Chief Financial
Officer,
2004-presentTreasurer,
2005-present
|John Millette5
(1962)Secretary,
2001-present                                        
|Patricia DeFilippis4(1963)Assistant Secretary,
2005-present                         
|Elisa D. Metzger4,(1962)Assistant Secretary
2005-present                            
|Caroline Pearson5
(1962)Assistant Secretary,
1998-present                           
|Paul Antosca5
(1957)Assistant Treasurer,
2007-present                               
|Kathleen Sullivan
D'Eramo5(1957)Assistant Treasurer,
2003-present                   
|Jason Vazquez4
(1972)Anti-Money
Laundering
Compliance Officer,
2007-present         
|Robert Kloby4(1962)Chief Compliance
Officer,
2006-present                           

The fund's Statement of Additional Information ("SAI") includes additional information about
the Board Members. The SAI is available, without charge, upon request. If you would like to
request a copy of the SAI, you may do so by calling the following toll-free number:
(800) 621-1048.

Account Management Resources

|                      
|----------------------
|For More
Information  
|Web Site              
|Written
Correspondence
|Proxy Voting          
|Principal
Underwriter 

|              | Class A    | Class B    | Class C    | Class S   
|------------- | ---------- | ---------- | ---------- | ----------
|Nasdaq Symbol | KSTAX      | KSTBX      | KSTCX      | KSTSX     
|CUSIP Number  | 23337K 101 | 23337K 200 | 23337K 309 | 23337K 507
|Fund Number   | 010        | 210        | 310        | 2391      

Notes

Notes

Notes

Notes

Notes

Notes

Notes

sif_backcover0

ITEM 2.
        CODE OF ETHICSAs of the end of the period, October 31, 2007, DWS Strategic Income Fund has a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.

There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.

A copy of the code of ethics is filed as an exhibit to this Form N-CSR.ITEM 3.
        AUDIT COMMITTEE FINANCIAL EXPERTThe Funds Board of Directors/Trustees has determined that the Fund has at least one audit committee financial expert serving on its audit  committee: Mr. William McClayton, Mr. Donald Dunaway and Mr. Robert Hoffman. Each of these audit committee members is independent, meaning that he is not an interested person of the Fund (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940) and he does not accept any consulting, advisory, or other compensatory fee from the Fund (except in the capacity as a Board or committee member).

An audit committee financial expert is not an expert for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an audit committee financial expert. Further, the designation of a person as an audit committee financial expert does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the audit committee financial expert designation. Similarly, the designation of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.ITEM 4.
        PRINCIPAL ACCOUNTANT FEES AND SERVICES
  DWS STRATEGIC INCOME FUND FORM N-CSR DISCLOSURE RE: AUDIT FEES The following table shows the amount of fees that Ernst & Young, LLP (E&Y), the Funds Independent Registered Public Accountant, billed to the Fund during the Funds last two fiscal years.  The Audit Committee approved in advance all audit services and non-audit services that E&Y provided to the Fund. The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee). Services that the Funds Independent Registered Public Accountant Billed to the Fund  Fiscal YearEndedOctober 31
        Audit Fees Billed to Fund
        Audit-RelatedFees Billed to Fund
        Tax Fees Billed to Fund
        AllOther Fees Billed to Fund2007
        $57,450
        $0
        $7,834
        $02006
        $54,443
        $0
        $7,424
        $0
  The above "Tax Fees" were billed for professional services rendered for tax return preparation.   Services that the Funds Independent Registered Public Accountant Billed to the Adviser and Affiliated Fund Service Providers

The following table shows the amount of fees billed by E&Y to Deutsche Investment Management Americas, Inc. (DeIM or the Adviser), and any entity controlling, controlled by or under common control with DeIM (Control Affiliate) that provides ongoing services to the Fund (Affiliated Fund Service Provider), for engagements directly related to the Funds operations and financial reporting, during the Funds last two fiscal years.




Fiscal YearEndedOctober 31
        Audit-RelatedFees Billedto Adviser and Affiliated Fund Service Providers
        Tax Fees Billed to Adviser and Affiliated Fund Service Providers
        AllOther Fees Billed to Adviser and Affiliated Fund Service Providers2007
        $250,000
        $486,614
        $02006
        $80,000
        $316,254
        $0



The Audit-Related Fees were billed for services in connection with agreed upon procedures related to fund mergers and the above Tax Fees were billed in connection with tax compliance services and agreed upon procedures.

