As filed with the Securities and Exchange Commission on January 28, 2008

                                                      1933 Act File No. 33-07404
                                                     1940 Act File No. 811-04760

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM N-1A

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                      POST-EFFECTIVE AMENDMENT NO. 156                       [X]

                                       and

                          REGISTRATION STATEMENT UNDER
                       THE INVESTMENT COMPANY ACT OF 1940

                              AMENDMENT NO. 156                              [X]

                                DWS ADVISOR FUNDS
               (Exact Name of Registrant as Specified in Charter)

                       345 Park Avenue, New York, NY 10154
                    (Address of Principal Executive Offices)

                                 (212) 454-7190
                         (Registrant's Telephone Number)

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

                                    Copy to:
                             Burton M. Leibert, Esq.
                          Willkie Farr & Gallagher LLP
                               787 Seventh Avenue
                             New York, NY 10019-6099

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

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

If appropriate, check the following box:

/_/   this post-effective amendment designates a new effective date for a
      previously filed post-effective amendment.


<PAGE>


                                EXPLANATORY NOTE
                                ----------------

This post-effective amendment contains the prospectuses and Statements of
Additional Information relating to the following series of the registrant:

o     DWS Micro Cap Fund - Classes A, B, C, S and Institutional
o     DWS Mid Cap Growth Fund - Classes A, B, C, S and Institutional
o     DWS Small Cap Growth Fund - Classes A, B, C, S and Institutional
o     DWS Short Duration Plus Fund - Classes A, B, C and S

This post-effective amendment is not intended to update or amend any other
prospectuses or Statements of Additional Information of the registrant's other
series or classes.


                                       2
<PAGE>



                                FEBRUARY 1, 2008








                                   PROSPECTUS

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

                               CLASSES A, B AND C

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


                               DWS MICRO CAP FUND


                            DWS MID CAP GROWTH FUND


                           DWS SMALL CAP GROWTH FUND


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


                       ONE GLOBAL FORCE. ONCE FOCUS, YOU. [GRAPHIC APPEARS HERE]




<PAGE>

CONTENTS





<TABLE>
<S>      <C>
HOW EACH FUND WORKS
  4      DWS Micro Cap Fund
 14      DWS Mid Cap Growth Fund
 24      DWS Small Cap Growth Fund
 33      Other Policies and Secondary
         Risks
 35      Who Manages and Oversees
         the Funds
 38      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUNDS
 49      Choosing a Share Class
 55      How to Buy Class A, B and C
         Shares
 56      How to Exchange or Sell
         Class A, B and C Shares
 59      Policies You Should Know
         About
 72      Understanding Distributions
         and Taxes
 76      Appendix
</TABLE>


<PAGE>

HOW EACH FUND WORKS

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


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

CLASSES A, B AND C shares are generally intended for investors seeking the
advice and assistance of a financial advisor.

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

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


<TABLE>
<S>                     <C>        <C>        <C>
                         Class A    Class B    Class C
  ticker symbol          SMFAX      SMFBX      SMFCX
    fund number          489        689        789

    DWS MICRO CAP FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks capital appreciation.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in stocks and other
            securities with equity characteristics of US micro capitalization
            companies. For the purposes of this 80% limitation, the micro
            capitalization equity universe is defined as the bottom 5% of the
            total domestic equity market capitalization (at the time of initial
            investment) using a minimum market capitalization of $10 million.
            The fund may invest up to 20% of its total assets in the securities
            of foreign companies that would be considered to be in the bottom
            5% in terms of market capitalization in the US equity market
            (subject to a $10 million market capitalization minimum). The
            fund's equity investments are mainly common stocks, but may also
            include other types of equity securities, such as preferred stocks
            or convertible securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of US micro
            capitalization growth-oriented companies. Portfolio management
            focuses on individual security selection rather than industry
            selection. Portfolio management uses an active process, which
            combines financial analysis with company visits to evaluate
            management and strategies. Each portfolio manager has specific
            sector responsibilities with investment discretion over securities
            within their sectors.

            Company research lies at the heart of our investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on undervalued stocks with
               fast-growing earnings and that they believe have superior
               near-to-intermediate term performance potential.


4 | DWS Micro Cap Fund
<PAGE>


            -  Portfolio management emphasizes individual selection of smaller
               stocks across all economic sectors, early in their growth cycles
               and with the potential to be the blue chips of the future.



            -  Portfolio management generally seeks companies with a leading or
               dominant position in their niche markets, a high rate of return
               on invested capital and the ability to finance a major part of
               future growth from internal sources.


            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.


            The fund may invest up to 20% of its assets in high quality debt
            instruments and money market instruments with remaining maturities
            of one year or less, including repurchase agreements. The fund may
            invest up to 5% of its net assets in non-convertible bonds and
            preferred stocks that portfolio management believes to be of high
            quality.

            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


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


                                                         DWS Micro Cap Fund  | 5
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.


            MICRO CAPITALIZATION COMPANY RISK. The fund's investments in micro
            capitalization companies will be more susceptible to
            share price fluctuations since micro capitalization company stocks
            tend to experience steeper fluctuations in price - down as well as
            up - than the stocks of larger companies. A shortage of reliable
            information - the same information gap that creates opportunity in
            micro capitalization company investing - can also pose added risk.
            Industry-wide reversals may have a greater impact on micro
            capitalization companies, since they lack a large company's
            financial resources. Micro capitalization companies may have
            limited product lines and markets. They may also have shorter
            operating histories and





THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors with long-term goals who can tolerate
capital fluctuation in pursuit of capital appreciation.









6 | DWS Micro Cap Fund
<PAGE>

            more volatile businesses and may be more dependent on key
            personnel. Finally, micro capitalization company stocks are
            typically less liquid than large company stocks. Particularly when
            they are performing poorly, a micro capitalization company's shares
            may be more difficult to sell.

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

                                                         DWS Micro Cap Fund  | 7
<PAGE>

            -  CURRENCY RISK. The fund invests in securities denominated in
            foreign currencies. This creates the possibility that changes in
            exchange rates between foreign currencies and the US dollar will
            affect the US dollar value of foreign securities or the income or
            gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US
               investments. The procedures and rules governing foreign
               transactions and custody may also involve delays in payment,
               delivery or recovery of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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


8 | DWS Micro Cap Fund
<PAGE>

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                         DWS Micro Cap Fund  | 9
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


The bar chart shows how the performance of the fund's Class A shares has varied
from year to year, which may give some idea of risk. The bar chart does not
reflect sales loads; if it did, total returns would be lower than those shown.
The table on the following page shows how fund performance compares to relevant
index performance (which, unlike fund performance, does not reflect fees or
expenses). The table includes the effects of maximum sales loads on fund
performance. The performance of both the fund and the index varies over time.
All figures assume reinvestment of dividends and distributions (in the case of
after-tax returns, reinvested net of assumed tax rates).


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


The performance data for the period prior to July 10, 2006 provided in the bar
chart and quarterly returns below and the risk return table on the following
pages are those of the fund's predecessor fund, DWS Micro Cap Fund, a series of
DWS Investments Trust (the "Predecessor Fund"). On July 10, 2006, the
Predecessor Fund transferred its assets to the fund, which is a new series of
DWS Advisor Funds. The fund assumed the Predecessor Fund's liabilities.


The inception date for Class A, B and C shares of the Predecessor Fund is June
28, 2002. The inception date for Institutional Class shares of the Predecessor
Fund is December 18, 1996. In the bar chart, the performance figures for Class
A of the Predecessor Fund before its inception date are based on the historical
performance of the original share class of the Predecessor Fund (Institutional
Class), adjusted to reflect the higher gross total annual operating expenses of
Class A.

DWS Micro Cap Fund


ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - CLASS A (Results do not reflect
sales loads; if they did, total returns would be lower than those shown.)


[BAR GRAPHIC APPEARS HERE]






<TABLE>
<S>     <C>      <C>     <C>      <C>       <C>      <C>      <C>     <C>       <C>
0.95    77.08    2.96    15.08    -27.19    40.66    12.71    7.83     8.44      7.18

1998    1999     2000    2001     2002      2003     2004     2005    2006      2007
</TABLE>






<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 29.66%, Q4 1999              WORST QUARTER: -24.17%, Q3 1998
</TABLE>



10 | DWS Micro Cap Fund
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/2007 (Fund returns include the
effects of maximum sales load.)




<TABLE>
<CAPTION>
                                             1 YEAR      5 YEARS      10 YEARS
<S>                                         <C>         <C>          <C>
 CLASS A
   Return before Taxes                        1.02         13.37        11.19
   Return after Taxes on Distributions        -1.29        10.76         9.25
   Return after Taxes on Distributions
   and Sale of Fund Shares                    1.71*        10.53         8.96
 CLASS B (Return before Taxes)                3.67         13.75        11.01
 CLASS C (Return before Taxes)                6.35         13.87        11.01
 RUSSELL 2000 (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                           7.05         16.50         4.32
</TABLE>




*    Return after Taxes on Distributions and Sale of Fund Shares is higher than
     other return figures for the same period due to a capital loss occurring
     upon redemption resulting in an assumed tax deduction for the shareholder.


Total returns would have been lower if operating expenses hadn't been reduced.

RUSSELL 2000 (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
measure of 2,000 of the smallest capitalized US companies with a
greater-than-average growth orientation and whose common stocks trade on the
NYSE, AMEX and Nasdaq.


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

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 621-1048 or visit our Web site at www.dws-scudder.com.



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

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


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



                                                        DWS Micro Cap Fund  | 11
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE                                        CLASS A         CLASS B       CLASS C
<S>                                         <C>                 <C>          <C>
 SHAREHOLDER FEES, paid directly from your investment
___________________________________________________________________________________________
 Maximum Sales Charge (Load) Imposed
 on Purchases (as % of offering price)             5.75%1         None          None
 Maximum Deferred Sales Charge (Load)
 (as % of redemption proceeds)                   None2             4.00%         1.00%
 Redemption/Exchange fee on shares
 owned less than 15 days (as % of
 redemption proceeds)3                            2.00             2.00          2.00
 ANNUAL OPERATING EXPENSES, deducted from fund assets
___________________________________________________________________________________________
 Management Fee4                                  1.35  %          1.35%         1.35%
 Distribution/Service (12b-1) Fee                 0.24             0.99          0.99
 Other Expenses                                   0.58             0.66          0.60
 TOTAL ANNUAL OPERATING EXPENSES                  2.17             3.00          2.94
 Less Expense Waiver/Expense
 Reimbursements5                                  0.40             0.48          0.42
 NET ANNUAL OPERATING EXPENSES5                   1.77             2.52          2.52
</TABLE>



1    Because of rounding in the calculation of the offering price, the actual
     maximum front-end sales charge paid by an investor may be higher than the
     percentage noted (see "Choosing a Share Class - Class A shares").


2    The redemption of shares purchased at net asset value under the Large Order
     NAV Purchase Privilege (see "Choosing a Share Class - Class A shares") may
     be subject to a contingent deferred sales charge of 1.00% if redeemed
     within 12 months of purchase and 0.50% if redeemed within the following six
     months.


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


4   Through November 30, 2009, the Advisor has contractually agreed to waive a
   portion of its Investment Management Fee in the amount of 0.305% of the
   fund's average daily total net assets. Includes 0.10% administration fee.



5    Through January 31, 2009, the Advisor has contractually agreed to waive all
     or a portion of its fees and reimburse or pay certain operating expenses of
     the fund so that the total operating expenses will not exceed 1.77%, 2.52%
     and 2.52% for Class A, Class B and Class C shares, respectively, excluding
     certain expenses such as extraordinary expenses, taxes, brokerage and
     interest.



12 | DWS Micro Cap Fund
<PAGE>


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




<TABLE>
<CAPTION>
EXAMPLE                1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                   <C>         <C>          <C>          <C>
 EXPENSES, assuming you sold your shares at the end of each period
_________________________________________________________________________
 Class A shares         $745       $1,179       $1,638       $2,905
 Class B shares*         655        1,182        1,735        2,910
 Class C shares          355          870        1,511        3,232
 EXPENSES, assuming you kept your shares
_________________________________________________________________________
 Class A shares         $745       $1,179       $1,638       $2,905
 Class B shares*         255          882        1,535        2,910
 Class C shares          255          870        1,511        3,232
</TABLE>




*    Reflects conversion of Class B to Class A shares, which pay lower fees.
     Conversion occurs six years after purchase.


                                                        DWS Micro Cap Fund  | 13
<PAGE>


<TABLE>
<S>                          <C>        <C>        <C>
                              Class A    Class B    Class C
  ticker symbol               SMCAX      SMCBX      SMCCX
    fund number               483        683        783

    DWS MID CAP GROWTH FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks long-term capital growth.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in companies with
            market caps within the market capitalization range of the Russell
            Mid Cap Growth Index or securities with equity characteristics that
            provide exposure to those companies. The fund's equity investments
            are mainly common stocks, but may also include other types of
            equity securities such as preferred stocks or convertible
            securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of medium-sized
            growth-oriented companies. Portfolio management focuses on
            individual security selection rather than industry selection.
            Portfolio management uses an active process which combines
            financial analysis with company visits to evaluate management and
            strategies. Each portfolio manager has specific sector
            responsibilities with investment discretion over securities within
            their sectors.

            Company research lies at the heart of the investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on undervalued stocks with
               fast-growing earnings and superior near-to-intermediate term
               performance potential.



            -  Portfolio management emphasizes individual selection of
               medium-sized stocks across all economic sectors, early in their
               growth cycles and with the potential to be the blue chips of the
               future.


14 | DWS Mid Cap Growth Fund
<PAGE>


           -  Portfolio management generally seeks companies with a leading or
              dominant position in their niche markets, a high rate of return
              on invested capital and the ability to finance a major part of
              future growth from internal sources.


            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.

            The fund may invest up to 20% of its assets in stocks and other
            securities of companies based outside the US.


            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 30% of its total assets to approved institutional
            borrowers who need to borrow securities in order to complete
            certain transactions.


                                                   DWS Mid Cap Growth Fund  | 15
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.


            MEDIUM-SIZED COMPANY RISK. Medium-sized company
            stocks tend to experience steeper price fluctuations - down as well
            as up - than stocks of larger companies. A shortage of reliable
            information - the same information gap that creates opportunity -
            can pose added risk. Industry-wide reversals may have a greater
            impact on medium-sized companies, since they usually lack a large
            company's financial resources. Medium-sized company stocks are
            typically less liquid than large company stocks; when things are
            going poorly, it is harder to find a buyer for a medium-sized
            company's shares.



THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors with long-term goals who can tolerate
capital fluctuation in pursuit of long-term capital growth.









16 | DWS Mid Cap Growth Fund
<PAGE>

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

                                                   DWS Mid Cap Growth Fund  | 17
<PAGE>

           -   TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US investments.
               The procedures and rules governing foreign transactions and
               custody may also involve delays in payment, delivery or recovery
               of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



18 | DWS Mid Cap Growth Fund
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


The bar chart shows how the performance of the fund's Class A shares has varied
from year to year, which may give some idea of risk. The bar chart does not
reflect sales loads; if it did, total returns would be lower than those shown.
The table on the following page shows how fund performance compares to relevant
index performance (which, unlike fund performance, does not reflect fees or
expenses). The table includes the effects of maximum sales loads on fund
performance. The performance of both the fund and the index varies over time.
All figures assume reinvestment of dividends and distributions (in the case of
after-tax returns, reinvested net of assumed tax rates).


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


The inception date for Class A, B and C shares of the fund is June 28, 2002. In
the bar chart, the performance figures for Class A before its inception date
are based on the historical performance of the fund's original share class
(Investment Class), adjusted to reflect the higher gross total annual operating
expenses of Class A.


In the table, the performance figures for each share class prior to its
inception are based on the historical performance of Investment Class, adjusted
to reflect both the higher gross total annual operating expenses for Class A, B
or C and the current applicable sales charges of Classes A, B, and C.
Investment Class shares merged into Class S shares on October 20, 2006.

DWS Mid Cap Growth Fund


ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - CLASS A (Results do not reflect
sales loads; if they did, total returns would be lower than those shown.)


[BAR GRAPHIC APPEARS HERE]






<TABLE>
<S>        <C>        <C>        <C>         <C>         <C>        <C>       <C>        <C>        <C>
18.51      49.68       -1.70      -13.37      -20.49     28.34       9.84     12.24      10.77      7.92

1998       1999       2000        2001        2002       2003       2004      2005       2006       2007
</TABLE>






<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 29.95%, Q4 1999              WORST QUARTER: -19.58%, Q3 1998
</TABLE>



                                                   DWS Mid Cap Growth Fund  | 19
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/2007 (Fund returns include the
effects of maximum sales load.)




<TABLE>
<CAPTION>
                                             1 YEAR      5 YEARS      10 YEARS
<S>                                         <C>         <C>          <C>
 CLASS A
   Return before Taxes                         1.71        12.26         7.91
   Return after Taxes on Distributions        -0.34        11.80         6.60
   Return after Taxes on Distributions
   and Sale of Fund Shares                    4.43*        11.69         6.51
 CLASS B (Return before Taxes)                4.33         12.62         7.61
 CLASS C (Return before Taxes)                7.10         12.73         7.61
 RUSSELL MIDCAP (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                          11.43         17.90         7.59
</TABLE>




*    Return after Taxes on Distributions and Sale of Fund Shares is higher than
     other return figures for the same period due to a capital loss occurring
     upon redemption resulting in an assumed tax deduction for the shareholder.

Total returns would have been lower if operating expenses hadn't been reduced.

RUSSELL MIDCAP (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
index of medium and medium/small companies in the Russell 1000 (Reg. TM) Index
chosen for their growth orientation. Russell 1000 (Reg. TM) Index is an
unmanaged price-only index of the 1,000 largest capitalized companies that are
domiciled in the US and whose common stocks are traded.



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

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 621-1048 or visit our Web site at www.dws-scudder.com.



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

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


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



20 | DWS Mid Cap Growth Fund
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE                                        CLASS A         CLASS B       CLASS C
<S>                                         <C>                 <C>          <C>
 SHAREHOLDER FEES, paid directly from your investment
___________________________________________________________________________________________
 Maximum Sales Charge (Load) Imposed
 on Purchases (as % of offering price)             5.75%1         None          None
 Maximum Deferred Sales Charge (Load)
 (as % of redemption proceeds)                   None2             4.00%         1.00%
 Redemption/Exchange fee on shares
 owned less than 15 days (as % of
 redemption proceeds)3                            2.00             2.00          2.00
 ANNUAL OPERATING EXPENSES, deducted from fund assets
___________________________________________________________________________________________
 Management Fee4                                  0.72  %          0.72%         0.72%
 Distribution/Service (12b-1) Fee                 0.24             0.99          0.99
 Other Expenses                                   0.29             0.45          0.36
 TOTAL ANNUAL OPERATING EXPENSES                  1.25             2.16          2.07
 Less Expense Waiver/Reimbursement5               0.00             0.16          0.07
 NET ANNUAL FUND OPERATING
 EXPENSES5                                        1.25             2.00          2.00
</TABLE>



1   Because of rounding in the calculation of the offering price, the actual
   maximum front-end sales charge paid by an investor may be higher than the
   percentage noted (see "Choosing a Share Class - Class A shares").


2   The redemption of shares purchased at net asset value under the Large Order
   NAV Purchase Privilege (see "Choosing a Share Class - Class A shares") may
   be subject to a contingent deferred sales charge of 1.00% if redeemed
   within 12 months of purchase and 0.50% if redeemed within the following six
   months.


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

4   Includes 0.10% administration fee.


5   Through January 31, 2009, the Advisor has contractually agreed to waive all
   or a portion of its management fee and reimburse or pay operating expenses
   of the fund to the extent necessary to maintain the fund's total operating
   expenses at 1.25% for Class A shares, and 2.00% for Class B and C shares,
   excluding certain expenses such as extraordinary expenses, taxes, brokerage
   and interest.


                                                   DWS Mid Cap Growth Fund  | 21
<PAGE>


Based on the costs above (including one year of capped expenses in each period
for Class B and Class C shares), this example helps you compare the expenses of
each share class to those of other mutual funds. This example assumes the
expenses above remain the same. It also assumes that you invested $10,000,
earned 5% annual returns, and reinvested all dividends and distributions. This
is only an example; actual expenses will be different.




<TABLE>
<CAPTION>
EXAMPLE                1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                   <C>         <C>          <C>          <C>
 EXPENSES, assuming you sold your shares at the end of each period
_________________________________________________________________________
 Class A shares         $695         $949       $1,222       $1,999
 Class B shares*         603          961        1,345        2,035
 Class C shares          303          642        1,107        2,394
 EXPENSES, assuming you kept your shares
_________________________________________________________________________
 Class A shares         $695         $949       $1,222       $1,999
 Class B shares*         203          661        1,145        2,035
 Class C shares          203          642        1,107        2,394
</TABLE>




*   Reflects conversion of Class B to Class A shares, which pay lower fees.
   Conversion occurs six years after purchase.


22 | DWS Mid Cap Growth Fund
<PAGE>


<TABLE>
<S>                            <C>        <C>        <C>
                                Class A    Class B    Class C
  ticker symbol                 SSDAX      SSDBX      SSDCX
    fund number                 471        671        771

    DWS SMALL CAP GROWTH FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks long-term capital growth.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in stocks and other
            securities with equity characteristics of US smaller capitalization
            companies. For purposes of this 80% investment limitation, the
            small capitalization equity universe is defined as the bottom 20%
            of the total domestic equity market capitalization (at the time of
            initial investment), using a minimum market capitalization of $10
            million. The fund may invest up to 20% of its assets in the stocks
            of non-US companies and large capitalization stocks. The fund may
            also invest in other types of equity securities such as preferred
            stocks or convertible securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of US smaller
            capitalization companies. Portfolio management focuses on
            individual security selection rather than industry selection.
            Portfolio management uses an active process which combines
            financial analysis with company visits to evaluate management and
            strategies. Each portfolio manager has specific sector
            responsibilities with investment discretion over the securities
            within sectors.

            Company research lies at the heart of our investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on stocks with superior growth
               prospects and above average near-to-intermediate term
               performance potential.


                                                 DWS Small Cap Growth Fund  | 23
<PAGE>


            -  Portfolio management emphasizes individual selection of small
            company stocks across all economic sectors, early in their growth
            cycles and with the potential to be the blue chips of the future.



            -  Portfolio management generally seeks companies with a leading or
               dominant position in their niche markets, a high rate of return
               on invested capital and the ability to finance a major part of
               future growth from internal sources.

            Portfolio management looks primarily for financial attributes that
            set these companies apart:


            -  estimated above-average growth in revenues and earnings; and

            -  a balance sheet that can support this growth potential with
               sufficient working capital and manageable levels of debt.

            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.


            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 30% of its total assets to approved institutional
            borrowers who need to borrow securities in order to complete
            certain transactions.


24 | DWS Small Cap Growth Fund
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.

            SMALL COMPANY CAPITALIZATION RISK. Small company stocks
            tend to experience steeper price fluctuations than the stocks of
            larger companies. A shortage of reliable information can also pose
            added risk. Industry-wide reversals may have a greater impact on
            small companies, since they lack a large company's financial
            resources. Small company stocks are typically less liquid than
            large company stocks. Accordingly, it may be harder to find a buyer
            for a small company's shares.


            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:



THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors with long-term goals who can tolerate
capital fluctuation in pursuit of long-term capital growth.









                                                 DWS Small Cap Growth Fund  | 25
<PAGE>

            -  POLITICAL RISK. Some foreign governments have limited the
            outflow of profits to investors abroad, imposed restrictions on the
            exchange or export of foreign currency, extended diplomatic
            disputes to include trade and financial relations, seized foreign
            investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

26 | DWS Small Cap Growth Fund
<PAGE>

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
            generally higher for foreign investments than for US investments.
            The procedures and rules governing foreign transactions and custody
            may also involve delays in payment, delivery or recovery of money
            or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                 DWS Small Cap Growth Fund  | 27
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


The bar chart shows how the performance of the fund's Class A shares has varied
from year to year, which may give some idea of risk. The bar chart does not
reflect sales loads; if it did, total returns would be lower than those shown.
The table on the following page shows how fund performance compares to relevant
index performance (which, unlike fund performance, does not reflect fees or
expenses). The table includes the effects of maximum sales loads on fund
performance. The performance of both the fund and the index varies over time.
All figures assume reinvestment of dividends and distributions (in the case of
after-tax returns, reinvested net of assumed tax rates).


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


The inception date for Class A, B and C shares is June 28, 2002. In the bar
chart, the performance figures for Class A before its inception date are based
on the historical performance of the fund's original share class (Investment
Class), adjusted to reflect the higher gross total annual operating expenses of
Class A. Investment Class shares merged into Class S shares on October 20,
2006.


In the table, the performance figures for each share class prior to its
inception are based on the historical performance of Investment Class, adjusted
to reflect both the higher gross total annual operating expenses for Class A, B
or C and the current applicable sales charge of Classes A, B, and C.

DWS Small Cap Growth Fund


ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - CLASS A (Results do not reflect
sales loads; if they did, total returns would be lower than those shown.)


[BAR GRAPHIC APPEARS HERE]






<TABLE>
<S>       <C>        <C>        <C>        <C>         <C>        <C>        <C>       <C>       <C>
 6.15     44.75      10.28       -8.56      -22.31     21.68      13.29       6.89      4.73     5.63

1998      1999       2000       2001        2002       2003       2004       2005      2006      2007
</TABLE>







<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>

BEST QUARTER: 28.70%, Q4 1998              WORST QUARTER: -24.39%, Q3 1998
</TABLE>




28 | DWS Small Cap Growth Fund
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/2007 (Fund returns include the
effects of the maximum sales load.)




<TABLE>
<CAPTION>
                                              1 YEAR       5 YEARS      10 YEARS
<S>                                         <C>           <C>          <C>
 CLASS A
   Return before Taxes                          -0.44         8.97         6.34
   Return after Taxes on Distributions          -0.66         8.44         5.45
   Return after Taxes on Distributions
   and Sale of Fund Shares                      1.02*         8.32         5.34
 CLASS B (Return before Taxes)                  1.83          9.31         6.18
 CLASS C (Return before Taxes)                  4.83          9.44         6.18
 RUSSELL 2000 (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                             7.05         16.50         4.32
</TABLE>




*    Return after Taxes on Distributions and Sale of Fund Shares is higher than
     other return figures for the same period due to a capital loss occurring
     upon redemption resulting in an assumed tax deduction for the
     shareholder.

Total returns would have been lower if operating expenses hadn't been reduced.


RUSSELL 2000 (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
measure of 2,000 of the smallest capitalized US companies with a
greater-than-average growth orientation and whose common stocks trade on the
NYSE, AMEX and Nasdaq.


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

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 621-1048 or visit our Web site at www.dws-scudder.com.



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

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


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



                                                 DWS Small Cap Growth Fund  | 29
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE                                        CLASS A         CLASS B       CLASS C
<S>                                         <C>                 <C>          <C>
 SHAREHOLDER FEES, paid directly from your investment
___________________________________________________________________________________________
 Maximum Sales Charge (Load) Imposed
 on Purchases (as % of offering price)             5.75%1         None          None
 Maximum Deferred Sales Charge (Load)
 (as % of redemption proceeds)                   None2             4.00%         1.00%
 Redemption/Exchange fee on shares
 owned less than 15 days (as % of
 redemption proceeds)3                            2.00             2.00          2.00
 ANNUAL OPERATING EXPENSES, deducted from fund assets
___________________________________________________________________________________________
 Management Fee4                                  0.75  %          0.75%         0.75
 Distribution/Service (12b-1) Fee                 0.23             0.99          0.98
 Other Expenses                                   0.39             0.52          0.43
 TOTAL ANNUAL OPERATING EXPENSES                  1.37             2.26          2.16
 Less Expense Waiver/Reimbursement5               0.12             0.26          0.16
 NET ANNUAL FUND OPERATING
 EXPENSES5                                        1.25             2.00          2.00
</TABLE>



1   Because of rounding in the calculation of the offering price, the actual
   maximum front-end sales charge paid by an investor may be higher than the
   percentage noted (see "Choosing a Share Class - Class A shares").


2   The redemption of shares purchased at net asset value under the Large Order
   NAV Purchase Privilege (see "Choosing a Share Class - Class A shares") may
   be subject to a contingent deferred sales charge of 1.00% if redeemed
   within 12 months of purchase and 0.50% if redeemed within the following six
   months.


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

4   Includes 0.10% administration fee.


5   Through January 31, 2010, the Advisor has contractually agreed to waive all
   or a portion of its management fee and reimburse or pay operating expenses
   of the fund to the extent necessary to maintain the fund's total operating
   expenses at 1.25% for Class A shares, and 2.00% for Class B and C shares,
   excluding certain expenses such as extraordinary expenses, taxes, brokerage
   and interest.


30 | DWS Small Cap Growth Fund
<PAGE>


Based on the costs above (including one year of capped expenses in the "1 Year"
period and two years of capped expenses in each of the "3 Years,""5 Years" and
"10 Years" periods), this example helps you compare the expenses of each share
class to those of other mutual funds. This example assumes the expenses above
remain the same. It also assumes that you invested $10,000, earned 5% annual
returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.




<TABLE>
<CAPTION>
EXAMPLE                1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                   <C>         <C>          <C>          <C>
 EXPENSES, assuming you sold your shares at the end of each period
_________________________________________________________________________
 Class A shares         $695         $961       $1,260       $2,106
 Class B shares*         603          955        1,361        2,121
 Class C shares          303          645        1,129        2,467
 EXPENSES, assuming you kept your shares
_________________________________________________________________________
 Class A shares         $695         $961       $1,260       $2,106
 Class B shares*         203          655        1,161        2,121
 Class C shares          203          645        1,129        2,467
</TABLE>




*   Reflects conversion of Class B to Class A shares, which pay lower fees.
   Conversion occurs six years after purchase.


                                                 DWS Small Cap Growth Fund  | 31
<PAGE>

OTHER POLICIES AND SECONDARY RISKS

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


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


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


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



           Secondary risks

           The risk disclosure below applies to each fund, unless otherwise
           noted.


           DERIVATIVES RISK. Risks associated with derivatives include the risk
           that the derivative is not well correlated with the security, index
           or currency to which it relates; the risk that derivatives may not
           have the intended effects and may result in losses or missed
           opportunities; the risk that the fund will be unable to sell the
           derivative because of an illiquid secondary market; and the risk
           that the derivative transaction could expose the fund to the effects
           of leverage, which could increase the fund's exposure to the market
           and magnify potential losses. There is no guarantee that
           derivatives, to the extent employed, will have the intended effect,
           and their use could cause lower returns or even losses to the fund.
           The use of derivatives by the fund to hedge risk may reduce the
           opportunity for gain by offsetting the positive effect of favorable
           price movements.



32 | Other Policies and Secondary Risks
<PAGE>

           For more information

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

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


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

           A complete list of each fund's portfolio holdings is posted as of
           the month-end on www.dws-scudder.com (the Web site does not form a
           part of this prospectus) on or after the last day of the following
           month. This posted information generally remains accessible at least
           until the date on which a fund files its Form N-CSR or N-Q with the
           Securities and Exchange Commission for the period that includes the
           date as of which the posted information is current. In addition,
           each fund's top ten equity holdings and other fund information is
           posted on www.dws-scudder.com as of the calendar quarter-end on or
           after the 15th day following quarter-end. Each fund's Statement of
           Additional Information includes a description of a fund's policies
           and procedures with respect to the disclosure of a fund's portfolio
           holdings.



                                        Other Policies and Secondary Risks  | 33
<PAGE>

WHO MANAGES AND OVERSEES THE FUNDS


           The investment advisor


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


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

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

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


34 | Who Manages and Oversees the Funds
<PAGE>


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




<TABLE>
<CAPTION>
FUND NAME                                   FEE PAID
<S>                                       <C>
  DWS Micro Cap Fund                           0.96%*
  DWS Mid Cap Growth Fund                     0.62  %
  DWS Small Cap Growth Fund                   0.65  %
</TABLE>




           *   Reflects the effects of expense limitations and/or fee waivers
then in effect.


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


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


                                        Who Manages and Oversees the Funds  | 35
<PAGE>

Portfolio management

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

The following people handle the day-to-day management of each fund:

Robert S. Janis
Managing Director of Deutsche Asset Management and Lead Portfolio Manager of
the funds.
- Joined Deutsche Asset Management and the funds in 2004.
- Previously served as portfolio manager for 10 years at Credit Suisse Asset
   Management (or at its predecessor, Warburg Pincus Asset Management).

- Over 22 years of investment industry experience.

- BA, University of Pennsylvania; MBA, University of Pennsylvania, Wharton
   School.

Joseph Axtell, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
funds.
- Joined Deutsche Asset Management in 2001 and the funds in 2006.
- Senior analyst at Merrill Lynch Investment Managers for the international
   equity portion of a global balanced portfolio (1996-2001).
- Director, International Research at PCM International (1989-1996).
- Associate manager, structured debt and equity group at Prudential Capital
   Corporation (1988-1989).
- Analyst at Prudential-Bache Capital Funding in London (1987-1988).
- Equity analyst in the health care sector at Prudential Equity Management
   Associates (1985-1987).
- BS, Carlson School of Management, University of Minnesota.


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



36 | Who Manages and Oversees the Funds
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of each table are for a single
share. The total return figures represent the percentage that an investor in a
fund would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by PricewaterhouseCoopers LLP,
independent registered public accounting firm, whose report, along with each
fund's financial statements, is included in each fund's annual report (see
"Shareholder reports" on the back cover). On July 10, 2006, DWS Micro Cap Fund
acquired all the assets and assumed all the liabilities of the Predecessor
Fund. The information contained in the following tables for DWS Micro Cap Fund
for periods prior to July 10, 2006 has been derived from the Predecessor Fund's
financial statements.



                                                      Financial Highlights  | 37
<PAGE>

DWS Micro Cap Fund - Class A



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                           2007            2006             2005          2004          2003
<S>                                             <C>           <C>                <C>           <C>           <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------------           -
NET ASSET VALUE, BEGINNING OF PERIOD             $  18.87        $  22.45         $  20.99      $  18.69      $  14.07
---------------------------------------------    --------        --------         --------      --------      --------
Income (loss) from investment
operations:
  Net investment income (loss)a                    (  .25)         (  .22)e         (  .32)       (  .31)       (  .18)
_____________________________________________    ________        ________         ________      ________      ________
  Net realized and unrealized gain
  (loss)                                             5.02         .24b                3.93          2.61          4.80
---------------------------------------------    --------        --------         --------      --------      --------
  TOTAL FROM INVESTMENT OPERATIONS                   4.77             .02             3.61          2.30          4.62
_____________________________________________    ________        ________         ________      ________      ________
Less distributions from:
  Net realized gains                               ( 3.55)         ( 3.60)          ( 2.15)            -             -
_____________________________________________    ________        ________         ________      ________      ________
Redemption fees                                       .00*            .00*             .00*            -             -
---------------------------------------------    --------        --------         --------      --------      --------
NET ASSET VALUE, END OF PERIOD                   $  20.09        $  18.87         $  22.45      $  20.99      $  18.69
---------------------------------------------    --------        --------         --------      --------      --------
Total Return (%)c,d                                 27.19          (  .90)e,f        17.88         12.37         32.84
---------------------------------------------    --------        --------         --------      --------      --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------    --------
Net assets, end of period ($ millions)                 27              29               26            22            11
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses before expense
reductions (%)                                       2.17            2.29             2.24          2.15          2.16
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses after expense
reductions (%)                                       1.64            1.75             1.74          1.74          1.74
_____________________________________________    ________        ________         ________      ________      ________
Ratio of net investment income
(loss) (%)                                         ( 1.29)         ( 1.09)e         ( 1.52)       ( 1.47)       ( 1.09)
_____________________________________________    ________        ________         ________      ________      ________
Portfolio turnover rate (%)                            73             100              108            99            74
---------------------------------------------    --------        --------         --------      --------      --------
</TABLE>




a   Based on average shares outstanding during the period.



b   Because of the timing of subscriptions and redemptions in relation to
   fluctuating markets at value the amount shown may not agree with the change
   in aggregate gains and losses.

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

d   Total return does not reflect the effect of any sales charges.



e   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.061 per share
   and an increase in the ratio of net investment income of 0.29%. Excluding
   this non-recurring income, total return would have been 0.33% lower.

f   The Fund realized a gain of $18,520 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.

*

  Amount is less than $.005.

38 | Financial Highlights
<PAGE>

DWS Micro Cap Fund - Class B



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                           2007            2006             2005          2004          2003
<S>                                             <C>           <C>                <C>           <C>           <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------------           -
NET ASSET VALUE, BEGINNING OF PERIOD             $  18.16        $  21.88         $  20.64      $  18.52      $  14.04
---------------------------------------------    --------        --------         --------      --------      --------
Income (loss) from investment
operations:
  Net investment income (loss)a                    (  .37)         (  .36)e         (  .47)       (  .46)       (  .30)
_____________________________________________    ________        ________         ________      ________      ________
  Net realized and unrealized gain
  (loss)                                             4.79         .24b                3.86          2.58          4.78
---------------------------------------------    --------        --------         --------      --------      --------
  TOTAL FROM INVESTMENT OPERATIONS                   4.42          (  .12)            3.39          2.12          4.48
_____________________________________________    ________        ________         ________      ________      ________
Less distributions from:
  Net realized gains                               ( 3.55)         ( 3.60)          ( 2.15)            -             -
_____________________________________________    ________        ________         ________      ________      ________
Redemption fees                                       .00*            .00*             .00*            -             -
---------------------------------------------    --------        --------         --------      --------      --------
NET ASSET VALUE, END OF PERIOD                   $  19.03        $  18.16         $  21.88      $  20.64      $  18.52
---------------------------------------------    --------        --------         --------      --------      --------
Total Return (%)c,d                                 26.18          ( 1.60)e,f        16.95         11.56         31.91
---------------------------------------------    --------        --------         --------      --------      --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------    --------
Net assets, end of period ($ millions)                  4               4                5             5             3
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses before expense
reductions (%)                                       3.00            3.05             2.98          2.90          2.91
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses after expense
reductions (%)                                       2.39            2.50             2.49          2.49          2.49
_____________________________________________    ________        ________         ________      ________      ________
Ratio of net investment income
(loss) (%)                                         ( 2.04)         ( 1.84)e         ( 2.27)       ( 2.22)       ( 1.84)
_____________________________________________    ________        ________         ________      ________      ________
Portfolio turnover rate (%)                            73             100              108            99            74
---------------------------------------------    --------        --------         --------      --------      --------
</TABLE>




a   Based on average shares outstanding during the period.



b   Because of the timing of subscriptions and redemptions in relation to
   fluctuating markets at value the amount shown may not agree with the change
   in aggregate gains and losses.

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

d   Total return does not reflect the effect of any sales charges.



e   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.061 per share
   and an increase in the ratio of net investment income of 0.29%. Excluding
   this non-recurring income, total return would have been 0.34% lower.

f   The Fund realized a gain of $18,520 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.

*   Amount is less than $.005.


                                                      Financial Highlights  | 39
<PAGE>

DWS Micro Cap Fund - Class C



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                           2007            2006             2005          2004          2003
<S>                                             <C>           <C>                <C>           <C>           <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------------           -
NET ASSET VALUE, BEGINNING OF PERIOD             $  18.15        $  21.88         $  20.64      $  18.51      $  14.04
---------------------------------------------    --------        --------         --------      --------      --------
Income (loss) from investment
operations:
  Net investment income (loss)a                    (  .37)         (  .36)e         (  .47)       (  .46)       (  .31)
_____________________________________________    ________        ________         ________      ________      ________
  Net realized and unrealized gain
  (loss)                                             4.80         .23b                3.86          2.59          4.78
---------------------------------------------    --------        --------         --------      --------      --------
  TOTAL FROM INVESTMENT OPERATIONS                   4.43          (  .13)            3.39          2.13          4.47
_____________________________________________    ________        ________         ________      ________      ________
Less distributions from:
  Net realized gains                               ( 3.55)         ( 3.60)          ( 2.15)            -             -
_____________________________________________    ________        ________         ________      ________      ________
Redemption fees                                       .00*            .00*             .00*            -             -
---------------------------------------------    --------        --------         --------      --------      --------
NET ASSET VALUE, END OF PERIOD                   $  19.03        $  18.15         $  21.88      $  20.64      $  18.51
---------------------------------------------    --------        --------         --------      --------      --------
Total Return (%)c,d                                 26.26          ( 1.66)e,f        16.95         11.56         31.84
---------------------------------------------    --------        --------         --------      --------      --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------    --------
Net assets, end of period ($ millions)                  8               8                9            14             5
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses before expense
reductions (%)                                       2.94            3.02             2.98          2.90          2.91
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses after expense
reductions (%)                                       2.39            2.50             2.49          2.49          2.49
_____________________________________________    ________        ________         ________      ________      ________
Ratio of net investment income
(loss) (%)                                         ( 2.04)         ( 1.84)e         ( 2.27)       ( 2.22)       ( 1.84)
_____________________________________________    ________        ________         ________      ________      ________
Portfolio turnover rate (%)                            73             100              108            99            74
---------------------------------------------    --------        --------         --------      --------      --------
</TABLE>




a   Based on average shares outstanding during the period.



b   Because of the timing of subscriptions and redemptions in relation to
   fluctuating markets at value the amount shown may not agree with the change
   in aggregate gains and losses.

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

d   Total return does not reflect the effect of any sales charges.



e   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.061 per share
   and an increase in the ratio of net investment income of 0.29%. Excluding
   this non-recurring income, total return would have been 0.34% lower.

f   The Fund realized a gain of $18,520 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.

*   Amount is less than $.005.


40 | Financial Highlights
<PAGE>

DWS Mid Cap Growth Fund - Class A



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                          2007          2006          2005          2004         2003
<S>                                            <C>           <C>           <C>           <C>          <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------          -
NET ASSET VALUE, BEGINNING OF PERIOD             $  15.70      $ 15.17       $  12.06     $  11.46      $  9.31
---------------------------------------------    --------      -------       --------     --------      -------
Income (loss) from investment
operations:
  Net investment income (loss)a                    (  .14)      (  .14)d       (  .12)      (  .10)      (  .08)
_____________________________________________    ________      _______       ________     ________      _______
  Net realized and unrealized gain
  (loss)                                             3.51          .67           3.23          .70         2.23
---------------------------------------------    --------      -------       --------     --------      -------
  TOTAL FROM INVESTMENT OPERATIONS                   3.37          .53           3.11          .60         2.15
_____________________________________________    ________      _______       ________     ________      _______
Redemption fees                                       .00*         .00*           .00*           -            -
---------------------------------------------    --------      -------       --------     --------      -------
NET ASSET VALUE, END OF PERIOD                   $  19.07      $ 15.70       $  15.17     $  12.06      $ 11.46
---------------------------------------------    --------      -------       --------     --------      -------
Total Return (%)c                                 21.46b       3.49b,d        25.79b        5.24b       23.09b
---------------------------------------------    --------      -------       --------     --------      -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------    -------
Net assets, end of period ($ millions)                566          528            587          242          212
_____________________________________________    ________      _______       ________     ________      _______
Ratio of expenses before expense
reductions (%)                                       1.25         1.35           1.31         1.35         1.34
_____________________________________________    ________      _______       ________     ________      _______
Ratio of expenses after expense
reductions (%)                                       1.24         1.29           1.25         1.25         1.25
_____________________________________________    ________      _______       ________     ________      _______
Ratio of net investment income
(loss) (%)                                         (  .76)      (  .90)d       (  .83)      (  .86)      (  .74)
_____________________________________________    ________      _______       ________     ________      _______
Portfolio turnover rate (%)                            56           53             83          116           82
---------------------------------------------    --------      -------       --------     --------      -------
</TABLE>




a   Based on average shares outstanding during the period.

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

c   Total return does not reflect the effect of any sales charges.

d   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.002 per share
   and an increase in the ratio of net investment income of 0.01%. Excluding
   this non-recurring income, total return would have been 0.01% lower.



*   Amount is less than $.005.


                                                      Financial Highlights  | 41
<PAGE>

DWS Mid Cap Growth Fund - Class B



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                           2007          2006           2005          2004         2003
<S>                                             <C>           <C>            <C>           <C>           <C>
SELECTED PER SHARE DATA
------------------------------------------------------------------------------------------------------          -
NET ASSET VALUE, BEGINNING OF PERIOD             $  15.21       $ 14.81       $  11.86      $  11.35      $  9.29
---------------------------------------------    --------       -------       --------      --------      -------
Income (loss) from investment
operations:
  Net investment income (loss)a                   (   .26)       (  .25)d       (  .22)       (  .19)      (  .15)
_____________________________________________    ________       _______       ________      ________      _______
  Net realized and unrealized gain
  (loss)                                             3.37           .65           3.17           .70         2.21
---------------------------------------------    --------       -------       --------      --------      -------
  TOTAL FROM INVESTMENT OPERATIONS                   3.11           .40           2.95           .51         2.06
_____________________________________________    ________       _______       ________      ________      _______
Redemption fees                                       .00*          .00*           .00*            -            -
---------------------------------------------    --------       -------       --------      --------      -------
NET ASSET VALUE, END OF PERIOD                   $  18.32       $ 15.21       $  14.81      $  11.86      $ 11.35
---------------------------------------------    --------       -------       --------      --------      -------
Total Return (%)b,c                                 20.45        2.70d           24.87          4.49        22.17
---------------------------------------------    --------       -------       --------      --------      -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------    -------
Net assets, end of period ($ millions)                 33            40             56             9            6
_____________________________________________    ________       _______       ________      ________      _______
Ratio of expenses before expense
reductions (%)                                       2.16          2.21           2.05          2.10         2.09
_____________________________________________    ________       _______       ________      ________      _______
Ratio of expenses after expense
reductions (%)                                       2.00          2.04           2.00          2.00         2.00
_____________________________________________    ________       _______       ________      ________      _______
Ratio of net investment income
(loss) (%)                                        (  1.52)       ( 1.65)d       ( 1.58)       ( 1.61)      ( 1.49)
_____________________________________________    ________       _______       ________      ________      _______
Portfolio turnover rate (%)                            56            53             83           116           82
---------------------------------------------    --------       -------       --------      --------      -------
</TABLE>




a   Based on average shares outstanding during the period.

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

c   Total return does not reflect the effect of any sales charges.

d   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.002 per share
   and an increase in the ratio of net investment income of 0.01%. Excluding
   this non-recurring income, total return would have been 0.01% lower.

*   Amount is less than $.005.


42 | Financial Highlights
<PAGE>

DWS Mid Cap Growth Fund - Class C



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                           2007          2006           2005          2004         2003
<S>                                             <C>           <C>            <C>           <C>           <C>
SELECTED PER SHARE DATA
------------------------------------------------------------------------------------------------------          -
NET ASSET VALUE, BEGINNING OF PERIOD             $  15.20       $ 14.80       $  11.85      $  11.35      $  9.29
---------------------------------------------    --------       -------       --------      --------      -------
Income (loss) from investment
operations:
  Net investment income (loss)a                    (  .26)       (  .25)d       (  .22)       (  .19)      (  .16)
_____________________________________________    ________       _______       ________      ________      _______
  Net realized and unrealized gain
  (loss)                                             3.37           .65           3.17           .69         2.22
---------------------------------------------    --------       -------       --------      --------      -------
  TOTAL FROM INVESTMENT OPERATIONS                   3.11           .40           2.95           .50         2.06
_____________________________________________    ________       _______       ________      ________      _______
Redemption fees                                       .00*          .00*           .00*            -            -
---------------------------------------------    --------       -------       --------      --------      -------
NET ASSET VALUE, END OF PERIOD                   $  18.31       $ 15.20       $  14.80      $  11.85      $ 11.35
---------------------------------------------    --------       -------       --------      --------      -------
Total Return (%)b,c                                 20.46        2.70d           24.89          4.41        22.17
---------------------------------------------    --------       -------       --------      --------      -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------    -------
Net assets, end of period ($ millions)                 28            28             34             8            5
_____________________________________________    ________       _______       ________      ________      _______
Ratio of expenses before expense
reductions (%)                                       2.07          2.09           2.05          2.10         2.09
_____________________________________________    ________       _______       ________      ________      _______
Ratio of expenses after expense
reductions (%)                                       2.00          2.04           2.00          2.00         2.00
_____________________________________________    ________       _______       ________      ________      _______
Ratio of net investment income
(loss) (%)                                         ( 1.52)       ( 1.65)d       ( 1.58)       ( 1.61)      ( 1.49)
_____________________________________________    ________       _______       ________      ________      _______
Portfolio turnover rate (%)                            56            53             83           116           82
---------------------------------------------    --------       -------       --------      --------      -------
</TABLE>




a   Based on average shares outstanding during the period.

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

c   Total return does not reflect the effect of any sales charges.

d   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.002 per share
   and an increase in the ratio of net investment income of 0.01%. Excluding
   this non-recurring income, total return would have been 0.01% lower.



*   Amount is less than $.005.


                                                      Financial Highlights  | 43
<PAGE>

DWS Small Cap Growth Fund - Class A



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                       2007           2006           2005          2004          2003
<S>                                         <C>           <C>             <C>           <C>           <C>
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD         $  23.60        $ 24.96       $  21.29      $  19.74      $  16.58
-----------------------------------------    --------        -------       --------      --------      --------
Income (loss) from investment
operations:
  Net investment income (loss)a                (  .18)        (  .23)c       (  .25)       (  .20)       (  .16)
_________________________________________    ________        _______       ________      ________      ________
  Net realized and unrealized gain
  (loss)                                         4.51            .83           4.09          1.75          3.32
------------------------------------------   --------        -------       --------      --------      --------
  TOTAL FROM INVESTMENT OPERATIONS               4.33            .60           3.84          1.55          3.16
__________________________________________   ________        _______       ________      ________      ________
Less distributions from:
  Net realized gains                           ( 1.61)        ( 1.96)        (  .17)            -             -
__________________________________________   ________        _______       ________      ________      ________
Redemption fees                                   .00*           .00*           .00*            -             -
------------------------------------------   --------        -------       --------      --------      --------
NET ASSET VALUE, END OF PERIOD               $  26.32        $ 23.60       $  24.96      $  21.29      $  19.74
------------------------------------------   --------        -------       --------      --------      --------
Total Return (%)b                               19.08       2.20c,d           17.91          7.95         19.06
------------------------------------------   --------       --------       --------      --------      --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)             59             87             80            40            25
__________________________________________   ________       ________       ________      ________      ________
Ratio of expenses before expense
reductions (%)                                   1.37           1.42           1.37          1.35          1.37
__________________________________________   ________       ________       ________      ________      ________
Ratio of expenses after expense
reductions (%)                                   1.25           1.29           1.25          1.25          1.25
__________________________________________   ________       ________       ________      ________      ________
Ratio of net investment income
(loss) (%)                                     (  .73)        (  .91)c       ( 1.03)       (  .93)       (  .90)
__________________________________________   ________       ________       ________      ________      ________
Portfolio turnover rate (%)                     64e               74            119           116            74
------------------------------------------   --------       --------       --------      --------      --------
</TABLE>




a   Based on average shares outstanding during the period.



b   Total return would have been lower had certain expenses not been reduced.
   Total return does not reflect the effect of any sales charges.



c   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.008 per share
   and an increase in the ratio of net investment income of 0.03%. Excluding
   this non-recurring income, total return would have been 0.03% lower.



d   The Fund realized a gain of $92,403 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.



e   Excludes portfolio securities delivered as a result of processing
   redemption in-kind transactions.

*   Amount is less than $.005.


44 | Financial Highlights
<PAGE>

DWS Small Cap Growth Fund - Class B



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                        2007           2006           2005          2004          2003
<S>                                          <C>           <C>             <C>           <C>           <C>
SELECTED PER SHARE DATA
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD          $  22.81        $ 24.36       $  20.94      $  19.56      $  16.55
------------------------------------------    --------        -------       --------      --------      --------
Income (loss) from investment
operations:
  Net investment income (loss)a                 (  .35)        (  .40)d       (  .42)       (  .36)       (  .30)
__________________________________________    ________        _______       ________      ________      ________
  Net realized and unrealized gain
  (loss) on investment transactions               4.33            .81           4.01          1.74          3.31
------------------------------------------    --------        -------       --------      --------      --------
  TOTAL FROM INVESTMENT OPERATIONS                3.98            .41           3.59          1.38          3.01
__________________________________________    ________        _______       ________      ________      ________
Less distributions from:
  Net realized gains                            ( 1.61)        ( 1.96)        (  .17)            -             -
__________________________________________    ________        _______       ________      ________      ________
Redemption fees                                    .00*           .00*           .00*            -             -
------------------------------------------    --------        -------       --------      --------      --------
NET ASSET VALUE, END OF PERIOD                $  25.18        $ 22.81       $  24.36      $  20.94      $  19.56
------------------------------------------    --------        -------       --------      --------      --------
Total Return (%)b                                18.20       1.38c,d           17.06          7.16         18.19
------------------------------------------    --------       --------       --------      --------      --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)               5              6              8             3             2
__________________________________________    ________       ________       ________      ________      ________
Ratio of expenses before expense
reductions (%)                                    2.26           2.24           2.11          2.10          2.12
__________________________________________    ________       ________       ________      ________      ________
Ratio of expenses after expense
reductions (%)                                    2.00           2.04           2.00          2.00          2.00
__________________________________________    ________       ________       ________      ________      ________
Ratio of net investment income
(loss) (%)                                      ( 1.48)        ( 1.66)c       ( 1.78)       ( 1.68)       ( 1.65)
___________________________________________   ________       ________       ________      ________      ________
Portfolio turnover rate (%)                      64e               74            119           116            74
-------------------------------------------   --------       --------       --------      --------      --------
</TABLE>




a   Based on average shares outstanding during the period.



b   Total return would have been lower had certain expenses not been reduced.
   Total return does not reflect the effect of any sales charges.



c   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.008 per share
   and an increase in the ratio of net investment income of 0.03%. Excluding
   this non-recurring income, total return would have been 0.04% lower.



d   The Fund realized a gain of $92,403 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.



e   Excludes portfolio securities delivered as a result of processing
   redemption in-kind transactions.

*   Amount is less than $.005.


                                                      Financial Highlights  | 45
<PAGE>

DWS Small Cap Growth Fund - Class C



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                       2007           2006           2005          2004          2003
<S>                                         <C>           <C>             <C>           <C>           <C>
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD         $  22.81        $ 24.36       $  20.94      $  19.56      $  16.55
-----------------------------------------    --------        -------       --------      --------      --------
Income (loss) from investment
operations:
  Net investment income (loss)a                (  .35)        (  .40)c       (  .42)       (  .36)       (  .30)
_________________________________________    ________        _______       ________      ________      ________
  Net realized and unrealized gain
  (loss)                                         4.34            .81           4.01          1.74          3.31
------------------------------------------   --------        -------       --------      --------      --------
  TOTAL FROM INVESTMENT OPERATIONS               3.99            .41           3.59          1.38          3.01
__________________________________________   ________        _______       ________      ________      ________
Less distributions from:
  Net realized gains                           ( 1.61)        ( 1.96)        (  .17)            -             -
__________________________________________   ________        _______       ________      ________      ________
Redemption fees                                   .00*           .00*           .00*            -             -
------------------------------------------   --------        -------       --------      --------      --------
NET ASSET VALUE, END OF PERIOD               $  25.19        $ 22.81       $  24.36      $  20.94      $  19.56
------------------------------------------   --------        -------       --------      --------      --------
Total Return (%)b                               18.25       1.38c,d           17.06          7.16         18.19
------------------------------------------   --------       --------       --------      --------      --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)              9              9             10             5             2
__________________________________________   ________       ________       ________      ________      ________
Ratio of expenses before expense
reductions (%)                                   2.16           2.11           2.10          2.10          2.12
__________________________________________   ________       ________       ________      ________      ________
Ratio of expenses after expense
reductions (%)                                   2.00           2.04           2.00          2.00          2.00
__________________________________________   ________       ________       ________      ________      ________
Ratio of net investment income
(loss) (%)                                     ( 1.48)        ( 1.66)c       ( 1.78)       ( 1.68)       ( 1.65)
__________________________________________   ________       ________       ________      ________      ________
Portfolio turnover rate (%)                     64e               74            119           116            74
------------------------------------------   --------       --------       --------      --------      --------
</TABLE>




a   Based on average shares outstanding during the period.



b   Total return would have been lower had certain expenses not been reduced.
   Total return does not reflect the effect of any sales charges.



c   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.008 per share
   and an increase in the ratio of net investment income of 0.03%. Excluding
   this non-recurring income, total return would have been 0.03% lower.



d   The Fund realized a gain of $92,403 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.



e   Excludes portfolio securities delivered as a result of processing
   redemption in-kind transactions.

*   Amount is less than $.005.


46 | Financial Highlights
<PAGE>

HOW TO INVEST IN THE FUNDS

Offered in this prospectus are share classes noted on the cover of the
prospectus. Each class has its own fees and expenses, offering you a choice of
cost structures. Each fund may offer other classes of shares in a separate
prospectus. These shares are intended for investors seeking the advice and
assistance of a financial advisor, who will typically receive compensation for
those services.

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

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



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


Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. YOU
MAY WANT TO ASK YOUR FINANCIAL ADVISOR TO HELP YOU WITH THIS DECISION.

<PAGE>

CHOOSING A SHARE CLASS


We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief description and
comparison of the main features of each class.




<TABLE>
<CAPTION>
 CLASSES AND FEATURES                         POINTS TO HELP YOU COMPARE
<S>                                          <C>
 CLASS A
 -  Sales charge of up to 5.75% charged       -  Some investors may be able to reduce
  when you buy shares                        or eliminate their sales charge; see
                                             "Class A shares"
 -  In most cases, no charge when you
  sell shares                                -  Total annual expenses are lower than
                                             those for Class B or Class C
 -  Up to 0.25% annual shareholder
    servicing fee

    CLASS B
 -  No sales charge when you buy shares       -  The deferred sales charge rate falls to
                                             zero after six years
 -  Deferred sales charge declining from
    4.00%, charged when you sell shares      -  Shares automatically convert to
    you bought within the last six years        Class A after six years, which means
                                                lower annual expenses going forward
 -  0.75% annual distribution fee and up
  to 0.25% annual shareholder servicing
  fee

 CLASS C
 -  No sales charge when you buy shares       -  The deferred sales charge rate for one
                                                 year is lower for Class C shares than
 -  Deferred sales charge of 1.00%,              Class B shares, but your shares never
    charged when you sell shares you             convert to Class A, so annual expenses
    bought within the last year                  remain higher

 -  0.75% annual distribution fee and up
  to 0.25% annual shareholder servicing
  fee
</TABLE>




Your financial advisor will typically be paid a fee when you buy shares and may
receive different levels of compensation depending upon which class of shares
you buy. Each fund may pay financial advisors or other intermediaries
compensation for the services they provide to their clients. This compensation
may vary depending on the class share and fund you buy. Your financial advisor
may also receive compensation from the Advisor and/or its affiliates. Please
see "Financial intermediary support payments" for more information.




48 | Choosing a Share Class
<PAGE>

           Class A shares


           Class A shares may make sense for long-term investors, especially
           those who are eligible for a reduced or eliminated sales charge.

           Class A shares have a 12b-1 plan, under which a shareholder
           servicing fee of up to 0.25% is deducted from class assets each
           year. Because the shareholder servicing fee is continuous in nature,
           it may, over time, increase the cost of your investment and may cost
           you more than paying other types of sales charges.


           Class A shares have an up-front sales charge that varies with the
           amount you invest:



<TABLE>
<CAPTION>
                          FRONT-END SALES          FRONT-END SALES
                            CHARGE AS %          CHARGE AS % OF YOUR
YOUR INVESTMENT        OF OFFERING PRICE 1,2        NET INVESTMENT 2
<S>                       <C>                       <C>
  Up to $50,000           5.75%                     6.10%
$    50,000-$99,999       4.50                      4.71
$  100,000-$249,999       3.50                      3.63
$  250,000-$499,999       2.60                      2.67
$  500,000-$999,999       2.00                      2.04
  $1 million or more      see below                see below
</TABLE>



           1   The offering price includes the sales charge.

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



           YOU MAY BE ABLE TO LOWER YOUR CLASS A SALES CHARGE IF:


           -  you plan to invest at least $50,000 in Class A shares (including
              Class A shares in other retail DWS funds) over the next 24 months
              ("Letter of Intent")

           -  the amount of Class A shares you already own (including Class A
              shares in other retail DWS funds) plus the amount you're
              investing now in Class A shares is at least $50,000 ("Cumulative
              Discount")

           -  you are investing a total of $50,000 or more in Class A shares of
              several retail DWS funds on the same day ("Combined Purchases")

                                                    Choosing a Share Class  | 49
<PAGE>

           The point of these three features is to let you count investments
           made at other times or in certain other funds for purposes of
           calculating your present sales charge. Any time you can use the
           privileges to "move" your investment into a lower sales charge
           category, it's generally beneficial for you to do so.


           For purposes of determining whether you are eligible for a reduced
           Class A sales charge, you and your immediate family (your spouse or
           life partner and your children or stepchildren age 21 or younger)
           may aggregate your investments in the DWS family of funds. This
           includes, for example, investments held in a retirement account, an
           employee benefit plan or at a financial advisor other than the one
           handling your current purchase. These combined investments will be
           valued at their current offering price to determine whether your
           current investment qualifies for a reduced sales charge.


           To receive a reduction in your Class A initial sales charge, you
           must let your financial advisor or Shareholder Services know at the
           time you purchase shares that you qualify for such a reduction. You
           may be asked by your financial advisor or Shareholder Services to
           provide account statements or other information regarding related
           accounts of you or your immediate family in order to verify your
           eligibility for a reduced sales charge.


           For more information about sales charge discounts, please visit
           www.dws-scudder.com (click on the link entitled "Fund Sales Charge
           and Breakpoint Schedule"), consult with your financial advisor or
           refer to the section entitled "Purchase or Redemption of Shares" in
           each fund's Statement of Additional Information.

           IN CERTAIN CIRCUMSTANCES, YOU MAY BE ABLE TO BUY CLASS A SHARES
           WITHOUT A SALES CHARGE. For example, the sales charge will be waived
           if you are reinvesting dividends or distributions or if you are
           exchanging an investment in Class A shares of another fund in the
           DWS family of funds for an investment in Class A shares of a fund.
           In addition, a sales charge waiver may apply to transactions by
           certain retirement plans and certain other entities or persons
           (e.g., affiliated persons of Deutsche Asset Management or the DWS
           funds) and with respect to certain types of investments (e.g., an
           investment advisory or agency commission program under which you pay
           a fee to an investment advisor or other firm for portfolio
           management or brokerage services).



50 | Choosing a Share Class
<PAGE>


           Details regarding the types of investment programs and categories of
           investors eligible for a sales charge waiver are provided in each
           fund's Statement of Additional Information.

           There are a number of additional provisions that apply in order to
           be eligible for a sales charge waiver. Each fund may waive the sales
           charge for investors in other situations as well. Your financial
           advisor or Shareholder Services can answer your questions and help
           you determine if you are eligible.

           IF YOU'RE INVESTING $1 MILLION OR MORE, either as a lump sum or
           through one of the sales charge reduction features described above,
           you may be eligible to buy Class A shares without a sales charge
           ("Large Order NAV Purchase Privilege"). However, you may be charged
           a contingent deferred sales charge (CDSC) of 1.00% on any shares you
           sell within 12 months of owning them and a similar charge of 0.50%
           on shares you sell within the following six months. This CDSC is
           waived under certain circumstances (see "Policies You Should Know
           About"). Your financial advisor or Shareholder Services can answer
           your questions and help you determine if you're eligible.


           Class B shares

           Class B shares may make sense for long-term investors who prefer to
           see all of their investment go to work right away and can accept
           somewhat higher annual expenses. Please note, however, that since
           not all DWS funds offer Class B shares, exchange options may be
           limited.

           With Class B shares, you pay no up-front sales charge to a fund.
           Class B shares have a 12b-1 plan, under which a distribution fee of
           0.75% and a shareholder servicing fee of up to 0.25% are deducted
           from class assets each year. This means the annual expenses for
           Class B shares are somewhat higher (and their performance
           correspondingly lower) compared to Class A shares. However, unlike
           Class A shares, your entire investment goes to work immediately.
           After six years, Class B shares automatically convert on a tax-free
           basis to Class A shares, which has the net effect of lowering the
           annual expenses from the seventh year on.



                                                    Choosing a Share Class  | 51
<PAGE>

           Class B shares have a CDSC. This charge declines over the years you
           own shares and disappears completely after six years of ownership.
           But for any shares you sell within those six years, you may be
           charged as follows:


<TABLE>
<CAPTION>
    YEAR AFTER YOU BOUGHT SHARES               CDSC ON SHARES YOU SELL
<S>                                    <C>
  First year                           4.00%
  Second or third year                 3.00
  Fourth or fifth year                 2.00
  Sixth year                           1.00
  Seventh year and later               None (automatic conversion to Class A)
</TABLE>


           This CDSC is waived under certain circumstances (see "Policies You
           Should Know About"). Your financial advisor or Shareholder Services
           can answer your questions and help you determine if you're eligible.


           While Class B shares don't have any front-end sales charge, their
           higher annual expenses mean that over the years you could end up
           paying more than the equivalent of the maximum allowable front-end
           sales charge.


           If you are thinking of making a large purchase in Class B shares or
           if you already own a large amount of Class A shares of a fund or
           other DWS funds, it may be more cost efficient to purchase Class A
           shares instead. Orders to purchase Class B shares of $100,000 or
           more will be declined with the exception of orders received from
           financial representatives acting for clients whose shares are held
           in an omnibus account and certain employer-sponsored employee
           benefit plans.



           Class C shares


           Class C shares may appeal to investors who plan to sell some or all
           of their shares within six years of buying them or who aren't
           certain of their investment time horizon.


           With Class C shares, you pay no up-front sales charge to a fund.
           Class C shares have a 12b-1 plan, under which a distribution fee of
           0.75% and a shareholder servicing fee of up to 0.25% are deducted
           from class assets each year. Because of these fees, the annual
           expenses for Class C shares are similar to those of Class B shares,
           but higher than those for Class A shares (and the performance of
           Class C shares is correspondingly lower than that of Class A
           shares).


52 | Choosing a Share Class
<PAGE>

           Unlike Class B shares, Class C shares do NOT automatically convert
           to Class A shares after six years, so they continue to have higher
           annual expenses.

           Class C shares have a CDSC, but only on shares you sell within one
           year of buying them:


<TABLE>
<CAPTION>
   YEAR AFTER YOU BOUGHT SHARES        CDSC ON SHARES YOU SELL
<S>                                   <C>
  First year                          1.00%
  Second year and later                         None
</TABLE>


           This CDSC is waived under certain circumstances (see "Policies You
           Should Know About"). Your financial advisor or Shareholder Services
           can answer your questions and help you determine if you're eligible.


           While Class C shares do not have an up-front sales charge, their
           higher annual expenses mean that, over the years, you could end up
           paying more than the equivalent of the maximum allowable up-front
           sales charge.


           Orders to purchase Class C shares of $500,000 or more will be
           declined with the exception of orders received from financial
           representatives acting for clients whose shares are held in an
           omnibus account and certain employer-sponsored employee benefit
           plans.



                                                    Choosing a Share Class  | 53
<PAGE>

How to BUY Class A, B and C Shares




<TABLE>
<CAPTION>
 FIRST INVESTMENT                                ADDITIONAL INVESTMENTS
<S>                                             <C>
 $1,000 or more for regular accounts             $50 or more for regular accounts and
 $500 or more for IRAs                          IRAs
 $500 or more for an account with an            $50 or more for an account with an
 Automatic Investment Plan                      Automatic Investment Plan

 THROUGH A FINANCIAL ADVISOR
 -  To obtain an application, contact your      -  Contact your advisor using the
  advisor                                       method that's most convenient for you

 BY MAIL OR EXPRESS MAIL (SEE BELOW)
 -  Fill out and sign an application            -  Send a check made payable to "DWS
                                                Scudder" and an investment slip to us
 -  Send it to us at the appropriate
  address, along with an investment             -  If you don't have an investment slip,
  check made payable to "DWS                    simply include a letter with your
  Scudder"                                      name, account number, the full name
                                                of the fund and the share class and
                                                your investment instructions

 BY WIRE
 -  Call (800) 621-1048 for instructions        -  Call (800) 621-1048 for instructions

 BY PHONE
 Not available                                  -  Call (800) 621-1048 for instructions

 WITH AN AUTOMATIC INVESTMENT PLAN
 -  Fill in the information on our              -  To set up regular investments from a
  application including a check for the         bank checking account call (800) 621-
  initial investment and a voided check         1048 ($50 minimum)

 USING QuickBuy
 Not available                                  -  Call (800) 621-1048 to make sure
                                                QuickBuy is set up on your account; if
                                                it is, you can request a transfer from
                                                your bank account of any amount
                                                between $50 and $250,000

 ON THE INTERNET
 Not available                                  -  Call (800) 621-1048 to ensure you have
                                                electronic services
                                                -  Register at www.dws-scudder.com or
                                                log in if already registered
                                                -  Follow the instructions for buying
                                                shares with money from your bank
                                                account
</TABLE>



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

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

EXPRESS, REGISTERED OR CERTIFIED MAIL:

DWS Scudder, 210 West 10th Street, Kansas City, MO 64105-1614


54 | How to Buy Class A, B and C Shares
<PAGE>

How to EXCHANGE or SELL Class A, B and C Shares


<TABLE>
<CAPTION>
 EXCHANGING INTO ANOTHER FUND                    SELLING SHARES
<S>                                             <C>
                                                 Some transactions, including most for
 -  Exchanges into existing accounts:            over $100,000, can only be ordered in
  $50 minimum per fund                           writing with a signature guarantee;
 -  Exchanges into new accounts:                 please see "Signature Guarantee"
  $1,000 minimum per fund for regular
  accounts and UGMAs
  $500 minimum for IRAs

 THROUGH A FINANCIAL ADVISOR
 -  Contact your advisor using the              -  Contact your advisor by the method
  method that's most convenient for you         that's most convenient for you

 BY PHONE                                        BY PHONE OR WIRE
 -  Call (800) 621-1048 for instructions        -  Call (800) 621-1048 for instructions

 BY MAIL OR EXPRESS MAIL
 (see previous page for address)
 Write a letter that includes:                  Write a letter that includes:
 -  the fund, class and account number          -  the fund, class and account number
  you're exchanging out of                      from which you want to sell shares
 -  the dollar amount or number of shares       -  the dollar amount or number of shares
  you want to exchange                          you want to sell
 -  the name and class of the fund you          -  your name(s), signature(s) and
  want to exchange into                         address, as they appear on your
                                                account
 -  your name(s), signature(s) and
  address, as they appear on your               -  a daytime telephone number
  account
 -  a daytime telephone number

 WITH AN AUTOMATIC EXCHANGE PLAN                 WITH AN AUTOMATIC WITHDRAWAL PLAN
 -  To set up regular exchanges from a          -  Call (800) 621-1048 (minimum $50)
  fund account, call (800) 621-1048
 USING QuickSell
 Not available                                  -  Call (800) 621-1048 to make sure
                                                QuickSell is set up on your account; if
                                                it is, you can request a transfer to your
                                                bank account of any amount between
                                                $50 and $250,000

 ON THE INTERNET
 -  Register at www.dws-scudder.com or          -  Register at www.dws-scudder.com or
  log in if already registered                  log in if already registered
 -  Follow the instructions for making on-      -  Follow the instructions for making on-
  line exchanges                                line redemptions
</TABLE>



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

<TABLE>
<S>               <C>
TO REACH US:      WEB SITE: www.dws-scudder.com
                  TELEPHONE REPRESENTATIVE: (800) 621-1048, M-F, 9 a.m. - 6 p.m. ET
                  TDD LINE: (800) 972-3006, M-F, 9 a.m. - 6 p.m. ET
</TABLE>



                           How to Exchange or Sell Class A, B and C Shares  | 55
<PAGE>


           Financial intermediary support payments

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


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



56 | How to Exchange or Sell Class A, B and C Shares
<PAGE>


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

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

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



                           How to Exchange or Sell Class A, B and C Shares  | 57
<PAGE>


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



POLICIES YOU SHOULD KNOW ABOUT


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


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

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.

           In order to reduce the amount of mail you receive and to help reduce
           expenses, we generally send a single copy of any shareholder report
           and prospectus to each household. If you do not want the mailing of
           these documents to be combined with those for other members of your
           household, please contact your financial advisor or call (800)
           621-1048.


           Policies about transactions

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


58 | Policies You Should Know About
<PAGE>

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

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


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


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

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


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


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


                                            Policies You Should Know About  | 59
<PAGE>

           INITIAL PURCHASE. The minimum initial investment for Class A, B and
           C shares is $1,000, except for investments on behalf of participants
           in certain fee-based and wrap programs offered through certain
           financial intermediaries approved by the Advisor, for which there is
           no minimum initial investment; and IRAs, for which the minimum
           initial investment is $500 per account. The minimum initial
           investment is $500 per account if you establish an automatic
           investment plan. Group retirement plans and certain other accounts
           have similar or lower minimum share balance requirements.


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

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

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



60 | Policies You Should Know About
<PAGE>


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

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

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



                                            Policies You Should Know About  | 61
<PAGE>


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

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

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

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of a fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in a fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.



62 | Policies You Should Know About
<PAGE>


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

           REDEMPTION FEES. Each fund imposes a redemption fee of 2% of the
           total redemption amount (calculated at net asset value, without
           regard to the effect of any contingent deferred sales charge; any
           contingent deferred sales charge is also assessed on the total
           redemption amount without regard to the assessment of the 2%
           redemption fee) on all fund shares redeemed or exchanged within 15
           days of buying them (either by purchase or exchange). The redemption
           fee is paid directly to each fund and is designed to encourage
           long-term investment and to offset transaction and other costs
           associated with short-term or excessive trading. For purposes of
           determining whether the redemption fee applies, shares held the
           longest time will be treated as being redeemed first and shares held
           the shortest time will be treated as being redeemed last.

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

           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) transactions on behalf of any mutual fund advised by



                                            Policies You Should Know About  | 63
<PAGE>


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

           THE AUTOMATED INFORMATION LINE IS AVAILABLE 24 HOURS A DAY BY
           CALLING (800) 621-1048. You can use our automated phone services to
           get information on DWS funds generally and on accounts held directly
           at DWS Scudder. You can also use this service to make exchanges and
           purchase and sell shares.


           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House (ACH) services. Transactions
           take two to three days to be completed and there is a $50 minimum
           and a $250,000 maximum. To set up QuickBuy or QuickSell on a new
           account, see the account application; to add it to an existing
           account, call (800) 621-1048.




THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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









64 | Policies You Should Know About
<PAGE>


           TELEPHONE AND ELECTRONIC TRANSACTIONS. Generally, you are
           automatically entitled to telephone and electronic transaction
           privileges, but you may elect not to have them when you open your
           account or by contacting Shareholder Services at (800) 621-1048 at a
           later date.


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


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

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

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

           SIGNATURE GUARANTEE. When you want to sell more than $100,000 worth
           of shares or send proceeds to a third party or to a new address,
           you'll usually need to place your order in writing and include a
           signature guarantee. However, if you want money



                                            Policies You Should Know About  | 65
<PAGE>

           wired to a bank account that is already on file with us, you don't
           need a signature guarantee. Also, generally you don't need a
           signature guarantee for an exchange, although we may require one in
           certain other circumstances.


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


           SELLING SHARES OF TRUST ACCOUNTS AND BUSINESS OR ORGANIZATION
           ACCOUNTS may require additional documentation. Please call (800)
           621-1048 or contact your financial advisor for more information.


           WHEN YOU SELL SHARES THAT HAVE A CDSC, we calculate the CDSC as a
           percentage of what you paid for the shares or what you are selling
           them for - whichever results in the lower charge to you. In
           processing orders to sell shares, the shares with the lowest CDSC
           are sold first. Exchanges from one fund into another don't affect
           CDSCs; for each investment you make, the date you first bought
           shares is the date we use to calculate a CDSC on that particular
           investment.


           There are certain cases in which you may be exempt from a CDSC.
           These include:

           -  the death or disability of an account owner (including a joint
              owner). This waiver applies only under certain conditions. Please
              contact your financial advisor or Shareholder Services to
              determine if the conditions exist


           -  withdrawals made through an automatic withdrawal plan up to a
              maximum of 12% per year of the net asset value of the account


           -  withdrawals related to certain retirement or benefit plans

           -  redemptions for certain loan advances, hardship provisions or
              returns of excess contributions from retirement plans

           -  for Class A shares purchased through the Large Order NAV Purchase
              Privilege, redemption of shares whose dealer of record at the
              time of the investment notifies the Distributor that the dealer
              waives the applicable commission





THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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







66 | Policies You Should Know About
<PAGE>

           -  for Class C shares, redemption of shares purchased through a
           dealer-sponsored asset allocation program maintained on an omnibus
           record-keeping system, provided the dealer of record has waived the
           advance of the first year distribution and service fees applicable
           to such shares and has agreed to receive such fees quarterly

           In each of these cases, there are a number of additional provisions
           that apply in order to be eligible for a CDSC waiver. Your financial
           advisor or Shareholder Services can answer your questions and help
           you determine if you are eligible.


           IF YOU SELL SHARES IN A DWS FUND AND THEN DECIDE TO INVEST WITH DWS
           SCUDDER AGAIN WITHIN SIX MONTHS, you may be able to take advantage
           of the "reinstatement feature." With this feature, you can put your
           money back into the same class of a DWS fund at its current NAV and,
           for purposes of a sales charge, it will be treated as if it had
           never left DWS Scudder.

           You'll be reimbursed (in the form of fund shares) for any CDSC you
           paid when you sold. Future CDSC calculations will be based on your
           original investment date, rather than your reinstatement date. There
           is also an option that lets investors who sold Class B shares buy
           Class A shares (if available) with no sales charge, although they
           won't be reimbursed for any CDSC they paid. You can only use the
           reinstatement feature once for any given group of shares. To take
           advantage of this feature, contact Shareholder Services or your
           financial advisor.

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



                                            Policies You Should Know About  | 67
<PAGE>


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


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


           How each fund calculates share price

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


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



           The price at which you buy shares is based on the NAV per share
           calculated after the order is received by the transfer agent,
           although for Class A shares it will be adjusted to allow for any
           applicable sales charge (see "Choosing a Share Class"). The price at
           which you sell shares is also based on the NAV per share calculated
           after the order is received by the transfer agent, although a CDSC
           may be taken out of the proceeds (see "Choosing a Share Class").

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

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



68 | Policies You Should Know About
<PAGE>

           Exchange. In such a case, a fund's value for a security is likely to
           be different from the last quoted market price or pricing service
           information. In addition, due to the subjective and variable nature
           of fair value pricing, it is possible that the value determined for
           a particular asset may be materially different from the value
           realized upon such asset's sale. It is expected that the greater the
           percentage of fund assets that is invested in non-US securities, the
           more extensive will be a fund's use of fair value pricing. This is
           intended to reduce a fund's exposure to "time zone arbitrage" and
           other harmful trading practices. (See "Market timing policies and
           procedures.")

           TO THE EXTENT THAT A FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when a
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change significantly on days when the
           New York Stock Exchange is closed and you cannot buy or sell fund
           shares. Price changes in the securities a fund owns may ultimately
           affect the price of fund shares the next time the NAV is
           calculated.)


           Other rights we reserve

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

           -  withdraw or suspend the offering of shares at any time


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

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


                                            Policies You Should Know About  | 69
<PAGE>


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

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

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

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



70 | Policies You Should Know About
<PAGE>

UNDERSTANDING DISTRIBUTIONS AND TAXES

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


           DIVIDENDS AND DISTRIBUTIONS ARE PAID ANNUALLY IN DECEMBER AND, IF
           NECESSARY, MAY BE PAID AT OTHER TIMES AS WELL.

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

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

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






THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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



                                     Understanding Distributions and Taxes  | 71
<PAGE>

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

           If a fund's distributions exceed its income and capital gains
           realized in any year, such excess distributions will constitute a
           return of capital for federal income tax purposes. A return of
           capital generally will not be taxable to you at the time of the
           distribution, but will reduce the cost basis of your shares and
           result in a higher reported capital gain or a lower reported capital
           loss when you sell your shares.

           However, if a fund has available capital loss carryforwards to
           offset its capital gains realized in any year, and its distributions
           exceed its income alone, all or a portion of the excess
           distributions may not be treated, for tax purposes, as a return of
           capital, and would be taxable to shareholders.

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



<TABLE>
<CAPTION>
GENERALLY TAXED AT LONG-TERM                       GENERALLY TAXED AT ORDINARY
CAPITAL GAIN RATES:                                INCOME RATES:
<S>                                                <C>
DISTRIBUTIONS FROM A FUND
- gains from the sale of                           -  gains from the sale of
  securities held (or treated as                      securities held by a fund for
  held) by a fund for more than                       one year or less
  one year                                         -  all other taxable income
- qualified dividend income

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




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



72 | Understanding Distributions and Taxes
<PAGE>


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

           For taxable years beginning before January 1, 2011, distributions to
           individuals and other noncorporate shareholders of investment income
           designated by a fund as derived from qualified dividend income are
           eligible for taxation for federal income tax purposes at the more
           favorable long-term capital gain rates. Qualified dividend income
           generally includes dividends from domestic and some foreign
           corporations. It does not include income from investments in debt
           securities or, generally, from REITs. In addition, a fund must meet
           certain holding period and other requirements with respect to the
           dividend-paying stocks in its portfolio and the shareholder must
           meet certain holding period and other requirements with respect to a
           fund's shares for the lower tax rates to apply.

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


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


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

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



                                     Understanding Distributions and Taxes  | 73
<PAGE>


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



74 | Understanding Distributions and Taxes
<PAGE>


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


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

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



                                                                  Appendix  | 75
<PAGE>


                         DWS Micro Cap Fund - Class A





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               5.75%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.77%             -2.71%       $  9,729.43        $   744.52
   2           10.25%        2.17%              0.05%       $ 10,004.77        $   241.12
   3           15.76%        2.17%              2.88%       $ 10,287.91        $   220.18
   4           21.55%        2.17%              5.79%       $ 10,579.05        $   226.41
   5           27.63%        2.17%              8.78%       $ 10,878.44        $   232.81
   6           34.01%        2.17%             11.86%       $ 11,186.30        $   239.40
   7           40.71%        2.17%             15.03%       $ 11,502.87        $   246.18
   8           47.75%        2.17%             18.28%       $ 11,828.40        $   253.14
   9           55.13%        2.17%             21.63%       $ 12,163.15        $   260.31
  10           62.89%        2.17%             25.07%       $ 12,507.36        $   267.68
  TOTAL                                                                        $ 2,904.75
</TABLE>




DWS Micro Cap Fund - Class B






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        2.52%              2.48%       $ 10,248.00        $   255.12
   2           10.25%        3.00%              4.53%       $ 10,452.96        $   310.51
   3           15.76%        3.00%              6.62%       $ 10,662.02        $   316.72
   4           21.55%        3.00%              8.75%       $ 10,875.26        $   323.06
   5           27.63%        3.00%             10.93%       $ 11,092.76        $   329.52
   6           34.01%        3.00%             13.15%       $ 11,314.62        $   336.11
   7           40.71%        2.17%             16.35%       $ 11,634.82        $   249.00
   8           47.75%        2.17%             19.64%       $ 11,964.09        $   256.05
   9           55.13%        2.17%             23.03%       $ 12,302.67        $   263.29
  10           62.89%        2.17%             26.51%       $ 12,650.84        $   270.75
  TOTAL                                                                        $ 2,910.13
</TABLE>





76 | Appendix

<PAGE>


                         DWS Micro Cap Fund - Class C





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        2.52%              2.48%       $ 10,248.00        $   255.12
   2           10.25%        2.94%              4.59%       $ 10,459.11        $   304.39
   3           15.76%        2.94%              6.75%       $ 10,674.57        $   310.67
   4           21.55%        2.94%              8.94%       $ 10,894.46        $   317.06
   5           27.63%        2.94%             11.19%       $ 11,118.89        $   323.60
   6           34.01%        2.94%             13.48%       $ 11,347.94        $   330.26
   7           40.71%        2.94%             15.82%       $ 11,581.71        $   337.07
   8           47.75%        2.94%             18.20%       $ 11,820.29        $   344.01
   9           55.13%        2.94%             20.64%       $ 12,063.79        $   351.10
  10           62.89%        2.94%             23.12%       $ 12,312.30        $   358.33
  TOTAL                                                                        $ 3,231.61
</TABLE>




DWS Mid Cap Growth Fund - Class A






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               5.75%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.25%             -2.22%       $  9,778.44        $   695.02
   2           10.25%        1.25%              1.45%       $ 10,145.13        $   124.52
   3           15.76%        1.25%              5.26%       $ 10,525.57        $   129.19
   4           21.55%        1.25%              9.20%       $ 10,920.28        $   134.04
   5           27.63%        1.25%             13.30%       $ 11,329.79        $   139.06
   6           34.01%        1.25%             17.55%       $ 11,754.66        $   144.28
   7           40.71%        1.25%             21.95%       $ 12,195.46        $   149.69
   8           47.75%        1.25%             26.53%       $ 12,652.79        $   155.30
   9           55.13%        1.25%             31.27%       $ 13,127.27        $   161.13
  10           62.89%        1.25%             36.20%       $ 13,619.54        $   167.17
  TOTAL                                                                        $ 1,999.40
</TABLE>





                                                                  Appendix  | 77

<PAGE>


                       DWS Mid Cap Growth Fund - Class B





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        2.00%              3.00%       $ 10,300.00        $   203.00
   2           10.25%        2.16%              5.93%       $ 10,592.52        $   225.64
   3           15.76%        2.16%              8.93%       $ 10,893.35        $   232.05
   4           21.55%        2.16%             12.03%       $ 11,202.72        $   238.64
   5           27.63%        2.16%             15.21%       $ 11,520.88        $   245.41
   6           34.01%        2.16%             18.48%       $ 11,848.07        $   252.38
   7           40.71%        1.25%             22.92%       $ 12,292.37        $   150.88
   8           47.75%        1.25%             27.53%       $ 12,753.34        $   156.54
   9           55.13%        1.25%             32.32%       $ 13,231.59        $   162.41
  10           62.89%        1.25%             37.28%       $ 13,727.77        $   168.50
  TOTAL                                                                        $ 2,035.45
</TABLE>




DWS Mid Cap Growth Fund - Class C






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        2.00%              3.00%       $ 10,300.00        $   203.00
   2           10.25%        2.07%              6.02%       $ 10,601.79        $   216.33
   3           15.76%        2.07%              9.12%       $ 10,912.42        $   222.67
   4           21.55%        2.07%             12.32%       $ 11,232.16        $   229.20
   5           27.63%        2.07%             15.61%       $ 11,561.26        $   235.91
   6           34.01%        2.07%             19.00%       $ 11,900.00        $   242.82
   7           40.71%        2.07%             22.49%       $ 12,248.67        $   249.94
   8           47.75%        2.07%             26.08%       $ 12,607.56        $   257.26
   9           55.13%        2.07%             29.77%       $ 12,976.96        $   264.80
  10           62.89%        2.07%             33.57%       $ 13,357.19        $   272.56
  TOTAL                                                                        $ 2,394.49
</TABLE>





78 | Appendix

<PAGE>


                      DWS Small Cap Growth Fund - Class A





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               5.75%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.25%             -2.22%       $  9,778.44        $   695.02
   2           10.25%        1.25%              1.45%       $ 10,145.13        $   124.52
   3           15.76%        1.37%              5.13%       $ 10,513.40        $   141.51
   4           21.55%        1.37%              8.95%       $ 10,895.03        $   146.65
   5           27.63%        1.37%             12.91%       $ 11,290.52        $   151.97
   6           34.01%        1.37%             17.00%       $ 11,700.37        $   157.49
   7           40.71%        1.37%             21.25%       $ 12,125.09        $   163.20
   8           47.75%        1.37%             25.65%       $ 12,565.23        $   169.13
   9           55.13%        1.37%             30.21%       $ 13,021.35        $   175.27
  10           62.89%        1.37%             34.94%       $ 13,494.03        $   181.63
  TOTAL                                                                        $ 2,106.39
</TABLE>




DWS Small Cap Growth Fund - Class B






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        2.00%              3.00%       $ 10,300.00        $   203.00
   2           10.25%        2.00%              6.09%       $ 10,609.00        $   209.09
   3           15.76%        2.26%              9.00%       $ 10,899.69        $   243.05
   4           21.55%        2.26%             11.98%       $ 11,198.34        $   249.71
   5           27.63%        2.26%             15.05%       $ 11,505.17        $   256.55
   6           34.01%        2.26%             18.20%       $ 11,820.41        $   263.58
   7           40.71%        1.37%             22.49%       $ 12,249.50        $   164.88
   8           47.75%        1.37%             26.94%       $ 12,694.15        $   170.86
   9           55.13%        1.37%             31.55%       $ 13,154.95        $   177.07
  10           62.89%        1.37%             36.32%       $ 13,632.47        $   183.49
  TOTAL                                                                        $ 2,121.28
</TABLE>





                                                                  Appendix  | 79

<PAGE>


                      DWS Small Cap Growth Fund - Class C





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        2.00%              3.00%       $ 10,300.00        $   203.00
   2           10.25%        2.00%              6.09%       $ 10,609.00        $   209.09
   3           15.76%        2.16%              9.10%       $ 10,910.30        $   232.41
   4           21.55%        2.16%             12.20%       $ 11,220.15        $   239.01
   5           27.63%        2.16%             15.39%       $ 11,538.80        $   245.80
   6           34.01%        2.16%             18.67%       $ 11,866.50        $   252.78
   7           40.71%        2.16%             22.04%       $ 12,203.51        $   259.96
   8           47.75%        2.16%             25.50%       $ 12,550.09        $   267.34
   9           55.13%        2.16%             29.07%       $ 12,906.51        $   274.93
  10           62.89%        2.16%             32.73%       $ 13,273.06        $   282.74
  TOTAL                                                                        $ 2,467.06
</TABLE>





80 | Appendix

<PAGE>

TO GET MORE INFORMATION


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

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

For a free copy of any of these documents or to request other information about
a fund, call (800) 621-1048, or contact DWS Scudder at the address listed
below. Each fund's SAI and shareholder reports are also available through the
DWS Scudder Web site at www.dws-scudder.com. These documents and other
information about each fund are available from the EDGAR Database on the SEC's
Internet site at www.sec.gov. If you like, you may obtain copies of this
information, after paying a copying fee, by e-mailing a request to
publicinfo@sec.gov or by writing the SEC at the address listed below. You can
also review and copy these documents and other information about each fund,
including each fund's SAI, at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the SEC's Public Reference Room may be
obtained by calling (800) SEC-0330.



<TABLE>
<CAPTION>
DWS SCUDDER              SEC                     DISTRIBUTOR
---------------------    --------------------    -------------------------------
<S>                      <C>                     <C>
PO Box 219151            100 F Street, N.E.      DWS Scudder Distributors, Inc.
Kansas City, MO          Washington, D.C.        222 South Riverside Plaza
64121-9151               20549-0102              Chicago, IL 60606-5808
WWW.DWS-SCUDDER.COM      WWW.SEC.GOV             (800) 621-1148
(800) 621-1048           (800) SEC-0330
</TABLE>




<TABLE>
<S>                    <C>                            <C>
SEC FILE NUMBER:
DWS Advisor Funds               DWS Micro Cap Fund    811-04760
DWS Advisor Funds          DWS Mid Cap Growth Fund    811-04760
DWS Advisor Funds        DWS Small Cap Growth Fund    811-04760
</TABLE>




                                         [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]






(02/01/08) DSAGF2-1
[RECYCLE GRAPHIC APPEARS HERE]




<PAGE>


                                FEBRUARY 1, 2008








                                   PROSPECTUS

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

                              INSTITUTIONAL CLASS


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

                               DWS MICRO CAP FUND


                            DWS MID CAP GROWTH FUND


                           DWS SMALL CAP GROWTH FUND


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


                         ONE GLOBAL FORCE. ONE FOCUS, YOU.[GRAPHIC APPEARS HERE]




<PAGE>

CONTENTS





<TABLE>
<S>      <C>
HOW EACH FUND WORKS
  4      DWS Micro Cap Fund
 13      DWS Mid Cap Growth Fund
 22      DWS Small Cap Growth Fund
 30      Other Policies and Secondary
         Risks
 32      Who Manages and Oversees
         the Funds
 35      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUNDS
 40      Buying and Selling
         Institutional Class Shares
 46      Policies You Should Know
         About
 58      Understanding Distributions
         and Taxes
 62      Appendix
</TABLE>


<PAGE>

HOW EACH FUND WORKS

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


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

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

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


<TABLE>
<S>                       <C>
                            Institutional Class
  ticker symbol             MGMCX
    fund number             589

    DWS MICRO CAP FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks capital appreciation.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in stocks and other
            securities with equity characteristics of US micro capitalization
            companies. For the purposes of this 80% limitation, the micro
            capitalization equity universe is defined as the bottom 5% of the
            total domestic equity market capitalization (at the time of initial
            investment) using a minimum market capitalization of $10 million.
            The fund may invest up to 20% of its total assets in the securities
            of foreign companies that would be considered to be in the bottom
            5% in terms of market capitalization in the US equity market
            (subject to a $10 million market capitalization minimum). The
            fund's equity investments are mainly common stocks, but may also
            include other types of equity securities, such as preferred stocks
            or convertible securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of US micro
            capitalization growth-oriented companies. Portfolio management
            focuses on individual security selection rather than industry
            selection. Portfolio management uses an active process, which
            combines financial analysis with company visits to evaluate
            management and strategies. Each portfolio manager has specific
            sector responsibilities with investment discretion over securities
            within their sectors.

            Company research lies at the heart of our investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on undervalued stocks with
               fast-growing earnings and that they believe have superior
               near-to-intermediate term performance potential.


4 | DWS Micro Cap Fund
<PAGE>


            -  Portfolio management emphasizes individual selection of smaller
            stocks across all economic sectors, early in their growth cycles
            and with the potential to be the blue chips of the future.



            -  Portfolio management generally seeks companies with a leading or
               dominant position in their niche markets, a high rate of return
               on invested capital and the ability to finance a major part of
               future growth from internal sources.


            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.


            The fund may invest up to 20% of its assets in high quality debt
            instruments and money market instruments with remaining maturities
            of one year or less, including repurchase agreements. The fund may
            invest up to 5% of its net assets in non-convertible bonds and
            preferred stocks that portfolio management believes to be of high
            quality.

            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


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


                                                         DWS Micro Cap Fund  | 5
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.


            MICRO CAPITALIZATION COMPANY RISK. The fund's investments in micro
            capitalization companies will be more susceptible to
            share price fluctuations since micro capitalization company stocks
            tend to experience steeper fluctuations in price - down as well as
            up - than the stocks of larger companies. A shortage of reliable
            information - the same information gap that creates opportunity in
            micro capitalization company investing - can also pose added risk.
            Industry-wide reversals may have a greater impact on micro
            capitalization companies, since they lack a large company's
            financial resources. Micro capitalization companies may have
            limited product lines and markets. They may also have shorter
            operating histories and




THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



This fund is designed for investors with long-term goals who can tolerate
capital fluctuation in pursuit of capital appreciation.