Non-Audit Services

The following table shows the amount of fees that E&Y billed during the Funds last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that E&Y provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Funds operations and financial reporting. The Audit Committee requested and received information from E&Y about any non-audit services that E&Y rendered during the Funds last fiscal year to the Adviser and any Affiliated Fund Service Provider.  The Committee considered this information in evaluating E&Ys independence.




Fiscal YearEndedOctober 31
        TotalNon-Audit Fees Billed to Fund
(A)
        Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund)
(B)
        Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements)
(C)
        Total of (A), (B)and (C)2007
        $7,834
        $486,614
        $1,129,726
        $1,624,1742006
        $7,424
        $316,254
        $891,699
        $1,215,377





All other engagement fees were billed for services in connection with internal control reviews, agreed upon procedures and tax compliance for DeIM and other related entities that provide support for the operations of the fund.



***

In connection with the audit of the 2006 and 2007 financial statements, the Fund entered into an engagement letter with E&Y.  The terms of the engagement letter required by E&Y, and agreed to by the Audit Committee, include provisions in which the parties consent to the sole jurisdiction of federal courts in New York, Boston or the Northern District of Illinois, as well as a waiver of right to a trial by jury and an exclusion of punitive damages.



***

E&Y recently advised the Funds Audit Committee that certain arrangements between the Ernst & Young member firm in Germany (E&Y Germany) and Deutsche Bank AG (DB) had been determined to be inconsistent with the SEC auditor independence rules.  DB is within the Investment Company Complex (as defined by SEC rules) and therefore covered by the SEC auditor independence rules applicable to the Fund.  In 2006 and 2007, DB provided standard overdraft protection on a depository account and a guarantee of certain lease deposits to E&Y Germany.  E&Y advised the Audit Committee that while neither of these arrangements was ever utilized by E&Y Germany, they could constitute lending type arrangements in violation of Rule 2-01 of Regulation S-X.  (Rule 2-01(c)(1)(ii)(A) provides that an accountant is not independent when
an accounting firm has a loan to or from an audit client.)  E&Y advised the Audit Committee that E&Y believes its independence has not been impacted as it relates to the audits of the Fund.  In reaching this conclusion, E&Y noted a number of factors, including that neither of the arrangements was ever utilized and, accordingly, E&Y Germany never had amounts outstanding to DB, these arrangements were immaterial to E&Y Germany and DB and the E&Y professionals responsible for the Funds audits were not aware of these arrangements.  E&Y informed the Audit Committee that E&Y Germany has cancelled the overdraft arrangements and has terminated the guarantee on the lease deposits.




ITEM 5.
        AUDIT COMMITTEE OF LISTED REGISTRANTSNot ApplicableITEM 6.
        SCHEDULE OF INVESTMENTSNot ApplicableITEM 7.
        DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIESNot applicable.ITEM 8.
        PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIESNot applicable.




ITEM 9.
        PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERSNot Applicable.




ITEM 10.
        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Procedures and Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to the Fund's Secretary for the attention of the Chairman of the Nominating and Governance Committee, Two International Place, Boston, MA 02110. Suggestions for candidates must include a resume of the candidate.ITEM 11.
        CONTROLS AND PROCEDURES(a)          The Chief Executive and Financial Officers concluded that the Registrants Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.(b)         There have been no changes in the registrants internal control over financial reporting that occurred during the registrants last half-year (the registrants second fiscal half-year in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal controls over financial reporting.ITEM 12.
        EXHIBITS(a)(1)     Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.(a)(2)     Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.(b)          Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.


Form N-CSR Item F  SIGNATURES  Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  Registrant:
        DWS Strategic Income Fund
  By:
        /s/Michael G. Clark
 Michael G. Clark
 President  Date:
        December 28, 2007
   Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  Registrant:
        DWS Strategic Income Fund
  By:
        /s/Michael G. Clark
 Michael G. Clark
 President  Date:
        December 28, 2007
   By:
        /s/Paul Schubert
 Paul Schubert
 Chief Financial Officer and Treasurer  Date:
        December 28, 2007