6 | DWS Micro Cap Fund
<PAGE>

            more volatile businesses and may be more dependent on key
            personnel. Finally, micro capitalization company stocks are
            typically less liquid than large company stocks. Particularly when
            they are performing poorly, a micro capitalization company's shares
            may be more difficult to sell.

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

                                                         DWS Micro Cap Fund  | 7
<PAGE>

            -  CURRENCY RISK. The fund invests in securities denominated in
            foreign currencies. This creates the possibility that changes in
            exchange rates between foreign currencies and the US dollar will
            affect the US dollar value of foreign securities or the income or
            gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US
               investments. The procedures and rules governing foreign
               transactions and custody may also involve delays in payment,
               delivery or recovery of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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


8 | DWS Micro Cap Fund
<PAGE>

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                         DWS Micro Cap Fund  | 9
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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


The performance data for the period prior to July 10, 2006 provided in the bar
chart and quarterly returns below and the risk return table on the following
pages are those of the fund's predecessor fund, DWS Micro Cap Fund, a series of
DWS Investments Trust (the "Predecessor Fund"). On July 10, 2006, the
Predecessor Fund transferred its assets to the fund, which is a new series of
DWS Advisor Funds. The fund assumed the Predecessor Fund's liabilities.


DWS Micro Cap Fund

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

[BAR GRAPHIC APPEARS HERE]






<TABLE>
<S>       <C>        <C>       <C>        <C>         <C>        <C>        <C>       <C>       <C>
 1.20     77.53       3.22     15.37       -27.07     41.00      12.96       8.15      8.74     7.44
1998      1999       2000      2001        2002       2003       2004       2005      2006       2007
</TABLE>






<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>

BEST QUARTER: 29.74%, Q4 1999              WORST QUARTER: -24.12%, Q3 1998
</TABLE>

10 | DWS Micro Cap Fund
<PAGE>



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





<TABLE>
<CAPTION>
                                             1 YEAR      5 YEARS      10 YEARS
<S>                                         <C>         <C>          <C>
 INSTITUTIONAL CLASS
   Return before Taxes                        7.44        15.01         12.12
   Return after Taxes on Distributions        5.08        12.86         10.40
   Return after Taxes on Distributions
   and Sale of Fund Shares                    8.59*       13.06*        10.30
 RUSSELL 2000 (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                           7.05        16.50          4.32
</TABLE>




*    Return after Taxes on Distributions and Sale of Fund Shares is higher than
     other return figures for the same period due to a capital loss occurring
     upon redemption resulting in an assumed tax deduction for the shareholder.


Total returns would have been lower if operating expenses hadn't been reduced.

RUSSELL 2000 (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
measure of 2,000 of the smallest capitalized US companies with a
greater-than-average growth orientation and whose common stocks trade on the
NYSE, AMEX and Nasdaq.


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

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 730-1313 or visit our Web site at www.dws-scudder.com.



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

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


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



                                                        DWS Micro Cap Fund  | 11
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE
<S>                                     <C>
 SHAREHOLDER FEES, paid directly from your investment
______________________________________________________________________
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds)1                              2.00%
 ANNUAL OPERATING EXPENSES, deducted from fund assets
______________________________________________________________________
 Management Fees2                                   1.35%
 Distribution/Service (12b-1) Fees                 None
 Other Expenses                                     0.36
 TOTAL ANNUAL OPERATING EXPENSES                    1.71
 Less Fee Waiver/Expense
 Reimbursement3                                     0.19
 NET ANNUAL OPERATING EXPENSES3                     1.52
</TABLE>



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


2   Through November 30, 2009, the Advisor has contractually agreed to waive a
   portion of its Investment Management Fee in the amount of 0.305% of the
   fund's average daily total net assets. Includes 0.10% administration fee.



3   Through January 31, 2009, the Advisor has contractually agreed to waive all
   or a portion of its fees and reimburse or pay certain operating expenses of
   the fund so that the total operating expense will not exceed 1.52% for
   Institutional Class shares, excluding certain expenses such as
   extraordinary expenses, taxes, brokerage and interest.

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




<TABLE>
<CAPTION>
EXAMPLE                    1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                       <C>         <C>          <C>          <C>
 Institutional Class        $155         $520         $910       $2,004
</TABLE>




12 | DWS Micro Cap Fund
<PAGE>


<TABLE>
<S>                            <C>
                                 Institutional Class
  ticker symbol                  BTEAX
    fund number                  583

    DWS MID CAP GROWTH FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks long-term capital growth.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in companies with
            market caps within the market capitalization range of the Russell
            Mid Cap Growth Index or securities with equity characteristics that
            provide exposure to those companies. The fund's equity investments
            are mainly common stocks, but may also include other types of
            equity securities such as preferred stocks or convertible
            securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of medium-sized
            growth-oriented companies. Portfolio management focuses on
            individual security selection rather than industry selection.
            Portfolio management uses an active process which combines
            financial analysis with company visits to evaluate management and
            strategies. Each portfolio manager has specific sector
            responsibilities with investment discretion over securities within
            their sectors.

            Company research lies at the heart of the investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on undervalued stocks with
               fast-growing earnings and superior near-to-intermediate term
               performance potential.



            -  Portfolio management emphasizes individual selection of
               medium-sized stocks across all economic sectors, early in their
               growth cycles and with the potential to be the blue chips of the
               future.


                                                   DWS Mid Cap Growth Fund  | 13
<PAGE>


            -  Portfolio management generally seeks companies with a leading or
            dominant position in their niche markets, a high rate of return on
            invested capital and the ability to finance a major part of future
            growth from internal sources.


            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.

            The fund may invest up to 20% of its assets in stocks and other
            securities of companies based outside the US.


            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 30% of its total assets to approved institutional
            borrowers who need to borrow securities in order to complete
            certain transactions.


14 | DWS Mid Cap Growth Fund
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.


            MEDIUM-SIZED COMPANY RISK. Medium-sized company
            stocks tend to experience steeper price fluctuations - down as well
            as up - than stocks of larger companies. A shortage of reliable
            information - the same information gap that creates opportunity -
            can pose added risk. Industry-wide reversals may have a greater
            impact on medium-sized companies, since they usually lack a large
            company's financial resources. Medium-sized company stocks are
            typically less liquid than large company stocks; when things are
            going poorly, it is harder to find a buyer for a medium-sized
            company's shares.



THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors with long-term goals who can tolerate
capital fluctuation in pursuit of long-term capital growth.









                                                   DWS Mid Cap Growth Fund  | 15
<PAGE>

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

16 | DWS Mid Cap Growth Fund
<PAGE>

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
            generally higher for foreign investments than for US investments.
            The procedures and rules governing foreign transactions and custody
            may also involve delays in payment, delivery or recovery of money
            or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                   DWS Mid Cap Growth Fund  | 17
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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

Prior to August 31, 2000 the bar chart and table include the performance of
Equity Appreciation Fund, Institutional Class shares. On August 31, 2000 Equity
Appreciation Fund, Institutional Class shares became Mid Cap Fund,
Institutional shares.

DWS Mid Cap Growth Fund

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

[BAR GRAPHIC APPEARS HERE]






<TABLE>
<S>      <C>      <C>      <C>       <C>       <C>      <C>      <C>      <C>        <C>
17.79    49.70    -1.31    -13.14    -20.26    28.67    10.07    12.61    11.00      8.14

1998     1999     2000     2001      2002      2003     2004     2005     2006       2007
</TABLE>






<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 31.08%, Q4 1999              WORST QUARTER: -19.38%, Q3 2001
</TABLE>

18 | DWS Mid Cap Growth Fund
<PAGE>



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





<TABLE>
<CAPTION>
                                             1 YEAR      5 YEARS      10 YEARS*
<S>                                         <C>         <C>          <C>
 INSTITUTIONAL CLASS
   Return before Taxes                         8.14        13.87         8.72
   Return after Taxes on Distributions         5.99        13.41         7.37
   Return after Taxes on Distributions
   and Sale of Fund Shares                     4.45        12.25         7.15
 RUSSELL MIDCAP (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                           11.43        17.90         7.59
</TABLE>




 *   Institutional Class commenced operations on August 31, 2000. Performance
     from January 1, 1998 through August 30, 2000 reflects actual returns of
     Equity Appreciation Fund Institutional Class shares.


     Total returns would have been lower if operating expenses hadn't been
     reduced.


 RUSSELL MIDCAP (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
 index of medium and medium/small companies in the Russell 1000 (Reg. TM) Index
 chosen for their growth orientation. Russell 1000 (Reg. TM) Index is an
 unmanaged price-only index of the 1,000 largest capitalized companies that are
 domiciled in the US and whose common stocks are traded.



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

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 730-1313 or visit our Web site at www.dws-scudder.com.



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

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


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



                                                   DWS Mid Cap Growth Fund  | 19
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE
<S>                                     <C>
 SHAREHOLDER FEES, paid directly from your investment
______________________________________________________________________
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds)1                              2.00%
 ANNUAL OPERATING EXPENSES, deducted from fund assets
______________________________________________________________________
 Management Fees2                                   0.72%
 Distribution/Service (12b-1) Fees                 None
 Other Expenses                                     0.31
 TOTAL ANNUAL OPERATING EXPENSES                    1.03
 Less Fee Waiver/Expense
 Reimbursement3                                     0.03
 NET ANNUAL OPERATING EXPENSES3                     1.00
</TABLE>



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

2   Includes 0.10% administration fee.


3   Through January 31, 2009, the Advisor has contractually agreed to waive all
   or a portion of its management fee and reimburse or pay operating expenses
   of the fund to the extent necessary to maintain the fund's total operating
   expenses at 1.00% for Institutional Class shares, excluding certain
   expenses such as extraordinary expenses, taxes, brokerage and interest.

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




<TABLE>
<CAPTION>
EXAMPLE                    1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                       <C>         <C>          <C>          <C>
 Institutional Class        $102         $325         $566       $1,257
</TABLE>




20 | DWS Mid Cap Growth Fund
<PAGE>


<TABLE>
<S>                              <C>
                                   Institutional Class
  ticker symbol                    SSDIX
    fund number                    1471

    DWS SMALL CAP GROWTH FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks long-term capital growth.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in stocks and other
            securities with equity characteristics of US smaller capitalization
            companies. For purposes of this 80% investment limitation, the
            small capitalization equity universe is defined as the bottom 20%
            of the total domestic equity market capitalization (at the time of
            initial investment), using a minimum market capitalization of $10
            million. The fund may invest up to 20% of its assets in the stocks
            of non-US companies and large capitalization stocks. The fund may
            also invest in other types of equity securities such as preferred
            stocks or convertible securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of US smaller
            capitalization companies. Portfolio management focuses on
            individual security selection rather than industry selection.
            Portfolio management uses an active process which combines
            financial analysis with company visits to evaluate management and
            strategies. Each portfolio manager has specific sector
            responsibilities with investment discretion over the securities
            within sectors.

            Company research lies at the heart of our investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on stocks with superior growth
               prospects and above average near-to-intermediate term
               performance potential.


                                                 DWS Small Cap Growth Fund  | 21
<PAGE>


            -  Portfolio management emphasizes individual selection of small
            company stocks across all economic sectors, early in their growth
            cycles and with the potential to be the blue chips of the future.



            -  Portfolio management generally seeks companies with a leading or
               dominant position in their niche markets, a high rate of return
               on invested capital and the ability to finance a major part of
               future growth from internal sources.

            Portfolio management looks primarily for financial attributes that
            set these companies apart:


            -  estimated above-average growth in revenues and earnings; and

            -  a balance sheet that can support this growth potential with
               sufficient working capital and manageable levels of debt.

            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.


            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 30% of its total assets to approved institutional
            borrowers who need to borrow securities in order to complete
            certain transactions.


22 | DWS Small Cap Growth Fund
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.

            SMALL COMPANY CAPITALIZATION RISK. Small company stocks
            tend to experience steeper price fluctuations than the stocks of
            larger companies. A shortage of reliable information can also pose
            added risk. Industry-wide reversals may have a greater impact on
            small companies, since they lack a large company's financial
            resources. Small company stocks are typically less liquid than
            large company stocks. Accordingly, it may be harder to find a buyer
            for a small company's shares.


            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:



THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS


This fund is designed for investors with long-term goals who can tolerate
capital fluctuation in pursuit of long-term capital growth.









                                                 DWS Small Cap Growth Fund  | 23
<PAGE>

            -  POLITICAL RISK. Some foreign governments have limited the
            outflow of profits to investors abroad, imposed restrictions on the
            exchange or export of foreign currency, extended diplomatic
            disputes to include trade and financial relations, seized foreign
            investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

24 | DWS Small Cap Growth Fund
<PAGE>

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
            generally higher for foreign investments than for US investments.
            The procedures and rules governing foreign transactions and custody
            may also involve delays in payment, delivery or recovery of money
            or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                 DWS Small Cap Growth Fund  | 25
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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

Institutional Class shares commenced operations on December 20, 2004.

DWS Small Cap Growth Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Institutional Class
[BAR GRAPHIC APPEARS HERE]






<TABLE>
<S>       <C>       <C>
 7.18      5.05      6.02

2005      2006      2007
</TABLE>






<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 11.65%, Q1 2006              WORST QUARTER: -7.43%, Q2 2006
</TABLE>



26 | DWS Small Cap Growth Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                             1 YEAR      SINCE INCEPTION*
<S>                                         <C>         <C>
 INSTITUTIONAL CLASS
   Return before Taxes                         6.02             6.63
   Return after Taxes on Distributions         5.79             5.83
   Return after Taxes on Distributions
   and Sale of Fund Shares                     4.22             5.68
 RUSSELL 2000 (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                            7.05             8.11
</TABLE>



 *   Institutional Class commenced operations December 20, 2004. Index
     comparisons begin on December 31, 2004.

     Total returns would have been lower if operating expenses hadn't been
reduced.

 RUSSELL 2000 (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
 measure of 2,000 of the smallest capitalized US companies with a
 greater-than-average growth orientation and whose common stocks trade on the
 NYSE, AMEX and Nasdaq.


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

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 730-1313 or visit our Web site at www.dws-scudder.com.



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

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


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



                                                 DWS Small Cap Growth Fund  | 27
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE
<S>                                     <C>
 SHAREHOLDER FEES, paid directly from your investment
______________________________________________________________________
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds)1                              2.00%
 ANNUAL OPERATING EXPENSES, deducted from fund assets
______________________________________________________________________
 Management Fees2                                   0.75%
 Distribution/Service (12b-1) Fees                 None
 Other Expenses                                     0.16
 TOTAL ANNUAL OPERATING EXPENSES3                   0.91
</TABLE>



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

2   Includes 0.10% administration fee.


3   Through January 31, 2010, the Advisor has contractually agreed to waive all
   or a portion of its management fee and reimburse or pay operating expenses
   of the fund to the extent necessary to maintain the fund's total operating
   expenses at 1.00% for Institutional Class shares, excluding certain
   expenses such as extraordinary expenses, taxes, brokerage and interest.

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




<TABLE>
<CAPTION>
EXAMPLE                    1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                       <C>         <C>          <C>          <C>
 Institutional Class         $93         $290         $504       $1,120
</TABLE>




28 | DWS Small Cap Growth Fund
<PAGE>

OTHER POLICIES AND SECONDARY RISKS

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


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


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


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



           Secondary risks

           The risk disclosure below applies to each fund, unless otherwise
           noted.


           DERIVATIVES RISK. Risks associated with derivatives include the risk
           that the derivative is not well correlated with the security, index
           or currency to which it relates; the risk that derivatives may not
           have the intended effects and may result in losses or missed
           opportunities; the risk that the fund will be unable to sell the
           derivative because of an illiquid secondary market; and the risk
           that the derivative transaction could expose the fund to the effects
           of leverage, which could increase the fund's exposure to the market
           and magnify potential losses. There is no guarantee that
           derivatives, to the extent employed, will have the intended effect,
           and their use could cause lower returns or even losses to the fund.
           The use of derivatives by the fund to hedge risk may reduce the
           opportunity for gain by offsetting the positive effect of favorable
           price movements.



                                        Other Policies and Secondary Risks  | 29
<PAGE>

           For more information

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

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


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

           A complete list of each fund's portfolio holdings is posted as of
           the month-end on www.dws-scudder.com (the Web site does not form a
           part of this prospectus) on or after the last day of the following
           month. This posted information generally remains accessible at least
           until the date on which a fund files its Form N-CSR or N-Q with the
           Securities and Exchange Commission for the period that includes the
           date as of which the posted information is current. In addition,
           each fund's top ten equity holdings and other fund information is
           posted on www.dws-scudder.com as of the calendar quarter-end on or
           after the 15th day following quarter-end. Each fund's Statement of
           Additional Information includes a description of a fund's policies
           and procedures with respect to the disclosure of a fund's portfolio
           holdings.



30 | Other Policies and Secondary Risks
<PAGE>

WHO MANAGES AND OVERSEES THE FUNDS


           The investment advisor


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


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

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

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


                                        Who Manages and Oversees the Funds  | 31
<PAGE>


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




<TABLE>
<CAPTION>
FUND NAME                                   FEE PAID
<S>                                       <C>
  DWS Micro Cap Fund                           0.96%*
  DWS Mid Cap Growth Fund                     0.62  %
  DWS Small Cap Growth Fund                   0.65  %
</TABLE>




           *   Reflects the effects of expense limitations and/or fee waivers
               then in effect.


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


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


32 | Who Manages and Oversees the Funds
<PAGE>

Portfolio management

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

The following people handle the day-to-day management of each fund:

Robert S. Janis
Managing Director of Deutsche Asset Management and Lead Portfolio Manager of
the funds.
- Joined Deutsche Asset Management and the funds in 2004.
- Previously served as portfolio manager for 10 years at Credit Suisse Asset
  Management (or at its predecessor, Warburg Pincus Asset Management).

- Over 22 years of investment industry experience.

- BA, University of Pennsylvania; MBA, University of Pennsylvania, Wharton
   School.

Joseph Axtell, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
funds.
- Joined Deutsche Asset Management in 2001 and the funds in 2006.
- Senior analyst at Merrill Lynch Investment Managers for the international
  equity portion of a global balanced portfolio (1996-2001).
- Director, International Research at PCM International (1989-1996).
- Associate manager, structured debt and equity group at Prudential Capital
  Corporation (1988-1989).
- Analyst at Prudential-Bache Capital Funding in London (1987-1988).
- Equity analyst in the health care sector at Prudential Equity Management
  Associates (1985-1987).
- BS, Carlson School of Management, University of Minnesota.


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



                                        Who Manages and Oversees the Funds  | 33
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of each table are for a single
share. The total return figures represent the percentage that an investor in a
fund would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by PricewaterhouseCoopers LLP,
independent registered public accounting firm, whose report, along with each
fund's financial statements, is included in each fund's annual report (see
"Shareholder reports" on the back cover). On July 10, 2006, DWS Micro Cap Fund
acquired all the assets and assumed all the liabilities of the Predecessor
Fund. The information contained in the following table for DWS Micro Cap Fund
for periods prior to July 10, 2006 has been derived from the Predecessor Fund's
financial statements.



34 | Financial Highlights
<PAGE>

DWS Micro Cap Fund - Institutional Class



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                           2007            2006             2005          2004          2003
<S>                                             <C>           <C>                <C>           <C>           <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------------           -
NET ASSET VALUE, BEGINNING OF PERIOD             $  19.36        $  22.90         $  21.32      $  18.93      $  14.22
---------------------------------------------    --------        --------         --------      --------      --------
Income (loss) from investment
operations:
  Net investment income (loss)a                    (  .21)         (  .18)d         (  .28)       (  .26)       (  .14)
_____________________________________________    ________        ________         ________      ________      ________
  Net realized and unrealized gain
  (loss)                                             5.17         .24b                4.01          2.65          4.85
---------------------------------------------    --------        --------         --------      --------      --------
  TOTAL FROM INVESTMENT OPERATIONS                   4.96             .06             3.73          2.39          4.71
_____________________________________________    ________        ________         ________      ________      ________
Less distributions from:
  Net realized gains                               ( 3.55)         ( 3.60)          ( 2.15)            -             -
_____________________________________________    ________        ________         ________      ________      ________
Redemption fees                                       .00*            .00*             .00*            -             -
---------------------------------------------    --------        --------         --------      --------      --------
NET ASSET VALUE, END OF PERIOD                   $  20.77        $  19.36         $  22.90      $  21.32      $  18.93
---------------------------------------------    --------        --------         --------      --------      --------
Total Return (%)c                                   27.58          (  .63)d,e        18.14         12.63         33.12
---------------------------------------------    --------        --------         --------      --------      --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------    --------
Net assets, end of period ($ millions)                 17              30               41            44            79
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses before expense
reductions (%)                                       1.71            2.00             1.99          1.90          1.91
_____________________________________________    ________        ________         ________      ________      ________
Ratio of expenses after expense
reductions (%)                                       1.39            1.50             1.49          1.49          1.49
_____________________________________________    ________        ________         ________      ________      ________
Ratio of net investment income
(loss) (%)                                         ( 1.04)         (  .84)d         ( 1.27)       ( 1.22)       (  .84)
_____________________________________________    ________        ________         ________      ________      ________
Portfolio turnover rate (%)                            73             100              108            99            74
---------------------------------------------    --------        --------         --------      --------      --------
</TABLE>



a   Based on average shares outstanding during the period.

b   Because of the timing of subscriptions and redemptions in relation to
   fluctuating markets at value the amount shown may not agree with the change
   in aggregate gains and losses.

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

d   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.061 per share
   and an increase in the ratio of net investment income of 0.29%. Excluding
   this non-recurring income, total return would have been 0.34% lower.

e   The Fund realized a gain of $18,520 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.

*   Amount is less than $.005.

                                                      Financial Highlights  | 35
<PAGE>

DWS Mid Cap Growth Fund - Institutional Class



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                            2007           2006           2005           2004          2003
<S>                                              <C>            <C>            <C>            <C>            <C>
SELECTED PER SHARE DATA
---------------------------------------------------------------------------------------------------------           -
NET ASSET VALUE, BEGINNING OF PERIOD              $  15.95        $ 15.38       $  12.19       $  11.55       $  9.36
---------------------------------------------     --------        -------       --------       --------       -------
Income (loss) from investment
operations:
  Net investment income (loss)a                     (  .10)        (  .11)c       (  .08)        (  .08)       (  .05)
_____________________________________________     ________        _______       ________       ________       _______
  Net realized and unrealized gain
  (loss)                                              3.56            .68           3.27            .72          2.24
---------------------------------------------     --------        -------       --------       --------       -------
  TOTAL FROM INVESTMENT OPERATIONS                    3.46            .57           3.19            .64          2.19
_____________________________________________     ________        _______       ________       ________       _______
Redemption fees                                        .00*           .00*           .00*             -             -
---------------------------------------------     --------        -------       --------       --------       -------
NET ASSET VALUE, END OF PERIOD                    $  19.41        $ 15.95       $  15.38       $  12.19       $ 11.55
---------------------------------------------     --------        -------       --------       --------       -------
Total Return (%)b                                    21.69        3.71c            26.17           5.54         23.40
---------------------------------------------     --------        -------       --------       --------       -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------     -------
Net assets, end of period ($ millions)                 387            412            417            328           323
_____________________________________________     ________        _______       ________       ________       _______
Ratio of expenses before expense
reductions (%)                                        1.03           1.08           1.06           1.10          1.09
_____________________________________________     ________        _______       ________       ________       _______
Ratio of expenses after expense
reductions (%)                                        1.00           1.04           1.00           1.00          1.00
_____________________________________________     ________        _______       ________       ________       _______
Ratio of net investment income
(loss) (%)                                          (  .52)        (  .65)c       (  .58)        (  .61)       (  .49)
_____________________________________________     ________        _______       ________       ________       _______
Portfolio turnover rate (%)                             56             53             83            116            82
---------------------------------------------     --------        -------       --------       --------       -------
</TABLE>



a   Based on average shares outstanding during the period.

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

c   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.002 per share
   and an increase in the ratio of net investment income of 0.01%. Excluding
   this non-recurring income, total return would have been 0.01% lower.


*   Amount is less than $.005.


36 | Financial Highlights
<PAGE>

DWS Small Cap Growth Fund - Institutional Class



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                              2007           2006           2005A
<S>                                               <C>            <C>            <C>
SELECTED PER SHARE DATA
-------------------------------------------------------------------------------           -
NET ASSET VALUE, BEGINNING OF PERIOD                $  23.71       $   25.01      $   23.88
-------------------------------------------------   --------       ---------      ---------
Income (loss) from investment operations:
  Net investment income (loss)b                       (  .10)         (  .16)d       (  .15)
_________________________________________________   ________       _________      _________
  Net realized and unrealized gain (loss)               4.56             .82           1.28
-------------------------------------------------   --------       ---------      ---------
  TOTAL FROM INVESTMENT OPERATIONS                      4.46             .66           1.13
_________________________________________________   ________       _________      _________
Less distributions from:
  Net realized gains                                  ( 1.61)         ( 1.96)             -
_________________________________________________   ________       _________      _________
Redemption fees                                          .00***          .00***         .00***
-------------------------------------------------   --------       ---------      ---------
NET ASSET VALUE, END OF PERIOD                      $  26.56       $   23.71      $   25.01
-------------------------------------------------   --------       ---------      ---------
Total Return (%)                                       19.57      2.41c,d,e          4.73 c**
-------------------------------------------------   --------      ----------      ---------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------------   ---------
Net assets, end of period ($ millions)                   116               5              4
_________________________________________________   ________      __________      _________
Ratio of expenses before expense reductions (%)          .91            1.10           1.12*
_________________________________________________   ________      __________      _________
Ratio of expenses after expense reductions (%)           .91            1.03           1.00*
_________________________________________________   ________      __________      _________
Ratio of net investment income (loss) (%)             (  .39)         (  .65)d       (  .78)*
_________________________________________________   ________      __________      _________
Portfolio turnover rate (%)                           64f                 74            119
-------------------------------------------------   --------      ----------      ---------
</TABLE>



a   For the period December 20, 2004 (commencement of operations of
   Institutional Class shares) to September 30, 2005.

b   Based on average shares outstanding during the period.

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

d   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.008 per share
   and an increase in the ratio of net investment income of 0.03%. Excluding
   this non-recurring income, total return would have been 0.03% lower.

e   The Fund realized a gain of $92,403 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.


f   Excludes portfolio securities delivered as a result of processing
   redemption in-kind transactions.


*   Annualized

**   Not annualized

***   Amount is less than $.005.

                                                      Financial Highlights  | 37
<PAGE>


HOW TO INVEST IN THE FUNDS

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

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



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

<PAGE>

Buying and Selling INSTITUTIONAL CLASS Shares



           You may buy Institutional Class shares through your securities
           dealer or through any financial institution that is authorized to
           act as a shareholder servicing agent ("financial advisor"). Contact
           them for details on how to enter and pay for your order. Your
           financial advisor may also receive compensation from the Advisor
           and/or its affiliates, please see "Financial intermediary support
           payments."

           You may also buy Institutional Class shares by sending your check
           (along with a completed Application Form) directly to DWS Scudder
           Investments Service Company (the "transfer agent"). Your purchase
           order may not be accepted if a fund withdraws the offering of fund
           shares, the sale of fund shares has been suspended or if it is
           determined that your purchase would be detrimental to the interests
           of a fund's shareholders.



           Eligibility requirements

           You may buy Institutional Class shares if you are any of the
           following:

           -  An eligible institution (e.g., a financial institution,
              corporation, trust, estate or educational, religious or
              charitable institution).

           -  An employee benefit plan with assets of at least $50 million.

           -  A registered investment advisor or financial planner purchasing
              on behalf of clients and charging an asset-based or
              hourly fee.

           -  A client of the private banking division of Deutsche Bank AG.

           -  A current or former director or trustee of the Deutsche or DWS
              mutual funds.

           -  An employee, the employee's spouse or life partner and children
              or stepchildren age 21 or younger of Deutsche Bank or its
              affiliates or a subadvisor to any fund in the DWS family of funds
              or a broker-dealer authorized to sell shares in the funds.


                             Buying and Selling Institutional Class Shares  | 39
<PAGE>


           Investment minimum


           Your initial investment must be for at least $1,000,000. There are
           no minimum subsequent investment requirements.

           The minimum initial investment is waived for:

           -  Shareholders with existing accounts prior to August 13, 2004 who
              met the previous minimum investment eligibility requirement.

           -  Investment advisory affiliates of Deutsche Bank Securities, Inc.,
              DWS funds or Deutsche funds purchasing shares for the accounts of
              their investment advisory clients.

           -  Employee benefit plans with assets of at least $50 million.

           -  Clients of the private banking division of Deutsche Bank AG.

           -  Institutional clients and qualified purchasers that are clients
              of a division of Deutsche Bank AG.

           -  A current or former director or trustee of the Deutsche or DWS
              mutual funds.


           -  An employee, the employee's spouse or life partner and children
              or stepchildren age 21 or younger of Deutsche Bank or its
              affiliates or a subadvisor to any fund in the DWS family of funds
              or a broker-dealer authorized to sell shares of the funds.

           -  Registered investment advisors who trade through platforms
              approved by the Advisor and whose client assets in the fund in
              the aggregate meet (or, in the Advisor's judgment, will meet
              within a reasonable period of time) the $1,000,000 minimum
              investment.

           Each fund reserves the right to modify the above eligibility
           requirements and investment minimum at any time.



40 | Buying and Selling Institutional Class Shares
<PAGE>


           How to contact the transfer agent




<TABLE>
<S>                       <C>
  BY PHONE:                (800) 730-1313
  FIRST INVESTMENTS        DWS Scudder Investments Service Company
  BY MAIL:                P.O. Box 219210
                          Kansas City, MO 64121-9210
  ADDITIONAL               DWS Scudder Investments Service Company
  INVESTMENTS BY          P.O. Box 219210
  MAIL:                   Kansas City, MO 64121-9210
  BY OVERNIGHT MAIL:       DWS Scudder Investments Service Company
                          210 West 10th Street
                          Kansas City, MO 64105-1614
</TABLE>



           You can reach the automated information line, 24 hours a day,
           7 days a week by calling (800) 621-1048.


           How to open your fund account


<TABLE>
<S>                  <C>
  MAIL:               Complete and sign the account application that
                     accompanies this prospectus. (You may obtain
                     additional applications by calling the transfer agent.)
                     Mail the completed application along with a check
                     payable to the fund you have selected to the transfer
                     agent. Be sure to include the fund number. The
                     applicable addresses are shown under "How to
                     contact the transfer agent."
  WIRE:               Call the transfer agent to set up a wire account.
  FUND NAME AND       Please use the complete fund name. Refer to "The
  FUND NUMBER:       Fund's Main Investment Strategy" above for the fund
                     number.
</TABLE>



           Please note that your account cannot become activated until we
           receive a completed application.


           How to BUY and SELL shares

           MAIL:


           BUYING: Send your check, payable to the fund you have selected, to
           the transfer agent. Be sure to include the fund number and your
           account number on your check. If you are investing in more than one
           fund, make your check payable to "DWS Scudder" and include your
           account number, the names and numbers of the funds you have
           selected, and the dollar amount or percentage you would like
           invested in each fund. Mailing addresses are shown under "How to
           contact the transfer agent."



                             Buying and Selling Institutional Class Shares  | 41
<PAGE>


           SELLING: Send a signed letter to the transfer agent with your name,
           your fund number and account number, the fund's name, and either the
           number of shares you wish to sell or the dollar amount you wish to
           receive. See "Signature Guarantee" for any applicable additional
           requirements. Unless exchanging into another DWS fund, you must
           submit a written authorization to sell shares in a retirement
           account.


           WIRE:


           BUYING: You may buy shares by wire only if your account is
           authorized to do so. Please note that you or your financial advisor
           must call Institutional Investment Services at (800) 730-1313 to
           notify us in advance of a wire transfer purchase. Inform
           Institutional Investment Services of the amount of your purchase and
           receive a trade confirmation number. Instruct your bank to send
           payment by wire using the wire instructions noted below. All wires
           must be received by 4:00 p.m. Eastern time the next business day
           following your purchase. If your wire is not received by 4:00 p.m.
           Eastern time on the next business day after the fund receives your
           request to purchase shares, your transaction will be canceled at
           your expense and risk.




<TABLE>
<S>                <C>
  BANK NAME:        State Street Bank Boston
  ROUTING NO:       011000028
  ATTN:             DWS Scudder
  DDA NO:           9903-5552
  FBO:              (Account name) (Account number)
  CREDIT:           (Fund name, Fund number and, if applicable, class
                   name) (see "How to open your fund account")
</TABLE>




           Refer to your account statement for the account name and number.
           Wire transfers normally take two or more hours to complete. Wire
           transfers may be restricted on holidays and at certain other times.

           SELLING: You may sell shares by wire only if your account is
           authorized to do so. You will be paid for redeemed shares by wire
           transfer of funds to your financial advisor or bank upon receipt of
           a duly authorized redemption request as promptly as feasible. For
           your protection, you may not change the destination bank account
           over the phone. To sell by wire, contact your financial advisor or
           Institutional Investment Services at (800) 730-1313. Inform
           Institutional Investment



42 | Buying and Selling Institutional Class Shares
<PAGE>


           Services of the amount of your redemption and receive a trade
           confirmation number. The minimum redemption by wire is $1,000. We
           must receive your order by 4:00 p.m. Eastern time to wire your
           account the next business day.


           TELEPHONE TRANSACTIONS:


           You may place orders to buy and sell over the phone by calling your
           financial advisor or Institutional Investment Services at (800)
           730-1313. If your shares are in an account with the transfer agent,
           you may (1) redeem by check in an amount up to $100,000, or by wire
           (minimum $1,000), or (2) exchange the shares for Institutional
           shares of another DWS fund by calling the transfer agent.

           You may make regular investments from a bank checking account. For
           more information on setting up an automatic investment plan or
           payroll investment plan, call Institutional Investment Services at
           (800) 730-1313.



           Financial intermediary support payments


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



                             Buying and Selling Institutional Class Shares  | 43
<PAGE>

           mutual fund "supermarket" platforms and other formal sales programs;
           granting the Distributor access to the financial advisor's sales
           force; granting the Distributor access to the financial advisor's
           conferences and meetings; assistance in training and educating the
           financial advisor's personnel; and obtaining other forms of
           marketing support.

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


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



44 | Buying and Selling Institutional Class Shares
<PAGE>

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

           It is likely that broker-dealers that execute portfolio transactions
           for each fund will include firms that also sell shares of the DWS
           funds to their customers. However, the Advisor will not consider
           sales of DWS fund shares as a factor in the selection of
           broker-dealers to execute portfolio transactions for the DWS funds.
           Accordingly, the Advisor has implemented policies and procedures
           reasonably designed to prevent its traders from considering sales of
           DWS fund shares as a factor in the selection of broker-dealers to
           execute portfolio transactions for each fund. In addition, the
           Advisor, the Distributor and/or their affiliates will not use fund
           brokerage to pay for their obligation to provide additional
           compensation to financial advisors as described above.


POLICIES YOU SHOULD KNOW ABOUT


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


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


                                            Policies You Should Know About  | 45
<PAGE>

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.

           In order to reduce the amount of mail you receive and to help reduce
           expenses, we generally send a single copy of any shareholder report
           and prospectus to each household. If you do not want the mailing of
           these documents to be combined with those for other members of your
           household, please contact your financial advisor or call (800)
           730-1313.


           Policies about transactions

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

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

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


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



46 | Policies You Should Know About
<PAGE>

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

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


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


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


           SUB-MINIMUM BALANCES. Each fund may redeem your shares and close
           your account on 60 days' notice if it fails to meet the minimum
           account balance requirement of $1,000,000 ($250,000 for shareholders
           with existing accounts prior to August 13, 2004) for any reason
           other than a change in market value.

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



                                            Policies You Should Know About  | 47
<PAGE>


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

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

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



48 | Policies You Should Know About
<PAGE>


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

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

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

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of a fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in a fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.



                                            Policies You Should Know About  | 49
<PAGE>


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

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


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


           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) transactions on behalf of any mutual fund advised by the
           Advisor and its affiliates (e.g., "funds of funds") or, in the case
           of a master/feeder relationship, redemptions by the feeder fund from
           the master portfolio; (v) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vi)
           transactions following death or disability of any registered
           shareholder, beneficial owner or grantor of a living trust with
           respect to shares purchased before death or disability; (vii)
           transactions involving hardship of any registered shareholder;



50 | Policies You Should Know About
<PAGE>


           (viii) systematic transactions with pre-defined trade dates for
           purchases, exchanges or redemptions, such as automatic account
           rebalancing, or loan origination and repayments; (ix) transactions
           involving shares purchased through the reinvestment of dividends or
           other distributions; (x) transactions involving shares transferred
           from another account in the same fund or converted from another
           class of the same fund (the redemption fee period will carry over to
           the acquired shares); (xi) transactions initiated by a fund or
           administrator (e.g., redemptions for not meeting account minimums,
           to pay account fees funded by share redemptions, or in the event of
           the liquidation or merger of the fund); or (xii) transactions in
           cases when there are legal or contractual limitations or
           restrictions on the imposition of the redemption fee (as determined
           by a fund or its agents in their sole discretion). It is the policy
           of the DWS funds to permit approved fund platform providers to
           execute transactions within the funds without the imposition of a
           redemption fee if such providers have implemented alternative
           measures that are determined by the Advisor to provide controls on
           short-term and excessive trading that are comparable to the DWS
           funds' policies.

           THE AUTOMATED INFORMATION LINE IS AVAILABLE 24 HOURS A DAY BY
           CALLING (800) 621-1048. You can use our automated phone services to
           get information on DWS funds generally and on accounts held directly
           at DWS Scudder.

           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House (ACH) services. Transactions
           take two to three days to be completed and there is a $50 minimum
           and a $250,000 maximum. To set up QuickBuy or QuickSell on a new
           account, see the account application; to add it to an existing
           account, call (800) 730-1313.


           TELEPHONE AND ELECTRONIC TRANSACTIONS. Generally, you are
           automatically entitled to telephone and electronic transaction
           privileges, but you may elect not to have them when you open your
           account or by contacting Institutional Investment Services at (800)
           730-1313 at a later date.







THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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









                                            Policies You Should Know About  | 51
<PAGE>

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


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

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

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


           IF YOU PAY FOR SHARES BY CHECK and the check fails to clear, or if
           you order shares by phone and fail to pay for them by 4:00 p.m.
           Eastern time the next business day, we have the right to cancel your
           order, hold you liable or charge you or your account for any losses
           or fees the fund or its agents have incurred. To sell shares, you
           must state whether you would like to receive the proceeds by wire or
           check.


52 | Policies You Should Know About
<PAGE>


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

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


           SELLING SHARES OF TRUST ACCOUNTS AND BUSINESS OR ORGANIZATION
           ACCOUNTS may require additional documentation. Please call (800)
           730-1313 or contact your financial advisor for more information.


           MONEY FROM SHARES YOU SELL is normally sent out within one business
           day of when your order is processed (not when it is received),
           although it could be delayed for up to seven days. There are other
           circumstances when it could be longer: When you are selling shares
           you bought recently by check or ACH (the funds will be placed under
           a 10 calendar day hold to ensure good funds) or when unusual
           circumstances prompt the SEC to allow further delays. Certain
           expedited redemption processes may also be delayed when you are
           selling recently purchased shares or in the event of closing of the
           Federal Reserve Bank's wire payment system. In addition, each fund
           reserves the right to suspend or postpone redemptions as permitted
           pursuant to Section 22(e) of the Investment Company Act of 1940.
           Generally, those circumstances are when 1) the New York Stock
           Exchange is closed other than customary weekend or holiday closings;
           2) trading on the New York Stock Exchange is restricted; 3) an
           emergency exists which makes the disposal of securities owned by a
           fund or the fair determination of the value of a fund's net assets
           not reasonably practicable; or 4) the SEC, by order, permits the
           suspension of the right of redemption.






THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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









                                            Policies You Should Know About  | 53
<PAGE>


           Redemption payments by wire may also be delayed in the event of a
           non-routine closure of the Federal Reserve wire payment system. For
           additional rights reserved by each fund, please see "Other rights we
           reserve."


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


           ACCOUNT STATEMENTS. We or your financial advisor will generally
           furnish you with a written confirmation of every transaction that
           affects your account balance. You will also receive periodic
           statements reflecting the balances in your account.



           How each fund calculates share price

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


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



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


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



54 | Policies You Should Know About
<PAGE>


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


           TO THE EXTENT THAT A FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when a
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change significantly on days when the
           New York Stock Exchange is closed and you cannot buy or sell fund
           shares. Price changes in the securities a fund owns may ultimately
           affect the price of fund shares the next time the NAV is
           calculated.)


                                            Policies You Should Know About  | 55
<PAGE>

           Other rights we reserve

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

           -  withdraw or suspend the offering of shares at any time


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

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



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

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

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

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



56 | Policies You Should Know About
<PAGE>

UNDERSTANDING DISTRIBUTIONS AND TAXES

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


           DIVIDENDS AND DISTRIBUTIONS ARE PAID ANNUALLY IN DECEMBER AND, IF
           NECESSARY, MAY BE PAID AT OTHER TIMES AS WELL.

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

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

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

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






THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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



                                     Understanding Distributions and Taxes  | 57
<PAGE>


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

           If a fund's distributions exceed its income and capital gains
           realized in any year, such excess distributions will constitute a
           return of capital for federal income tax purposes. A return of
           capital generally will not be taxable to you at the time of the
           distribution, but will reduce the cost basis of your shares and
           result in a higher reported capital gain or a lower reported capital
           loss when you sell your shares.

           However, if a fund has available capital loss carryforwards to
           offset its capital gains realized in any year, and its distributions
           exceed its income alone, all or a portion of the excess
           distributions may not be treated, for tax purposes, as a return of
           capital, and would be taxable to shareholders.


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



<TABLE>
<CAPTION>
GENERALLY TAXED AT LONG-TERM                       GENERALLY TAXED AT ORDINARY
CAPITAL GAIN RATES:                                INCOME RATES:
<S>                                                   <C>
DISTRIBUTIONS FROM A FUND
- gains from the sale of                           -  gains from the sale of
  securities held (or treated as                      securities held by a fund for
  held) by a fund for more than                       one year or less
  one year                                         -  all other taxable income
- qualified dividend income

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




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



58 | Understanding Distributions and Taxes
<PAGE>


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

           For taxable years beginning before January 1, 2011, distributions to
           individuals and other noncorporate shareholders of investment income
           designated by a fund as derived from qualified dividend income are
           eligible for taxation for federal income tax purposes at the more
           favorable long-term capital gain rates. Qualified dividend income
           generally includes dividends from domestic and some foreign
           corporations. It does not include income from investments in debt
           securities or, generally, from REITs. In addition, a fund must meet
           certain holding period and other requirements with respect to the
           dividend-paying stocks in its portfolio and the shareholder must
           meet certain holding period and other requirements with respect to a
           fund's shares for the lower tax rates to apply.

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


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


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

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



                                     Understanding Distributions and Taxes  | 59
<PAGE>


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



60 | Understanding Distributions and Taxes
<PAGE>


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


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

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



                                                                  Appendix  | 61
<PAGE>


                   DWS Micro Cap Fund - Institutional Class





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.52%              3.48%       $ 10,348.00        $   154.64
   2           10.25%        1.71%              6.88%       $ 10,688.45        $   179.86
   3           15.76%        1.71%             10.40%       $ 11,040.10        $   185.78
   4           21.55%        1.71%             14.03%       $ 11,403.32        $   191.89
   5           27.63%        1.71%             17.78%       $ 11,778.49        $   198.20
   6           34.01%        1.71%             21.66%       $ 12,166.00        $   204.73
   7           40.71%        1.71%             25.66%       $ 12,566.26        $   211.46
   8           47.75%        1.71%             29.80%       $ 12,979.69        $   218.42
   9           55.13%        1.71%             34.07%       $ 13,406.72        $   225.60
  10           62.89%        1.71%             38.48%       $ 13,847.80        $   233.03
  TOTAL                                                                        $ 2,003.61
</TABLE>




DWS Mid Cap Growth Fund - Institutional Class






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.00%              4.00%       $ 10,400.00        $   102.00
   2           10.25%        1.03%              8.13%       $ 10,812.88        $   109.25
   3           15.76%        1.03%             12.42%       $ 11,242.15        $   113.58
   4           21.55%        1.03%             16.88%       $ 11,688.46        $   118.09
   5           27.63%        1.03%             21.52%       $ 12,152.50        $   122.78
   6           34.01%        1.03%             26.35%       $ 12,634.95        $   127.66
   7           40.71%        1.03%             31.37%       $ 13,136.56        $   132.72
   8           47.75%        1.03%             36.58%       $ 13,658.08        $   137.99
   9           55.13%        1.03%             42.00%       $ 14,200.31        $   143.47
  10           62.89%        1.03%             47.64%       $ 14,764.06        $   149.17
  TOTAL                                                                        $ 1,256.71
</TABLE>





62 | Appendix

<PAGE>


                DWS Small Cap Growth Fund - Institutional Class





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        0.91%              4.09%       $ 10,409.00        $    92.86
   2           10.25%        0.91%              8.35%       $ 10,834.73        $    96.66
   3           15.76%        0.91%             12.78%       $ 11,277.87        $   100.61
   4           21.55%        0.91%             17.39%       $ 11,739.13        $   104.73
   5           27.63%        0.91%             22.19%       $ 12,219.26        $   109.01
   6           34.01%        0.91%             27.19%       $ 12,719.03        $   113.47
   7           40.71%        0.91%             32.39%       $ 13,239.24        $   118.11
   8           47.75%        0.91%             37.81%       $ 13,780.73        $   122.94
   9           55.13%        0.91%             43.44%       $ 14,344.36        $   127.97
  10           62.89%        0.91%             49.31%       $ 14,931.04        $   133.20
  TOTAL                                                                        $ 1,119.56
</TABLE>





                                                                  Appendix  | 63

<PAGE>

TO GET MORE INFORMATION


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

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

For a free copy of any of these documents or to request other information about
a fund, call (800) 730-1313, or contact DWS Scudder at the address listed
below. Each fund's SAI and shareholder reports are also available through the
DWS Scudder Web site at www.dws-scudder.com. These documents and other
information about each fund are available from the EDGAR Database on the SEC's
Internet site at www.sec.gov. If you like, you may obtain copies of this
information, after paying a copying fee, by e-mailing a request to
publicinfo@sec.gov or by writing the SEC at the address listed below. You can
also review and copy these documents and other information about each fund,
including each fund's SAI, at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the SEC's Public Reference Room may be
obtained by calling (800) SEC-0330.



<TABLE>
<CAPTION>
DWS SCUDDER              SEC                     DISTRIBUTOR
---------------------    --------------------    -------------------------------
<S>                      <C>                     <C>
PO Box 219210            100 F Street, N.E.      DWS Scudder Distributors, Inc.
Kansas City, MO          Washington, D.C.        222 South Riverside Plaza
64121-9210               20549-0102              Chicago, IL 60606-5808
WWW.DWS-SCUDDER.COM      WWW.SEC.GOV             (800) 621-1148
(800) 730-1313           (800) SEC-0330
</TABLE>




<TABLE>
<S>                    <C>                            <C>
SEC FILE NUMBER:
DWS Advisor Funds               DWS Micro Cap Fund    811-04760
DWS Advisor Funds          DWS Mid Cap Growth Fund    811-04760
DWS Advisor Funds        DWS Small Cap Growth Fund    811-04760
</TABLE>




[DWS SCUDDER LOGO GRAPHIC APPEARS HERE]






(02/01/08) DSAGF2-1-IN
[RECYCLE GRAPHIC APPEARS HERE]




<PAGE>


                                FEBRUARY 1, 2008








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

                               DWS MICRO CAP FUND


                            DWS MID CAP GROWTH FUND


                           DWS SMALL CAP GROWTH FUND


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

                     ONE GLOBAL FORCE. ONE FOCUS. YOU. [DWS SCUDDER Logo]
                                                             Deutsche Bank Group





<PAGE>

CONTENTS





<TABLE>
<S>      <C>
HOW EACH FUND WORKS
  4      DWS Micro Cap Fund
 13      DWS Mid Cap Growth Fund
 22      DWS Small Cap Growth Fund
 30      Other Policies and Secondary
         Risks
 32      Who Manages and Oversees
         the Funds
 35      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUNDS
 40      How to Buy Shares
 41      How to Exchange or Sell
         Shares
 44      Policies You Should Know
         About
 56      Understanding Distributions
         and Taxes
 60      Appendix
</TABLE>


<PAGE>

HOW EACH FUND WORKS

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


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


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


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

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


<TABLE>
<S>                       <C>
                            Class S
  ticker symbol             SMFSX
    fund number             2390

    DWS MICRO CAP FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks capital appreciation.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in stocks and other
            securities with equity characteristics of US micro capitalization
            companies. For the purposes of this 80% limitation, the micro
            capitalization equity universe is defined as the bottom 5% of the
            total domestic equity market capitalization (at the time of initial
            investment) using a minimum market capitalization of $10 million.
            The fund may invest up to 20% of its total assets in the securities
            of foreign companies that would be considered to be in the bottom
            5% in terms of market capitalization in the US equity market
            (subject to a $10 million market capitalization minimum). The
            fund's equity investments are mainly common stocks, but may also
            include other types of equity securities, such as preferred stocks
            or convertible securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of US micro
            capitalization growth-oriented companies. Portfolio management
            focuses on individual security selection rather than industry
            selection. Portfolio management uses an active process, which
            combines financial analysis with company visits to evaluate
            management and strategies. Each portfolio manager has specific
            sector responsibilities with investment discretion over securities
            within their sectors.

            Company research lies at the heart of our investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on undervalued stocks with
               fast-growing earnings and that they believe have superior
               near-to-intermediate term performance potential.


4 | DWS Micro Cap Fund
<PAGE>


            -  Portfolio management emphasizes individual selection of smaller
            stocks across all economic sectors, early in their growth cycles
            and with the potential to be the blue chips of the future.



            -  Portfolio management generally seeks companies with a leading or
               dominant position in their niche markets, a high rate of return
               on invested capital and the ability to finance a major part of
               future growth from internal sources.


            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.


            The fund may invest up to 20% of its assets in high quality debt
            instruments and money market instruments with remaining maturities
            of one year or less, including repurchase agreements. The fund may
            invest up to 5% of its net assets in non-convertible bonds and
            preferred stocks that portfolio management believes to be of high
            quality.

            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


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


                                                         DWS Micro Cap Fund  | 5
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.


            MICRO CAPITALIZATION COMPANY RISK. The fund's investments in micro
            capitalization companies will be more susceptible to
            share price fluctuations since micro capitalization company stocks
            tend to experience steeper fluctuations in price - down as well as
            up - than the stocks of larger companies. A shortage of reliable
            information - the same information gap that creates opportunity in
            micro capitalization company investing - can also pose added risk.
            Industry-wide reversals may have a greater impact on micro
            capitalization companies, since they lack a large company's
            financial resources. Micro capitalization companies may have
            limited product lines and markets. They may also have shorter
            operating histories and



            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

            This fund is designed for investors with long-term goals who can
            tolerate capital fluctuation in pursuit of capital appreciation.

6 | DWS Micro Cap Fund
<PAGE>

            more volatile businesses and may be more dependent on key
            personnel. Finally, micro capitalization company stocks are
            typically less liquid than large company stocks. Particularly when
            they are performing poorly, a micro capitalization company's shares
            may be more difficult to sell.

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

                                                         DWS Micro Cap Fund  | 7
<PAGE>

            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income or
               gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US
               investments. The procedures and rules governing foreign
               transactions and custody may also involve delays in payment,
               delivery or recovery of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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


8 | DWS Micro Cap Fund
<PAGE>

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                         DWS Micro Cap Fund  | 9
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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


The performance data for the period prior to July 10, 2006 provided in the bar
chart and quarterly returns below and the risk return table on the following
pages are those of the fund's predecessor fund, DWS Micro Cap Fund, a series of
DWS Investments Trust (the "Predecessor Fund"). On July 10, 2006, the
Predecessor Fund transferred its assets to the fund, which is a new series of
DWS Advisor Funds. The fund assumed the Predecessor Fund's liabilities.


The inception date for Class S shares of the Predecessor Fund is February 1,
2005. The inception date for Institutional Class shares of the Predecessor Fund
is December 18, 1996. In the bar chart, the performance figures for Class S of
the Predecessor Fund before its inception date are based on the historical
performance of the original share class of the Predecessor Fund (Institutional
Class), adjusted to reflect the higher gross total annual operating expenses of
Class S.

DWS Micro Cap Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Class S
[GRAPHIC APPEARS HERE]






<TABLE>
<S>     <C>      <C>     <C>      <C>       <C>      <C>      <C>     <C>       <C>
 0.95   77.09    2.96    15.08    -27.25    40.65    12.68    7.93     8.59      7.44
 1998   1999     2000    2001     2002      2003     2004     2005    2006      2007
</TABLE>






<TABLE>
<CAPTION>
                 FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 29.66%, Q4 1999              WORST QUARTER: -24.17 %, Q3 1998
</TABLE>



10 | DWS Micro Cap Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                             1 YEAR      5 YEARS      10 YEARS
<S>                                         <C>         <C>          <C>
 CLASS S
   Return before Taxes                        7.44         14.82        11.89
   Return after Taxes on Distributions        5.00         12.19         9.94
   Return after Taxes on Distributions
   and Sale of Fund Shares                    8.07*        11.94         9.65
 RUSSELL 2000 (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                           7.05         16.50         4.32
</TABLE>




*    Return after Taxes on Distributions  and Sale of Fund Shares is higher than
     other return  figures for the same period due to a capital  loss  occurring
     upon redemption resulting in an assumed tax deduction for the shareholder.


     Total returns would have been lower if operating expenses hadn't been
reduced.

 RUSSELL 2000 (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
 measure of 2,000 of the smallest capitalized US companies with a
 greater-than-average growth orientation and whose common stocks trade on the
 NYSE, AMEX and Nasdaq.


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

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



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

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


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



                                                        DWS Micro Cap Fund  | 11
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE                                        CLASS S
<S>                                    <C>
 SHAREHOLDER FEES, paid directly from your investment
_____________________________________________________________________
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds) 1                             2.00%
 ANNUAL OPERATING EXPENSES, deducted from fund assets
_____________________________________________________________________
 Management Fee 2                                   1.35%
 Distribution/Service (12b-1) Fee                   None
 Other Expenses                                     0.58
 TOTAL ANNUAL OPERATING EXPENSES                    1.93
 Less Expense Waiver/
 Reimbursements 3                                   0.41
 NET ANNUAL OPERATING EXPENSES3                     1.52
</TABLE>



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


2   Through November 30, 2009, the Advisor has contractually agreed to waive a
   portion of its Investment Management Fee in the amount of 0.305% of the
   fund's average daily total net assets. Includes 0.10% administration fee.



3   Through January 31, 2009, the Advisor has contractually agreed to waive all
   or a portion of its fees and reimburse or pay certain operating expenses of
   the fund so that the total operating expenses will not exceed 1.52% for
   Class S shares, excluding certain expenses such as extraordinary expenses,
   taxes, brokerage and interest.


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



<TABLE>
<CAPTION>
EXAMPLE               1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                  <C>         <C>          <C>          <C>
 Class S shares        $155         $566       $1,004       $2,221
</TABLE>




12 | DWS Micro Cap Fund
<PAGE>


<TABLE>
<S>                            <C>
                                 Class S
  ticker symbol                  SMCSX
    fund number                  2383

    DWS MID CAP GROWTH FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks long-term capital growth.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in companies with
            market caps within the market capitalization range of the Russell
            Mid Cap Growth Index or securities with equity characteristics that
            provide exposure to those companies. The fund's equity investments
            are mainly common stocks, but may also include other types of
            equity securities such as preferred stocks or convertible
            securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of medium-sized
            growth-oriented companies. Portfolio management focuses on
            individual security selection rather than industry selection.
            Portfolio management uses an active process which combines
            financial analysis with company visits to evaluate management and
            strategies. Each portfolio manager has specific sector
            responsibilities with investment discretion over securities within
            their sectors.

            Company research lies at the heart of the investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on undervalued stocks with
               fast-growing earnings and superior near-to-intermediate term
               performance potential.



            -  Portfolio management emphasizes individual selection of
               medium-sized stocks across all economic sectors, early in their
               growth cycles and with the potential to be the blue chips of the
               future.


                                                   DWS Mid Cap Growth Fund  | 13
<PAGE>


            -  Portfolio management generally seeks companies with a leading or
               dominant position in their niche markets, a high rate of return
               on invested capital and the ability to finance a major part of
               future growth from internal sources.


            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.

            The fund may invest up to 20% of its assets in stocks and other
            securities of companies based outside the US.


            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 30% of its total assets to approved institutional
            borrowers who need to borrow securities in order to complete
            certain transactions.


14 | DWS Mid Cap Growth Fund
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.


            MEDIUM-SIZED COMPANY RISK. Medium-sized company stocks tend to
            experience steeper price fluctuations - down as well as up - than
            stocks of larger companies. A shortage of reliable information - the
            same information gap that creates opportunity - can pose added risk.
            Industry-wide reversals may have a greater impact on medium-sized
            companies, since they usually lack a large company's financial
            resources. Medium-sized company stocks are typically less liquid
            than large company stocks; when things are going poorly, it is
            harder to find a buyer for a medium-sized company's shares.



            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

            This fund is designed for investors with long-term goals who can
            tolerate capital fluctuation in pursuit of long-term capital growth.


                                                   DWS Mid Cap Growth Fund  | 15
<PAGE>

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

16 | DWS Mid Cap Growth Fund
<PAGE>

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US investments.
               The procedures and rules governing foreign transactions and
               custody may also involve delays in payment, delivery or recovery
               of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                   DWS Mid Cap Growth Fund  | 17
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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


The inception date for Class S shares of the fund is February 1, 2005. In the
bar chart, the performance figures for Class S before its inception date are
based on the historical performance of the fund's original share class
(Investment Class), adjusted to reflect the higher gross total annual operating
expenses of Class S.

In the table, the performance figures for Class S prior to its inception are
based on the historical performance of Investment Class, adjusted to reflect
both the higher gross total annual operating expenses for Class S. Investment
Class shares merged into Class S shares on October 20, 2006.


DWS Mid Cap Growth Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Class S
[GRAPHIC APPEARS HERE]






<TABLE>
<S>        <C>        <C>        <C>         <C>         <C>        <C>       <C>        <C>        <C>
18.51      49.68       -1.70      -13.37      -20.49     28.44       9.75     12.46      10.95       8.31
1998       1999       2000        2001        2002       2003       2004      2005       2006       2007
</TABLE>






<TABLE>
<CAPTION>
                FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 29.95 %, Q4 1999             WORST QUARTER: -19.58%, Q3 1998
</TABLE>



18 | DWS Mid Cap Growth Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                             1 YEAR      5 YEARS      10 YEARS
<S>                                         <C>         <C>          <C>
 CLASS S
   Return before Taxes                         8.31        13.76         8.63
   Return after Taxes on Distributions         6.14        13.28         7.31
   Return after Taxes on Distributions
   and Sale of Fund Shares                     4.60        11.84         6.58
 RUSSELL MIDCAP (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                           11.43        17.90         7.59
</TABLE>



     Total returns would have been lower if operating expenses hadn't been
reduced.



 RUSSELL MIDCAP (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
 index of medium and medium/small companies in the Russell 1000 (Reg. TM) Index
 chosen for their growth orientation. Russell 1000 (Reg. TM) Index is an
 unmanaged price-only index of the 1,000 largest capitalized companies that are
 domiciled in the US and whose common stocks are traded.



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

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



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

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


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



                                                   DWS Mid Cap Growth Fund  | 19
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE                                        CLASS S
<S>                                    <C>
 SHAREHOLDER FEES, paid directly from your investment
_____________________________________________________________________
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds) 1                             2.00%
 ANNUAL OPERATING EXPENSES, deducted from fund assets
_____________________________________________________________________
 Management Fee 2                                   0.72%
 Distribution/Service (12b-1) Fee                   None
 Other Expenses                                     0.27
 TOTAL ANNUAL OPERATING EXPENSES 3                  0.99
</TABLE>



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

2   Includes 0.10% administrative fee.


3   Through January 31, 2009, the Advisor has contractually agreed to waive all
   or a portion of its management fee and reimburse or pay operating expenses
   of the fund to the extent necessary to maintain the fund's total operating
   expenses at 1.05% for Class S shares, excluding certain expenses such as
   extraordinary expenses, taxes, brokerage and interest.


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



<TABLE>
<CAPTION>
EXAMPLE               1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                  <C>         <C>          <C>          <C>
 Class S shares        $101         $315         $547       $1,213
</TABLE>




20 | DWS Mid Cap Growth Fund
<PAGE>


<TABLE>
<S>                              <C>
                                   Class S
  ticker symbol                    SSDSX
    fund number                    2314

    DWS SMALL CAP GROWTH FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks long-term capital growth.

            Under normal circumstances, the fund invests at least 80% of its
            assets, determined at the time of purchase, in stocks and other
            securities with equity characteristics of US smaller capitalization
            companies. For purposes of this 80% investment limitation, the
            small capitalization equity universe is defined as the bottom 20%
            of the total domestic equity market capitalization (at the time of
            initial investment), using a minimum market capitalization of $10
            million. The fund may invest up to 20% of its assets in the stocks
            of non-US companies and large capitalization stocks. The fund may
            also invest in other types of equity securities such as preferred
            stocks or convertible securities.


            In particular, the fund may use futures, options and covered call
            options.

            The fund invests primarily in equity securities of US smaller
            capitalization companies. Portfolio management focuses on
            individual security selection rather than industry selection.
            Portfolio management uses an active process which combines
            financial analysis with company visits to evaluate management and
            strategies. Each portfolio manager has specific sector
            responsibilities with investment discretion over the securities
            within sectors.

            Company research lies at the heart of our investment process.
            Portfolio management uses a "bottom-up" approach to picking
            securities.



            -  Portfolio management focuses on stocks with superior growth
               prospects and above average near-to-intermediate term
               performance potential.


                                                 DWS Small Cap Growth Fund  | 21
<PAGE>


            -  Portfolio management emphasizes individual selection of small
               company stocks across all economic sectors, early in their growth
               cycles and with the potential to be the blue chips of the future.



            -  Portfolio management generally seeks companies with a leading or
               dominant position in their niche markets, a high rate of return
               on invested capital and the ability to finance a major part of
               future growth from internal sources.

            Portfolio management looks primarily for financial attributes that
            set these companies apart:


            -  estimated above-average growth in revenues and earnings; and

            -  a balance sheet that can support this growth potential with
               sufficient working capital and manageable levels of debt.

            The fund follows a disciplined selling process in order to lessen
            risk. A security may be sold if one or more of the following
            conditions are met:


            -  the stock price reaches portfolio management's expectations;


            -  there is a material change in the company's fundamentals;


            -  portfolio management believes other investments offer better
               opportunities; or


            -  the market capitalization of a stock distorts the weighted
               average market capitalization of the fund.


            OTHER INVESTMENTS. The fund is permitted, but not required, to use
            various types of derivatives (contracts whose value is based on,
            for example, indices, currencies or securities). Derivatives may be
            used for hedging and for risk management or for non-hedging
            purposes to seek to enhance potential gains. The fund may use
            derivatives in circumstances where portfolio management believes
            they offer an economical means of gaining exposure to a particular
            asset class or to keep cash on hand to meet shareholder redemptions
            or other needs while maintaining exposure to the market.


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 30% of its total assets to approved institutional
            borrowers who need to borrow securities in order to complete
            certain transactions.


22 | DWS Small Cap Growth Fund
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes, which
            could affect the fund's ability to sell them at an attractive
            price.

            GROWTH INVESTING RISK. Since growth stocks usually reinvest a large
            portion of earnings in their own businesses, they may lack the
            dividends associated with value stocks that might otherwise cushion
            their decline in a falling market. Earnings disappointments in
            growth stocks often result in sharp price declines because
            investors buy these stocks for their potential superior earnings
            growth. Growth stocks may also be out of favor for certain periods
            in relation to value stocks.

            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.

            SMALL COMPANY CAPITALIZATION RISK. Small company stocks
            tend to experience steeper price fluctuations than the stocks of
            larger companies. A shortage of reliable information can also pose
            added risk. Industry-wide reversals may have a greater impact on
            small companies, since they lack a large company's financial
            resources. Small company stocks are typically less liquid than
            large company stocks. Accordingly, it may be harder to find a buyer
            for a small company's shares.


            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:




            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

            This fund is designed for investors with long-term goals who can
            tolerate capital fluctuation in pursuit of long-term capital growth.




                                                 DWS Small Cap Growth Fund  | 23
<PAGE>

            -  POLITICAL RISK. Some foreign governments have limited the outflow
               of profits to investors abroad, imposed restrictions on the
               exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized foreign
               investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

24 | DWS Small Cap Growth Fund
<PAGE>

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US investments.
               The procedures and rules governing foreign transactions and
               custody may also involve delays in payment, delivery or recovery
               of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.


            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.


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

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements. (See "Secondary Risks" for more information.)



                                                 DWS Small Cap Growth Fund  | 25
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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

Class S shares commenced operations on December 20, 2004.

DWS Small Cap Growth Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Class S
[GRAPHIC APPEARS HERE]






<TABLE>
<S>       <C>       <C>
 7.18      5.05      5.85
2005      2006      2007
</TABLE>






<TABLE>
<CAPTION>
                FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 11.65%, Q1 2006              WORST QUARTER: -7.43%, Q2 2006
</TABLE>



26 | DWS Small Cap Growth Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                             1 YEAR      SINCE INCEPTION*
<S>                                         <C>         <C>
 CLASS S
   Return before Taxes                         5.85             6.57
   Return after Taxes on Distributions         5.62             5.77
   Return after Taxes on Distributions
   and Sale of Fund Shares                     4.11             5.63
 RUSSELL 2000 (Reg. TM) GROWTH INDEX
 (reflects no deductions for fees,
 expenses or taxes)                            7.05             8.11
</TABLE>




 *   Class S commenced operations on December 20, 2004. Index comparisons are
     as of December 31, 2004.

     Total returns would have been lower if operating expenses hadn't been
reduced.


 RUSSELL 2000 (Reg. TM) GROWTH INDEX is an unmanaged capitalization-weighted
 measure of 2,000 of the smallest capitalized US companies with a
 greater-than-average growth orientation and whose common stocks trade on the
 NYSE, AMEX and Nasdaq.


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

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



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

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


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



                                                 DWS Small Cap Growth Fund  | 27
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE                                        CLASS S
<S>                                    <C>
 SHAREHOLDER FEES, paid directly from your investment
_____________________________________________________________________
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds) 1                             2.00%
 ANNUAL OPERATING EXPENSES, deducted from fund assets
_____________________________________________________________________
 Management Fee 2                                   0.75%
 Distribution/Service (12b-1) Fee                   None
 Other Expenses                                     0.37
 TOTAL ANNUAL OPERATING EXPENSES                    1.12
 Less Fee Waiver/Expense
 Reimbursement 3                                    0.12
 NET ANNUAL FUND OPERATING
 EXPENSES3                                          1.00
</TABLE>



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

2   Includes 0.10% administration fee.


3   Through January 31, 2010, the Advisor has contractually agreed to waive all
   or a portion of its management fee and reimburse or pay operating expenses
   of the fund to the extent necessary to maintain the fund's total operating
   expenses at 1.00% for Class S shares, excluding certain expenses such as
   extraordinary expense, taxes, brokerage and interest.

Based on the costs above (including one year of capped expenses in the "1 Year"
period and two years of capped expenses in each of the "3 Years," "5 Years" and
"10 Years" periods), this example helps you compare the expenses of the fund to
those of other mutual funds. This example assumes the expenses above remain the
same. It also assumes that you invested $10,000, earned 5% annual returns and
reinvested all dividends and distributions and sold your shares at the end of
the period. This is only an example; actual expenses will be different.




<TABLE>
<CAPTION>
EXAMPLE               1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                  <C>         <C>          <C>          <C>
 Class S shares        $102         $332         $593       $1,341
</TABLE>




28 | DWS Small Cap Growth Fund
<PAGE>

OTHER POLICIES AND SECONDARY RISKS

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


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


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


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



           Secondary risks

           The risk disclosure below applies to each fund, unless otherwise
           noted.


           DERIVATIVES RISK. Risks associated with derivatives include the risk
           that the derivative is not well correlated with the security, index
           or currency to which it relates; the risk that derivatives may not
           have the intended effects and may result in losses or missed
           opportunities; the risk that the fund will be unable to sell the
           derivative because of an illiquid secondary market; and the risk
           that the derivative transaction could expose the fund to the effects
           of leverage, which could increase the fund's exposure to the market
           and magnify potential losses. There is no guarantee that
           derivatives, to the extent employed, will have the intended effect,
           and their use could cause lower returns or even losses to the fund.
           The use of derivatives by the fund to hedge risk may reduce the
           opportunity for gain by offsetting the positive effect of favorable
           price movements.



                                        Other Policies and Secondary Risks  | 29
<PAGE>

           For more information

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

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


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

           A complete list of each fund's portfolio holdings is posted as of
           the month-end on www.dws-scudder.com (the Web site does not form a
           part of this prospectus) on or after the last day of the following
           month. This posted information generally remains accessible at least
           until the date on which a fund files its Form N-CSR or N-Q with the
           Securities and Exchange Commission for the period that includes the
           date as of which the posted information is current. In addition,
           each fund's top ten equity holdings and other fund information is
           posted on www.dws-scudder.com as of the calendar quarter-end on or
           after the 15th day following quarter-end. Each fund's Statement of
           Additional Information includes a description of a fund's policies
           and procedures with respect to the disclosure of a fund's portfolio
           holdings.



30 | Other Policies and Secondary Risks
<PAGE>

WHO MANAGES AND OVERSEES THE FUNDS


           The investment advisor


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


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

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

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


                                        Who Manages and Oversees the Funds  | 31
<PAGE>


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




<TABLE>
<CAPTION>
FUND NAME                                   FEE PAID
<S>                                       <C>
  DWS Micro Cap Fund                          0.96  %*
  DWS Mid Cap Growth Fund                     0.62  %
  DWS Small Cap Growth Fund                   0.65  %
</TABLE>




           *   Reflects the effects of expense limitations and/or fee waivers
then in effect.


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


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


32 | Who Manages and Oversees the Funds
<PAGE>

Portfolio management

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

The following people handle the day-to-day management of each fund:

Robert S. Janis
Managing Director of Deutsche Asset Management and Lead Portfolio Manager of
the funds.
- Joined Deutsche Asset Management and the funds in 2004.
- Previously served as portfolio manager for 10 years at Credit Suisse Asset
   Management (or at its predecessor, Warburg Pincus Asset Management).

- Over 22 years of investment industry experience.

- BA, University of Pennsylvania; MBA, University of Pennsylvania, Wharton
   School.

Joseph Axtell, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
funds.
- Joined Deutsche Asset Management in 2001 and the funds in 2006.
- Senior analyst at Merrill Lynch Investment Managers for the international
   equity portion of a global balanced portfolio (1996-2001).
- Director, International Research at PCM International (1989-1996).
- Associate manager, structured debt and equity group at Prudential Capital
   Corporation (1988-1989).
- Analyst at Prudential-Bache Capital Funding in London (1987-1988).
- Equity analyst in the health care sector at Prudential Equity Management
   Associates (1985-1987).
- BS, Carlson School of Management, University of Minnesota.


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



                                        Who Manages and Oversees the Funds  | 33
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of each table are for a single
share. The total return figures represent the percentage that an investor in a
fund would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by PricewaterhouseCoopers LLP,
independent registered public accounting firm, whose report, along with each
fund's financial statements, is included in each fund's annual report (see
"Shareholder reports" on the back cover). On July 10, 2006, DWS Micro Cap Fund
acquired all the assets and assumed all the liabilities of the Predecessor
Fund. The information contained in the following table for DWS Micro Cap Fund
for periods prior to July 10, 2006 has been derived from the Predecessor Fund's
financial statements.




34 | Financial Highlights
<PAGE>

DWS Micro Cap Fund - Class S



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                              2007            2006            2005 A
<S>                                               <C>            <C>              <C>
SELECTED PER SHARE DATA
---------------------------------------------------------------------------------          -
NET ASSET VALUE, BEGINNING OF PERIOD                $  18.89        $  22.46        $  20.99
-------------------------------------------------   --------        --------        --------
Income (loss) from investment operations:
  Net investment income (loss) b                     (  .20)        (  .20) e        (  .21)
_________________________________________________   ________        ________        ________
  Net realized and unrealized gain (loss)               5.03          .23 c             1.68
-------------------------------------------------   --------        --------        --------
  TOTAL FROM INVESTMENT OPERATIONS                      4.83             .03            1.47
_________________________________________________   ________        ________        ________
Less distributions from:
  Net realized gains                                  ( 3.55)         ( 3.60)              -
_________________________________________________   ________        ________        ________
Redemption fees                                          .00***          .00***          .00***
-------------------------------------------------   --------        --------        --------
NET ASSET VALUE, END OF PERIOD                      $  20.17        $  18.89        $  22.46
-------------------------------------------------   --------        --------        --------
Total Return (%) d                                     27.52         (.85) e,f        7.00**
-------------------------------------------------   --------        --------        --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------   --------
Net assets, end of period ($ millions)                    11               1               5
_________________________________________________   ________        ________        ________
Ratio of expenses before expense reductions (%)         1.93            2.21            2.23*
_________________________________________________   ________        ________        ________
Ratio of expenses after expense reductions (%)          1.39            1.68            1.74*
_________________________________________________   ________        ________        ________
Ratio of net investment income (loss) (%)             ( 1.04)        ( 1.02) e        ( 1.46)*
_________________________________________________   ________        ________        ________
Portfolio turnover rate (%)                               73             100             108
-------------------------------------------------   --------        --------        --------
</TABLE>



a   For the period February 1, 2005 (commencement of operations of Class S
   shares) to September 30, 2005.

b   Based on average shares outstanding during the period.

c   Because of the timing of subscriptions and redemptions in relation to
   fluctuating markets at value the amount shown may not agree with the change
   in aggregate gains and losses.

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

e   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.061 per share
   and an increase in the ratio of net investment income of 0.29%. Excluding
   this non-recurring income, total return would have been 0.33% lower.

f   The Fund realized a gain of $18,520 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.

*   Annualized

**   Not annualized

***   Amount is less than $.005.

                                                      Financial Highlights  | 35
<PAGE>

DWS Mid Cap Growth Fund - Class S


<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                              2007           2006           2005 A
<S>                                               <C>            <C>            <C>
SELECTED PER SHARE DATA
-------------------------------------------------------------------------------          -
NET ASSET VALUE, BEGINNING OF PERIOD                $  15.74       $  15.18       $  13.66
-------------------------------------------------   --------       --------       --------
Income (loss) from investment operations:
  Net investment income (loss) b                      (  .08)        (.11) d       (  .06)
_________________________________________________   ________       ________       ________
  Net realized and unrealized gain (loss)               3.51            .67           1.58
-------------------------------------------------   --------       --------       --------
  TOTAL FROM INVESTMENT OPERATIONS                      3.43            .56           1.52
_________________________________________________   ________       ________       ________
Redemption fees                                          .00***         .00***         .00***
-------------------------------------------------   --------       --------       --------
NET ASSET VALUE, END OF PERIOD                      $  19.17       $  15.74       $  15.18
-------------------------------------------------   --------       --------       --------
Total Return (%) c                                     21.79         3.69 d          11.13**
-------------------------------------------------   --------       --------       --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------------   --------
Net assets, end of period ($ millions)                   255            213            223
_________________________________________________   ________       ________       ________
Ratio of expenses before expense reductions (%)          .99           1.11           1.13*
_________________________________________________   ________       ________       ________
Ratio of expenses after expense reductions (%)           .94           1.08           1.06*
_________________________________________________   ________       ________       ________
Ratio of net investment income (loss) (%)             (  .46)        (.69) d       (  .57)*
_________________________________________________   ________       ________       ________
Portfolio turnover rate (%)                               56             53             83
-------------------------------------------------   --------       --------       --------
</TABLE>



a   For the period February 1, 2005 (commencement of operations of Class S
   shares) to September 30, 2005.

b   Based on average shares outstanding during period.

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

d   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.002 per share
   and an increase in the ratio of net investment income of 0.01%. Excluding
   this non-recurring income, total return would have been 0.01% lower.

*   Annualized

**   Not annualized

***   Amount is less than $.005.

36 | Financial Highlights
<PAGE>

DWS Small Cap Growth Fund - Class S



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                              2007           2006           2005 A
<S>                                               <C>            <C>            <C>
SELECTED PER SHARE DATA
-------------------------------------------------------------------------------          -
NET ASSET VALUE, BEGINNING OF PERIOD                $  23.71       $  25.01       $  23.88
-------------------------------------------------   --------       --------       --------
Income (loss) from investment operations:
  Net investment income (loss) b                     (  .12)       (  .17) d       (  .15)
_________________________________________________   ________       ________       ________
  Net realized and unrealized gain (loss)               4.54            .83           1.28
-------------------------------------------------   --------       --------       --------
  TOTAL FROM INVESTMENT OPERATIONS                      4.42            .66           1.13
_________________________________________________   ________       ________       ________
Less distributions from:
NET REALIZED GAINS                                    ( 1.61)        ( 1.96)             -
-------------------------------------------------   --------       --------       --------
Redemption fees                                          .00***        .00***         .00***
-------------------------------------------------   --------       --------       --------
NET ASSET VALUE, END OF PERIOD                      $  26.52       $  23.71       $  25.01
-------------------------------------------------   --------       --------       --------
Total Return (%) c                                     19.43       2.41 d,e          4.73**
-------------------------------------------------   --------       --------       --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------------   --------
Net assets, end of period ($ millions)                   202             68             79
_________________________________________________   ________       ________       ________
Ratio of expenses before expense reductions (%)         1.12           1.21           1.12*
_________________________________________________   ________       ________       ________
Ratio of expenses after expense reductions (%)          1.00           1.03           1.00*
_________________________________________________   ________       ________       ________
Ratio of net investment income (loss) (%)             (  .48)        (.65) d       (  .78)*
_________________________________________________   ________       ________       ________
Portfolio turnover rate (%)                             64 f             74            119
-------------------------------------------------   --------       --------       --------
</TABLE>



a   For the period December 20, 2004 (commencement of operations of Class S
   shares) to September 30, 2005.

b   Based on average shares outstanding during the period.

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

d   Includes non-recurring income from the Advisor recorded as a result of an
   administrative proceeding regarding disclosure of brokerage allocation
   practices in connection with sales of DWS Scudder Funds. The non-recurring
   income resulted in an increase in net investment income of $0.008 per share
   and an increase in the ratio of net investment income of 0.03%. Excluding
   this non-recurring income, total return would have been 0.04% lower.

e   The Fund realized a gain of $92,403 on the disposal of an investment not
   adhering to the Fund's investment restrictions. Excluding this gain, total
   return would have been 0.02% lower.


f   Excludes portfolio securities delivered as a result of processing
   redemption in-kind transactions.


*   Annualized

**   Not annualized

***   Amount is less than $.005.

                                                      Financial Highlights  | 37
<PAGE>


HOW TO INVEST IN THE FUNDS

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

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


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


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

<PAGE>


How to BUY Shares





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

 -  Fill out and sign an application          Send a DWS Scudder investment slip or
 -  Send it to us at the appropriate          short note that includes:
  address, along with an investment           -  fund and class name
  check made payable to "DWS                  -  account number
  Scudder"                                    -  check payable to "DWS Scudder"
---------------------------------------------------------------------------------------
 BY WIRE
 -  Call (800) 728-3337 for instructions      -  Call (800) 728-3337 for instructions
---------------------------------------------------------------------------------------
 BY PHONE
 Not available                                -  Call (800) 728-3337 for instructions
---------------------------------------------------------------------------------------
 WITH AN AUTOMATIC INVESTMENT PLAN
 -  Fill in the information on our            -  To set up regular investments from a
  application including a check for the       bank checking account, call
  initial investment and a voided check       (800) 728-3337 (minimum $50)
---------------------------------------------------------------------------------------
 USING QuickBuy
 Not available                                -  Call (800) 728-3337 to make sure
                                              QuickBuy is set up on your account; if
                                              it is, you can request a transfer from
                                              your bank account of any amount
                                              between $50 and $250,000
---------------------------------------------------------------------------------------
ON THE INTERNET
 -  Register at www.dws-scudder.com or        -  Call (800) 728-3337 to ensure you have
  log in if already registered                electronic services
 -  Print out a prospectus and a new          -  Register at www.dws-scudder.com
  account application                         or log in if already registered
 -  Complete and return the application       -  Follow the instructions for buying
  with your check                             shares with money from your bank
                                              account
</TABLE>



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

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

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


                                                         How to Buy Shares  | 39
<PAGE>


How to EXCHANGE or SELL Shares





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

 -  Exchanges into existing accounts:            Some transactions, including most for
  $50 minimum per fund                          over $100,000, can only be ordered in
 -  Exchanges into new accounts:                writing with a signature guarantee;
  $2,500 minimum per fund                       please see "Signature Guarantee"
  $1,000 minimum for IRAs and UGMAs
---------------------------------------------------------------------------------------
 BY PHONE                                        BY PHONE OR WIRE
 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions
---------------------------------------------------------------------------------------
 USING THE AUTOMATED INFORMATION LINE
 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions
---------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL
 (see previous page for address)
 Your instructions should include:              Your instructions should include:
 -  the fund, class and account number          -  the fund, class and account number
  you're exchanging out of                      from which you want to sell shares
 -  the dollar amount or number of shares       -  the dollar amount or number of shares
  you want to exchange                          you want to sell
 -  the name and class of the fund you          -  your name(s), signature(s) and
  want to exchange into                         address, as they appear on your
 -  your name(s), signature(s) and              account
  address, as they appear on your               -  a daytime telephone number
  account
 -  a daytime telephone number
---------------------------------------------------------------------------------------
 WITH AN AUTOMATIC EXCHANGE PLAN                 WITH AN AUTOMATIC WITHDRAWAL PLAN
 -  To set up regular exchanges from a          -  To set up regular cash payments from
  fund account, call (800) 728-3337             a DWS fund account, call
                                                (800) 728-3337
---------------------------------------------------------------------------------------
 USING QuickSell
 Not available                                  -  Call (800) 728-3337 to make sure
                                                QuickSell is set up on your account; if
                                                it is, you can request a transfer to your
                                                bank account of any amount between
                                                $50 and $250,000
---------------------------------------------------------------------------------------
 ON THE INTERNET
 -  Register at www.dws-scudder.com or          -  Register at www.dws-scudder.com or
  log in if already registered                  log in if already registered
 -  Follow the instructions for making on-      -  Follow the instructions for making on-
  line exchanges                                line redemptions
</TABLE>



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


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




40 | How to Sell or Exchange Shares
<PAGE>

           Financial intermediary support payments


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



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


                                            How to Sell or Exchange Shares  | 41
<PAGE>


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


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

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


42 | How to Sell or Exchange Shares
<PAGE>

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


POLICIES YOU SHOULD KNOW ABOUT


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


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

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.

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


           Policies about transactions

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




            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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

                                            Policies You Should Know About  | 43
<PAGE>

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

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


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


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

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


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


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


44 | Policies You Should Know About
<PAGE>

           INITIAL PURCHASE. The minimum initial investment is $2,500, except
           for investments on behalf of participants in certain fee-based and
           wrap programs offered through certain financial intermediaries
           approved by the Advisor, for which there is no
           minimum initial investment; and fiduciary accounts such as IRAs and
           custodial accounts such as Uniform Gifts to Minors Act and Uniform
           Transfers to Minors Act accounts for which the minimum initial
           investment is $1,000 per account. In addition, the minimum initial
           investment is $1,000 if an automatic investment plan of $50 per
           month is established. Group retirement plans and certain other
           accounts have similar or lower minimum share balance requirements.


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

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



                                            Policies You Should Know About  | 45
<PAGE>


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

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

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



46 | Policies You Should Know About
<PAGE>


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

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

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

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



                                            Policies You Should Know About  | 47
<PAGE>


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

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of a fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in a fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.

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

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


           The redemption fee is applicable to fund shares purchased either
           directly or through a financial intermediary, such as a
           broker-dealer. Transactions through financial intermediaries
           typically are placed with a fund on an omnibus basis and include
           both purchase and sale transactions placed on behalf of multiple
           investors. These purchase and sale transactions are generally


48 | Policies You Should Know About
<PAGE>

           netted against one another and placed on an aggregate basis;
           consequently the identities of the individuals on whose behalf the
           transactions are placed generally are not known to a fund. For this
           reason, each fund has undertaken to notify financial intermediaries
           of their obligation to assess the redemption fee on customer
           accounts and to collect and remit the proceeds to each fund.
           However, due to operational requirements, the intermediaries'
           methods for tracking and calculating the fee may be inadequate or
           differ in some respects from each fund's.


           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) transactions on behalf of any mutual fund advised by the
           Advisor and its affiliates (e.g., "funds of funds") or, in the case
           of a master/feeder relationship, redemptions by the feeder fund from
           the master portfolio; (v) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vi)
           transactions following death or disability of any registered
           shareholder, beneficial owner or grantor of a living trust with
           respect to shares purchased before death or disability; (vii)
           transactions involving hardship of any registered shareholder;
           (viii) systematic transactions with pre-defined trade dates for
           purchases, exchanges or redemptions, such as automatic account
           rebalancing, or loan origination and repayments; (ix) transactions
           involving shares purchased through the reinvestment of dividends or
           other distributions; (x) transactions involving shares transferred
           from another account in the same fund or converted from another
           class of the same fund (the redemption fee period will carry over to
           the acquired shares); (xi) transactions initiated by a fund or
           administrator (e.g., redemptions for not meeting account minimums,
           to pay account fees funded by share redemptions, or in the event of
           the liquidation or merger of the fund); or (xii) transactions in
           cases when there are legal or contractual limitations or
           restrictions on the imposition of the redemption fee (as determined
           by a fund or its agents in their sole discretion). It is the policy
           of the DWS funds to permit approved fund platform providers to
           execute transactions within



                                            Policies You Should Know About  | 49
<PAGE>


           the funds without the imposition of a redemption fee if such
           providers have implemented alternative measures that are determined
           by the Advisor to provide controls on short-term and excessive
           trading that are comparable to the DWS funds' policies.

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


           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House (ACH) services. Transactions
           take two to three days to be completed and there is a $50 minimum
           and a $250,000 maximum. To set up QuickBuy or QuickSell on a new
           account, see the account application; to add it to an existing
           account, call (800) 728-3337.


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


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


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



            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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




50 | Policies You Should Know About
<PAGE>


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

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

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

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






            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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





                                            Policies You Should Know About  | 51
<PAGE>

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


           MONEY FROM SHARES YOU SELL is normally sent out within one business
           day of when your order is processed (not when it is received),
           although it could be delayed for up to seven days. There are other
           circumstances when it could be longer: When you are selling shares
           you bought recently by check or ACH (the funds will be placed under
           a 10 calendar day hold to ensure good funds) or when unusual
           circumstances prompt the SEC to allow further delays. Certain
           expedited redemption processes may also be delayed when you are
           selling recently purchased shares or in the event of closing of the
           Federal Reserve Bank's wire payment system. In addition, each fund
           reserves the right to suspend or postpone redemptions as permitted
           pursuant to Section 22(e) of the Investment Company Act of 1940.
           Generally, those circumstances are when 1) the New York Stock
           Exchange is closed other than customary weekend or holiday closings;
           2) trading on the New York Stock Exchange is restricted; 3) an
           emergency exists which makes the disposal of securities owned by a
           fund or the fair determination of the value of a fund's net assets
           not reasonably practicable; or 4) the SEC, by order, permits the
           suspension of the right of redemption. Redemption payments by wire
           may also be delayed in the event of a non-routine closure of the
           Federal Reserve wire payment system. For additional rights reserved
           by each fund, please see "Other rights we reserve."


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


           How each fund calculates share price

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


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



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


52 | Policies You Should Know About
<PAGE>


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

           WETYPICALLY VALUE SECURITIES USING INFORMATION FURNISHED BY AN
           INDEPENDENT PRICING SERVICE OR MARKET QUOTATIONS, WHERE APPROPRIATE.
           However, we may use methods approved by a fund's Board, such as a
           fair valuation model, which are intended to reflect fair value when
           pricing service information or market quotations are not readily
           available or when a security's value or a meaningful portion of the
           value of a fund's portfolio is believed to have been materially
           affected by a significant event, such as a natural disaster, an
           economic event like a bankruptcy filing, or a substantial
           fluctuation in domestic or foreign markets that has occurred between
           the close of the exchange or market on which the security is
           principally traded (for example, a foreign exchange or market) and
           the close of the New York Stock Exchange. In such a case, a fund's
           value for a security is likely to be different from the last quoted
           market price or pricing service information. In addition, due to the
           subjective and variable nature of fair value pricing, it is possible
           that the value determined for a particular asset may be materially
           different from the value realized upon such asset's sale. It is
           expected that the greater the percentage of fund assets that is
           invested in non-US securities, the more extensive will be a fund's
           use of fair value pricing. This is intended to reduce a fund's
           exposure to "time zone arbitrage" and other harmful trading
           practices. (See "Market timing policies and procedures.")


           TO THE EXTENT THAT A FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when a
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change significantly on days when the
           New York Stock Exchange is closed and you cannot buy or sell fund
           shares. Price changes in the securities a fund owns may ultimately
           affect the price of fund shares the next time the NAV is
           calculated.)


                                            Policies You Should Know About  | 53
<PAGE>

           Other rights we reserve

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

           -  withdraw or suspend the offering of shares at any time


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

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



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

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

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

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



54 | Policies You Should Know About
<PAGE>

UNDERSTANDING DISTRIBUTIONS AND TAXES

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


           DIVIDENDS AND DISTRIBUTIONS ARE PAID ANNUALLY IN DECEMBER AND, IF
           NECESSARY, MAY BE PAID AT OTHER TIMES AS WELL.

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

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

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

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




            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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


                                     Understanding Distributions and Taxes  | 55
<PAGE>


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

           If a fund's distributions exceed its income and capital gains
           realized in any year, such excess distributions will constitute a
           return of capital for federal income tax purposes. A return of
           capital generally will not be taxable to you at the time of the
           distribution, but will reduce the cost basis of your shares and
           result in a higher reported capital gain or a lower reported capital
           loss when you sell your shares.

           However, if a fund has available capital loss carryforwards to
           offset its capital gains realized in any year, and its distributions
           exceed its income alone, all or a portion of the excess
           distributions may not be treated, for tax purposes, as a return of
           capital, and would be taxable to shareholders.


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



<TABLE>
<CAPTION>
 GENERALLY TAXED AT LONG-TERM                           GENERALLY TAXED AT ORDINARY
CAPITAL GAIN RATES:                                   INCOME RATES:
<S>                                                   <C>
DISTRIBUTIONS FROM A FUND
-  gains from the sale of                             -  gains from the sale of
  securities held (or treated as                      securities held by a fund for
  held) by a fund for more than                       one year or less
  one year                                            -  all other taxable income
- qualified dividend income
TRANSACTIONS INVOLVING FUND
SHARES
-  gains from selling fund                            -  gains from selling fund
  shares held for more than                           shares held for one year or
  one year                                            less
</TABLE>




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



56 | Understanding Distributions and Taxes
<PAGE>


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

           For taxable years beginning before January 1, 2011, distributions to
           individuals and other noncorporate shareholders of investment income
           designated by a fund as derived from qualified dividend income are
           eligible for taxation for federal income tax purposes at the more
           favorable long-term capital gain rates. Qualified dividend income
           generally includes dividends from domestic and some foreign
           corporations. It does not include income from investments in debt
           securities or, generally, from REITs. In addition, a fund must meet
           certain holding period and other requirements with respect to the
           dividend-paying stocks in its portfolio and the shareholder must
           meet certain holding period and other requirements with respect to a
           fund's shares for the lower tax rates to apply.

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


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


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

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



                                     Understanding Distributions and Taxes  | 57
<PAGE>


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



58 | Understanding Distributions and Taxes
<PAGE>


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


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

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



                                                                  Appendix  | 59
<PAGE>


                         DWS Micro Cap Fund - Class S





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.52%              3.48%       $ 10,348.00        $   154.64
   2           10.25%        1.93%              6.66%       $ 10,665.68        $   202.78
   3           15.76%        1.93%              9.93%       $ 10,993.12        $   209.01
   4           21.55%        1.93%             13.31%       $ 11,330.61        $   215.42
   5           27.63%        1.93%             16.78%       $ 11,678.46        $   222.04
   6           34.01%        1.93%             20.37%       $ 12,036.99        $   228.85
   7           40.71%        1.93%             24.07%       $ 12,406.52        $   235.88
   8           47.75%        1.93%             27.87%       $ 12,787.40        $   243.12
   9           55.13%        1.93%             31.80%       $ 13,179.98        $   250.59
  10           62.89%        1.93%             35.85%       $ 13,584.60        $   258.28
  TOTAL                                                                        $ 2,220.61
</TABLE>




DWS Mid Cap Growth Fund - Class S






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        0.99%              4.01%       $ 10,401.00        $   100.98
   2           10.25%        0.99%              8.18%       $ 10,818.08        $   105.03
   3           15.76%        0.99%             12.52%       $ 11,251.89        $   109.25
   4           21.55%        0.99%             17.03%       $ 11,703.09        $   113.63
   5           27.63%        0.99%             21.72%       $ 12,172.38        $   118.18
   6           34.01%        0.99%             26.60%       $ 12,660.49        $   122.92
   7           40.71%        0.99%             31.68%       $ 13,168.18        $   127.85
   8           47.75%        0.99%             36.96%       $ 13,696.22        $   132.98
   9           55.13%        0.99%             42.45%       $ 14,245.44        $   138.31
  10           62.89%        0.99%             48.17%       $ 14,816.68        $   143.86
  TOTAL                                                                        $ 1,212.99
</TABLE>





60 | Appendix

<PAGE>


                      DWS Small Cap Growth Fund - Class S





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.00%              4.00%       $ 10,400.00        $   102.00
   2           10.25%        1.00%              8.16%       $ 10,816.00        $   106.08
   3           15.76%        1.12%             12.36%       $ 11,235.66        $   123.49
   4           21.55%        1.12%             16.72%       $ 11,671.60        $   128.28
   5           27.63%        1.12%             21.24%       $ 12,124.46        $   133.26
   6           34.01%        1.12%             25.95%       $ 12,594.89        $   138.43
   7           40.71%        1.12%             30.84%       $ 13,083.57        $   143.80
   8           47.75%        1.12%             35.91%       $ 13,591.22        $   149.38
   9           55.13%        1.12%             41.19%       $ 14,118.56        $   155.17
  10           62.89%        1.12%             46.66%       $ 14,666.36        $   161.20
  TOTAL                                                                        $ 1,341.09
</TABLE>





                                                                  Appendix  | 61

<PAGE>

TO GET MORE INFORMATION


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

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

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



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




<TABLE>
<S>                    <C>                            <C>
SEC FILE NUMBER:
DWS Advisor Funds               DWS Micro Cap Fund    811-04760
DWS Advisor Funds          DWS Mid Cap Growth Fund    811-04760
DWS Advisor Funds        DWS Small Cap Growth Fund    811-04760
</TABLE>








(02/01/08) 314/383/390-2
[RECYCLE GRAPHIC APPEARS HERE]
                                                 [DWS SCUDDER LOGO APPEARS HERE]






<PAGE>


                                FEBRUARY 1, 2008








                                   PROSPECTUS

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


                               CLASSES A, B AND C


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


                          DWS SHORT DURATION PLUS FUND

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


       ONE GLOBAL FORCE. ONE FOCUS, YOU. [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]




<PAGE>

CONTENTS





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

  4      The Fund's Main Investment
         Strategy

  8      The Main Risks of Investing in
         the Fund

 12      The Fund's Performance
         History

 14      How Much Investors Pay

 16      Other Policies and Secondary
         Risks

 17      Who Manages and Oversees
         the Fund

 21      Financial Highlights


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

 26      Choosing a Share Class

 32      How to Buy Class A, B and C
         Shares

 33      How to Exchange or Sell
         Class A, B and C Shares

 36      Policies You Should Know
         About

 49      Understanding Distributions
         and Taxes

 52      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS


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


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


CLASSES A, B AND C shares are generally intended for investors seeking the
advice and assistance of a financial advisor.

CLASS B shares were created especially for former CLASS B shareholders of DWS
Short Term Bond Fund. CLASS B shares are generally not available to new
investors.


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

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



<TABLE>
<S>                               <C>        <C>        <C>
--------------------------------------------------------------------------------
                                                   Class A    Class B    Class C

                  ticker symbol                    PPIAX      PPLBX      PPLCX

                    fund number                    418        618        718

DWS SHORT DURATION PLUS FUND
--------------------------------------------------------------------------------

</TABLE>


            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund's investment objective is to provide high income while
            also seeking to maintain a high degree of stability of
            shareholders' capital.


            The fund invests in securities of varying maturities and normally
            seeks to maintain an average portfolio duration of no longer than
            three years. The fund invests, under normal market conditions, at
            least 65% of its total assets in fixed income securities rated, at
            the time of purchase, within the top four long-term rating
            categories by a nationally recognized statistical rating
            organization (a "NRSRO") (or, if unrated, determined by the fund's
            investment advisor to be of similar quality).


            Fixed income securities in which the fund may invest include the
            following:

            -  US government securities that are issued or guaranteed by the US
               Treasury, or by agencies or instrumentalities of the US
               government. Securities issued by certain agencies and
               instrumentalities of the US government are not guaranteed by the
               US government and are supported solely by the credit of the
               agency or instrumentality.

            -  US dollar-denominated securities issued by domestic or foreign
               corporations, foreign governments or supranational entities.

            -  US dollar-denominated asset-backed securities issued by domestic
               or foreign entities.

            -  Mortgage pass-through securities issued by governmental and
               non-governmental issuers.

            -  Collateralized mortgage obligations, real estate mortgage
               investment conduits and commercial mortgage-backed securities.

4 | DWS Short Duration Plus Fund
<PAGE>

            -  Obligations issued or guaranteed, or backed by securities issued
               or guaranteed, by the US government, or any of its agencies or
               instrumentalities.


            -  Short-term investments, including money market mutual funds. The
               fund invests in short-term investments to meet shareholder
               withdrawals and other liquidity needs. Short-term investments
               will be rated at the time of purchase within one of the top two
               short-term rating categories by a NRSRO or, if unrated,
               determined by the fund's investment advisor to be of similar
               quality.

            The fund may invest up to 10% of its assets in US
            dollar-denominated, domestic and foreign below investment-grade
            fixed income securities (junk bonds) rated in the fifth and sixth
            long-term rating categories by a NRSRO (or, if unrated, determined
            by the fund's investment advisor to be of similar quality),
            including those whose issuers are located in countries with new or
            emerging securities markets. The fund considers an emerging
            securities market to be one where the sovereign debt issued by the
            government in local currency terms is rated below investment-grade.
            A portion of high yield securities purchased for the fund may
            consist of non-US dollar denominated, below investment-grade fixed
            income securities. Compared to investment-grade bonds, junk bonds
            may pay higher yields, have higher volatility and higher risk of
            default on payments of interest or principal.


            The fund can invest up to 15% of its net assets in illiquid
            securities.


            The fund may also invest in and utilize the following investments
            and investment techniques and practices: Rule 144A securities, to
            be announced (TBA) securities, when-issued and delayed delivery
            securities, repurchase agreements, reverse repurchase agreements
            and dollar rolls.

            DERIVATIVE INSTRUMENTS. The fund may invest in various instruments
            commonly known as "derivatives" to increase its exposure to certain
            groups of securities. The derivatives that the fund may use
            include, among others, futures contracts, forward contracts and
            options on forward contracts. The fund may use derivatives to keep
            cash on hand to meet shareholder redemptions, as a hedging strategy
            to maintain a specific portfolio duration, or to protect against
            market risk. When employing the global tactical asset allocation
            overlay strategy mentioned below (also known as integrated Global
            Alpha



                                               DWS Short Duration Plus Fund  | 5
<PAGE>


            Platform or iGAP), the fund also may use derivatives for
            leveraging, which is a way to attempt to enhance returns. The fund
            will only use these instruments if portfolio management believes
            that their return potential more than compensates for the extra
            risks associated with using them.


            The fund's investment strategy emphasizes a diversified exposure to
            higher yielding mortgage, corporate and asset-backed sectors of the
            investment-grade fixed income markets. The investment process
            focuses on a top-down approach, first focusing on sector
            allocations, then using relative value analysis to select the best
            securities within each sector. To select securities, we analyze
            such factors as credit quality, interest rate sensitivity and
            spread relationships between individual bonds.


            The portfolio managers primarily invest in fixed income securities
            that are rated, at the time of purchase, within the top four rating
            categories as rated by Moody's Investors Service, Inc., the
            Standard & Poor's Division of The McGraw-Hill Companies, Inc.,
            Fitch, Inc., or another NRSRO, or, if unrated, determined by the
            fund's investment advisor to be of similar quality.


            The portfolio managers normally target an average portfolio
            duration of no longer than three years by investing in fixed income
            securities with short- to intermediate-term maturities. Generally,
            rates of short-term investments fluctuate less than rates of
            longer-term investments.


            In an attempt to enhance return, the fund also employs a global
            tactical asset allocation overlay strategy (iGAP), which invests in
            instruments across domestic and international fixed income and
            currency markets.


            Through the global asset allocation investment strategy, the
            portfolio managers seek to enhance the fund's return by shifting
            investment weightings among global bond and currency markets in an
            effort to capture short- and medium-term market moves. The
            portfolio managers take the investment views of Deutsche Asset
            Management's bond, asset allocation and currency teams located
            around the world and combine them using a structured, disciplined
            portfolio construction and risk management process. The end result
            is a portfolio of bond and currency positions intended to generate
            returns for the fund that exceed those that could be achieved
            without the global asset allocation strategy, although there can


6 | DWS Short Duration Plus Fund
<PAGE>

            be no guarantee that such result will be achieved. Because the
            global asset allocation strategy focuses on short- and medium-term
            market moves, the managers expect to change the fund's investment
            weightings frequently.

            In implementing the global asset allocation strategy, the fund
            invests in options and futures based on any type of security or
            index, including options and futures traded on foreign exchanges.
            Some options and futures strategies, including selling futures,
            buying puts and writing calls, hedge the fund's investments against
            price fluctuations. Other strategies, including buying futures,
            writing puts and buying calls, tend to increase and will broaden
            the fund's market exposure. Options and futures may be combined
            with each other, or with forward contracts, in order to adjust the
            risk and return characteristics of an overall strategy.

            The fund may also enter into forward currency exchange contracts
            (agreements to exchange one currency for another at a future date),
            may buy and sell options and futures contracts relating to foreign
            currencies and may purchase securities indexed to foreign
            currencies. Currency management strategies allow us to shift
            investment exposure from one currency to another or to attempt to
            profit from anticipated declines in the value of a foreign currency
            relative to the US dollar. Successful implementation of the global
            asset allocation strategy depends on our judgment as to the
            potential risks and rewards of implementing the different types of
            strategies.


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



                                               DWS Short Duration Plus Fund  | 7
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


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

            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value of the
            bonds to decline. In addition, an issuer may not be able to make
            timely payments on the interest and/or principal on the bonds it
            has issued. Because the issuers of high-yield bonds or junk bonds
            (bonds rated below the fourth highest category) may be in uncertain
            financial health, the prices of their bonds can be more vulnerable
            to bad economic news or even the expectation of bad news, than
            investment-grade bonds. In some cases, bonds, particularly
            high-yield bonds, may decline in credit quality or go into default.
            Because the fund may invest in securities not paying current
            interest or in securities already in default, these risks may be
            more pronounced.


            MARKET RISK. Deteriorating market conditions might cause a general
            weakness in the market that reduces the overall level of securities
            prices in that market. Developments in a particular class of bonds
            or the stock market could also adversely affect the fund by
            reducing the relative attractiveness of bonds as an investment.
            Also, to the extent that the fund emphasizes bonds from any given
            industry, it could be hurt if that industry does not do well.


            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.



8 | DWS Short Duration Plus Fund
<PAGE>


            LIQUIDITY RISK. Liquidity risk is the risk that a security cannot
            be sold quickly at a price that reflects the fund's estimate of its
            value.

            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.

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

            IGAP RISK. The success of the iGAP strategy depends, in part, on
            the investment advisor's ability to analyze the correlation between
            various global markets and asset classes. If the investment
            advisor's correlation analysis proves to be incorrect, losses to
            the fund may be significant and may exceed the intended level of
            market exposure for the iGAP strategy.

            DERIVATIVES RISK. Risks associated with derivatives include the
            risk that the derivative is not well correlated with the security,
            index or currency to which it relates; the risk that derivatives
            may not have the intended effects and may result in losses or
            missed opportunities; the risk that the fund will be unable to sell
            the derivative because of an illiquid secondary market; the risk
            that a counterparty is unwilling or unable to meet its obligation;
            and the risk that the derivative transaction could expose the fund
            to the effects of leverage, which could increase the fund's
            exposure to the market and magnify potential losses. There is no
            guarantee that derivatives, to the



                                               DWS Short Duration Plus Fund  | 9
<PAGE>


            extent employed, will have the intended effect, and their use could
            cause lower returns or even losses to the fund. The use of
            derivatives by the fund to hedge risk may reduce the opportunity
            for gain by offsetting the positive effect of favorable price
            movements.

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:



            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.



            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.



            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.

            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.


10 | DWS Short Duration Plus Fund
<PAGE>


            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income or
               gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US
               investments. The procedures and rules governing foreign
               transactions and custody may also involve delays in payment,
               delivery or recovery of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.



                                              DWS Short Duration Plus Fund  | 11
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


The bar chart shows how the performance of the fund's Class A shares has varied
from year to year, which may give some idea of risk. The bar chart does not
reflect sales loads; if it did, total returns would be lower than those shown.
The table on the following page shows how fund performance compares to relevant
index performance (which, unlike fund performance, does not reflect fees or
expenses). The table includes the effects of maximum sales loads on fund
performance. The performance of both the fund and the index varies over time.
All figures assume reinvestment of dividends and distributions (in the case of
after-tax returns, reinvested net of assumed tax rates).

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

The inception dates for Class A, Class B and Class C shares are November 29,
2002, April 23, 2007 and February 3, 2003, respectively. In the bar chart, the
performance figures for Class A before its inception date are based on the
historical performance of the fund's original share class (Investment Class,
which was renamed Class S on October 23, 2006), adjusted to reflect the higher
gross total annual operating expenses of Class A. In the table, the performance
figures for each share class prior to its inception are based on the historical
performance of Class S shares, adjusted to reflect both the higher gross total
annual operating expenses and the current applicable sales charges of Classes
A, B or C. Class S shares are offered in a different prospectus, which is
available upon request. Prior to November 17, 2004, the fund had a different
objective, strategies, fees and expenses. Consequently, the fund's past
performance prior to this time may have been different if the current strategy
had been in place.


DWS Short Duration Plus Fund


ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - CLASS A (Results do not reflect
sales loads; if they did, total returns would be lower than those shown.)


[BAR GRAPHIC APPEARS HERE]



<TABLE>
<S>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
 5.72      6.47      5.88      4.75      3.75     6.30       2.47      5.74     5.45

1999      2000      2001      2002      2003      2004*     2005      2006      2007
</TABLE>







<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>

BEST QUARTER: 3.32% Q4 2004                WORST QUARTER: 0.16% Q1 2005
</TABLE>



 *   The return for the year 2004 includes the effect of the conversion of the
     fund from a stable value fund to a short-term bond fund. In the absence of
     such conversion, the return would have been lower.

12 | DWS Short Duration Plus Fund
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/2007 (Fund returns include the
effects of maximum sales load.)




<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                1 YEAR        5 YEARS       SINCE INCEPTION*
----------------------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>
 CLASS A
----------------------------------------------------------------------------------------------
   Return before Taxes                           2.55           4.15              4.84
----------------------------------------------------------------------------------------------
   Return after Taxes on Distributions           0.63           2.33              2.76
----------------------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares                       0.66**         2.36**            2.79**
----------------------------------------------------------------------------------------------
 CLASS B (Return before Taxes)                   1.26           3.31              3.94
----------------------------------------------------------------------------------------------
 CLASS C (Return before Taxes)                   4.61           3.98              4.38
----------------------------------------------------------------------------------------------
 LEHMAN 1-3 YEAR GOVERNMENT/CREDIT
 INDEX (reflects no deductions for fees,
 expenses or taxes)                              6.83           3.38              4.77
----------------------------------------------------------------------------------------------
</TABLE>




 *   Since December 23, 1998 for the Class S shares of the fund. Index
     comparison began December 31, 1998.



 **   Return after Taxes on Distributions and Sale of Fund Shares is higher
     than other return figures for the same period due to a capital loss
     occurring upon redemption resulting in an assumed tax deduction for the
     shareholder.

 Total returns from inception through 2005 would have been lower if operating
 expenses hadn't been reduced.

 LEHMAN 1-3 YEAR GOVERNMENT/CREDIT INDEX is an unmanaged index consisting of
 all US government agency and Treasury securities, as well as all investment
 grade corporate debt securities with maturities of one to three years.


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

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 621-1048 or visit our Web site at www.dws-scudder.com.



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


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


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



                                              DWS Short Duration Plus Fund  | 13
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
FEE TABLE                                         CLASS A         CLASS B       CLASS C
----------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>          <C>
 SHAREHOLDER FEES, paid directly from your investment
----------------------------------------------------------------------------------------------
 Maximum Sales Charge (Load) Imposed
 on Purchases (as % of offering price)              2.75% 1        None          None
----------------------------------------------------------------------------------------------
 Maximum Deferred Sales Charge (Load)
 (as % of redemption proceeds)                     None 2           4.00%         1.00%
----------------------------------------------------------------------------------------------
 Redemption/Exchange fee on shares
 owned less than 15 days (as % of
 redemption proceeds) 3                            2.00             2.00          2.00
----------------------------------------------------------------------------------------------

 ANNUAL OPERATING EXPENSES, deducted from fund assets
----------------------------------------------------------------------------------------------
 Management Fee 4                                  0.47%            0.47%         0.47%
----------------------------------------------------------------------------------------------
 Distribution/Service (12b-1) Fee                  0.24             1.00          1.00
----------------------------------------------------------------------------------------------
 Other Expenses 5                                  0.18             0.35          0.15
----------------------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES                   0.89             1.82          1.62
----------------------------------------------------------------------------------------------
 Less Expense Reimbursements 6, 7, 8, 9            0.00             0.15          0.00
----------------------------------------------------------------------------------------------
 NET ANNUAL OPERATING
 EXPENSES 6, 7, 8, 9                               0.89             1.67          1.62
----------------------------------------------------------------------------------------------
</TABLE>



1    Because of rounding in the calculation of the offering price, the actual
     maximum front-end sales charge paid by an investor may be higher than the
     percentage noted (see "Choosing a Share Class - Class A shares").


2    The redemption of shares purchased at net asset value under the Large Order
     NAV Purchase Privilege (see "Choosing a Share Class - Class A shares") may
     be subject to a contingent deferred sales charge of 0.50% if redeemed
     within 12 months of purchase.


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


4    Restated on an annualized basis to reflect fee changes that took effect on
     April 23, 2007. Includes 0.10% administration fee.

5    "Other Expenses" are based on estimated amounts for the current fiscal
     year. Actual expenses may be different.



6    The investment advisor has contractually agreed through April 22, 2010 to
     waive a portion of its fees and reimburse expenses so that total annual
     operating expenses will not exceed 0.94% for Class A, excluding certain
     expenses such as extraordinary expenses, taxes, brokerage and interest.



7    The investment advisor has contractually agreed through January 31, 2009 to
     waive a portion of its fees and reimburse expenses so that total annual
     operating expenses will not exceed 1.67% for Class B, excluding certain
     expenses such as extraordinary expenses, taxes, brokerage and interest.

8    The investment advisor has voluntarily agreed to waive a portion of its
     fees and reimburse expenses so that total annual operating expenses will
     not exceed 0.86% and 1.61%, for Class A and Class C shares, respectively,
     excluding certain expenses such as extraordinary expenses, taxes, brokerage
     and interest. The investment advisor, at its discretion, may revise or
     discontinue this arrangement at any time.


14 | DWS Short Duration Plus Fund
<PAGE>


9    The investment advisor has contractually agreed through September 30, 2008
     to waive a portion of its fees and reimburse expenses so that total annual
     operating expenses will not exceed 0.92% and 1.67% for Class A and Class C
     shares, respectively, excluding certain expenses such as extraordinary
     expenses, taxes, brokerage and interest.

Based on the costs above (including one year of capped expenses in each period
for Class B shares), this example helps you compare the expenses of the fund's
Class A, B and C shares to those of other mutual funds. This example assumes
the expenses above remain the same. It also assumes that you invested $10,000,
earned 5% annual returns and reinvested all dividends and distributions. This
is only an example; actual expenses will be different.




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EXAMPLE                1 YEAR      3 YEARS      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                   <C>         <C>          <C>          <C>
 EXPENSES, assuming you sold your shares at the end of each period
--------------------------------------------------------------------------------
 Class A shares         $363         $551       $  754       $1,341
--------------------------------------------------------------------------------
 Class B shares*         570          858        1,171        1,655
--------------------------------------------------------------------------------
 Class C shares          265          511          881        1,922
--------------------------------------------------------------------------------

 EXPENSES, assuming you kept your shares
--------------------------------------------------------------------------------
 Class A shares         $363         $551       $  754       $1,341
--------------------------------------------------------------------------------
 Class B shares*         170          558          971        1,655
--------------------------------------------------------------------------------
 Class C shares          165          511          881        1,922
--------------------------------------------------------------------------------
</TABLE>




*    Reflects conversion of Class B to Class A shares, which pay lower fees.
     Conversion occurs six years after purchase.


                                              DWS Short Duration Plus Fund  | 15
<PAGE>

OTHER POLICIES AND SECONDARY RISKS

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


           -  Although major changes tend to be infrequent, the fund's Board
              could change the fund's investment objective without seeking
              shareholder approval.


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


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


           Prior to January 13, 2006, the fund operated pursuant to a
           master/feeder structure under which the fund invested all of its
           assets in a master portfolio (the "Portfolio").


           Secondary risks

           IPO RISK. Securities purchased in initial public offerings (IPOs)
           may be very volatile, rising and falling rapidly, often based, among
           other reasons, on investor perceptions rather than on economic
           reasons. Additionally, investments in IPOs may magnify the fund's
           performance if it has a small asset base. The fund is less likely to
           experience a similar impact on its performance as its assets grow
           because it is unlikely that the fund will be able to obtain
           proportionately larger IPO allocations.


           For more information

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

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


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



16 | Other Policies and Secondary Risks
<PAGE>


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



WHO MANAGES AND OVERSEES THE FUND


           The investment advisor


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


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

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

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


                                         Who Manages and Oversees the Fund  | 17
<PAGE>


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




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FUND NAME                                     FEE PAID
--------------------------------------------------------------------------------
<S>                                          <C>
  DWS Short Duration Plus Fund                  0.41%
--------------------------------------------------------------------------------
</TABLE>




           Effective April 23, 2007, DWS Short Duration Plus Fund pays the
           Advisor under the investment management agreement a fee, calculated
           daily and paid monthly, at the annual rate of 0.365% of the fund's
           average daily net assets up to $1.5 billion, 0.340% of the next $500
           million, 0.315% of the next $1.0 billion, 0.300% of the next $1.0
           billion, 0.285% of the next $1.0 billion, 0.270% of the next $1.0
           billion, and 0.255% thereafter.

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


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


18 | Who Manages and Oversees the Fund
<PAGE>

Portfolio management

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

The following people handle the day-to-day management of the fund.

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 2002.
-  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.

-  Joined Deutsche Asset Management in 1999, 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.


-  Senior Portfolio Manager for Quantitative Strategies: New York.
-  Joined the fund in 2007.
-  BA and MBA, University of Miami.

Gary Sullivan, CFA
Director of Deutsche Asset Management and 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


                                         Who Manages and Oversees the Fund  | 19
<PAGE>


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


- Joined Deutsche Asset Management in 1995 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 2005.


- BS, The Wharton School, University of Pennsylvania.

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



20 | Who Manages and Oversees the Fund
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of each table are for a single
share. The total return figures represent the percentage that an investor in
the fund would have earned (or lost), assuming all dividends and distributions
were reinvested. This information has been audited by PricewaterhouseCoopers
LLP, independent registered public accounting firm, whose report, along with
the fund's financial statements, is included in the fund's annual report (see
"Shareholder reports" on the back cover). Investors should note that the fund's
performance before November 17, 2004 was obtained while the fund had a
different investment objective and different investment strategies, fees and
expenses. Information for the periods ended prior to September 30, 2005 was
audited by a different independent registered public accounting firm.



                                                      Financial Highlights  | 21
<PAGE>

DWS Short Duration Plus Fund - Class A



<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,                     2007          2006          2005a           2004           2003b
---------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>           <C>            <C>              <C>
SELECTED PER SHARE DATA
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD       $  9.88       $  9.93       $  10.00        $  10.00        $  10.00
---------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
  Net investment income c                      .38           .35            .33             .38             .32
---------------------------------------------------------------------------------------------------------------
  Net realized and unrealized gain
  (loss)                                       .17           .10            .19          (  .00)***      (  .01)
---------------------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS             .55           .45            .52             .38             .31
---------------------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                      ( .43)        ( .38)        (  .34)         (  .38)         (  .31)
---------------------------------------------------------------------------------------------------------------
  Net realized gains                         ( .06)        ( .12)        (  .25)         (  .16)         (  .04)
---------------------------------------------------------------------------------------------------------------
  Reverse stock split d                          -             -              -             .16             .04
---------------------------------------------------------------------------------------------------------------
  TOTAL DISTRIBUTIONS                        ( .49)        ( .50)        (  .59)         (  .38)         (  .31)
---------------------------------------------------------------------------------------------------------------
Redemption fees                                .00***        .00***         .00***            -               -
---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD             $  9.94       $  9.88       $   9.93        $  10.00        $  10.00
---------------------------------------------------------------------------------------------------------------
Total Return (%) e,f                          5.79          4.71           5.24            3.87            3.12**
---------------------------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------   --------
Net assets, end of period ($ millions)         325            85            119             288             250
---------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions                                     .93        1.34h         1.45 h           1.50 h          1.51 h*
---------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions                                     .86        .88h           .95 h           1.25 h          1.25 h*
---------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%)            3.83          3.61           3.21            3.86            3.79*
---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                         57        129 g             298             120             244
---------------------------------------------------------------------------------------------------------------
</TABLE>



a    Effective November 17, 2004, the Fund converted from a stable value fund to
     a short-term bond fund. The return for the Fund includes a one-time
     adjustment of 2.7% related to the conversion and in the absence of the
     conversion, the return would have been lower.

b    For the period November 29, 2002 (commencement of operations of Class A
     shares) to September 30, 2003.

c    Based on average share outstanding during the period.


d    See Note E in Notes to Financial Statements in the Annual Report to
     shareholders.

e   Total return does not reflect the effect of any sales charges.

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

g    On January 13, 2006, the Scudder Limited-Duration Plus Portfolio was
     closed. This ratio includes the purchase and sale of portfolio securities
     of the DWS Short Duration Plus Fund as a stand-alone fund in addition to
     the Scudder Limited-Duration Plus Portfolio.

h    Includes expenses allocated from Scudder Limited-Duration Plus Portfolio.

*    Annualized

**   Not annualized

***  Amount is less than $.005.


22 | Financial Highlights
<PAGE>


DWS Short Duration Plus Fund - Class B




<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                             2007A
-------------------------------------------------------------------
<S>                                              <C>
SELECTED PER SHARE DATA
-------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD               $   9.97
-------------------------------------------------------------------
Income (loss) from investment operations:
  Net investment income b                               .13
-------------------------------------------------------------------
  Net realized and unrealized gain (loss)               .01
-------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS                      .14
-------------------------------------------------------------------
Less distributions from:
  Net investment income                              (  .17)
-------------------------------------------------------------------
Redemption fees                                         .00***
-------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD                     $   9.94
-------------------------------------------------------------------
Total Return (%)c,d                                    1.39**
-------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------
Net assets, end of period ($ millions)                    7
-------------------------------------------------------------------
Ratio of expenses before expense reductions            1.82*
-------------------------------------------------------------------
Ratio of expenses after expense reductions             1.72*
-------------------------------------------------------------------
Ratio of net investment income (%)                     2.94*
-------------------------------------------------------------------
Portfolio turnover rate                                  57
-------------------------------------------------------------------
</TABLE>




a   For the period April 23, 2007 (commencement of operations of Class B
   shares) to September 30, 2007.

b   Based on average shares outstanding during the period.

c   Total return does not reflect the effect of any sales charges.

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


*   Annualized

**   Not annualized

***   Amount is less than $.005.

                                                      Financial Highlights  | 23
<PAGE>

DWS Short Duration Plus Fund - Class C



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                     2007          2006          2005a           2004           2003b
-------------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>           <C>            <C>              <C>
SELECTED PER SHARE DATA
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD       $  9.87       $  9.93       $  10.00        $  10.00        $  10.00
-------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
  Net investment income c                      .31           .29            .26             .31             .20
-------------------------------------------------------------------------------------------------------------------
  Net realized and unrealized gain
  (loss)                                       .17           .09         .19 d           (  .00)***      (  .01)
-------------------------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS             .48           .38            .45             .31             .19
-------------------------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                      ( .37)        ( .32)        (  .27)         (  .31)         (  .19)
-------------------------------------------------------------------------------------------------------------------
  Net realized gains                         ( .06)        ( .12)        (  .25)         (  .16)              -
-------------------------------------------------------------------------------------------------------------------
  Reverse stock split d                          -             -              -             .16               -
-------------------------------------------------------------------------------------------------------------------
  TOTAL DISTRIBUTIONS                        ( .43)        ( .44)        (  .52)         (  .31)         (  .19)
-------------------------------------------------------------------------------------------------------------------
Redemption fees                                .00***        .00***         .00***            -               -
-------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD             $  9.92       $  9.87       $   9.93        $  10.00        $  10.00
-------------------------------------------------------------------------------------------------------------------
Total Return (%) e,f                          4.98          4.07           4.47            3.10            1.92**
-------------------------------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------   --------
Net assets, end of period ($ millions)         130           100            139             257             222
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions                                    1.66        2.09h         2.19h           2.25 h           2.26 h*
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions                                    1.61        1.50h         1.57h           2.00 h           2.00 h*
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%)            3.08          2.99           2.59            3.11            3.06*
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                         57        129 g             298             120             244
-------------------------------------------------------------------------------------------------------------------
</TABLE>



a    Effective November 17, 2004, the Fund converted from a stable value fund to
     a short-term bond fund. The return for the Fund includes a one-time
     adjustment of 2.7% related to the conversion and in the absence of the
     conversion, the return would have been lower.

b    For the period February 3, 2003 (commencement of operations of Class C
     shares) to September 30, 2003.


c    Based on average shares outstanding during the period.

d    See Note E in Notes to Financial Statements in the Annual Report to
     shareholders.

e    Total return does not reflect the effect of sales charges.

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



g    On January 13, 2006, the Scudder Limited-Duration Plus Portfolio was
     closed. This ratio includes the purchase and sale of portfolio securities
     of the DWS Short Duration Plus Fund as a stand-alone fund in addition to
     the Scudder Limited-Duration Plus Portfolio.

h    Includes expenses allocated from Scudder Limited-Duration Plus Portfolio.


*   Annualized

**   Not annualized

***   Amount is less than $.005.

24 | Financial Highlights
<PAGE>

HOW TO INVEST IN THE FUND


Offered in this prospectus are share classes noted on the cover of the
prospectus. Each class has its own fees and expenses, offering you a choice of
cost structures. The fund may offer other classes of shares in a separate
prospectus. These shares are intended for investors seeking the advice and
assistance of a financial advisor, who will typically receive compensation for
those services.

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

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



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


Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. YOU
MAY WANT TO ASK YOUR FINANCIAL ADVISOR TO HELP YOU WITH THIS DECISION.

<PAGE>

CHOOSING A SHARE CLASS


We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief description and
comparison of the main features of each class.




<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
 CLASSES AND FEATURES                         POINTS TO HELP YOU COMPARE
---------------------------------------------------------------------------------------
<S>                                          <C>
 CLASS A

 -  Sales charge of up to 2.75% charged       -  Some investors may be able to reduce
    when you buy shares                          or eliminate their sales charge; see
                                                 "Class A shares"
 -  In most cases, no charge when you
    sell shares                               -  Total annual expenses are lower than
                                                 those for Class B or Class C
 -  Up to 0.25% annual shareholder
    servicing fee
---------------------------------------------------------------------------------------
 CLASS B

 -  No sales charge when you buy shares       -  The deferred sales charge rate falls to
                                                 zero after six years
 -  Deferred sales charge declining from
    4.00%, charged when you sell shares       -  Shares automatically convert to
    you bought within the last six years         Class A after six years, which means
                                                 lower annual expenses going forward
 -  0.75% annual distribution fee and up
    to 0.25% annual shareholder servicing
    fee
---------------------------------------------------------------------------------------
 CLASS C

 -  No sales charge when you buy shares       -  The deferred sales charge rate for one
                                                 year is lower for Class C shares than
 -  Deferred sales charge of 1.00%,              Class B shares, but your shares never
    charged when you sell shares you             convert to Class A, so annual expenses
    bought within the last year                  remain higher

 -  0.75% annual distribution fee and up
    to 0.25% annual shareholder servicing
    fee
---------------------------------------------------------------------------------------
</TABLE>




Your financial advisor will typically be paid a fee when you buy shares and may
receive different levels of compensation depending upon which class of shares
you buy. The fund may pay financial advisors or other intermediaries
compensation for the services they provide to their clients. This compensation
may vary depending on the class share and fund you buy. Your financial advisor
may also receive compensation from the Advisor and/or its affiliates. Please
see "Financial intermediary support payments" for more information.




26 | Choosing a Share Class
<PAGE>


           Class A shares

           Class A shares may make sense for long-term investors, especially
           those who are eligible for a reduced or eliminated sales charge.

           Class A shares have a 12b-1 plan, under which a shareholder
           servicing fee of up to 0.25% is deducted from class assets each
           year. Because the shareholder servicing fee is continuous in nature,
           it may, over time, increase the cost of your investment and may cost
           you more than paying other types of sales charges.


           Class A shares have an up-front sales charge that varies with the
           amount you invest:



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                         FRONT-END SALES           FRONT-END SALES
                          CHARGE AS A %         CHARGE AS A % OF YOUR
YOUR INVESTMENT       OF OFFERING PRICE 1,2        NET INVESTMENT 2
--------------------------------------------------------------------------------
<S>                       <C>                       <C>
  Up to $100,000          2.75%                     2.83%
--------------------------------------------------------------------------------
  $100,000-$249,999       2.50                      2.56
--------------------------------------------------------------------------------
  $250,000 or more        see below                 see below
--------------------------------------------------------------------------------
</TABLE>




           1   The offering price includes the sales charge.


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



           YOU MAY BE ABLE TO LOWER YOUR CLASS A SALES CHARGE IF:


           -  you plan to invest at least $100,000 in Class A shares (including
              Class A shares in other retail DWS funds) over the next 24 months
              ("Letter of Intent")

           -  the amount of Class A shares you already own (including Class A
              shares in other retail DWS funds) plus the amount you're
              investing now in Class A shares is at least $100,000 ("Cumulative
              Discount")

           -  you are investing a total of $100,000 or more in Class A shares
              of several retail DWS funds on the same day ("Combined
              Purchases")

           The point of these three features is to let you count investments
           made at other times or in certain other funds for purposes of
           calculating your present sales charge. Any time you can use the
           privileges to "move" your investment into a lower sales charge
           category, it's generally beneficial for you to do so.


                                                    Choosing a Share Class  | 27
<PAGE>


           For purposes of determining whether you are eligible for a reduced
           Class A sales charge, you and your immediate family (your spouse or
           life partner and your children or stepchildren age 21 or younger)
           may aggregate your investments in the DWS family of funds. This
           includes, for example, investments held in a retirement account, an
           employee benefit plan or at a financial advisor other than the one
           handling your current purchase. These combined investments will be
           valued at their current offering price to determine whether your
           current investment qualifies for a reduced sales charge.


           To receive a reduction in your Class A initial sales charge, you
           must let your financial advisor or Shareholder Services know at the
           time you purchase shares that you qualify for such a reduction. You
           may be asked by your financial advisor or Shareholder Services to
           provide account statements or other information regarding related
           accounts of you or your immediate family in order to verify your
           eligibility for a reduced sales charge.


           For more information about sales charge discounts, please visit
           www.dws-scudder.com (click on the link entitled "Fund Sales Charge
           and Breakpoint Schedule"), consult with your financial advisor or
           refer to the section entitled "Purchase or Redemption of Shares" in
           the fund's Statement of Additional Information.

           IN CERTAIN CIRCUMSTANCES, YOU MAY BE ABLE TO BUY CLASS A SHARES
           WITHOUT A SALES CHARGE. For example, the sales charge will be waived
           if you are reinvesting dividends or distributions or if you are
           exchanging an investment in Class A shares of another fund in the
           DWS family of funds for an investment in Class A shares of the fund.
           In addition, a sales charge waiver may apply to transactions by
           certain retirement plans and certain other entities or persons
           (e.g., affiliated persons of Deutsche Asset Management or the DWS
           funds) and with respect to certain types of investments (e.g., an
           investment advisory or agency commission program under which you pay
           a fee to an investment advisor or other firm for portfolio
           management or brokerage services).

           Details regarding the types of investment programs and categories of
           investors eligible for a sales charge waiver are provided in the
           fund's Statement of Additional Information.



28 | Choosing a Share Class
<PAGE>


           There are a number of additional provisions that apply in order to
           be eligible for a sales charge waiver. The fund may waive the sales
           charge for investors in other situations as well. Your financial
           advisor or Shareholder Services can answer your questions and help
           you determine if you are eligible.

           IF YOU'RE INVESTING $250,000 OR MORE, either as a lump sum or
           through one of the sales charge reduction features described above,
           you may be eligible to buy Class A shares without a sales charge
           ("Large Order NAV Purchase Privilege"). However, you may be charged
           a contingent deferred sales charge (CDSC) of 0.50% on any shares you
           sell within 12 months of owning them. This CDSC is waived under
           certain circumstances (see "Policies You Should Know About"). Your
           financial advisor or Shareholder Services can answer your questions
           and help you determine if you're eligible.


           Class B shares

           Class B shares may make sense for long-term investors who prefer to
           see all of their investment go to work right away and can accept
           somewhat higher annual expenses. Please note, however, that since
           not all DWS funds offer Class B shares, exchange options may be
           limited.

           With Class B shares, you pay no up-front sales charge to the fund.
           Class B shares have a 12b-1 plan, under which a distribution fee of
           0.75% and a shareholder servicing fee of up to 0.25% are deducted
           from class assets each year. This means the annual expenses for
           Class B shares are somewhat higher (and their performance
           correspondingly lower) compared to Class A shares. However, unlike
           Class A shares, your entire investment goes to work immediately.
           After six years, Class B shares automatically convert on a tax-free
           basis to Class A shares, which has the net effect of lowering the
           annual expenses from the seventh year on.



                                                    Choosing a Share Class  | 29
<PAGE>


           Class B shares have a CDSC. This charge declines over the years you
           own shares and disappears completely after six years of ownership.
           But for any shares you sell within those six years, you may be
           charged as follows:




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
    YEAR AFTER YOU BOUGHT SHARES               CDSC ON SHARES YOU SELL
--------------------------------------------------------------------------------
<S>                                    <C>
  First year                           4.00%
--------------------------------------------------------------------------------
  Second or third year                 3.00
--------------------------------------------------------------------------------
  Fourth or fifth year                 2.00
--------------------------------------------------------------------------------
  Sixth year                           1.00
--------------------------------------------------------------------------------
  Seventh year and later               None (automatic conversion to Class A)
--------------------------------------------------------------------------------
</TABLE>




           This CDSC is waived under certain circumstances (see "Policies You
           Should Know About"). Your financial advisor or Shareholder Services
           can answer your questions and help you determine if you're eligible.


           While Class B shares don't have any front-end sales charge, their
           higher annual expenses mean that over the years you could end up
           paying more than the equivalent of the maximum allowable front-end
           sales charge.

           If you are thinking of making a large purchase in Class B shares or
           if you already own a large amount of Class A shares of the fund or
           other DWS funds, it may be more cost efficient to purchase Class A
           shares instead. Orders to purchase Class B shares of $100,000 or
           more will be declined with the exception of orders received from
           financial representatives acting for clients whose shares are held
           in an omnibus account and certain employer-sponsored employee
           benefit plans.



           Class C shares


           Class C shares may appeal to investors who plan to sell some or all
           of their shares within six years of buying them or who aren't
           certain of their investment time horizon.

           With Class C shares, you pay no up-front sales charge to the fund.
           Class C shares have a 12b-1 plan, under which a distribution fee of
           0.75% and a shareholder servicing fee of up to 0.25% are deducted
           from class assets each year. Because of these fees, the annual
           expenses for Class C shares are similar to those of Class B shares,
           but higher than those for Class A shares (and the performance of
           Class C shares is correspondingly lower than that of Class A
           shares).



30 | Choosing a Share Class
<PAGE>


           Unlike Class B shares, Class C shares do NOT automatically convert
           to Class A shares after six years, so they continue to have higher
           annual expenses.

           Class C shares have a CDSC, but only on shares you sell within one
           year of buying them:



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
   YEAR AFTER YOU BOUGHT SHARES        CDSC ON SHARES YOU SELL
--------------------------------------------------------------------------------
<S>                                   <C>
  First year                          1.00%
--------------------------------------------------------------------------------
  Second year and later                         None
--------------------------------------------------------------------------------
</TABLE>


           This CDSC is waived under certain circumstances (see "Policies You
           Should Know About"). Your financial advisor or Shareholder Services
           can answer your questions and help you determine if you're eligible.


           While Class C shares do not have an up-front sales charge, their
           higher annual expenses mean that, over the years, you could end up
           paying more than the equivalent of the maximum allowable up-front
           sales charge.


           Orders to purchase Class C shares of $250,000 or more will be
           declined with the exception of orders received from financial
           representatives acting for clients whose shares are held in an
           omnibus account and certain employer-sponsored employee benefit
           plans.



                                                    Choosing a Share Class  | 31
<PAGE>


How to BUY Class A, B and C Shares





<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
 FIRST INVESTMENT                                ADDITIONAL INVESTMENTS
----------------------------------------------------------------------------------------
<S>                                             <C>
 $1,000 or more for regular accounts            $50 or more for regular accounts and
 $500 or more for IRAs                          IRAs
 $500 or more for an account with an            $50 or more for an account with an
 Automatic Investment Plan                      Automatic Investment Plan
----------------------------------------------------------------------------------------
 THROUGH A FINANCIAL ADVISOR

 -  To obtain an application, contact your      -  Contact your advisor using the
    advisor                                        method that's most convenient for you
----------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL (SEE BELOW)

 -  Fill out and sign an application            -  Send a check made payable to "DWS
                                                Scudder" and an investment slip to us
 -  Send it to us at the appropriate
    address, along with an investment           -  If you don't have an investment slip,
    check made payable to "DWS                     simply include a letter with your
    Scudder"                                       name, account number, the full name
                                                   of the fund and the share class and
                                                   your investment instructions
----------------------------------------------------------------------------------------
 BY WIRE

 -  Call (800) 621-1048 for instructions        -  Call (800) 621-1048 for instructions
----------------------------------------------------------------------------------------
 BY PHONE

 Not available                                  -  Call (800) 621-1048 for instructions
----------------------------------------------------------------------------------------
 WITH AN AUTOMATIC INVESTMENT PLAN

 -  Fill in the information on our              -  To set up regular investments from a
    application including a check for the           bank checking account call (800) 621-
    initial investment and a voided check         1048 ($50 minimum)
----------------------------------------------------------------------------------------
 USING QuickBuy

 Not available                                  -  Call (800) 621-1048 to make sure
                                                   QuickBuy is set up on your account; if
                                                   it is, you can request a transfer from
                                                   your bank account of any amount
                                                   between $50 and $250,000
----------------------------------------------------------------------------------------
 ON THE INTERNET

 Not available                                  -  Call (800) 621-1048 to ensure you have
                                                   electronic services
                                                -  Register at www.dws-scudder.com or
                                                   log in if already registered
                                                -  Follow the instructions for buying
                                                   shares with money from your bank
                                                   account
----------------------------------------------------------------------------------------
</TABLE>



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

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

EXPRESS, REGISTERED OR CERTIFIED MAIL:

DWS Scudder, 210 West 10th Street, Kansas City, MO 64105-1614


32 | How to Buy Class A, B and C Shares
<PAGE>


How to EXCHANGE or SELL Class A, B and C Shares



<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
 EXCHANGING INTO ANOTHER FUND                    SELLING SHARES
----------------------------------------------------------------------------------------
<S>                                             <C>
 -  Exchanges into existing accounts:           Some transactions, including most for
    $50 minimum per fund                        over $100,000, can only be ordered in
                                                writing with a signature guarantee;
 -  Exchanges into new accounts:                please see "Signature Guarantee"
    $1,000 minimum per fund for regular
    accounts and UGMAs
    $500 minimum for IRAs
----------------------------------------------------------------------------------------
 THROUGH A FINANCIAL ADVISOR

 -  Contact your advisor using the              -  Contact your advisor by the method
    method that's most convenient for you          that's most convenient for you
----------------------------------------------------------------------------------------
 BY PHONE                                        BY PHONE OR WIRE

 -  Call (800) 621-1048 for instructions        -  Call (800) 621-1048 for instructions
----------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL
 (see previous page for address)

 Write a letter that includes:                  Write a letter that includes:
 -  the fund, class and account number          -  the fund, class and account number
    you're exchanging out of                       from which you want to sell shares
 -  the dollar amount or number of shares       -  the dollar amount or number of shares
    you want to exchange                           you want to sell
 -  the name and class of the fund you          -  your name(s), signature(s) and
    want to exchange into                          address, as they appear on your
 -  your name(s), signature(s) and                 account
    address, as they appear on your             -  a daytime telephone number
    account
 -  a daytime telephone number
----------------------------------------------------------------------------------------
 WITH AN AUTOMATIC EXCHANGE PLAN                 WITH AN AUTOMATIC WITHDRAWAL PLAN

 -  To set up regular exchanges from a          -  Call (800) 621-1048 (minimum $50)
    fund account, call (800) 621-1048
----------------------------------------------------------------------------------------
 USING QuickSell

 Not available                                  -  Call (800) 621-1048 to make sure
                                                   QuickSell is set up on your account; if
                                                   it is, you can request a transfer to your
                                                   bank account of any amount between
                                                   $50 and $250,000
----------------------------------------------------------------------------------------
 ON THE INTERNET
 -  Register at www.dws-scudder.com or          -  Register at www.dws-scudder.com or
    log in if already registered                   log in if already registered
 -  Follow the instructions for making on-      -  Follow the instructions for making on-
    line exchanges                                 line redemptions
----------------------------------------------------------------------------------------
</TABLE>



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

<TABLE>
<S>               <C>
TO REACH US:      WEB SITE: www.dws-scudder.com
                  TELEPHONE REPRESENTATIVE: (800) 621-1048, M-F, 9 a.m. - 6 p.m. ET
                  TDD LINE: (800) 972-3006, M-F, 9 a.m. - 6 p.m. ET
</TABLE>



                           How to Exchange or Sell Class A, B and C Shares  | 33
<PAGE>


           Financial intermediary support payments

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

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



34 | How to Exchange or Sell Class A, B and C Shares
<PAGE>


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

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

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



                           How to Exchange or Sell Class A, B and C Shares  | 35
<PAGE>


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



POLICIES YOU SHOULD KNOW ABOUT


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


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

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.

           In order to reduce the amount of mail you receive and to help reduce
           expenses, we generally send a single copy of any shareholder report
           and prospectus to each household. If you do not want the mailing of
           these documents to be combined with those for other members of your
           household, please contact your financial advisor or call (800)
           621-1048.


           Policies about transactions

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


36 | Policies You Should Know About
<PAGE>

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

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


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


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

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


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


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


                                            Policies You Should Know About  | 37
<PAGE>


           INITIAL PURCHASE. The minimum initial investment for Class A, B and
           C shares is $1,000, except for investments on behalf of participants
           in certain fee-based and wrap programs offered through certain
           financial intermediaries approved by the Advisor, for which there is
           no minimum initial investment; and IRAs, for which the minimum
           initial investment is $500 per account. The minimum initial
           investment is $500 per account if you establish an automatic
           investment plan. Group retirement plans and certain other accounts
           have similar or lower minimum share balance requirements.

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

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

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



38 | Policies You Should Know About
<PAGE>


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

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

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



                                            Policies You Should Know About  | 39
<PAGE>


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

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

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

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of the fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in the fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.



40 | Policies You Should Know About
<PAGE>


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

           REDEMPTION FEES. The fund imposes a redemption fee of 2% of the
           total redemption amount (calculated at net asset value, without
           regard to the effect of any contingent deferred sales charge; any
           contingent deferred sales charge is also assessed on the total
           redemption amount without regard to the assessment of the 2%
           redemption fee) on all fund shares redeemed or exchanged within 15
           days of buying them (either by purchase or exchange). The redemption
           fee is paid directly to the fund and is designed to encourage
           long-term investment and to offset transaction and other costs
           associated with short-term or excessive trading. For purposes of
           determining whether the redemption fee applies, shares held the
           longest time will be treated as being redeemed first and shares held
           the shortest time will be treated as being redeemed last.

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

           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) transactions on behalf of any mutual fund advised by



                                            Policies You Should Know About  | 41
<PAGE>


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

           THE AUTOMATED INFORMATION LINE IS AVAILABLE 24 HOURS A DAY BY
           CALLING (800) 621-1048. You can use our automated phone services to
           get information on DWS funds generally and on accounts held directly
           at DWS Scudder. You can also use this service to make exchanges and
           purchase and sell shares.


           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House (ACH) services. Transactions
           take two to three days to be completed and there is a $50 minimum
           and a $250,000 maximum. To set up QuickBuy or QuickSell on a new
           account, see the account application; to add it to an existing
           account, call (800) 621-1048.





THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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









42 | Policies You Should Know About
<PAGE>


           TELEPHONE AND ELECTRONIC TRANSACTIONS. Generally, you are
           automatically entitled to telephone and electronic transaction
           privileges, but you may elect not to have them when you open your
           account or by contacting Shareholder Services at (800) 621-1048 at a
           later date.


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


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

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

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

           SIGNATURE GUARANTEE. When you want to sell more than $100,000 worth
           of shares or send proceeds to a third party or to a new address,
           you'll usually need to place your order in writing and include a
           signature guarantee. However, if you want money



                                            Policies You Should Know About  | 43
<PAGE>

           wired to a bank account that is already on file with us, you don't
           need a signature guarantee. Also, generally you don't need a
           signature guarantee for an exchange, although we may require one in
           certain other circumstances.


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


           SELLING SHARES OF TRUST ACCOUNTS AND BUSINESS OR ORGANIZATION
           ACCOUNTS may require additional documentation. Please call (800)
           621-1048 or contact your financial advisor for more information.


           WHEN YOU SELL SHARES THAT HAVE A CDSC, we calculate the CDSC as a
           percentage of what you paid for the shares or what you are selling
           them for - whichever results in the lower charge to you. In
           processing orders to sell shares, the shares with the lowest CDSC
           are sold first. Exchanges from one fund into another don't affect
           CDSCs; for each investment you make, the date you first bought
           shares is the date we use to calculate a CDSC on that particular
           investment.


           There are certain cases in which you may be exempt from a CDSC.
           These include:

           -  the death or disability of an account owner (including a joint
              owner). This waiver applies only under certain conditions. Please
              contact your financial advisor or Shareholder Services to
              determine if the conditions exist


           -  withdrawals made through an automatic withdrawal plan up to a
              maximum of 12% per year of the net asset value of the account


           -  withdrawals related to certain retirement or benefit plans

           -  redemptions for certain loan advances, hardship provisions or
              returns of excess contributions from retirement plans

           -  for Class A shares purchased through the Large Order NAV Purchase
              Privilege, redemption of shares whose dealer of record at the
              time of the investment notifies the Distributor that the dealer
              waives the applicable commission



            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



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







44 | Policies You Should Know About
<PAGE>

           -  for Class C shares, redemption of shares purchased through a
              dealer-sponsored asset allocation program maintained on an omnibus
              record-keeping system, provided the dealer of record has waived
              the advance of the first year distribution and service fees
              applicable to such shares and has agreed to receive such fees
              quarterly

           In each of these cases, there are a number of additional provisions
           that apply in order to be eligible for a CDSC waiver. Your financial
           advisor or Shareholder Services can answer your questions and help
           you determine if you are eligible.


           IF YOU SELL SHARES IN A DWS FUND AND THEN DECIDE TO INVEST WITH DWS
           SCUDDER AGAIN WITHIN SIX MONTHS, you may be able to take advantage
           of the "reinstatement feature." With this feature, you can put your
           money back into the same class of a DWS fund at its current NAV and,
           for purposes of a sales charge, it will be treated as if it had
           never left DWS Scudder.

           You'll be reimbursed (in the form of fund shares) for any CDSC you
           paid when you sold. Future CDSC calculations will be based on your
           original investment date, rather than your reinstatement date. There
           is also an option that lets investors who sold Class B shares buy
           Class A shares (if available) with no sales charge, although they
           won't be reimbursed for any CDSC they paid. You can only use the
           reinstatement feature once for any given group of shares. To take
           advantage of this feature, contact Shareholder Services or your
           financial advisor.

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



                                            Policies You Should Know About  | 45
<PAGE>


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


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


           How the fund calculates share price

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


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



           The price at which you buy shares is based on the NAV per share
           calculated after the order is received by the transfer agent,
           although for Class A shares it will be adjusted to allow for any
           applicable sales charge (see "Choosing a Share Class"). The price at
           which you sell shares is also based on the NAV per share calculated
           after the order is received by the transfer agent, although a CDSC
           may be taken out of the proceeds (see "Choosing a Share Class").

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

           WETYPICALLY VALUE SECURITIES USING INFORMATION FURNISHED BY AN
           INDEPENDENT PRICING SERVICE OR MARKET QUOTATIONS, WHERE APPROPRIATE.
           However, we may use methods approved by the fund's Board, such as a
           fair valuation model, which are intended to reflect fair value when
           pricing service information or market quotations are not readily
           available or when a security's value or a meaningful portion of the
           value of the fund's portfolio is believed to have been materially
           affected by a significant event, such as a natural disaster, an
           economic event like a bankruptcy filing, or a substantial
           fluctuation in domestic or foreign markets that has occurred between
           the close of the exchange or market on which the security is
           principally traded (for example, a foreign exchange or market) and
           the close of the New York



46 | Policies You Should Know About
<PAGE>

           Stock Exchange. In such a case, the fund's value for a security is
           likely to be different from the last quoted market price or pricing
           service information. In addition, due to the subjective and variable
           nature of fair value pricing, it is possible that the value
           determined for a particular asset may be materially different from
           the value realized upon such asset's sale. It is expected that the
           greater the percentage of fund assets that is invested in non-US
           securities, the more extensive will be the fund's use of fair value
           pricing. This is intended to reduce the fund's exposure to "time
           zone arbitrage" and other harmful trading practices. (See "Market
           timing policies and procedures.")

           TO THE EXTENT THAT THE FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when the
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change significantly on days when the
           New York Stock Exchange is closed and you cannot buy or sell fund
           shares. Price changes in the securities the fund owns may ultimately
           affect the price of fund shares the next time the NAV is
           calculated.)


           Other rights we reserve

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

           -  withdraw or suspend the offering of shares at any time


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

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


                                            Policies You Should Know About  | 47
<PAGE>


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

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

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

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



48 | Policies You Should Know About
<PAGE>

UNDERSTANDING DISTRIBUTIONS AND TAXES

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


           THE FUND INTENDS TO PAY INCOME DIVIDENDS TO ITS SHAREHOLDERS
           MONTHLY; short-term and long-term capital gains are paid in December
           or otherwise as needed.

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

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

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

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






THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



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



                                     Understanding Distributions and Taxes  | 49
<PAGE>

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

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



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

- gains from the sale of              -  gains from the sale of
  securities held (or treated as         securities held by the fund for
  held) by the fund for more             one year or less
  than one year                       -  all other taxable income
- qualified dividend income
--------------------------------------------------------------------------------
TRANSACTIONS INVOLVING FUND
SHARES

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




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

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

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



50 | Understanding Distributions and Taxes
<PAGE>


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

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


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


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

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

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



                                     Understanding Distributions and Taxes  | 51
<PAGE>


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


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

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



52 | Appendix
<PAGE>


                    DWS Short Duration Plus Fund - Class A





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               2.75%                   $10,000                            5%
-------------------------------------------------------------------------------------------
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
-------------------------------------------------------------------------------------------
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        0.89%              1.25%       $ 10,124.70        $   363.33
-------------------------------------------------------------------------------------------
   2           10.25%        0.89%              5.41%       $ 10,540.82        $    91.96
-------------------------------------------------------------------------------------------
   3           15.76%        0.89%              9.74%       $ 10,974.05        $    95.74
-------------------------------------------------------------------------------------------
   4           21.55%        0.89%             14.25%       $ 11,425.08        $    99.68
-------------------------------------------------------------------------------------------
   5           27.63%        0.89%             18.95%       $ 11,894.65        $   103.77
-------------------------------------------------------------------------------------------
   6           34.01%        0.89%             23.84%       $ 12,383.53        $   108.04
-------------------------------------------------------------------------------------------
   7           40.71%        0.89%             28.92%       $ 12,892.49        $   112.48
-------------------------------------------------------------------------------------------
   8           47.75%        0.89%             34.22%       $ 13,422.37        $   117.10
-------------------------------------------------------------------------------------------
   9           55.13%        0.89%             39.74%       $ 13,974.03        $   121.91
-------------------------------------------------------------------------------------------
  10           62.89%        0.89%             45.48%       $ 14,548.36        $   126.92
-------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 1,340.93
-------------------------------------------------------------------------------------------
</TABLE>




DWS Short Duration Plus Fund - Class B






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
-------------------------------------------------------------------------------------------
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
-------------------------------------------------------------------------------------------
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.67%              3.33%       $ 10,333.00        $   169.78
-------------------------------------------------------------------------------------------
   2           10.25%        1.82%              6.62%       $ 10,661.59        $   191.05
-------------------------------------------------------------------------------------------
   3           15.76%        1.82%             10.01%       $ 11,000.63        $   197.13
-------------------------------------------------------------------------------------------
   4           21.55%        1.82%             13.50%       $ 11,350.45        $   203.39
-------------------------------------------------------------------------------------------
   5           27.63%        1.82%             17.11%       $ 11,711.39        $   209.86
-------------------------------------------------------------------------------------------
   6           34.01%        1.82%             20.84%       $ 12,083.81        $   216.54
-------------------------------------------------------------------------------------------
   7           40.71%        0.89%             25.80%       $ 12,580.46        $   109.76
-------------------------------------------------------------------------------------------
   8           47.75%        0.89%             30.98%       $ 13,097.52        $   114.27
-------------------------------------------------------------------------------------------
   9           55.13%        0.89%             36.36%       $ 13,635.82        $   118.96
-------------------------------------------------------------------------------------------
  10           62.89%        0.89%             41.96%       $ 14,196.26        $   123.85
-------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 1,654.59
-------------------------------------------------------------------------------------------
</TABLE>


                                                               Appendix  | 53
<PAGE>



DWS Short Duration Plus Fund - Class C






<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
-------------------------------------------------------------------------------------------
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER        ANNUAL
              FEES AND        EXPENSE        FEES AND           FEES AND         FEES AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
-------------------------------------------------------------------------------------------
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        1.62%              3.38%       $ 10,338.00        $   164.74
-------------------------------------------------------------------------------------------
   2           10.25%        1.62%              6.87%       $ 10,687.42        $   170.31
-------------------------------------------------------------------------------------------
   3           15.76%        1.62%             10.49%       $ 11,048.66        $   176.06
-------------------------------------------------------------------------------------------
   4           21.55%        1.62%             14.22%       $ 11,422.10        $   182.01
-------------------------------------------------------------------------------------------
   5           27.63%        1.62%             18.08%       $ 11,808.17        $   188.17
-------------------------------------------------------------------------------------------
   6           34.01%        1.62%             22.07%       $ 12,207.29        $   194.53
-------------------------------------------------------------------------------------------
   7           40.71%        1.62%             26.20%       $ 12,619.89        $   201.10
-------------------------------------------------------------------------------------------
   8           47.75%        1.62%             30.46%       $ 13,046.45        $   207.90
-------------------------------------------------------------------------------------------
   9           55.13%        1.62%             34.87%       $ 13,487.42        $   214.92
-------------------------------------------------------------------------------------------
  10           62.89%        1.62%             39.43%       $ 13,943.29        $   222.19
-------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 1,921.93
-------------------------------------------------------------------------------------------
</TABLE>





54 | Appendix

<PAGE>

TO GET MORE INFORMATION

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

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

For a free copy of any of these documents or to request other information about
the fund, call (800) 621-1048, or contact DWS Scudder at the address listed
below. The fund's SAI and shareholder reports are also available through the
DWS Scudder Web site at www.dws-scudder.com. These documents and other
information about the fund are available from the EDGAR Database on the SEC's
Internet site at www.sec.gov. If you like, you may obtain copies of this
information, after paying a copying fee, by e-mailing a request to
publicinfo@sec.gov or by writing the SEC at the address listed below. You can
also review and copy these documents and other information about the fund,
including the fund's SAI, at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the SEC's Public Reference Room may be
obtained by calling (800) SEC-0330.


<TABLE>
<CAPTION>
DWS SCUDDER              SEC                     DISTRIBUTOR
---------------------    --------------------    -------------------------------
<S>                      <C>                     <C>
PO Box 219151            100 F Street, N.E.      DWS Scudder Distributors, Inc.
Kansas City, MO          Washington, D.C.        222 South Riverside Plaza
64121-9151               20549-0102              Chicago, IL 60606-5808
WWW.DWS-SCUDDER.COM      WWW.SEC.GOV             (800) 621-1148
(800) 621-1048           (800) SEC-0330
</TABLE>




<TABLE>
<S>                    <C>                               <C>
SEC FILE NUMBER:
DWS Advisor Funds        DWS Short Duration Plus Fund    811-04760
</TABLE>




[DWS SCUDDER LOGO GRAPHIC APPEARS HERE]






(02/01/08) DSDP-1
[RECYCLE GRAPHIC APPEARS HERE]


<PAGE>
<PAGE>


                                FEBRUARY 1, 2008








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

                          DWS SHORT DURATION PLUS FUND

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


                                         [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]




<PAGE>

CONTENTS





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

  4      The Fund's Main Investment
         Strategy

  8      The Main Risks of Investing in
         the Fund

 12      The Fund's Performance
         History

 14      How Much Investors Pay

 15      Other Policies and Secondary
         Risks

 16      Who Manages and Oversees
         the Fund

 20      Financial Highlights


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

 23      How to Buy Shares

 24      How to Exchange or Sell
         Shares

 27      Policies You Should Know
         About

 39      Understanding Distributions
         and Taxes

 43      Appendix

</TABLE>


<PAGE>

HOW THE FUND WORKS

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


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

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

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

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


<TABLE>
--------------------------------------------------------------------------------
<S>                                                                 <C>
                                                                    Class S
                                ticker symbol                       DBPIX
                                  fund number                       822

 DWS SHORT DURATION PLUS FUND
--------------------------------------------------------------------------------


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund's investment objective is to provide high income while
            also seeking to maintain a high degree of stability of
            shareholders' capital.


            The fund invests in securities of varying maturities and normally
            seeks to maintain an average portfolio duration of no longer than
            three years. The fund invests, under normal market conditions, at
            least 65% of its total assets in fixed income securities rated, at
            the time of purchase, within the top four long-term rating
            categories by a nationally recognized statistical rating
            organization (a "NRSRO") (or, if unrated, determined by the fund's
            investment advisor to be of similar quality).


            Fixed income securities in which the fund may invest include the
            following:

            -  US government securities that are issued or guaranteed by the US
               Treasury, or by agencies or instrumentalities of the US
               government. Securities issued by certain agencies and
               instrumentalities of the US government are not guaranteed by the
               US government and are supported solely by the credit of the
               agency or instrumentality.

            -  US dollar-denominated securities issued by domestic or foreign
               corporations, foreign governments or supranational entities.

            -  US dollar-denominated asset-backed securities issued by domestic
               or foreign entities.

            -  Mortgage pass-through securities issued by governmental and
               non-governmental issuers.

            -  Collateralized mortgage obligations, real estate mortgage
               investment conduits and commercial mortgage-backed securities.

4 | DWS Short Duration Plus Fund
<PAGE>

            -  Obligations issued or guaranteed, or backed by securities issued
            or guaranteed, by the US government, or any of its agencies or
            instrumentalities.


            -  Short-term investments, including money market mutual funds. The
               fund invests in short-term investments to meet shareholder
               withdrawals and other liquidity needs. Short-term investments
               will be rated at the time of purchase within one of the top two
               short-term rating categories by a NRSRO or, if unrated,
               determined by the fund's investment advisor to be of similar
               quality.

            The fund may invest up to 10% of its assets in US
            dollar-denominated, domestic and foreign below investment-grade
            fixed income securities (junk bonds) rated in the fifth and sixth
            long-term rating categories by a NRSRO (or, if unrated, determined
            by the fund's investment advisor to be of similar quality),
            including those whose issuers are located in countries with new or
            emerging securities markets. The fund considers an emerging
            securities market to be one where the sovereign debt issued by the
            government in local currency terms is rated below investment-grade.
            A portion of high yield securities purchased for the fund may
            consist of non-US dollar denominated, below investment-grade fixed
            income securities. Compared to investment-grade bonds, junk bonds
            may pay higher yields, have higher volatility and higher risk of
            default on payments of interest or principal.


            The fund can invest up to 15% of its net assets in illiquid
            securities.


            The fund may also invest in and utilize the following investments
            and investment techniques and practices: Rule 144A securities, to
            be announced (TBA) securities, when-issued and delayed delivery
            securities, repurchase agreements, reverse repurchase agreements
            and dollar rolls.

            DERIVATIVE INSTRUMENTS. The fund may invest in various instruments
            commonly known as "derivatives" to increase its exposure to certain
            groups of securities. The derivatives that the fund may use
            include, among others, futures contracts, forward contracts and
            options on forward contracts. The fund may use derivatives to keep
            cash on hand to meet shareholder redemptions, as a hedging strategy
            to maintain a specific portfolio duration, or to protect against
            market risk. When employing the global tactical asset allocation
            overlay strategy mentioned below (also known as integrated Global
            Alpha



                                               DWS Short Duration Plus Fund  | 5
<PAGE>


            Platform or iGAP), the fund also may use derivatives for
            leveraging, which is a way to attempt to enhance returns. The fund
            will only use these instruments if portfolio management believes
            that their return potential more than compensates for the extra
            risks associated with using them.


            The fund's investment strategy emphasizes a diversified exposure to
            higher yielding mortgage, corporate and asset-backed sectors of the
            investment-grade fixed income markets. The investment process
            focuses on a top-down approach, first focusing on sector
            allocations, then using relative value analysis to select the best
            securities within each sector. To select securities, we analyze
            such factors as credit quality, interest rate sensitivity and
            spread relationships between individual bonds.


            The portfolio managers primarily invest in fixed income securities
            that are rated, at the time of purchase, within the top four rating
            categories as rated by Moody's Investors Service, Inc., the
            Standard & Poor's Division of The McGraw-Hill Companies, Inc.,
            Fitch, Inc., or another NRSRO, or, if unrated, determined by the
            fund's investment advisor to be of similar quality.


            The portfolio managers normally target an average portfolio
            duration of no longer than three years by investing in fixed income
            securities with short- to intermediate-term maturities. Generally,
            rates of short-term investments fluctuate less than rates of
            longer-term investments.


            In an attempt to enhance return, the fund also employs a global
            tactical asset allocation overlay strategy (iGAP), which invests in
            instruments across domestic and international fixed income and
            currency markets.


            Through the global asset allocation investment strategy, the
            portfolio managers seek to enhance the fund's return by shifting
            investment weightings among global bond and currency markets in an
            effort to capture short- and medium-term market moves. The
            portfolio managers take the investment views of Deutsche Asset
            Management's bond, asset allocation and currency teams located
            around the world and combine them using a structured, disciplined
            portfolio construction and risk management process. The end result
            is a portfolio of bond and currency positions intended to generate
            returns for the fund that exceed those that could be achieved
            without the global asset allocation strategy, although there can


6 | DWS Short Duration Plus Fund
<PAGE>

            be no guarantee that such result will be achieved. Because the
            global asset allocation strategy focuses on short- and medium-term
            market moves, the managers expect to change the fund's investment
            weightings frequently.

            In implementing the global asset allocation strategy, the fund
            invests in options and futures based on any type of security or
            index, including options and futures traded on foreign exchanges.
            Some options and futures strategies, including selling futures,
            buying puts and writing calls, hedge the fund's investments against
            price fluctuations. Other strategies, including buying futures,
            writing puts and buying calls, tend to increase and will broaden
            the fund's market exposure. Options and futures may be combined
            with each other, or with forward contracts, in order to adjust the
            risk and return characteristics of an overall strategy.

            The fund may also enter into forward currency exchange contracts
            (agreements to exchange one currency for another at a future date),
            may buy and sell options and futures contracts relating to foreign
            currencies and may purchase securities indexed to foreign
            currencies. Currency management strategies allow us to shift
            investment exposure from one currency to another or to attempt to
            profit from anticipated declines in the value of a foreign currency
            relative to the US dollar. Successful implementation of the global
            asset allocation strategy depends on our judgment as to the
            potential risks and rewards of implementing the different types of
            strategies.


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



                                               DWS Short Duration Plus Fund  | 7
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

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


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

            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value of the
            bonds to decline. In addition, an issuer may not be able to make
            timely payments on the interest and/or principal on the bonds it
            has issued. Because the issuers of high-yield bonds or junk bonds
            (bonds rated below the fourth highest category) may be in uncertain
            financial health, the prices of their bonds can be more vulnerable
            to bad economic news or even the expectation of bad news, than
            investment-grade bonds. In some cases, bonds, particularly
            high-yield bonds, may decline in credit quality or go into default.
            Because the fund may invest in securities not paying current
            interest or in securities already in default, these risks may be
            more pronounced.


            MARKET RISK. Deteriorating market conditions might cause a general
            weakness in the market that reduces the overall level of securities
            prices in that market. Developments in a particular class of bonds
            or the stock market could also adversely affect the fund by
            reducing the relative attractiveness of bonds as an investment.
            Also, to the extent that the fund emphasizes bonds from any given
            industry, it could be hurt if that industry does not do well.


            SECURITY SELECTION RISK. A risk that pervades all investing is the
            risk that the securities in the fund's portfolio may decline in
            value.



8 | DWS Short Duration Plus Fund
<PAGE>


            LIQUIDITY RISK. Liquidity risk is the risk that a security cannot
            be sold quickly at a price that reflects the fund's estimate of its
            value.

            PRICING RISK. At times, market conditions might make it hard to
            value some investments, and the fund may use certain valuation
            methodologies for some of its investments, such as fair value
            pricing. Given the subjective nature of such methodologies, it is
            possible that the value determined for an investment may be
            different than the value realized upon such investment's sale. If
            the fund has valued its securities too highly, you may end up
            paying too much for fund shares when you buy into the fund. If the
            fund underestimates the price of its securities, you may not
            receive the full market value when you sell your fund shares.

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

            IGAP RISK. The success of the iGAP strategy depends, in part, on
            the investment advisor's ability to analyze the correlation between
            various global markets and asset classes. If the investment
            advisor's correlation analysis proves to be incorrect, losses to
            the fund may be significant and may exceed the intended level of
            market exposure for the iGAP strategy.

            DERIVATIVES RISK. Risks associated with derivatives include the
            risk that the derivative is not well correlated with the security,
            index or currency to which it relates; the risk that derivatives
            may not have the intended effects and may result in losses or
            missed opportunities; the risk that the fund will be unable to sell
            the derivative because of an illiquid secondary market; the risk
            that a counterparty is unwilling or unable to meet its obligation;
            and the risk that the derivative transaction could expose the fund
            to the effects of leverage, which could increase the fund's
            exposure to the market and magnify potential losses. There is no
            guarantee that derivatives, to the



                                               DWS Short Duration Plus Fund  | 9
<PAGE>


            extent employed, will have the intended effect, and their use could
            cause lower returns or even losses to the fund. The use of
            derivatives by the fund to hedge risk may reduce the opportunity
            for gain by offsetting the positive effect of favorable price
            movements.

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:



            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.



            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.



            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.

            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.


10 | DWS Short Duration Plus Fund
<PAGE>


            -  CURRENCY RISK. The fund invests in securities denominated in
            foreign currencies. This creates the possibility that changes in
            exchange rates between foreign currencies and the US dollar will
            affect the US dollar value of foreign securities or the income or
            gain received on these securities.

            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US
               investments. The procedures and rules governing foreign
               transactions and custody may also involve delays in payment,
               delivery or recovery of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.



                                              DWS Short Duration Plus Fund  | 11
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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


Prior to October 23, 2006 Class S was known as Investment Class. Prior to
November 17, 2004, the fund had a different objective, strategies, fees and
expenses. Consequently, the fund's past performance prior to this time may have
been different if the current strategy had been in place.


DWS Short Duration Plus Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Class S
[GRAPHIC APPEARS HERE]






<TABLE>
<S>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
 5.99      6.74      6.14      5.01      4.01      6.53      2.56      5.73     5.48
1999      2000      2001      2002      2003      2004*     2005      2006      2007
</TABLE>







<TABLE>
<CAPTION>
               FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 3.35% Q4 2004                WORST QUARTER: 0.16% Q1 2005
</TABLE>



 *   The return for the year 2004 includes the effect of the conversion of the
     fund from a stable value fund to a short-term bond fund. In the absence of
     such conversion, the return would have been lower.

12 | DWS Short Duration Plus Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                                                           SINCE
                                              1 YEAR       5 YEARS       INCEPTION*
<S>                                          <C>         <C>            <C>
 CLASS S
   Return before Taxes                          5.48         4.85           5.35
   Return after Taxes on Distributions          3.49         3.58           4.08
   Return after Taxes on Distributions
   and Sale of Fund Shares                      3.54         3.62**         4.10**
 LEHMAN 1-3 YEAR GOVERNMENT/CREDIT
 INDEX (reflects no deductions for fees,
 expenses or taxes)                             6.83         3.38           4.77
</TABLE>




     *   Since December 23, 1998. Index comparison began December 31, 1998.



 **   Return after Taxes on Distributions and Sale of Fund Shares is higher
     than other return figures for the same period due to a capital loss
     occurring upon redemption resulting in an assumed tax deduction for the
     shareholder.

 In both the chart and the table, total returns would have been lower if
 operating expenses hadn't been reduced.

 LEHMAN 1-3 YEAR GOVERNMENT/CREDIT INDEX is an unmanaged index consisting of
 all US government agency and Treasury securities, as well as all investment
 grade corporate debt securities with maturities of one to three years.


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

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



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

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


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



                                              DWS Short Duration Plus Fund  | 13
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
FEE TABLE                                          CLASS S
<S>                                      <C>
 SHAREHOLDER FEES, paid directly from your investment
_______________________________________________________________________
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds)1                               2.00%

 ANNUAL OPERATING EXPENSES, deducted from fund assets
_______________________________________________________________________
 Management Fee2                                     0.47%
 Distribution/Service (12b-1) Fee                   None
 Other Expenses3                                     0.28
 TOTAL ANNUAL OPERATING EXPENSES                     0.75
 Less Expense Reimbursement 4, 5                     0.08
 NET ANNUAL OPERATING EXPENSES 4, 5                  0.67
</TABLE>



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


2   Restated on an annualized basis to reflect fee changes that took effect on
   April 23, 2007. Includes 0.10% administration fee.

3   "Other Expenses" are based on estimated amounts for the current fiscal
   year. Actual expenses may be different.



4   The investment advisor has contractually agreed through January 31, 2009 to
   waive a portion of its fees and reimburse expenses so that total annual
   operating expenses will not exceed 0.67% for Class S shares, excluding
   certain expenses such as extraordinary expenses, taxes, brokerage and
   interest.

5   In addition, the investment advisor has contractually agreed through April
   22, 2010 to waive a portion of its fees and reimburse expenses so that
   total annual operating expenses will not exceed 0.73% for Class S shares,
   excluding certain expenses such as extraordinary expenses, taxes, brokerage
   and interest.

Based on the costs above (includes one year of capped expenses in the "1Year"
period and two years of capped expenses in each of the "3 Year", "5 Year" and
"10 Year" periods), this example helps you compare the expenses of the fund's
Class S shares to those of other mutual funds. This example assumes the
expenses above remain the same. It also assumes that you invested $10,000,
earned 5% annual returns and reinvested all dividends and distributions. This
is only an example; actual expenses will be different.




<TABLE>
<CAPTION>
EXAMPLE               1 YEAR      3 YEARS      5 YEARS      10 YEARS
<S>                  <C>         <C>          <C>          <C>
 Class S shares         $68         $230         $407         $921
</TABLE>




14 | DWS Short Duration Plus Fund
<PAGE>

OTHER POLICIES AND SECONDARY RISKS

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


           -  Although major changes tend to be infrequent, the fund's Board
              could change the fund's investment objective without seeking
              shareholder approval.


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


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


           Prior to January 13, 2006, the fund operated pursuant to a
           master/feeder structure under which the fund invested all of its
           assets in a master portfolio (the "Portfolio").


           Secondary risks

           IPO RISK. Securities purchased in initial public offerings (IPOs)
           may be very volatile, rising and falling rapidly, often based, among
           other reasons, on investor perceptions rather than on economic
           reasons. Additionally, investments in IPOs may magnify the fund's
           performance if it has a small asset base. The fund is less likely to
           experience a similar impact on its performance as its assets grow
           because it is unlikely that the fund will be able to obtain
           proportionately larger IPO allocations.


           For more information

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

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


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



                                        Other Policies and Secondary Risks  | 15
<PAGE>


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



WHO MANAGES AND OVERSEES THE FUND


           The investment advisor


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


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

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

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


16 | Who Manages and Oversees the Fund
<PAGE>


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




<TABLE>
<CAPTION>
FUND NAME                                     FEE PAID
<S>                                          <C>
  DWS Short Duration Plus Fund                  0.41%
</TABLE>




           Effective April 23, 2007, DWS Short Duration Plus Fund pays the
           Advisor under the investment management agreement a fee, calculated
           daily and paid monthly, at the annual rate of 0.365% of the fund's
           average daily net assets up to $1.5 billion, 0.340% of the next $500
           million, 0.315% of the next $1.0 billion, 0.300% of the next $1.0
           billion, 0.285% of the next $1.0 billion, 0.270% of the next $1.0
           billion, and 0.255% thereafter.

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


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


                                         Who Manages and Oversees the Fund  | 17
<PAGE>

Portfolio management

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

The following people handle the day-to-day management of the fund.

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 2002.
-  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.

-  Joined Deutsche Asset Management in 1999, 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.


-  Senior Portfolio Manager for Quantitative Strategies: New York.
-  Joined the fund in 2007.
-  BA and MBA, University of Miami.

Gary Sullivan, CFA
Director of Deutsche Asset Management and 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


18 | Who Manages and Oversees the Fund
<PAGE>


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


- Joined Deutsche Asset Management in 1995 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 2005.


- BS, The Wharton School, University of Pennsylvania.

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



                                         Who Manages and Oversees the Fund  | 19
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of the table are for a single share.
The total return figures represent the percentage that an investor in the fund
would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by PricewaterhouseCoopers LLP,
independent registered public accounting firm, whose report, along with the
fund's financial statements, is included in the fund's annual report (see
"Shareholder reports" on the back cover). Investors should note that the fund's
performance before November 17, 2004 was obtained while the fund had a
different investment objective and different investment strategies, fees and
expenses. Information for the periods ended prior to September 30, 2005 was
audited by a different independent registered public accounting firm.



20 | Financial Highlights
<PAGE>

DWS Short Duration Plus Fund - Class S+



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                      2007           2006           2005a           2004            2003
<S>                                         <C>           <C>            <C>             <C>             <C>
SELECTED PER SHARE DATA
-----------------------------------------------------------------------------------------------------            -
NET ASSET VALUE, BEGINNING OF PERIOD         $  9.89        $  9.93        $  10.00        $ 10.00        $  10.00
----------------------------------------     -------        -------        --------        -------        --------
Income (loss) from investment
operations:
  Net investment income b                        .39            .35             .33            .40             .42
________________________________________     _______        _______        ________        _______        ________
  Net realized and unrealized gain
  (loss)                                         .16            .11             .19         (  .00)*        (  .01)
----------------------------------------     -------        -------        --------        -------        --------
  TOTAL FROM INVESTMENT OPERATIONS               .55            .46             .52            .40             .41
________________________________________     _______        _______        ________        _______        ________
Less distributions from:
  Net investment income                        ( .43)         ( .38)         (  .34)        (  .40)         (  .41)
________________________________________     _______        _______        ________        _______        ________
  Net realized gains                           ( .06)         ( .12)         (  .25)        (  .16)         (  .04)
________________________________________     _______        _______        ________        _______        ________
  Reverse stock split c                            -              -               -            .16             .04
________________________________________     _______        _______        ________        _______        ________
  TOTAL DISTRIBUTIONS                          ( .49)         ( .50)         (  .59)        (  .40)         (  .41)
________________________________________     _______        _______        ________        _______        ________
Redemption fees                                  .00*           .00*            .00*             -               -
----------------------------------------     -------        -------        --------        -------        --------
NET ASSET VALUE, END OF PERIOD               $  9.95        $  9.89        $   9.93        $ 10.00        $  10.00
----------------------------------------     -------        -------        --------        -------        --------
Total Return (%)d                               5.79           4.80            5.28           4.12            4.13
----------------------------------------     -------        -------        --------        -------        --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------     --------
Net assets, end of period ($ millions)           879            287             518          1,584           1,513
________________________________________     _______        _______        ________        _______        ________
Ratio of expenses before expense
reductions                                       .79         1.27f          1.38f           1.50f           1.50f
________________________________________     _______        _______        ________        _______        ________
Ratio of expenses after expense
reductions                                       .73         .88f            .90f           1.00f           1.00f
________________________________________     _______        _______        ________        _______        ________
Ratio of net investment income (%)              3.97           3.61            3.26           4.11            4.13
________________________________________     _______        _______        ________        _______        ________
Portfolio turnover rate                           57         129e               298            120             244
----------------------------------------     -------        -------        --------        -------        --------
</TABLE>




+  On October 23, 2006, Investment Class was renamed Class S.


a   Effective November 17, 2004, the Fund converted from a stable value fund to
   a short-term bond fund. The return for the Fund includes a one-time
   adjustment of 2.7% related to the conversion and in the absence of the
   conversion, the return would have been lower.


b   Based on average shares outstanding during the period.

c   See Note E in Notes to Financial Statements in the Annual Report to
shareholders.

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



e   On January 13, 2006, the Scudder Limited-Duration Plus Portfolio was
   closed. This ratio includes the purchase and sale of portfolio securities
   of the DWS Short Duration Plus Fund as a stand-alone fund in addition to
   the Scudder Limited-Duration Plus Portfolio.

f   Includes expenses allocated from Scudder Limited-Duration Plus Portfolio.


*   Amount is less than $.005.

                                                      Financial Highlights  | 21
<PAGE>


HOW TO INVEST IN THE FUND

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

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


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


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

<PAGE>


How to BUY Shares





<TABLE>
<CAPTION>
 FIRST INVESTMENT                              ADDITIONAL INVESTMENTS
<S>                                           <C>
 $2,500 or more for regular accounts           $50 or more for regular accounts and
 $1,000 or more for IRAs                      IRAs
 $1,000 or more for an account with an        $50 or more for an account with an
 Automatic Investment Plan                    Automatic Investment Plan

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

 BY WIRE
 -  Call (800) 728-3337 for instructions      -  Call (800) 728-3337 for instructions

 BY PHONE
 Not available                                -  Call (800) 728-3337 for instructions

 WITH AN AUTOMATIC INVESTMENT PLAN
 -  Fill in the information on our            -  To set up regular investments from a
  application including a check for the       bank checking account, call
  initial investment and a voided check       (800) 728-3337 (minimum $50)
 USING QuickBuy
 Not available                                -  Call (800) 728-3337 to make sure
                                              QuickBuy is set up on your account; if
                                              it is, you can request a transfer from
                                              your bank account of any amount
                                              between $50 and $250,000
 ON THE INTERNET
 -  Register at www.dws-scudder.com or        -  Call (800) 728-3337 to ensure you have
  log in if already registered                electronic services
 -  Print out a prospectus and a new          -  Register at www.dws-scudder.com
  account application                         or log in if already registered
 -  Complete and return the application       -  Follow the instructions for buying
  with your check                             shares with money from your bank
                                              account
</TABLE>



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

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

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


                                                         How to Buy Shares  | 23
<PAGE>


How to EXCHANGE or SELL Shares





<TABLE>
<CAPTION>
 EXCHANGING INTO ANOTHER FUND                    SELLING SHARES
<S>                                             <C>
                                                 Some transactions, including most for
 -  Exchanges into existing accounts:
                                                over $100,000, can only be ordered in
  $50 minimum per fund
                                                writing with a signature guarantee;
 -  Exchanges into new accounts:
                                                please see "Signature Guarantee"
  $2,500 minimum per fund
  $1,000 minimum for IRAs and UGMAs

 BY PHONE                                        BY PHONE OR WIRE
 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions

 USING THE AUTOMATED INFORMATION LINE
 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions

 BY MAIL OR EXPRESS MAIL
 (see previous page for address)
 Your instructions should include:              Your instructions should include:
 -  the fund, class and account number          -  the fund, class and account number
  you're exchanging out of                      from which you want to sell shares
 -  the dollar amount or number of shares       -  the dollar amount or number of shares
  you want to exchange                          you want to sell
 -  the name and class of the fund you          -  your name(s), signature(s) and
  want to exchange into                         address, as they appear on your
                                                account
 -  your name(s), signature(s) and
  address, as they appear on your               -  a daytime telephone number
  account
 -  a daytime telephone number

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



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


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




24 | How to Sell or Exchange Shares
<PAGE>

           Financial intermediary support payments


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


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


                                            How to Sell or Exchange Shares  | 25
<PAGE>


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


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

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


26 | How to Sell or Exchange Shares
<PAGE>

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


POLICIES YOU SHOULD KNOW ABOUT


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


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

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.

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

           Policies about transactions

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


            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



                                                                      Questions?

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



                                            Policies You Should Know About  | 27
<PAGE>

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

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


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


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

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


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


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


28 | Policies You Should Know About
<PAGE>

           INITIAL PURCHASE. The minimum initial investment is $2,500, except
           for investments on behalf of participants in certain fee-based and
           wrap programs offered through certain financial intermediaries
           approved by the Advisor, for which there is no
           minimum initial investment; and fiduciary accounts such as IRAs and
           custodial accounts such as Uniform Gifts to Minors Act and Uniform
           Transfers to Minors Act accounts for which the minimum initial
           investment is $1,000 per account. In addition, the minimum initial
           investment is $1,000 if an automatic investment plan of $50 per
           month is established. Group retirement plans and certain other
           accounts have similar or lower minimum share balance requirements.


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

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



                                            Policies You Should Know About  | 29
<PAGE>


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

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

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



30 | Policies You Should Know About
<PAGE>


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

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

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

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



                                            Policies You Should Know About  | 31
<PAGE>


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

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of the fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in the fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.

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

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


           The redemption fee is applicable to fund shares purchased either
           directly or through a financial intermediary, such as a
           broker-dealer. Transactions through financial intermediaries
           typically are placed with the fund on an omnibus basis and include
           both purchase and sale transactions placed on behalf of multiple
           investors. These purchase and sale transactions are generally


32 | Policies You Should Know About
<PAGE>

           netted against one another and placed on an aggregate basis;
           consequently the identities of the individuals on whose behalf the
           transactions are placed generally are not known to the fund. For
           this reason, the fund has undertaken to notify financial
           intermediaries of their obligation to assess the redemption fee on
           customer accounts and to collect and remit the proceeds to the fund.
           However, due to operational requirements, the intermediaries'
           methods for tracking and calculating the fee may be inadequate or
           differ in some respects from the fund's.


           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) transactions on behalf of any mutual fund advised by the
           Advisor and its affiliates (e.g., "funds of funds") or, in the case
           of a master/feeder relationship, redemptions by the feeder fund from
           the master portfolio; (v) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vi)
           transactions following death or disability of any registered
           shareholder, beneficial owner or grantor of a living trust with
           respect to shares purchased before death or disability; (vii)
           transactions involving hardship of any registered shareholder;
           (viii) systematic transactions with pre-defined trade dates for
           purchases, exchanges or redemptions, such as automatic account
           rebalancing, or loan origination and repayments; (ix) transactions
           involving shares purchased through the reinvestment of dividends or
           other distributions; (x) transactions involving shares transferred
           from another account in the same fund or converted from another
           class of the same fund (the redemption fee period will carry over to
           the acquired shares); (xi) transactions initiated by the fund or
           administrator (e.g., redemptions for not meeting account minimums,
           to pay account fees funded by share redemptions, or in the event of
           the liquidation or merger of the fund); or (xii) transactions in
           cases when there are legal or contractual limitations or
           restrictions on the imposition of the redemption fee (as determined
           by the fund or its agents in their sole discretion). It is the
           policy of the DWS funds to permit approved fund platform providers
           to execute transactions within



                                            Policies You Should Know About  | 33
<PAGE>


           the funds without the imposition of a redemption fee if such
           providers have implemented alternative measures that are determined
           by the Advisor to provide controls on short-term and excessive
           trading that are comparable to the DWS funds' policies.

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


           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House (ACH) services. Transactions
           take two to three days to be completed and there is a $50 minimum
           and a $250,000 maximum. To set up QuickBuy or QuickSell on a new
           account, see the account application; to add it to an existing
           account, call (800) 728-3337.


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


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


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




            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



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





34 | Policies You Should Know About
<PAGE>


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

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

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

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


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



           MONEY FROM SHARES YOU SELL is normally sent out within one business
           day of when your order is processed (not when it is received),
           although it could be delayed for up to seven days. There are other
           circumstances when it could be longer: When you are selling shares
           you bought recently by check or ACH (the


            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



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



                                            Policies You Should Know About  | 35
<PAGE>


           funds will be placed under a 10 calendar day hold to ensure good
           funds) or when unusual circumstances prompt the SEC to allow further
           delays. Certain expedited redemption processes may also be delayed
           when you are selling recently purchased shares or in the event of
           closing of the Federal Reserve Bank's wire payment system. In
           addition, the fund reserves the right to suspend or postpone
           redemptions as permitted pursuant to Section 22(e) of the Investment
           Company Act of 1940. Generally, those circumstances are when 1) the
           New York Stock Exchange is closed other than customary weekend or
           holiday closings; 2) trading on the New York Stock Exchange is
           restricted; 3) an emergency exists which makes the disposal of
           securities owned by the fund or the fair determination of the value
           of the fund's net assets not reasonably practicable; or 4) the SEC,
           by order, permits the suspension of the right of redemption.
           Redemption payments by wire may also be delayed in the event of a
           non-routine closure of the Federal Reserve wire payment system. For
           additional rights reserved by the fund, please see "Other rights we
           reserve."


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


36 | Policies You Should Know About
<PAGE>

           How the fund calculates share price

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


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



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


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

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



                                            Policies You Should Know About  | 37
<PAGE>

           TO THE EXTENT THAT THE FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when the
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change significantly on days when the
           New York Stock Exchange is closed and you cannot buy or sell fund
           shares. Price changes in the securities the fund owns may ultimately
           affect the price of fund shares the next time the NAV is
           calculated.)


           Other rights we reserve

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

           -  withdraw or suspend the offering of shares at any time


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

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



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

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


38 | Policies You Should Know About
<PAGE>


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

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



UNDERSTANDING DISTRIBUTIONS AND TAXES

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


           THE FUND INTENDS TO PAY INCOME DIVIDENDS TO ITS SHAREHOLDERS
           MONTHLY; short-term and long-term capital gains are paid in December
           or otherwise as needed.

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

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

           YOU CAN CHOOSE HOW TO RECEIVE YOUR DIVIDENDS AND DISTRIBUTIONS. You
           can have them all automatically reinvested in fund shares (at NAV),
           all deposited directly to your bank account or all sent to you by
           check, have one type reinvested and the other sent to you by check
           or have them invested in a different fund. Tell us your preference
           on your application. If you don't indicate a preference, your
           dividends and distributions will all be reinvested in shares of the
           fund without a sales charge (if


            THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



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



                                     Understanding Distributions and Taxes  | 39
<PAGE>


           applicable). Distributions are treated the same for federal income
           tax purposes whether you receive them in cash or reinvest them in
           additional shares. For employer-sponsored qualified plans, and
           retirement plans, reinvestment (at NAV) is the only option.

           BUYING, SELLING OR EXCHANGING FUND SHARES WILL USUALLY HAVE FEDERAL
           INCOME TAX CONSEQUENCES FOR YOU (except in employer-sponsored
           qualified plans, IRAs or other tax-advantaged accounts). Your sale
           of shares may result in a capital gain or loss. The gain or loss
           will be long-term or short-term depending on how long you owned the
           shares that were sold. For federal income tax purposes, an exchange
           is treated the same as a sale.


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



<TABLE>
<CAPTION>
           GENERALLY TAXED AT LONG-TERM               GENERALLY TAXED AT ORDINARY
           CAPITAL GAIN RATES:                        INCOME RATES:
<S>                                                   <C>
           DISTRIBUTIONS FROM THE FUND
           - gains from the sale of                  -  gains from the sale of
             securities held (or treated as             securities held by the fund for
             held) by the fund for more                 one year or less
             than one year                           -  all other taxable income
           - qualified dividend income

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




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



40 | Understanding Distributions and Taxes
<PAGE>


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

           For taxable years beginning before January 1, 2011, distributions to
           individuals and other noncorporate shareholders of investment income
           designated by the fund as derived from qualified dividend income are
           eligible for taxation for federal income tax purposes at the more
           favorable long-term capital gain rates. Qualified dividend income
           generally includes dividends from domestic and some foreign
           corporations. It does not include income from investments in debt
           securities or, generally, from REITs. In addition, the fund must
           meet certain holding period and other requirements with respect to
           the dividend-paying stocks in its portfolio and the shareholder must
           meet certain holding period and other requirements with respect to
           the fund's shares for the lower tax rates to apply. The fund does
           not expect a significant portion of its distributions to constitute
           qualified dividend income.

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


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


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



                                     Understanding Distributions and Taxes  | 41
<PAGE>


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

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



42 | Understanding Distributions and Taxes
<PAGE>


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


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

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



                                                                  Appendix  | 43
<PAGE>


                    DWS Short Duration Plus Fund - Class S





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        0.67%              4.33%       $ 10,433.00         $  68.45
   2           10.25%        0.73%              8.78%       $ 10,878.49         $  77.79
   3           15.76%        0.75%             13.41%       $ 11,340.82         $  83.32
   4           21.55%        0.75%             18.23%       $ 11,822.81         $  86.86
   5           27.63%        0.75%             23.25%       $ 12,325.28         $  90.56
   6           34.01%        0.75%             28.49%       $ 12,849.10         $  94.40
   7           40.71%        0.75%             33.95%       $ 13,395.19         $  98.42
   8           47.75%        0.75%             39.64%       $ 13,964.49         $ 102.60
   9           55.13%        0.75%             45.58%       $ 14,557.98         $ 106.96
  10           62.89%        0.75%             51.77%       $ 15,176.69         $ 111.51
  TOTAL                                                                         $ 920.87
</TABLE>





44 | Appendix

<PAGE>

TO GET MORE INFORMATION

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

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

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


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




<TABLE>
<S>                    <C>                               <C>
SEC FILE NUMBER:
DWS Advisor Funds        DWS Short Duration Plus Fund    811-04760
</TABLE>




[GRAPHIC APPEARS HERE]






(02/01/08) 822-2
[RECYCLED PAPER GRAPHIC APPEARS HERE]    [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]





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

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

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


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

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


<PAGE>

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

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


<PAGE>






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


</TABLE>











                            Please Retain This Supplement for Future Reference


November 26, 2007



<PAGE>


                                DWS ADVISOR FUNDS


                             DWS Mid Cap Growth Fund
                Class A, Class B, Class C and Institutional Class

                            DWS Small Cap Growth Fund
                Class A, Class B, Class C and Institutional Class


                               DWS Micro Cap Fund
                Class A, Class B, Class C and Institutional Class









                       STATEMENT OF ADDITIONAL INFORMATION


                                February 1, 2008

This combined Statement of Additional Information is not a prospectus and should
be read in conjunction  with the  prospectuses,  dated February 1, 2008, for DWS
Mid Cap Growth  Fund,  DWS Small Cap Growth  Fund and DWS Micro Cap Fund (each a
"Fund" and  collectively  the "Funds),  each a series of DWS Advisor  Funds (the
"Trust")"),  as  amended  from time to time,  copies  of which  may be  obtained
without charge by contacting DWS Scudder Distributors, Inc., 222 South Riverside
Plaza, Chicago,  Illinois 60606, (800) 621-1148 or from the firm from which this
Statement of  Additional  Information  was obtained and is available  along with
other  materials on the Securities and Exchange  Commission's  Internet Web site
(http://www.sec.gov).

The  Annual  Reports  to  Shareholders,  each  dated  September  30,  2007,  are
incorporated  herein by reference and are deemed to be part of this Statement of
Additional  Information.  A copy of each  Fund's  Annual  Report may be obtained
without charge by calling the Funds at the toll-free number (800) 621-1048.

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





<PAGE>



                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----

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

INVESTMENT POLICIES AND TECHNIQUES.............................................5
   Investment Techniques.......................................................5
   Portfolio Holdings.........................................................38

MANAGEMENT OF THE FUNDS.......................................................39
   Investment Advisor.........................................................39
   Compensation of Portfolio Managers.........................................44

FUND SERVICE PROVIDERS........................................................54
   Administrator..............................................................54
   Distributor................................................................57
   Custodian..................................................................62
   Transfer Agent and Shareholder Service Agent...............................62
   Legal Counsel..............................................................64
   Independent Registered Public Accounting Firm..............................64

PORTFOLIO TRANSACTIONS........................................................64

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

DIVIDENDS.....................................................................93

TAXES.........................................................................94

NET ASSET VALUE...............................................................99

TRUSTEES AND OFFICERS........................................................100

TRUST ORGANIZATION...........................................................121

PROXY VOTING GUIDELINES......................................................123

FINANCIAL STATEMENTS.........................................................125

ADDITIONAL INFORMATION.......................................................125

APPENDIX.....................................................................127




                                       i
<PAGE>



                             INVESTMENT RESTRICTIONS


Investment Restrictions

Except as otherwise indicated, each Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders.  There can be
no assurance that a Fund's  objective will be met.  Shareholders  of a Fund will
receive  30 days'  prior  written  notice  with  respect  to any  change  in the
investment objective of a Fund.


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


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


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

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

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

(3)      engage in the  business of  underwriting  securities  issues by others,
         except to the extent that a Fund may be deemed to be an  underwriter in
         connection with the disposition of portfolio securities.

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

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

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

(7)      concentrate its investments in a particular  industry,  as that term is
         used in the 1940 Act, as  amended,  and as  interpreted  or modified by
         regulatory authority having jurisdiction, from time to time.



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


Non-fundamental  Investment  Restrictions  for DWS Mid Cap  Growth  Fund and DWS
Small Cap Growth Fund.  In order to comply with certain  statutes and  policies,
DWS Small Cap Growth  Fund and DWS Mid Cap Growth  Fund will not, as a matter of
nonfundamental operating policy:

<PAGE>


(i)      borrow money  (including  through  reverse  repurchase  or forward roll
         transactions),  except  that the  Fund  may  borrow  for  temporary  or
         emergency purposes up to 1/3 of its net assets;

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

(iii)    sell  securities  it does not own  (short  sales)  such that the dollar
         amount  of such  short  sales  at any one time  exceeds  25% of the net
         equity of the Fund,  and the value of  securities  of any one issuer in
         which the Fund is short  exceeds the lesser of 2.0% of the value of the
         Fund's  net  assets  or 2.0% of the  securities  of any class of any US
         issuer,  and  provided  that  short  sales  may be made  only in  those
         securities which are fully listed on a national  securities exchange or
         a  foreign  exchange  (This  provision  does  not  include  the sale of
         securities that the Fund  contemporaneously  owns or where the Fund has
         the right to obtain  securities  equivalent in kind and amount to those
         sold,  i.e., short sales against the box.) (The Fund currently does not
         engage in short selling.);

(iv)     invest for the purpose of  exercising  control or management of another
         company;

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

(vi)     invest more than 15% of the Fund's net assets  (taken at the greater of
         cost or market  value) in  securities  that are illiquid or not readily
         marketable  (excluding Rule 144A  securities  deemed by the Board to be
         liquid);

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

(viii)   buy and sell puts and  calls on  securities,  stock  index  futures  or
         options on stock  index  futures,  or  financial  futures or options on
         financial  futures,  unless such  options are written by other  persons
         and: (a) the options or futures are offered through the facilities of a
         national securities  association or are listed on a national securities
         or  commodities  exchange,  except for put and call  options  issued by
         non-US   entities  or  listed  on


                                       2
<PAGE>

         non-US securities or commodities exchanges;  (b) the aggregate premiums
         paid on all such  options  which are held at any time do not exceed 20%
         of the Fund's total net assets;  and (c) the aggregate  margin deposits
         required on all such futures or options thereon held at any time do not
         exceed 5% of the Fund's total assets; and


(ix)     for DWS Small Cap Growth Fund only,  acquire  securities  of registered
         open-end  investment  companies or registered unit investment trusts in
         reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.





                                       3
<PAGE>




Non-fundamental   Investment   Restrictions   for  DWS  Micro   Cap  Fund.   The
nonfundamental investment restrictions set forth below may be changed or amended
by the Trust's Board of Trustees without shareholder approval.

As a matter of non-fundamental policy, DWS Micro Fund may not:

1.       Participate  on a  joint-and-several  basis in any  securities  trading
         account.  The  "bunching"  of  orders  for  the  sale  or  purchase  of
         marketable   portfolio   securities   with  other  accounts  under  the
         management  of the  Advisor to save  commissions  or to average  prices
         among them is not deemed to result in a securities trading account.

2.       Purchase securities of other investment companies,  except as permitted
         by the the  1940  Act and the  rules,  regulations  and any  applicable
         exemptive order issued thereunder.

3.       Invest for the purpose of exercising  control over or management of any
         company.

4.       Purchase any security,  including any repurchase  agreement maturing in
         more than seven days,  which is  illiquid,  if more than 15% of the net
         assets of the Fund,  taken at market  value,  would be invested in such
         securities.

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

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

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

There will be no violation of any investment restriction (except with respect to
fundamental  investment  restriction (1) above) if that  restriction is complied
with at the time the relevant action is taken, notwithstanding a later change in
the market  value of an  investment,  in net or total assets or in the change of
securities rating of the investment, or any other later change.


To meet  federal  income  tax  requirements  for  qualification  as a  regulated
investment company, each Fund must, among other things, limit its investments so
that at the close of each  quarter of its  taxable  year (1) no more than 25% of
the  value of its  total  assets  is  invested  in the  securities  (other  than
securities of the US Government or a regulated  investment  company) of a single
issuer or two or more issuers  which the Fund  controls and which are engaged in
the same, similar or related trades or businesses or in the securities of one or
more qualified publicly traded  partnerships,  and (2) at least 50% of the value
of its total assets is represented by cash, cash items (including  receivables),
US Government securities, securities of other regulated investment companies and
other securities of any issuer that does not represent more than 5% of the value
of the Fund's  total  assets and not more than 10% of the  issuer's  outstanding
voting securities.

                                       4
<PAGE>

                       INVESTMENT POLICIES AND TECHNIQUES

Investment Techniques


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


Equity Securities


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


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

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


                                       5
<PAGE>

Warrants.  The Funds may invest in warrants.  Warrants are securities  that give
the holder the right but not the obligation to buy a specified  number of shares
of common  stock at a  specified  price,  which is often  higher than the market
price  at the time of  issuance,  for a  specified  period  (or in  perpetuity).
Warrants may be issued in units with other securities or separately,  and may be
freely transferable and traded on exchanges. Investing in warrants can provide a
greater  potential  for  profit or loss  than an  equivalent  investment  in the
underlying  security  and,  thus, is a  speculative  investment.  At the time of
issue,  the  cost of a  warrant  is  substantially  less  than  the  cost of the
underlying  security itself, and price movements in the underlying  security are
generally  magnified  in the price  movements of the  warrant.  This  leveraging
effect enables the investor to gain exposure to the  underlying  security with a
relatively low capital investment. Such leveraging increases an investor's risk,
however,  in the event of a decline in the value of the underlying  security and
can result in a complete loss of the amount invested in the warrant.

While the market value of a warrant  tends to be more  volatile than that of the
securities underlying the warrant,  changes in the market value of a warrant may
not necessarily correlate with that of the underlying security. A warrant ceases
to have value if it is not exercised  prior to the  expiration  date, if any, to
which the warrant is subject.  The purchase of warrants involves a risk that the
Funds could lose the  purchase  value of a warrant if the right to  subscribe to
additional shares is not exercised prior to the warrant's expiration.  Also, the
purchase of warrants  involves  the risk that the  effective  price paid for the
warrant added to the  subscription  price of the related security may exceed the
value  of the  subscribed  security's  market  price,  such as when  there is no
movement  in the level of the  underlying  security.  The value of a warrant may
decline  because  of a decline  in the  value of the  underlying  security,  the
passage of time,  changes in interest rates or in the dividend or other policies
of the company whose equity  underlies the warrant or a change in the perception
as to the future price of the underlying  security,  or any combination thereof.
Also,  warrants  do not entitle the holder to  dividends  or voting  rights with
respect to the  underlying  securities  and do not  represent  any rights in the
assets of the issuing company.

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

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

Convertible  Securities.  A  convertible  security is a bond or preferred  stock
which may be converted at a stated price within a specific period of time into a
specified  number of shares of common  stock of the same or a different  issuer.
Convertible  securities  are senior to common stock in a  corporation's  capital
structure,  but are generally


                                       6
<PAGE>

subordinate to non-convertible  debt securities.  While providing a fixed income
stream that is generally  higher in yield than the income  derived from a common
stock but  lower  than that  afforded  by a  non-convertible  debt  security,  a
convertible  security  also  affords an investor  the  opportunity,  through its
conversion feature,  to participate in the capital  appreciation of common stock
into which it is convertible.

The terms of any  convertible  security  determine  its  ranking in a  company's
capital  structure.  In the case of  subordinated  convertible  debentures,  the
holders'  claims on assets and earnings are  subordinated to the claims of other
creditors and are senior to the claims of preferred and common shareholders.  In
the case of  convertible  preferred  stock,  the  holders'  claims on assets and
earnings are  subordinated  to the claims of all creditors and are senior to the
claims of common  shareholders.  In general,  the market value of a  convertible
security is the  greater of its  investment  value (its value as a fixed  income
security) or its conversion value (the value of the underlying  shares of common
stock if the  security is  converted).  As a fixed income  security,  the market
value of a convertible  security generally increases when interest rates decline
and  generally  decreases  when  interest  rates rise;  however,  the price of a
convertible  security generally  increases as the market value of the underlying
stock  increases and generally  decreases as the market value of the  underlying
stock declines. Investments in convertible securities generally entail less risk
than investments in the common stock of the same issuer.

Medium-Capitalization  and  Small-Capitalization  Stocks. Lesser known companies
with medium- and  small-market  capitalizations  frequently offer greater growth
potential than larger,  better-known and more mature  companies.  Investments in
medium- and  small-capitalization  companies involve considerations that are not
applicable  to investing in  securities of  established,  larger  capitalization
issuers,  including reduced and less reliable information about the issuer, less
stringent financial disclosure  requirements,  higher brokerage  commissions and
fees, and greater market risk in general.

In addition,  investing in the  securities of these  companies also involves the
possibility of greater  portfolio  price  volatility.  Among the reasons for the
greater price volatility of such companies are the less certain growth prospects
of medium and  smaller  firms,  the greater  illiquidity  in the markets for the
stocks of such  companies  and the  greater  sensitivity  of such  companies  to
changing economic conditions in their respective geographic regions.

For example,  securities of these companies  involve higher investment risk than
that normally  associated with larger firms due to the greater business risks of
smaller  size and limited  product  lines,  markets,  distribution  channels and
financial and managerial resources.


In addition,  many medium- and  small-market  capitalization  companies  are not
well-known  to the  investing  public,  do not  have  significant  institutional
ownership and are followed by relatively  few  securities  analysts.  Also,  the
securities of smaller capitalization companies traded on the OTC market may have
fewer market makers,  wider spreads  between their quoted bid and ask prices and
lower trading volumes,  resulting in comparatively  greater price volatility and
less liquidity than exists for securities of larger capitalization companies.

Small and Micro  Capitalization  Companies.  Each Fund  invests a portion of its
assets in  smaller,  lesser-known  companies  which the Advisor  believes  offer
greater  growth  potential  than larger,  more mature,  better-known  companies.
Investing  in  the  securities  of  these  companies,   however,  also  involves
significantly  greater  risk and the  possibility  of  greater  portfolio  price
volatility.  Among the reasons for the greater  price  volatility of these small
companies and unseasoned stocks are the less certain growth prospects of smaller
firms,  the lower  degree of  liquidity  in the  markets for such stocks and the
greater  sensitivity of small companies to changing economic conditions in their
geographic  region.  For example,  securities of these companies  involve higher
investment  risk than that  normally  associated  with  larger  firms due to the
greater  business  risks  of small  size and  limited  product  lines,  markets,
distribution  channels and financial and managerial  resources  and,  therefore,
such  securities may be subject to more abrupt or erratic market  movements than
securities  of larger,  more  established  companies  or the market  averages in
general.  Many smaller  capitalization  companies in which a Fund may invest are
not well known to the investing  public,  do not have significant  institutional
ownership and are followed by relatively few securities  analysts.  As a result,
it may be difficult to obtain  reliable  information  and financial data on such
companies  and the  securities  of  these  small  companies  may not be  readily
marketable,  making it  difficult  to  dispose  of  shares  when  desirable.  As
mentioned  above, the securities of smaller  capitalization  companies traded on
the OTC market may have fewer market makers,  wider spreads between their quoted
bid and asked  prices and lower


                                       7
<PAGE>

trading volumes,  resulting in  comparatively  greater price volatility and less
liquidity  than exists for  securities of larger  capitalization  companies.  An
additional  risk of  investing  in smaller  emerging  companies  is that smaller
issuers may face  increased  difficulty  in obtaining  the capital  necessary to
continue  operations  and thus may go into  bankruptcy,  which could result in a
complete  loss of an  investment.  Furthermore,  when the  economy  enters  into
recession  there  tends to be a  "flight  to  quality,"  which  exacerbates  the
increased risk and greater price  volatility  normally  associated  with smaller
companies.


Investing in Foreign Securities. Each Fund may invest up to 20% of its assets in
foreign  securities.  Investors  should  realize that investing in securities of
foreign issuers involves  considerations not typically associated with investing
in  securities  of  companies  organized  and  operated  in the  United  States.
Investors should realize that the value of the Funds' foreign investments may be
adversely  affected by changes in  political  or social  conditions,  diplomatic
relations, confiscatory taxation, expropriation,  nationalization, limitation on
the removal of funds or assets, or imposition of (or change in) exchange control
or tax  regulations  in foreign  countries.  In addition,  changes in government
administrations  or economic or monetary policies in the United States or abroad
could result in appreciation  or depreciation of portfolio  securities and could
favorably  or  unfavorably  affect  the  Funds'  operations.   Furthermore,  the
economies of individual foreign nations may differ from the US economy,  whether
favorably or  unfavorably,  in areas such as growth of gross  national  product,
rate of inflation, capital reinvestment, resource self-sufficiency or balance of
payments position. In addition, it may be more difficult to obtain and enforce a
judgment  against a foreign  issuer.  In general,  less  information is publicly
available  with respect to foreign  issuers than is available with respect to US
companies.  Most foreign companies are not subject to the uniform accounting and
financial reporting requirements applicable to issuers in the United States. Any
foreign  investments  made by the Funds must be made in  compliance  with US and
foreign currency  restrictions and tax laws restricting the amounts and types of
foreign investments.

The Funds' foreign  investments  may be less liquid and their prices may be more
volatile  than  comparable  investments  in  securities  of  US  companies.  The
settlement periods for foreign securities, which are often longer than those for
securities of US issuers, may affect portfolio liquidity. Furthermore, there may
be less government  supervision and regulation of securities exchanges,  brokers
and issuers in foreign countries than in the United States.

Trading in Foreign Securities. Trading in foreign securities may be completed at
times which vary from the closing of the New York Stock  Exchange  ("NYSE").  In
computing  their net asset  values,  the Funds value  foreign  securities at the
latest closing price on the exchange on which they are traded  immediately prior
to the closing of the NYSE.  Foreign securities quoted in foreign currencies are
translated into US dollars at the foreign exchange rates.

Occasionally, events that affect values and exchange rates may occur between the
times at which such values and exchange  rates are determined and the closing of
the NYSE. If such events  materially  affect the value of portfolio  securities,
these  securities  may be valued at their fair value as determined in good faith
using methods approved by the Trustees.

US  Dollar-Denominated  Foreign Debt Securities.  Each Fund may invest in the US
dollar-denominated  debt  securities  of  foreign  companies.  Investing  in the
securities of foreign companies involves more risks than investing in securities
of US companies.  Their value is subject to economic and political  developments
in the countries where the companies  operate and to changes in foreign currency
values.  Values may also be  affected  by foreign  tax laws,  changes in foreign
economic or monetary  policies,  exchange  control  regulations  and regulations
involving prohibitions on the repatriation of foreign currencies.

In addition, the relative performance of various countries' fixed income markets
historically   has   reflected   wide   variations   relating   to  the   unique
characteristics of each country's economy.  Year-to-year fluctuations in certain
markets have been  significant,  and negative  returns have been  experienced in
various markets from time to time.

US Dollar-Denominated  Foreign Government Debt Securities.  Each Fund may invest
in US  dollar-denominated  foreign government debt securities which include debt
obligations issued or guaranteed by national, state or provincial governments or
similar political subdivisions and quasi-governmental and supranational entities
(collectively,   "sovereign  debt  obligations").  Sovereign  debt  obligations,
especially those of developing countries, may involve a high degree of risk. The
issuer of such an obligation or the  governmental  authorities  that control the

                                       8
<PAGE>

repayment of the  obligation  may be unable or unwilling to repay  principal and
interest  when  due  and  may  require  renegotiation  or  rescheduling  of debt
payments.  In addition,  prospects  for  repayment of principal and interest may
depend on political as well as economic factors.

Quasi-governmental    and   supranational    entities   include    international
organizations  designated  or  supported  by  governmental  entities  to promote
economic  reconstruction or development and international  banking  institutions
and related government  agencies.  Examples include (but are not limited to) the
International  Bank for  Reconstruction  and Development (the "World Bank"), the
Japanese  Development  Bank, the Asian  Development Bank and the  Inter-American
Development Bank. Currently, the Portfolio intends to invest only in obligations
issued  or  guaranteed  by  the  Asian  Development  Bank,  the   Inter-American
Development  Bank,  the World Bank, the African  Development  Bank, the European
Coal  and  Steel  Community,  the  European  Economic  Community,  the  European
Investment Bank and the Nordic Investment Bank.  Foreign  government  securities
also include mortgage-related securities issued or guaranteed by national, state
or  provincial  governmental  instrumentalities,   including  quasi-governmental
agencies.

Fixed Income Securities and Money Market Instruments


General.  Each Fund may invest in a broad  range of domestic  and foreign  fixed
income (debt)  securities  consistent with its investment  objective and the 80%
investment  policy for each Fund.  Fixed income  securities,  including (but not
limited  to)  bonds,  are used by issuers to borrow  money from  investors.  The
issuer pays the investor a fixed or variable rate of interest and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon bonds, do
not pay  current  interest,  but are  purchased  at a  discount  from their face
values.


The value of fixed income securities in a Fund's securities  portfolio generally
varies  inversely  with  changes  in  interest  rates.  Prices  of fixed  income
securities with longer effective  maturities are more sensitive to interest rate
changes than those with shorter effective maturities.

In periods of declining  interest rates,  the yield (the income generated over a
stated  period of time) of a Fund that  invests in fixed income  securities  may
tend to be higher  than  prevailing  market  rates  and,  in  periods  of rising
interest rates, the yield of such Fund may tend to be lower. Also, when interest
rates  are  falling,  the  inflow  of net  new  money  to such a Fund  from  the
continuous  sale of its shares will likely be invested in portfolio  instruments
producing  lower  yields  than the balance of the Fund's  investment  portfolio,
thereby reducing the yield of the Fund. In periods of rising interest rates, the
opposite can be true.  To the extent a Fund invests in fixed income  securities,
the net asset value can  generally  be  expected to change as general  levels of
interest rates fluctuate.

Fixed Income Security Risk. Fixed income  securities  generally expose a Fund to
four types of risk:  (1) interest rate risk (the potential for  fluctuations  in
bond prices due to changing interest rates);  (2) income risk (the potential for
a decline in the Fund's income due to falling market interest rates); (3) credit
risk (the  possibility  that a bond issuer will fail to make timely  payments of
either interest or principal to the Fund);  and (4) prepayment risk or call risk
(the likelihood that, during a period of falling interest rates, securities with
high stated  interest  rates will be prepaid,  or  "called"  prior to  maturity,
requiring the Fund to invest the proceeds at generally lower interest rates).

Short-Term  Instruments.  When a Fund  experiences  large  cash  inflows  -- for
example,  through  the sale of  securities  -- and  attractive  investments  are
unavailable in sufficient  quantities,  the Fund may hold short-term investments
(or shares of money market mutual funds) for a limited time pending availability
of such investments.  Each Fund may invest up to 20% of its total assets in high
quality short-term investments with remaining maturities of 397 days or less, or
in money market mutual funds, to meet  anticipated  redemptions and expenses for
day-to-day operating purposes. In addition,  when in the Advisor's opinion it is
advisable to adopt a temporary defensive position because of unusual and adverse
market or other  conditions,  up to 100% of a Fund's  assets may be  invested in
such short-term instruments.

Short-term   instruments  consist  of  foreign  and  domestic:   (1)  short-term
obligations  of  sovereign  governments,   their  agencies,   instrumentalities,
authorities or political  subdivisions;  (2) other  short-term  debt  securities
rated AA or higher by S&P or Aa or higher by Moody's or, if unrated,  are deemed
to be of comparable quality in the opinion of


                                       9
<PAGE>

the Advisor;  (3) commercial paper; (4) bank obligations,  including  negotiable
certificates  of  deposit,  time  deposits  and  bankers'  acceptances;  and (5)
repurchase  agreements.  At the time a Fund invests in  commercial  paper,  bank
obligations  or repurchase  agreements,  the issuer or the issuer's  parent must
have  outstanding  debt  rated AA or higher  by S&P or Aa or higher by  Moody's;
outstanding  commercial paper or bank obligations rated A-1 by S&P or Prime-1 by
Moody's; or, if no such ratings are available,  the instrument must be deemed to
be of comparable quality in the opinion of the Advisor. These instruments may be
denominated in US dollars or in foreign currencies.

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

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

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

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

Commercial Paper. The Funds may invest in fixed rate or variable rate commercial
paper, issued by US or foreign entities. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured  promissory notes issued by US or foreign
corporations in order to finance their current operations.  Any commercial paper
issued by a foreign  entity  corporation  and  purchased  by the Fund must be US
dollar-denominated  and must not be subject to  foreign  withholding  tax at the
time of purchase.

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

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

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

                                       10
<PAGE>

US  Government  Securities.  The  Funds  may  invest  in  obligations  issued or
guaranteed by the US government, which include: (1) direct obligations of the US
Treasury   and  (2)   obligations   issued  by  US   government   agencies   and
instrumentalities.  Included  among direct  obligations of the United States are
Treasury  Bills,  Treasury  Notes and Treasury  Bonds,  which differ in terms of
their  interest  rates,  maturities  and dates of issuance.  Treasury Bills have
maturities of less than one year,  Treasury  Notes have  maturities of one to 10
years and Treasury Bonds  generally have  maturities of greater than 10 years at
the date of  issuance.  Included  among the  obligations  issued by agencies and
instrumentalities  of the United States are:  instruments  that are supported by
the  full  faith  and  credit  of the US  (such as  certificates  issued  by the
Government National Mortgage Association ("GNMA" or "Ginnie Mae"));  instruments
that are  supported  by the right of the issuer to borrow  from the US  Treasury
(such as  securities  of Federal  Home Loan  Banks);  and  instruments  that are
supported solely by the credit of the instrumentality  (such as Federal National
Mortgage  Association  ("FNMA" or "Fannie  Mae") and Federal Home Loan  Mortgage
Corporation ("FHLMC" or "Freddie Mac")).

Investments in American, European, Global and International Depository Receipts.
The Funds may invest in non-US  securities  in the form of  American  Depository
Receipts ("ADRs"),  European  Depository  Receipts  ("EDRs"),  Global Depository
Receipts  ("GDRs"),  or International  Depository  Receipts  ("IDRs").  ADRs are
receipts typically issued by a US bank or trust company which evidence ownership
of  underlying  securities  issued by a foreign  corporation.  EDRs and IDRs are
receipts  issued in Europe  typically by non-US banking and trust companies that
evidence ownership of either foreign or US securities.  GDRs are receipts issued
by  either  a US or  non-US  banking  institution  evidencing  ownership  of the
underlying non-US securities.  Generally, ADRs, in registered form, are designed
for use in US securities  markets and EDRs,  GDRs and IDRs, in bearer form,  are
designed for use in European and international  securities markets. An ADR, EDR,
GDR or IDR may be denominated in a currency different from the currency in which
the underlying foreign security is denominated.

Zero Coupon Securities and Deferred Interest Bonds. The Funds may invest in zero
coupon securities and deferred interest bonds. Zero coupon and deferred interest
bonds are debt obligations which are issued at a significant  discount from face
value. The original discount approximates the total amount of interest the bonds
will accrue and compound  over the period until  maturity or the first  interest
accrual date at a rate of interest reflecting the market rate of the security at
the time of issuance. Zero coupon securities are redeemed at face value at their
maturity date without interim cash payments of interest or principal. The amount
of this  discount  is accrued  over the life of the  security,  and the  accrual
constitutes  the  income  earned on the  security  for both  accounting  and tax
purposes. Because of these features, the market prices of zero coupon securities
are generally  more  volatile  than the market  prices of  securities  that have
similar maturity but that pay interest periodically.

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

The  Funds  will  accrue  income  on such  investments  for  tax and  accounting
purposes, as required, which is distributable to shareholders and which, because
no  cash  is  generally  received  at the  time  of  accrual,  may  require  the
liquidation  of other  portfolio  securities to satisfy the Funds'  distribution
obligations. See "Taxes."

Repurchase Agreements. The Funds may engage in repurchase agreement transactions
with member banks of the Federal  Reserve System and certain  non-bank  dealers,
including  governmental  securities  dealers  approved  by the  Funds'  Board of
Trustees.  Under the  terms of a  typical  repurchase  agreement,  a Fund  would
acquire any underlying  security for a relatively short period (usually not more
than one week),  subject to an obligation of the seller to  repurchase,  and the
Fund to resell, the obligation at an agreed price and time, thereby  determining
the yield during the Fund's holding period.  This arrangement results in a fixed
rate of return  that is not  subject  to market  fluctuations  during the Fund's
holding period. The value of the underlying securities will be at least equal at
all times to the total amount of the repurchase obligations, including interest.
A Fund  bears a risk of loss in the event of  default  by or  bankruptcy  of the
other party to a  repurchase  agreement.  A Fund may be delayed in, or prevented
from, exercising its rights to dispose of the collateralized  securities. To the
extent  that,  in the  meantime,  the value of the  securities  repurchased  had
decreased  or  the  value  of the  securities  had  increased,  the  Fund  could
experience a loss. The


                                       11
<PAGE>

Advisor reviews the  creditworthiness  of those banks and dealers with which the
Funds enter into  repurchase  agreements  and  monitors on an ongoing  basis the
value of the  securities  subject to  repurchase  agreements to ensure that such
value is maintained at the required level. A repurchase  agreement is considered
to be a loan under the 1940 Act.

Reverse  Repurchase  Agreements.  Each Fund may borrow  funds for  temporary  or
emergency purposes, such as meeting larger than anticipated redemption requests,
and  not for  leverage,  by  among  other  things,  agreeing  to sell  portfolio
securities to financial institutions such as member banks of the Federal Reserve
System and certain  non-bank dealers and to repurchase them at a mutually agreed
date and price (a  "reverse  repurchase  agreement").  At the time a Fund enters
into a reverse repurchase agreement, it will segregate cash or liquid securities
having a value equal to the repurchase price,  including  accrued interest.  The
segregated assets will be  marked-to-market  daily and additional assets will be
segregated on any day in which the assets fall below the repurchase  price (plus
accrued interest).  A Fund's liquidity and ability to manage its assets might be
affected  when  it sets  aside  cash  or  portfolio  securities  to  cover  such
commitments.  Reverse  repurchase  agreements  involve  the risk that the market
value of the securities sold by a Fund may decline below the repurchase price of
those  securities.  In the  event  the  buyer  of  securities  under  a  reverse
repurchase  agreement files for bankruptcy or becomes  insolvent,  such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce a Fund's obligation to repurchase the securities,  and the Fund's use of
the proceeds of the reverse  repurchase  agreement may effectively be restricted
pending such  decision.  Reverse  repurchase  agreements  are  considered  to be
borrowings by a Fund.

Mortgage Dollar Rolls. The Funds may enter into mortgage "dollar rolls" in which
a Fund sells  securities  for delivery in the current  month and  simultaneously
contracts to repurchase  substantially similar (same type, coupon and maturity),
but not  identical,  securities  on a  specified  future  date.  During the roll
period, the Fund forgoes principal and interest paid on the securities. The Fund
is compensated  by the difference  between the current sales price and the lower
forward price for the future  purchase  (often referred to as the "drop") or fee
income and by the interest  earned on the cash  proceeds of the initial  sale. A
"covered  roll"  is a  specific  type of  dollar  roll  for  which  there  is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward settlement date of the dollar roll transaction.  The Funds
may enter into both covered and uncovered  rolls. At the time a Fund enters into
a dollar roll transaction,  it will segregate cash or liquid securities having a
value not less than the repurchase price (including  accrued  interest) and will
subsequently  monitor  the  segregated  assets  to  ensure  that  its  value  is
maintained.

Illiquid Securities.  Historically, illiquid securities have included securities
subject to  contractual  or legal  restrictions  on resale because they have not
been  registered  under the 1933 Act,  securities that are otherwise not readily
marketable  and  repurchase  agreements  having a maturity  of longer than seven
days.  Securities that have not been registered  under the 1933 Act are referred
to as private  placements or restricted  securities  and are purchased  directly
from the  issuer or in the  secondary  market.  Non-publicly  traded  securities
(including Rule 144A securities,  discussed in greater detail below) may involve
a high  degree of  business  and  financial  risk and may result in  substantial
losses. These securities may be less liquid than publicly traded securities, and
it may take  longer to  liquidate  these  positions  than  would be the case for
publicly traded  securities.  Companies whose securities are not publicly traded
may not be subject to the disclosure and other investor protection  requirements
applicable to companies  whose  securities are publicly  traded.  Limitations on
resale may have an adverse effect on the marketability of portfolio  securities,
and a mutual  fund might be unable to dispose of  restricted  or other  illiquid
securities  promptly  or at  reasonable  prices  and  might  thereby  experience
difficulty  satisfying  redemptions within seven days. An investment in illiquid
securities is subject to the risk that should a Fund desire to sell any of these
securities  when a ready buyer is not  available at a price that is deemed to be
representative  of the  securities'  value,  the value of the  Fund's net assets
could be adversely affected.

Mutual funds do not typically hold a significant  amount of these  restricted or
other  illiquid  securities  because of the  potential  for delays on resale and
uncertainty  in  valuation.  A mutual  fund  might  also have to  register  such
restricted  securities  in order to dispose  of them,  resulting  in  additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

A large  institutional  market has developed for certain securities that are not
registered  under  the 1933 Act,  including  repurchase  agreements,  commercial
paper,  non-US securities,  municipal  securities and corporate bonds and notes.

                                       12
<PAGE>

Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment.  The fact that there are contractual or legal restrictions
on resale of such  investments to the general public or to certain  institutions
may not be indicative of their liquidity.


The SEC has adopted  Rule 144A,  which  allows a broader  institutional  trading
market for  securities  otherwise  subject to restriction on their resale to the
general  public.  Rule 144A  establishes a "safe  harbor" from the  registration
requirements  of the 1933 Act for  resales of certain  securities  to  qualified
institutional buyers ("Rule 144A Securities").  The Advisor anticipates that the
market for certain restricted securities such as institutional  commercial paper
will  expand  further  as a result of this  regulation  and the  development  of
automated  systems for the trading,  clearance and  settlement  of  unregistered
securities of domestic and non-US issuers,  such as the PORTAL System  sponsored
by the Financial Industry Regulatory Authority ("FINRA").


An investment in Rule 144A Securities will be considered  illiquid and therefore
subject to a Fund's  limit on the  purchase  of illiquid  securities  unless the
Board  determines or its delegates  determine that the Rule 144A  Securities are
liquid.  In  reaching  liquidity  decisions,  the  Board and its  delegates  may
consider,  inter alia, the following factors: (i) the unregistered nature of the
security;  (ii) the frequency of trades and quotes for the  security;  (iii) the
number of dealers  wishing to  purchase or sell the  security  and the number of
other  potential  purchasers;  (iv) dealer  undertakings to make a market in the
security;  and (v) the nature of the security and the nature of the  marketplace
trades  (e.g.,  the time  needed  to  dispose  of the  security,  the  method of
soliciting offers and the mechanics of the transfer).

Investing in Rule 144A Securities  could have the effect of increasing the level
of illiquidity in a Fund to the extent that qualified  institutional  buyers are
unavailable or  uninterested  in purchasing  such  securities from the Fund. The
Board has adopted  guidelines and delegated to the Advisor the daily function of
determining and monitoring the liquidity of Rule 144A  Securities,  although the
Board will retain ultimate responsibility for any liquidity determinations.

When-Issued and Delayed Delivery  Securities.  The Funds may purchase securities
on a when-issued or delayed  delivery  basis.  Delivery of and payment for these
securities  can  take  place a month  or more  after  the  date of the  purchase
commitment.  The payment  obligation and the interest rate that will be received
on when-issued and delayed  delivery  securities are fixed at the time the buyer
enters  into the  commitment.  Due to  fluctuations  in the value of  securities
purchased  or sold on a  when-issued  or  delayed  delivery  basis,  the  yields
obtained on such securities may be higher or lower than the yields  available in
the market on the dates  when the  investments  are  actually  delivered  to the
buyers.  When-issued securities may include securities purchased on a "when, as,
and if-issued"  basis,  under which the issuance of the security  depends on the
occurrence  of a  subsequent  event,  such as  approval  of a merger,  corporate
reorganization or debt restructuring. The value of such securities is subject to
market  fluctuation during this period and no interest or income, as applicable,
accrues to a Fund until settlement takes place.


At the time  when a Fund  makes  the  commitment  to  purchase  securities  on a
when-issued or delayed delivery basis, it will record the  transaction,  reflect
the value each day of such securities in determining its net asset value and, if
applicable,  calculate  the maturity for the purposes of average  maturity  from
that date.  At the time of  settlement a  when-issued  security may be valued at
less than the purchase price. To facilitate such acquisition,  a Fund identifies
on its  books  cash or  liquid  assets  in an  amount  at  least  equal  to such
commitments.  It may be expected that the Fund's net assets will  fluctuate to a
greater  degree when it sets aside  portfolio  securities to cover such purchase
commitments   than  when  it  sets  aside  cash.  On  delivery  dates  for  such
transactions, the Fund will meet its obligations from maturities or sales of the
segregated securities and/or from cash flow. If a Fund chooses to dispose of the
right to acquire a when-issued  security prior to its acquisition,  it could, as
with the disposition of any other portfolio obligation, incur a gain or loss due
to market  fluctuation.  It is the current policy of the Funds not to enter into
when-issued  commitments  exceeding in the  aggregate 15% for DWS Mid Cap Growth
Fund and DWS  Small Cap  Growth  Fund and 33 1/3% for DWS Micro Cap Fund in each
case,  of  the  market  value  of  the  applicable  Fund's  total  assets,  less
liabilities other than the obligations created by when-issued commitments.  When
a Fund engages in when-issued or delayed-delivery transactions, it relies on the
other party to consummate  the trade.


                                       13
<PAGE>

Failure  of the seller to do so may  result in the  Fund's  incurring  a loss or
missing an opportunity to obtain a price considered to be advantageous.

Lending  of  Portfolio  Securities.  DWS Mid Cap  Growth  Fund and DWS Small Cap
Growth  Fund may each  lend up to 30% and DWS  Micro  Cap Fund may lend up to 33
1/3% of the  total  value of their  respective  portfolio  securities  (taken at
market value) to approved institutional  borrowers who need to borrow securities
in order  to  complete  certain  transactions,  such as  covering  short  sales,
avoiding failures to deliver securities or completing arbitrage  operations.  By
lending  its  investment  securities,  a  Fund  attempts  to  increase  its  net
investment  income through the receipt of interest on the loan. Any gain or loss
in the market price of the securities loaned that might occur during the term of
the loan would belong to the Fund. Each Fund may lend its investment  securities
so long as the  terms,  structure  and  aggregate  amount of such  loans are not
inconsistent  with the 1940 Act or the rules and regulations or  interpretations
of the SEC thereunder,  which currently require that (a) the borrower pledge and
maintain  with the Fund  collateral  consisting of liquid,  unencumbered  assets
having a value at all times of not less than 100% of the value of the securities
loaned,  (b) the  borrower  add to such  collateral  whenever  the  price of the
securities  loaned  rises (i.e.,  the borrower  "marks to the market" on a daily
basis), (c) the loan be made subject to termination by the Fund at any time, and
(d) the Fund  receive  reasonable  interest  on the loan  (which may include the
Fund's   investing   any  cash   collateral   in   interest-bearing   short-term
investments),  distributions on the loaned  securities and any increase in their
market value.  There may be risks of delay in recovery of the securities or even
loss of rights in the  collateral  should the  borrower of the  securities  fail
financially.  However,  loans  will be made only to  borrowers  selected  by the
Fund's  delegate  after a commercially  reasonable  review of relevant facts and
circumstances, including the creditworthiness of the borrower.


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

Payments  received  by a Fund  in  lieu  of any  dividends  paid  on the  loaned
securities  will not be treated as "qualified  dividend  income" for purposes of
determining what portion of the Fund's dividends  received by individuals may be
taxed at the rates generally applicable to long-term capital gains. See "Taxes."


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

Investment Company Securities. A Fund may acquire securities of other investment
companies to the extent consistent with its investment  objective and subject to
the limitations of the 1940 Act. A Fund will  indirectly bear its  proportionate
share of any management  fees and other  expenses paid by such other  investment
companies.


For example,  a Fund may invest in a variety of investment  companies which seek
to track the  composition  and  performance  of  specific  indexes or a specific
portion of an index.  These  index-based  investments hold  substantially all of
their assets in securities representing their specific index.  Accordingly,  the
main risk of investing in index-based  investments is the same as investing in a
portfolio  of equity  securities  comprising  the index.  The  market  prices of
index-based  investments  will fluctuate in accordance  with both changes in the
market  value of their  underlying  portfolio  securities  and due to supply and
demand for the  instruments on the exchanges on which they are traded (which may
result in their  trading at a discount  or premium to their  NAVs).  Index-based
investments  may not replicate  exactly the performance of their specified index
because of  transaction  costs and because of the  temporary  unavailability  of
certain component securities of the index.

                                       14
<PAGE>

Examples of index-based investments include:

SPDRs(R):  SPDRs,  an acronym for "Standard & Poor's  Depositary  Receipts," are
based on the S&P 500  Composite  Stock Price Index.  They are issued by the SPDR
Trust,  a unit  investment  trust that  holds  shares of  substantially  all the
companies  in the S&P 500 in  substantially  the  same  weighting  and  seeks to
closely track the price performance and dividend yield of the Index.

MidCap  SPDRs(R):  MidCap SPDRs are based on the S&P MidCap 400 Index.  They are
issued by the MidCap SPDR Trust, a unit investment  trust that holds a portfolio
of securities  consisting of  substantially  all of the common stocks in the S&P
MidCap 400 Index in substantially  the same weighting and seeks to closely track
the price performance and dividend yield of the Index.

Select Sector SPDRs(R):  Select Sector SPDRs are based on a particular sector or
group of  industries  that are  represented  by a specified  Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end  management  investment  company with nine
portfolios  that each seeks to closely track the price  performance and dividend
yield of a particular Select Sector Index.

DIAMONDS(SM):  DIAMONDS are based on the Dow Jones Industrial Average(SM).  They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.

Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq-100 Index. They are
issued by the Nasdaq-100  Trust, a unit investment  trust that holds a portfolio
consisting of substantially  all of the securities,  in  substantially  the same
weighting,  as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.




Derivative Securities -- DWS Mid Cap Growth Fund and DWS Small Cap Growth Fund


General.  Each Fund may invest in various instruments that are commonly known as
"derivatives." Generally, a derivative is a financial arrangement,  the value of
which is based on, or "derived"  from, a traditional  security,  asset or market
index.  Some  derivatives,  such  as  mortgage-related  and  other  asset-backed
securities, are in many respects like any other investment, although they may be
more volatile and/or less liquid than more traditional  debt


                                       15
<PAGE>

securities.  There are, in fact,  many different  types of derivatives  and many
different  ways to use them.  There is a range of risks  associated  with  those
uses.  For example,  a Fund may use futures and options as a low-cost  method of
gaining exposure to a particular securities market without investing directly in
those  securities;  for traditional  hedging  purposes to attempt to protect the
Fund from exposure to changing  interest  rates,  securities  prices or currency
exchange rates; and for cash management or other investment purposes. The use of
derivatives  may result in  leverage,  which  tends to magnify the effects of an
instrument's  price changes as market conditions  change.  Leverage involves the
use of a small amount of money to control a large amount of financial assets and
can, in some circumstances, lead to significant losses. Each Fund will limit the
leverage created by its use of derivatives for investment purposes by "covering"
such  positions  as required by the SEC.  The  Advisor  may use  derivatives  in
circumstances  where the  Advisor  believes  they offer an  economical  means of
gaining  exposure to a particular  asset class.  Derivatives will not be used to
increase  portfolio  risk  above the level  that  could be  achieved  using only
traditional investment securities or to acquire exposure to changes in the value
of assets or indexes that by themselves  would not be purchased for a Fund.  The
use of derivatives for non-hedging purposes may be considered speculative.

Each  Fund's  investment  in options,  futures,  forward  contracts  and similar
strategies  depend  on the  Advisor's  judgment  as to the  potential  risks and
rewards of different  types of  strategies.  Options and futures can be volatile
investments,  and may not perform as expected. If the Advisor applies a hedge at
an inappropriate  time or judges price trends  incorrectly,  options and futures
strategies may lower a Fund's return. A Fund could also experience losses if the
prices of its options  and futures  positions  were poorly  correlated  with its
other  investments,  or if it could not close out its  positions  because  of an
illiquid  secondary  market.  Options  and futures  traded on foreign  exchanges
generally are not regulated by US  authorities  and may offer less liquidity and
less  protection  to a Fund in the event of  default  by the other  party to the
contract.

Options on  Securities.  Each Fund may  purchase  and write  (sell) put and call
options on stocks.  A call option gives the purchaser of the option the right to
buy, and  obligates  the writer to sell,  the  underlying  stock at the exercise
price at any time during the option  period.  Similarly,  a put option gives the
purchaser of the option the right to sell,  and obligates the writer to buy, the
underlying stock at the exercise price at any time during the option period.

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

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

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

A put option written by a Fund is "covered"  when,  among other things,  cash or
liquid securities acceptable to the broker are placed in a segregated account to
fulfill the obligations undertaken.  When a Fund writes a covered put option, it
gives the purchaser of the option the right to sell the  underlying  security to
the Fund at the specified


                                       16
<PAGE>

exercise  price at any time  during the  option  period.  If the option  expires
unexercised,  the Fund  will  realize  income in the  amount of the net  premium
received for writing the option. If the put option is exercised, a decision over
which the Fund has no control,  the Fund must purchase the  underlying  security
from the option holder at the exercise  price.  By writing a covered put option,
the Fund,  in  exchange  for the net  premium  received,  accepts  the risk of a
decline in the market value of the underlying security below the exercise price.
A  Fund  will  only  write  put  options   involving   securities  for  which  a
determination  is made at the time the option is written that the Fund wishes to
acquire the securities at the exercise price.

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

When a Fund writes an option, an amount equal to the net premium received by the
Fund is included in the liability  section of the Fund's Statement of Assets and
Liabilities  as a deferred  credit.  The amount of the  deferred  credit will be
subsequently  marked to market to reflect the current market value of the option
written.  The current market value of a traded option is the last sale price or,
in the absence of a sale,  the mean between the closing bid and asked price.  If
an option expires on its stipulated  expiration  date or if a Fund enters into a
closing purchase transaction,  the Fund will realize a gain (or loss if the cost
of the closing purchase transaction exceeds the premium received when the option
was sold), and the deferred credit related to such option will be eliminated. If
a call option is  exercised,  the Fund will realize a gain or loss from the sale
of the  underlying  security,  and the proceeds of the sale will be increased by
the premium  originally  received.  The writing of covered  call  options may be
deemed to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be identified on
a Fund's books.

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

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

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

Each  Fund may also  engage  in  options  transactions  in the OTC  market  with
broker-dealers  who make markets in these options.  The ability to terminate OTC
option  positions  is more limited than with  exchange-traded  option


                                       17
<PAGE>

positions because the predominant  market is the issuing broker,  rather than an
exchange, and OTC options may involve the risk that broker-dealers participating
in such transactions will not fulfill their obligations.  To reduce this risk, a
Fund will  purchase  such  options only from  broker-dealers  who are primary US
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are  expected  to be capable  of)  entering  into  closing
transactions,  although  there can be no guarantee  that any such option will be
liquidated at a favorable  price prior to  expiration.  The Advisor will monitor
the  creditworthiness  of  dealers  with whom a Fund  enters  into such  options
transactions  under the general  supervision  of the Fund's  Board of  Trustees.
Unless the Trustees conclude  otherwise,  each Fund intends to treat OTC options
purchased  and the assets  used to "cover"  OTC  options  written as not readily
marketable and therefore  subject to the Fund's limit on investments in illiquid
securities.

Options  on  Securities   Indices.   Each  Fund  may  also  purchase  and  write
exchange-listed  and OTC put  and  call  options  on US and  foreign  securities
indices.  A  securities  index  measures  the  movement  of a  certain  group of
securities by assigning relative values to the securities included in the index,
fluctuating  with  changes  in  the  market  values  of  such  securities.  Some
securities  index  options are based on a broad market  index,  such as the NYSE
Composite  Index, or a narrower market index,  such as the S&P 100.  Indices may
also be based on a particular industry or market segment.

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

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

As discussed in "Options on Securities,"  each Fund would normally  purchase put
options in  anticipation  of a decline in the market value of the relevant index
("protective  puts").  The purchase of a put option would  entitle the Fund,  in
exchange for the premium paid, to sell the underlying  securities at a specified
price  during the option  period.  The purchase of  protective  puts is designed
merely to offset or hedge  against a decline in the  market  value of the index.
The Fund would  ordinarily  recognize a gain if the value of the index decreased
below the exercise price sufficiently to cover the premium and would recognize a
loss if the value of the index  remained at or above the exercise  price.  Gains
and losses on the purchase of protective  put options would tend to be offset by
countervailing changes in the value of the index.

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

Options on securities  indices  entail risks in addition to the risks of options
on  securities.  The absence of a liquid  secondary  market to close out options
positions  on  securities  indices  is more  likely  to occur,  although  a Fund

                                       18
<PAGE>

generally will only purchase or write such an option if the Advisor believes the
option can be closed out. Use of options on securities  indices also entails the
risk that  trading  in such  options  may be  interrupted  if trading in certain
securities  included in the index is interrupted.  A Fund will not purchase such
options unless the Advisor  believes the market is  sufficiently  developed such
that the risk of trading in such  options is no greater than the risk of trading
in options on securities.

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

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


Futures Contracts and Options on Futures Contracts - DWS Mid Cap Growth Fund and
DWS Small Cap Growth Fund


General.  Each Fund may enter into futures  contracts on securities,  securities
indices,  foreign  currencies and interest rates,  and purchase and write (sell)
options  thereon  which are  traded on  exchanges  designated  by the  Commodity
Futures Trading Commission (the "CFTC") or, if consistent with CFTC regulations,
on foreign exchanges. These futures contracts are standardized contracts for the
future  delivery of, among other  things,  a commodity,  a non-US  currency,  an
interest rate sensitive  security or, in the case of index futures  contracts or
certain other futures contracts, a cash settlement with reference to a specified
multiplier  times the change in the index. An option on a futures contract gives
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract.

Each Fund may enter into futures  contracts and options on futures  contracts on
securities,  securities  indices and  currencies  both to manage its exposure to
changing  interest rates,  security prices and currency exchange rates and as an
efficient means of managing allocations between asset classes.

The  successful  use of futures  contracts  and options  thereon  draws upon the
Advisor's skill and experience  with respect to such  instruments and is subject
to special risk  considerations.  A liquid  secondary  market for any futures or
options  contract  may not be  available  when a futures or options  position is
sought to be closed. In addition,  there may be an imperfect correlation between
movements in the market value of the securities or currency held by the Fund and
the prices of the  futures  and  options.  Successful  use of futures or options
contracts is further  dependent on the  Advisor's  ability to predict  correctly
movements in the securities or foreign  currency markets and no assurance can be
given that its judgment will be correct.

Futures  Contracts.  Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future.  US futures  contracts  have been designed by exchanges that have
been designated  "contracts markets" by the CFTC, and must be executed through a
futures  commission  merchant,  or  brokerage  firm,  which is a  member  of the
relevant  contract  market.  Futures  contracts  trade on a number  of  exchange
markets,  and,  through their  clearing  corporations,  the exchanges  guarantee
performance  of the  contracts as between the clearing  members of the exchange.
Each Fund may enter into contracts for the purchase or sale for future  delivery
of fixed-income securities,  foreign currencies, or financial indices, including
any  index  of  US  government  securities,  foreign  government  securities  or
corporate debt securities.  Each Fund may enter into futures contracts which are
based on debt  securities that are backed by the full faith and credit of the US
government,  such as long-term US Treasury Bonds, Treasury Notes and US Treasury
Bills.  The Fund may also enter into futures  contracts which are based on bonds
issued by governments other than the US government. Futures contracts on foreign
currencies  may be used to hedge  against  securities  that are  denominated  in
foreign currencies.

                                       19
<PAGE>

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

At the time of delivery of securities  pursuant to such a contract,  adjustments
are  made to  recognize  differences  in value  arising  from  the  delivery  of
securities  with a different  interest rate from that specified in the contract.
In some, but not many,  cases,  securities  called for by a futures contract may
not have been issued when the contract was written.

Although futures  contracts (other than those that settle in cash, such as index
futures)  by their  terms call for the actual  delivery  or  acquisition  of the
instrument underlying the contract, in most cases the contractual  obligation is
fulfilled by offset  before the date of the contract  without a Fund's having to
make or take delivery of the instrument underlying the contract.  The offsetting
of a  contractual  obligation  is  accomplished  by  entering  into an  opposite
position in an identical  futures contract on the commodities  exchange on which
the  futures  contract  was  entered  into (or a linked  exchange)  calling  for
delivery  in the same month.  Such a  transaction,  which is effected  through a
member of an exchange,  cancels the  obligation  to make or take delivery of the
instrument underlying the contract. Since all transactions in the futures market
are made,  offset or  fulfilled  through a clearing  house  associated  with the
exchange on which the contracts  are traded,  a Fund will incur  brokerage  fees
when it enters into futures contracts.

The purpose of the acquisition or sale of a futures  contract,  in cases where a
Fund  holds or  intends to  acquire  fixed-income  securities,  is to attempt to
protect the Fund from fluctuations in interest or foreign exchange rates without
actually buying or selling  fixed-income  securities or foreign currencies.  For
example, if interest rates were expected to increase (which thus would cause the
prices of debt securities to decline), a Fund might enter into futures contracts
for the sale of debt securities.  Such a sale would have much the same effect as
selling an equivalent  value of the debt securities owned by a Fund. If interest
rates did increase,  the value of the debt  security in the Fund would  decline,
but  the  value  of  the  futures  contracts  to  the  Fund  would  increase  at
approximately  the same rate,  thereby  keeping  the net asset value of the Fund
from  declining  as much as it  otherwise  would have.  A Fund could  accomplish
similar  results by selling debt  securities  and  investing in bonds with short
maturities  when  interest  rates are expected to increase.  However,  since the
futures market is more liquid than the cash market, the use of futures contracts
as an  investment  technique  allows a Fund to  maintain  a  defensive  position
without having to sell its portfolio securities.

Similarly,  when it is expected that interest rates may decline (thus increasing
the value of debt securities),  futures contracts may be purchased to attempt to
hedge against anticipated  purchases of debt securities at higher prices.  Since
the fluctuations in the value of futures contracts should be similar to those of
debt  securities,  a Fund could take  advantage of the  anticipated  rise in the
value of debt  securities  without  actually  buying  them  until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could  then buy  debt  securities  on the cash  market.  The  segregated  assets
maintained to cover a Fund's  obligations with respect to such futures contracts
will  consist of cash or liquid  securities  acceptable  to the broker  from the
Fund's  portfolio in an amount equal to the difference  between the  fluctuating
market value of such futures  contracts and the  aggregate  value of the initial
and  variation  margin  payments  made by the Fund with  respect to such futures
contracts.

The  ordinary  spreads  between  prices in the cash and futures  market,  due to
differences in the nature of those markets,  are subject to distortions.  First,
all  participants  in the  futures  market are  subject to initial  deposit  and
variation margin  requirements.  Rather than meeting additional variation margin
requirements,   investors  may  close  futures  contracts   through   offsetting
transactions,  which could distort the normal relationship  between the cash and
futures  markets.  Second,  the liquidity of the futures  market depends on most
participants' entering into offsetting transactions rather than making or taking
delivery.  To the extent that many participants decide to make or take delivery,
liquidity in the futures  market could be reduced,  thus  producing  distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin  requirements  in the securities
market. Therefore,  increased participation by speculators in the futures market
may cause temporary price distortions.  Due to the possibility of distortion,  a
correct forecast of securities price, general interest rate or currency exchange
rate trends by the Advisor may still not result in a successful transaction.

                                       20
<PAGE>

In addition,  futures contracts entail significant  risks.  Although the Advisor
believes  that use of such  contracts  will  benefit  a Fund,  if the  Advisor's
investment judgment about the general direction of interest rates or an index is
incorrect,  the Fund's  overall  performance  would be poorer than if it had not
entered into any such  contract.  For example,  if a Fund has hedged against the
possibility  of an increase  in  interest  rates or a decrease in an index which
would  adversely  affect  the  value of  securities  held in its  portfolio  and
interest rates decrease or securities  prices  increase  instead,  the Fund will
lose part or all of the benefit of the increased  value of its securities  which
it has hedged because it will have offsetting  losses in its futures  positions.
In addition, in such situations,  if the Fund has insufficient cash, it may have
to  sell  securities   from  its  portfolio  to  meet  daily  variation   margin
requirements.  Such sales of securities may be, but will not  necessarily be, at
increased  prices  which  reflect the rising  market.  The Fund may have to sell
securities at a time when it may be disadvantageous to do so.

Options on Futures Contracts. Each Fund may purchase and write (sell) options on
futures  contracts for hedging  purposes.  For example,  as with the purchase of
futures  contracts,  when a Fund is not fully  invested,  it may purchase a call
option  on an  interest-rate-sensitive  futures  contract  to  hedge  against  a
potential price increase on debt securities due to declining interest rates.

The purchase of a call option on a futures  contract is similar in some respects
to the purchase of a call option on an index or individual  security.  Depending
on the  pricing  of the  option  compared  to either  the  price of the  futures
contract upon which it is based or the price of the underlying debt  securities,
it may or may not be less  risky  than  ownership  of the  futures  contract  or
underlying debt securities.

The  writing of a call option on a futures  contract  may  constitute  a partial
hedge against declining prices of the underlying  portfolio securities which are
the  same  as or  correlate  with  the  security  or  foreign  currency  that is
deliverable  upon  exercise of the  futures  contract.  If the futures  price at
expiration  of the option is below the price  specified in the premium  received
for writing the option ("exercise price"), a Fund will retain the full amount of
the  net  premium  (the  premium  received  for  writing  the  option  less  any
commission),  which  provides a partial  hedge against any decline that may have
occurred in the Fund's holdings.

The  writing of a put  option on an index  futures  contract  may  constitute  a
partial hedge against increasing prices of the underlying  securities or foreign
currency  that are  deliverable  upon exercise of the futures  contract.  If the
futures price at expiration of the option is higher than the exercise  price,  a
Fund will retain the full  amount of the option net  premium,  which  provides a
partial  hedge  against any  increase in the price of  securities  that the Fund
intends to purchase.

If a put or call option a Fund has written is  exercised,  the Fund will incur a
loss  that  will be  reduced  by the  amount  of the net  premium  it  receives.
Depending  on the  degree of  correlation  between  changes  in the value of its
portfolio  securities  and  changes in the value of its futures  positions,  the
Fund's losses from existing  options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.

The  purchase of a call or put option on a futures  contract  with respect to an
index is similar in some  respects to the purchase of a call or  protective  put
option on an index.  For  example,  a Fund may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The  amount  of risk a Fund  assumes  when it  purchases  an option on a futures
contract  with  respect  to an index is the  premium  paid for the  option  plus
related transaction costs. In addition to the correlation risks discussed above,
the  purchase of such an option also  entails the risk that changes in the value
of the underlying  futures  contract will not be fully reflected in the value of
the option purchased.

Futures Contracts on Securities  Indices.  Each Fund may also enter into futures
contracts  providing for the making and  acceptance of a cash  settlement  based
upon  changes  in  the  value  of an  index  of US or  non-US  securities.  This
investment  technique may be used as a low-cost method of gaining  exposure to a
particular securities market without investing directly in those securities,  to
hedge against anticipated future changes in general market prices that otherwise
might  either  adversely  affect  the  value  of  securities  held  by a Fund or
adversely  affect the prices of securities which are intended to be purchased at
a later date for a Fund, or as an efficient means of managing


                                       21
<PAGE>

allocation between asset classes. A futures contract may also be entered into to
close out or offset an existing futures position.

When used for hedging  purposes,  each futures  contract on a  securities  index
transaction  involves the establishment of a position which the Advisor believes
will move in a direction  opposite to that of the  investment  being hedged.  If
these hedging  transactions are successful,  the futures positions taken for the
Fund will rise in value by an amount which approximately  offsets the decline in
value of the  portion  of a Fund's  investments  that are being  hedged.  Should
general  market  prices  move in an  unexpected  manner,  the  full  anticipated
benefits of futures contracts may not be achieved or a loss may be realized.

Currency  Exchange  Contracts.  Because  each  Fund may buy and sell  securities
denominated  in  currencies  other than the US dollar and may receive  interest,
dividends and sale proceeds in currencies  other than the US dollar, a Fund from
time to time may enter into  currency  exchange  transactions  to convert to and
from different foreign  currencies and to convert foreign currencies to and from
the US dollar.  A Fund either  enters into these  transactions  on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency  exchange market
or uses forward contracts to purchase or sell foreign currencies.

Forward Currency Exchange Contracts.  A forward currency exchange contract is an
obligation  by a Fund to purchase or sell a specific  currency at a future date,
which may be any fixed  number  of days from the date of the  contract.  Forward
currency exchange  contracts  establish an exchange rate at a future date. These
contracts are transferable in the interbank  market  conducted  directly between
currency  traders  (usually large  commercial  banks and  brokerages)  and their
customers.  A  forward  currency  exchange  contract  may  not  have  a  deposit
requirement  and  may  be  traded  at a net  price  without  commission.  A Fund
maintains with its custodian a segregated  account of cash or liquid  securities
in an amount at least  equal to its  obligations  under  each  forward  currency
exchange  contract.  Neither spot  transactions  nor forward  currency  exchange
contracts  eliminate  fluctuations  in the prices of a Fund's  securities  or in
foreign exchange rates, or prevent loss if the prices of these securities should
decline.

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

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

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


                                       22
<PAGE>

the US  dollar  will  continue.  Thus,  at any time poor  correlation  may exist
between movements in the exchange rates of the foreign currencies underlying the
Fund's  cross-hedges  and the  movements  in the  exchange  rates of the foreign
currencies in which the Fund's assets that are the subject of such  cross-hedges
are denominated.

Options on Foreign Currencies.  Each Fund may write covered put and call options
and  purchase  put and call  options on foreign  currencies  for the  purpose of
protecting  against  declines in the dollar  value of portfolio  securities  and
against increases in the dollar cost of securities to be acquired. The Funds may
use options on currencies to cross-hedge,  which involves  writing or purchasing
options  on one  currency  to hedge  against  changes  in  exchange  rates for a
different but related  currency.  As with other types of options,  however,  the
writing of an option on foreign currency will constitute only a partial hedge up
to the amount of the premium received,  and a Fund could be required to purchase
or sell foreign currencies at disadvantageous  exchange rates, thereby incurring
losses.  The  purchase of an option on a foreign  currency  may be used to hedge
against fluctuations in exchange rates,  although, in the event of exchange rate
movements  adverse to a Fund's position,  the Fund may forfeit the entire amount
of the  premium  plus  related  transaction  costs.  In  addition  each Fund may
purchase  call  options  on a currency  when the  Advisor  anticipates  that the
currency will appreciate in value.


Each Fund may also write  options on  foreign  currencies  for the same types of
hedging purposes.  For example,  when a Fund anticipates a decline in the dollar
value of foreign currency denominated  securities due to adverse fluctuations in
exchange  rates,  it could,  instead of  purchasing  a put option,  write a call
option on the relevant currency. If the expected decline occurs, the option will
most  likely  not be  exercised,  and  the  diminution  in  value  of  portfolio
securities will be offset by the amount of the premium received.


Similarly,  instead of purchasing a call option to hedge against an  anticipated
increase in the dollar cost of securities  to be acquired,  a Fund could write a
put  option  on the  relevant  currency  which,  if  rates  move  in the  manner
projected,  will expire  unexercised  and allow the Fund to hedge such increased
cost up to the amount of the premium.  As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the  premium,  and only if rates move in the  expected
direction.  If this does not occur,  the option  may be  exercised  and the Fund
would be required to  purchase or sell the  underlying  currency at a loss which
may not be offset by the amount of the  premium.  Through the writing of options
on foreign currencies,  a Fund also may be required to forgo all or a portion of
the benefits which might  otherwise have been obtained from favorable  movements
in exchange rates.


Each Fund may write  covered call options on foreign  currencies.  A call option
written  on a  foreign  currency  by a Fund is  "covered"  if the Fund  owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for  additional  cash  consideration   identified  on  the  Fund's  books)  upon
conversion or exchange of other foreign  currency held in its portfolio.  A call
option is also covered if a Fund has a call on the same foreign  currency and in
the same  principal  amount as the call written where the exercise  price of the
call held (a) is equal to or less than the exercise price of the call written or
(b) is greater than the exercise  price of the call written if the difference is
segregated by the Fund in cash or liquid securities.

Each Fund also may write call options on foreign currencies that are not covered
for  cross-hedging  purposes.  A  call  option  on a  foreign  currency  is  for
cross-hedging  purposes if it is not covered, but is instead designed to provide
a hedge  against a decline in the US dollar  value of a security  which the Fund
owns or has the  right to  acquire  and  which is  denominated  in the  currency
underlying  the option,  due to an adverse  change in the exchange rate. In such
circumstances,  the Fund collateralizes the option by segregating cash or liquid
securities  in an  amount  not less  than the  value of the  underlying  foreign
currency in US dollars marked to market daily.


There  is no  assurance  that a  liquid  secondary  market  will  exist  for any
particular  option,  or at any particular  time. If a Fund is unable to effect a
closing purchase transaction with respect to covered options it has written, the
Fund will not be able to sell the underlying  currency or dispose of assets held
in a segregated account until the options expire or are exercised. Similarly, if
a Fund is unable to effect a closing sale transaction with respect to options it
has  purchased,  it will have to  exercise  the  options in order to realize any
profit and will incur  transaction costs upon the purchase or sale of underlying
currency. Each Fund pays brokerage commissions or spreads in connection with its
options transactions.

                                       23
<PAGE>

As in the case of forward  contracts,  certain options on foreign currencies are
traded  over-the-counter and involve liquidity and credit risks which may not be
present in the case of exchange-traded  currency options. In some circumstances,
a Fund's  ability  to  terminate  OTC  options  may be more  limited  than  with
exchange-traded  options. It is also possible that broker-dealers  participating
in OTC  options  transactions  will not  fulfill  their  obligations.  Each Fund
intends to treat OTC  options  as not  readily  marketable  and,  therefore,  as
subject to the Fund's limitation with respect to illiquid securities.




                                       24
<PAGE>




Options on Securities,  Securities  Indices and Foreign  Currencies -- DWS Micro
Cap Fund

General.  The Fund may write  covered put and call  options and purchase put and
call options. Such options may relate to particular securities, to various stock
indices,  or to  currencies.  The Fund may write call and put options  which are
issued  by  the  OCC  or  which  are  traded  on US  and  non-US  exchanges  and
over-the-counter. These instruments may be considered derivative instruments.

Written  Options.  The Fund may write  (sell)  covered  put and call  options on
securities  and enter into related  closing  transactions.  The Fund may receive
fees  (referred  to as  "premiums")  for  granting  the rights  evidenced by the
options.  However, in return for the premium for a written call option, the Fund
assumes certain risks.  For example,  in the case of a written call option,  the
Fund forfeits the right to any appreciation in the underlying security while the
option is  outstanding.  A put option gives to its purchaser the right to compel
the Fund to  purchase  an  underlying  security  from the  option  holder at the
specified price at any time during the option period. In contrast, a call option
written by the Fund gives to its  purchaser the right to compel the Fund to sell
an  underlying  security to the option  holder at a specified  price at any time
during the option period. Upon the exercise of a put option written by the Fund,
the Fund may suffer a loss equal to the  difference  between  the price at which
the Fund is required to purchase the underlying security and its market value at
the time of the option  exercise,  less the  premium  received  for  writing the
option.  All  options  written  by the Fund are  covered.  In the case of a call
option,  this means that the Fund will own the securities  subject to the option
or an offsetting  call option as long as the written option is  outstanding,  or
will have the absolute and immediate right to acquire other  securities that are
the same as those  subject to the written  option.  In the case of a put option,
this means that the Fund will deposit cash or liquid  securities in a segregated
account with the custodian  with a value at least equal to the exercise price of
the put option.

Purchased  Options.  The  Fund  may  also  purchase  put  and  call  options  on
securities.  A put option  entitles the Fund to sell, and a call option entitles
the Fund to buy, a specified  security at a specified  price  during the term of
the option. The advantage to the purchaser of a call option is that it may hedge
against an increase in the price of


                                       25
<PAGE>

securities it ultimately  wishes to buy. The advantage to the purchaser of a put
option  is that it may  hedge  against  a  decrease  in the  price of  portfolio
securities it ultimately wishes to sell.

The Fund may enter into closing  transactions  in order to offset an open option
position  prior to exercise or  expiration by selling an option it has purchased
or by entering into an  offsetting  option.  If the Fund cannot  affect  closing
transactions,  it may  have to  retain  a  security  in its  portfolio  it would
otherwise sell, or deliver a security it would otherwise retain.

The Fund may purchase and sell options traded on US exchanges and, to the extent
permitted by law,  options traded  over-the-counter.  The Fund may also purchase
and sell  options  traded  on  recognized  foreign  exchanges.  There  can be no
assurance that a liquid secondary  market will exist for any particular  option.
OTC  options  also  involve the risk that a  counterparty  will fail to meet its
obligation under the option.

Options  on  Stock  Indices  or  Currencies.  The Fund may  purchase  and  write
exchange-listed  put and call options on stock indices to hedge against risks of
market-wide  price  movements.  A stock index measures the movement of a certain
group of stocks by assigning  relative  values to the common stocks  included in
the index.  Examples of  well-known  stock indices are the S&P 500 Index and the
Wilshire  5000  Index.  Options  on stock  indices  are  similar  to  options on
securities.  However,  because  options  on stock  indices  do not  involve  the
delivery of an underlying security,  the option represents the holder's right to
obtain  from the  writer  in cash a fixed  multiple  of the  amount by which the
exercise  price exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the  underlying  index on the exercise date. The Fund
may also purchase and write put and call options on currencies.

A call  option on a  securities  index  provides  the  holder  with the right to
receive a cash  payment  upon  exercise of the option if the market value of the
underlying index exceeds the option's exercise price.  Conversely,  a put option
on a  securities  index  provides  the  holder  with the right to receive a cash
payment upon exercise of the option if the market value of the underlying  index
is less than the  option's  exercise  price.  The  amount of any  payment to the
option holder will be equal to the  difference  between the closing price of the
index at the time of exercise and the exercise price of the option  expressed in
US dollars or a foreign currency,  times a specified multiple. A put option on a
currency gives its holder the right to sell an amount (specified in units of the
underlying  currency) of the underlying currency at the stated exercise price at
any time  prior to the  option's  expiration.  Conversely,  a call  option  on a
currency gives its holder the right to purchase an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration.

When the Fund  writes an option on a stock  index,  it will  cover the option by
depositing cash or liquid securities or a combination of both in an amount equal
to the market value of the option in a segregated account,  which will be marked
to market daily, with the Fund's custodian,  and will maintain the account while
the option is open. Alternatively, and only in the case of a written call option
on a stock index,  the Fund may cover the written option by owning an offsetting
call  option.  A call option on  currency  written by the Fund is covered if the
Fund owns an equal amount of the underlying currency.

Other   Considerations.   The  Fund  will  engage  in  OTC  options   only  with
broker-dealers  deemed  creditworthy  by the Advisor.  Closing  transactions  in
certain options are usually affected directly with the same  broker-dealer  that
effected  the  original  option  transaction.  The Fund  bears the risk that the
broker-dealer  may fail to meet its obligations.  There is no assurance that the
Fund will be able to close an unlisted option  position.  Furthermore,  unlisted
options are not subject to the protections afforded purchasers of listed options
by the OCC, which  performs the  obligations of its members who fail to do so in
connection with the purchase or sale of options.

When the Fund  purchases a put option,  the premium paid by it is recorded as an
asset of the Fund.  When the Fund writes an option,  an amount  equal to the net
premium (the premium less the commission  paid by the Fund) received by the Fund
is  included  in the  liability  section of the Fund's  statement  of assets and
liabilities as a deferred  credit.  The amount of this asset or deferred  credit
will be marked-to-market on an ongoing basis to reflect the current value of the
option  purchased or written.  The current  value of a traded option is the last
sale price or, in the  absence of a sale,  the  average of the  closing  bid and
asked prices. If an option purchased by the Fund expires  unexercised,  the Fund
realizes a loss equal to the  premium  paid.  If the Fund  enters into a closing
sale  transaction on an option  purchased by it, the Fund will realize a gain if
the premium  received by the Fund on the  closing  transaction  is more


                                       26
<PAGE>

than the premium  paid to purchase  the option,  or a loss if it is less.  If an
option written by the Fund expires on the stipulated  expiration  date or if the
Fund enters into a closing purchase transaction, it will realize a gain (or loss
if the cost of a closing purchase  transaction  exceeds the net premium received
when the option is sold), and the deferred credit related to such option will be
eliminated.  If an option written by the Fund is exercised,  the proceeds to the
Fund from the exercise will be increased by the net premium originally received,
and the Fund will realize a gain or loss.

There are several risks  associated with  transactions in options on securities,
securities   indices  and  currencies.   For  example,   there  are  significant
differences   between  the  securities   markets,   currency   markets  and  the
corresponding  options  markets  that could  result in  imperfect  correlations,
causing a given option transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded OTC or on a US or
non-US  securities  exchange,  may be  absent  for  reasons  which  include  the
following:  there may be  insufficient  trading  interest  in  certain  options;
restrictions  may be imposed by an exchange on opening  transactions  or closing
transactions or both;  trading halts,  suspensions or other  restrictions may be
imposed with respect to  particular  classes or series of options or  underlying
securities;  unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or the OCC may not at all times be
adequate to handle current trading volume;  or one or more exchanges  could, for
economic  or other  reasons,  decide  or be  compelled  at some  future  date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options)  would cease to exist,  although  outstanding  options that had been
issued by the OCC as a result of trades on that  exchange  would  continue to be
exercisable in accordance with their terms.

The hours of trading for options may not conform to the hours  during  which the
underlying  securities and currencies are traded. To the extent that the options
markets close before the markets for the underlying  securities and  currencies,
significant  price and rate movements can take place in the  underlying  markets
that cannot be  reflected in the options  markets.  The purchase of options is a
highly  specialized  activity  that  involves  investment  techniques  and risks
different from those associated with ordinary portfolio securities transactions.

The risks described above also apply to options on futures,  which are discussed
below.

Futures Contracts and  Options on Futures Contracts - DWS Micro Cap Fund

General.  When deemed advisable by the Advisor,  the Fund may enter into futures
contracts and purchase and write  options on futures  contracts to hedge against
changes in interest rates,  securities  prices or currency exchange rates or for
certain non-hedging  purposes.  The Fund may purchase and sell financial futures
contracts,  including  stock  index  futures,  and  purchase  and write  related
options.  The Fund may engage in futures and related  options  transactions  for
hedging  and  non-hedging  purposes  as  defined  in  regulations  of the  CFTC.
Transactions  in futures  contracts  and  options on futures  involve  brokerage
costs,  require  margin  deposits  and,  in the case of  contracts  and  options
obligating the Fund to purchase  securities,  require the Fund to segregate cash
or liquid securities with a value equal to the amount of the Fund's obligations.

Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell a  particular  financial  instrument  for an
agreed price during a designated  month (or to deliver the final cash settlement
price,  in the case of a contract  relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).  Futures contracts
obligate  the long or  short  holder  to take or make  delivery  of a  specified
quantity of a commodity or financial instrument,  such as a security or the cash
value of a securities  index,  during a specified  future  period at a specified
price.

When interest  rates are rising or securities  prices are falling,  the Fund can
seek to  offset a  decline  in the  value of its  current  portfolio  securities
through  the sale of  futures  contracts.  When  interest  rates are  falling or
securities  prices  are  rising,  the Fund,  through  the  purchase  of  futures
contracts,  can  attempt to secure  better  rates or prices  than might later be
available in the market when it affects anticipated purchases.

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions, which may result in a profit
or a loss.  While futures  contracts on securities will usually be liquidated in

                                       27
<PAGE>

this manner,  the Fund may instead  make,  or take,  delivery of the  underlying
securities  whenever it appears  economically  advantageous to do so. A clearing
corporation  associated  with the exchange on which  futures on  securities  are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.

Hedging  Strategies.  Hedging,  by use of futures contracts,  seeks to establish
with  more  certainty  the  effective  price  and rate of  return  on  portfolio
securities and securities  that the Fund proposes to acquire.  The Fund may, for
example,  take a "short"  position  in the  futures  market by  selling  futures
contracts in order to hedge against an  anticipated  rise in interest rates or a
decline in market  prices  that would  adversely  affect the value of the Fund's
portfolio  securities.  Such futures  contracts  may include  contracts  for the
future   delivery  of   securities   held  by  the  Fund  or   securities   with
characteristics similar to those of the Fund's portfolio securities.  If, in the
opinion of the Advisor,  there is a  sufficient  degree of  correlation  between
price trends for the Fund's portfolio  securities and futures contracts based on
other financial  instruments,  securities indices or other indices, the Fund may
also enter into such futures contracts as part of its hedging strategy. Although
under some  circumstances  prices of securities  in the Fund's  portfolio may be
more or less  volatile than prices of such futures  contracts,  the Advisor will
attempt to estimate the extent of this volatility difference based on historical
patterns and compensate for any such  differential by having the Fund enter into
a greater or lesser number of futures contracts or by attempting to achieve only
a partial hedge against price changes affecting the Fund's securities portfolio.
When hedging of this character is successful,  any  depreciation in the value of
portfolio  securities will be substantially  offset by appreciation in the value
of the futures position.  On the other hand, any  unanticipated  appreciation in
the value of the Fund's portfolio  securities would be substantially offset by a
decline in the value of the futures position.

On other  occasions,  the Fund may take a "long" position by purchasing  futures
contracts.  This  would be done,  for  example,  when the Fund  anticipates  the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable  market to be less favorable
than prices that are currently available.

Options on Futures Contracts. The acquisition of put and call options on futures
contracts will give the Fund the right (but not the  obligation) for a specified
price to sell or to purchase,  respectively,  the underlying futures contract at
any time during the option  period.  As the  purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract  generates a premium that may
partially offset a decline in the value of the Fund's assets.  By writing a call
option,  the Fund becomes  obligated,  in exchange  for the  premium,  to sell a
futures  contract  (if the option is  exercised),  which may have a value higher
than the exercise  price.  Conversely,  the writing of a put option on a futures
contract  generates a premium that may partially offset an increase in the price
of  securities  that the Fund  intends to  purchase.  However,  the Fund becomes
obligated to purchase a futures contract (if the option is exercised), which may
have a value lower than the exercise price.  Thus, the loss incurred by the Fund
in writing options on futures is potentially unlimited and may exceed the amount
of the premium  received.  The Fund will incur  transaction  costs in connection
with the writing of options on futures.

The  holder or writer of an option  on a  futures  contract  may  terminate  its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee  that such  closing  transactions  can be  affected.  The Fund's
ability to establish  and close out positions on such options will be subject to
the development and maintenance of a liquid market.

The Fund may use options on futures  contracts  solely for bona fide  hedging or
other non-hedging purposes as described below.

Other  Considerations.  The Fund has claimed an exclusion from the definition of
the term  "commodity  pool  operator"  under  the  Commodity  Exchange  Act and,
therefore,  is not subject to  registration  or  regulation  under the Commodity
Exchange  Act. The Fund will  determine  whether the price  fluctuations  in the
futures  contracts  and options on futures  used by it for hedging  purposes are
substantially related to price fluctuations in securities or instruments held by
the Fund or securities or  instruments  which it expects to purchase.  Except as
stated  below,  the  Fund's  futures  transactions  will  be  entered  into  for
traditional  hedging


                                       28
<PAGE>

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

The Fund will engage in  transactions  in futures  contracts and related options
only to the extent such transactions are consistent with the requirements of the
Code, for maintaining its qualification as a regulated  investment company.  See
"Taxes."

The Fund will be required,  in connection with transactions in futures contracts
and the writing of options on futures contracts, to make margin deposits,  which
will be held by its custodian for the benefit of the futures commission merchant
through  whom the Fund engages in such  futures and option  transactions.  These
transactions  involve brokerage costs,  require margin deposits and, in the case
of futures  contracts and options  obligating  the Fund to purchase  securities,
require the Fund to segregate cash or liquid securities in an account maintained
with its custodian to cover such contracts and options.

While  transactions  in futures  contracts  and  options  on futures  may reduce
certain risks,  such transactions  themselves entail certain other risks.  Thus,
unanticipated  changes in interest  rates or  securities  prices may result in a
poorer  overall  performance  for the Fund than if it had not  entered  into any
futures contracts or options  transactions.  The other risks associated with the
use of futures  contracts  and  options  thereon are (i)  imperfect  correlation
between the change in market  value of the  securities  held by the Fund and the
prices of the  futures and  options  and (ii) the  possible  absence of a liquid
secondary market for a futures contract or option and the resulting inability to
close a futures position prior to its maturity date.

In the  event  of an  imperfect  correlation  between  a  futures  position  and
portfolio position which is intended to be protected, the desired protection may
not be  obtained  and the Fund may be  exposed  to risk of  loss.  Investing  in
contracts  whose price  behavior  is  expected  to  resemble  that of the Fund's
underlying securities may minimize the risk of imperfect  correlation.  The Fund
will  attempt to  minimize  the risk that it will be unable to close out futures
positions by entering  into such  transactions  on a national  exchange  with an
active and liquid secondary market.

Limitations and Risks Associated with Transactions in Options, Futures Contracts
and Options on Futures Contracts -- DWS Micro Cap Fund

Options and futures  transactions  involve (1) liquidity  risk that  contractual
positions  cannot  be  easily  closed  out in the  event of  market  changes  or
generally in the absence of a liquid secondary market, (2) correlation risk that
changes in the value of hedging  positions may not match the  securities  market
fluctuations  intended  to be  hedged,  and (3)  market  risk that an  incorrect
prediction  of  securities  prices by the  Advisor may cause the Fund to perform
worse than if such  positions  had not been  taken.  The  ability  to  terminate
over-the-counter  options is more limited than with exchange-traded  options and
may  involve the risk that the  counterparty  to the option will not fulfill its
obligations. In accordance with a position taken by the SEC, the Fund will limit
its investments in illiquid securities to 15% of the Fund's net assets.

Options and futures transactions are highly specialized activities which involve
investment  techniques and risks that are different from those  associated  with
ordinary portfolio transactions.  Gains and losses on investments in options and
futures depend on the Advisor's ability to predict the direction of stock prices
and  other  economic  factors.  The  loss  that may be  incurred  by the Fund in
entering  into futures  contracts  and written  options  thereon is  potentially
unlimited. There is no assurance that  higher-than-anticipated  trading activity
or other unforeseen events might not, at times,  render certain facilities of an
options clearing entity or other entity  performing the regulatory and liquidity
functions of an options  clearing entity  inadequate,  and thereby result in the
institution  by an exchange of special  procedures  that may interfere  with the
timely execution of customers'  orders.  Most futures exchanges limit the


                                       29
<PAGE>

amount of fluctuation  permitted in a futures  contract's prices during a single
trading day. Once the limit has been reached, no further trades may be made that
day at a price  beyond  the  limit.  The price  limit  will not limit  potential
losses,  and may in fact prevent the prompt  liquidation  of futures  positions,
ultimately resulting in further losses.

There is no limit on the  percentage  of the  assets  of the Fund that may be at
risk with respect to futures  contracts  and related  options.  The Fund may not
invest more than 25% of its total  assets in purchased  protective  put options.
The Fund's  transactions  in options,  futures  contracts and options on futures
contracts may be limited by the requirements for  qualification of the Fund as a
regulated  investment  company for tax  purposes.  See "Taxes"  below.  Options,
futures contracts and options on futures contracts are derivative instruments.

Asset  Coverage - DWS Mid Cap  Growth  Fund,  DWS Small Cap Growth  Fund and DWS
Micro Cap Fund

Asset  Coverage.  Each  Fund  will  comply  with  the  segregation  or  coverage
guidelines  established by the SEC and other applicable  regulatory  bodies with
respect to certain transactions,  including (but not limited to) options written
on securities  and indexes,  currency,  interest rate and security index futures
contracts  and  options  on  those  futures  contracts,   and  forward  currency
contracts. These guidelines may, in certain instances,  require segregation by a
Fund of cash or liquid  securities  to the extent the  Fund's  obligations  with
respect to these strategies are not otherwise  covered through  ownership of the
underlying security or financial instrument,  by other portfolio positions or by
other  means  consistent  with  applicable   regulatory  policies.   Unless  the
transaction is covered,  the segregated assets must at all times equal or exceed
a Fund's obligations with respect to these strategies.  Segregated assets cannot
be sold or transferred  unless  equivalent assets are substituted in their place
or it is no  longer  necessary  to  segregate  them.  As a  result,  there  is a
possibility  that  segregation  of a large  percentage  of a Fund's assets could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.

For example,  a call option written on securities may require a Fund to hold the
securities  subject to the call (or securities  convertible  into the securities
without  additional  consideration)  or to segregate assets (as described above)
sufficient to purchase and deliver the  securities  if the call is exercised.  A
call option  written on an index may require a Fund to own portfolio  securities
that correlate with the index or to segregate  assets (as described above) equal
to the excess of the index value over the exercise  price on a current  basis. A
put  option  written  by a Fund may  require  the Fund to  segregate  assets (as
described above) equal to the exercise price. A Fund could purchase a put option
if the strike  price of that option is the same or higher than the strike  price
of a put option sold by the Fund. If a Fund holds a futures  contract,  the Fund
could purchase a put option on the same futures  contract with a strike price as
high or higher than the price of the contract  held. A Fund may enter into fully
or partially offsetting transactions so that its net position,  coupled with any
segregated  assets  (equal  to  any  remaining   obligation),   equals  its  net
obligation.  Asset coverage may be achieved by other means when  consistent with
applicable regulatory policies.

The Board of  Trustees of the Funds has adopted  the  requirement  that  futures
contracts  and  options on futures  contracts  be used as a hedge and that stock
index  futures may be used on a continual  basis to equitize cash so that a Fund
may maintain  100% equity  exposure.  The Funds are operated by persons who have
claimed an exclusion from the definition of the term  "commodity  pool operator"
under  the  Commodity  Exchange  Act  and,  therefore,  who are not  subject  to
registration or regulation under the Commodity Exchange Act.

The  use  of  options,  futures  and  foreign  currency  contracts  is a  highly
specialized  activity  which involves  investment  techniques and risks that are
different from those associated with ordinary portfolio transactions.  Gains and
losses on investments in options and futures depend on the Advisor's  ability to
predict the direction of stock prices,  interest rates,  currency  movements and
other economic factors. The loss that may be incurred by a Fund in entering into
futures contracts and written options thereon and forward currency  contracts is
potentially  unlimited.  There  is  no  assurance  that  higher-than-anticipated
trading activity or other unforeseen events might not, at times,  render certain
facilities  of an  options  clearing  entity  or  other  entity  performing  the
regulatory and liquidity functions of an options clearing entity inadequate, and
thereby  result in the  institution by an exchange of special  procedures  which
could  interfere with the timely  execution of customers'  orders.  Most futures
exchanges  limit the amount of  fluctuation  permitted  in a futures  contract's
prices during a single trading day. Once the limit has been reached,  no further
trades may be made that day at a price  beyond the limit.  The price  limit will
not limit potential  losses,  and may in fact prevent the prompt  liquidation of
futures positions,  ultimately resulting in further losses.  Options and futures

                                       30
<PAGE>

traded on foreign exchanges  generally are not regulated by US authorities,  and
may offer less  liquidity and less  protection to a Fund in the event of default
by the other party to the contract.

There is no limit on the  percentage of the assets of a Fund that may be at risk
with  respect to  futures  contracts  and  related  options or forward  currency
contracts.  A Fund may not invest more than 25% of its total assets in purchased
protective  put options.  A Fund's  transactions  in options,  forward  currency
contracts,  futures contracts and options on futures contracts may be limited by
the requirements for qualification of a Fund as a regulated  investment  company
for tax purposes.  See "Taxes."  There can be no assurance that the use of these
portfolio strategies will be successful.

The Funds' active management  techniques involve (1) liquidity risk (contractual
positions  cannot  be  easily  closed  out in the  event of  market  changes  or
generally in the absence of a liquid  secondary  market),  (2) correlation  risk
(changes in the value of hedging  positions may not match the securities  market
and foreign currency  fluctuations  intended to be hedged),  and (3) market risk
(an incorrect  prediction of securities  prices or exchange rates by the Advisor
may cause a Fund to perform worse than if such positions had not been taken). In
addition,  the  ability  to  terminate  OTC  options is more  limited  than with
exchange-traded  options and may involve the risk that the  counterparty  to the
option will not fulfill its obligations.

Other Investments and Investment  Practices - DWS Mid Cap Growth Fund, DWS Small
Cap Growth Fund and DWS Micro Cap Fund





                                       31
<PAGE>




Borrowing.  The Fund may  borrow  for  temporary  or  emergency  purposes.  This
borrowing may be  unsecured.  Among the forms of borrowing in which the Fund may
engage is entering into reverse repurchase agreements. The 1940 Act requires the
Fund to maintain  continuous  asset  coverage  (that is, total assets  including
borrowings,  less  liabilities  exclusive of  borrowings)  of 300% of the amount
borrowed.  If the asset coverage should decline below 300% as a result of market
fluctuations  or for other  reasons,  the Fund is  required  to sell some of its
portfolio  securities within three days to reduce its borrowings and restore the
300% asset coverage,  even though it may be  disadvantageous  from an investment
standpoint to sell securities at that time.  Borrowing may exaggerate the effect
on net asset  value of any  increase  or  decrease  in the  market  value of the
portfolio. Money borrowed will be subject to interest costs which may or may not
be recovered by appreciation of the securities  purchased.  The Fund also may be
required to maintain  minimum average balances in connection with such borrowing
or to pay a  commitment  or other fee to  maintain a line of  credit;  either of
these requirements would increase the cost of borrowing over the stated interest
rate. See "Investment Restrictions."

US  Dollar-Denominated  Foreign Debt  Securities.  The Fund may invest in the US
dollar-denominated  debt  securities  of  foreign  companies.  Investing  in the
securities of foreign companies involves more risks than investing in securities
of US companies.  Their value is subject to economic and political  developments
in the countries where the companies  operate and to changes in foreign currency
values.  Values may also be  affected  by foreign  tax laws,  changes in foreign
economic or monetary  policies,  exchange  control  regulations  and regulations
involving prohibitions on the repatriation of foreign currencies.

In addition, the relative performance of various countries' fixed income markets
historically   has   reflected   wide   variations   relating   to  the   unique
characteristics of each country's economy.  Year-to-year fluctuations in certain
markets have been  significant,  and negative  returns have been  experienced in
various markets from time to time.

US Dollar-Denominated Foreign Government Debt Securities. The Fund may invest in
US  dollar-denominated  foreign  government debt  securities  which include debt
obligations issued or guaranteed by national, state or provincial governments or
similar political subdivisions and quasi-governmental and supranational entities
(collectively,   "sovereign  debt  obligations").  Sovereign  debt  obligations,
especially those of developing countries,


                                       32
<PAGE>

may  involve a high  degree of risk.  The  issuer of such an  obligation  or the
governmental  authorities  that control the repayment of the  obligation  may be
unable or unwilling  to repay  principal  and interest  when due and may require
renegotiation  or  rescheduling  of debt  payments.  In addition,  prospects for
repayment of principal  and interest may depend on political as well as economic
factors.

Quasi-governmental    and   supranational    entities   include    international
organizations  designated  or  supported  by  governmental  entities  to promote
economic  reconstruction or development and international  banking  institutions
and related government  agencies.  Examples include (but are not limited to) the
International  Bank for  Reconstruction  and Development (the "World Bank"), the
Japanese  Development  Bank, the Asian  Development Bank and the  Inter-American
Development Bank. Currently, the Portfolio intends to invest only in obligations
issued  or  guaranteed  by  the  Asian  Development  Bank,  the   Inter-American
Development  Bank,  the World Bank, the African  Development  Bank, the European
Coal  and  Steel  Community,  the  European  Economic  Community,  the  European
Investment Bank and the Nordic Investment Bank.  Foreign  government  securities
also include mortgage-related securities issued or guaranteed by national, state
or  provincial  governmental  instrumentalities,   including  quasi-governmental
agencies.

Restricted  Securities.  The Fund may invest to a limited  extent in  restricted
securities.  Restricted securities are securities that may not be sold freely to
the public  without  prior  registration  under  federal  securities  laws or an
exemption from registration.  Restricted  securities will be considered illiquid
unless  they  are   restricted   securities   offered  and  sold  to  "qualified
institutional  buyers"  under  Rule  144A  under  the 1933 Act and the  Board of
Trustees  determines that these securities are liquid based upon a review of the
trading markets for the specific securities.

Temporary Defensive Investments. For temporary defensive purposes during periods
when the Advisor determines that conditions  warrant,  the Fund may invest up to
100% of its assets in cash and money market  instruments,  including  securities
issued or guaranteed by the US  Government,  its agencies or  instrumentalities;
certificates of deposit, time deposits, and bankers' acceptances issued by banks
or savings and loans associations  having net assets of at least $500 million as
of the end of their most recent fiscal year;  commercial paper rated at the time
of purchase at least A-1 by S&P or P-1 by Moody's,  or unrated  commercial paper
determined by the Advisor to be of  comparable  quality;  repurchase  agreements
involving any of the foregoing;  and, to the extent permitted by applicable law,
shares  of  other  investment   companies   investing  solely  in  money  market
instruments.

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

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

US commercial  banks  organized under federal law are supervised and examined by
the  Comptroller  of the  Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal  Deposit  Insurance  Corporation
(the "FDIC").  US banks organized under state law are supervised and examined by
state banking  authorities but are members of the Federal Reserve System only if
they elect to join.  Most state  banks are  insured by the FDIC  (although  such
insurance  may not be of  material  benefit  to the  Fund,  depending  upon  the
principal  amount  of CDs of each bank  held by the  Fund)  and are  subject  to
federal examination and to a substantial body of federal law and regulation.  As
a result of  governmental  regulations,  US  branches  of US banks,  among other
things,


                                       33
<PAGE>

generally are required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial soundness.  US
savings and loan  associations,  the CDs of which may be  purchased by the Fund,
are supervised  and subject to examination by the Office of Thrift  Supervision.
US  savings  and  loan  associations  are  insured  by the  Savings  Association
Insurance  Fund,  which is administered by the FDIC and backed by the full faith
and credit of the US Government.

Investment of Uninvested  Cash  Balances.  Each Fund may have cash balances that
have not been invested in portfolio securities  ("Uninvested Cash").  Uninvested
Cash may result  from a variety of  sources,  including  dividends  or  interest
received from portfolio securities, unsettled securities transactions,  reserves
held for  investment  strategy  purposes,  scheduled  maturity  of  investments,
liquidation of investment securities to meet anticipated redemptions or dividend
payments, and new cash received from investors.  Uninvested Cash may be invested
directly in money  market  instruments  or other  short-term  debt  obligations.
Pursuant to an exemptive order issued by the SEC, a Fund may use Uninvested Cash
to purchase  shares of affiliated  funds,  including  money market funds and the
Cash  Management  QP  Trust,  or  entities  for  which  the  Advisor  may act as
investment  advisor  now  or in the  future  that  operate  as  cash  management
investment  vehicles  but are  excluded  from the  definition  of an  investment
company  pursuant to Section  3(c)(1) or 3(c)(7) of the 1940 Act  (collectively,
the "Central  Funds") in excess of the  limitations  of Section  12(d)(1) of the
1940 Act.  Investment  by a Fund in shares of the Central Funds will comply with
Rule 2a-7 under the 1940 Act and will be in accordance with a Fund's  investment
policies and restrictions.

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


The  following  is a chart of the various  types of  securities  and  investment
strategies  employed  by the Funds.  Unless  otherwise  indicated,  each Fund is
permitted, but not obligated, to pursue any of the following strategies and does
not represent  that these  techniques  are available now or will be available at
any time in the future.  If a Fund's investment in a particular type of security
is  limited  to  a  certain  percentage  of a  Fund's  assets,  that  percentage
limitation is listed in the chart.  Following the chart,  there is a description
of how each type of security and  investment  strategy may be used by each Fund.
As a matter of  non-fundamental  operating  policy,  the Funds may be subject to
additional restrictions. See the section entitled "Investment Restrictions."


DWS Mid Cap Growth Fund and DWS Small Cap Growth Fund


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                               DWS Mid Cap Growth    DWS Small Cap
INVESTMENT PRACTICE                                                                   Fund            Growth Fund
----------------------------------------------------------------------------------------------------------------------
KEY TO TABLE:

I        Permitted without stated limit

II       Permitted without stated limit, but not expected to be used to a significant extent

X        Not permitted

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

20% Roman type (e.g. 20%) represents an investment limitation as a percentage of total Fund assets; does not
indicate actual use
----------------------------------------------------------------------------------------------------------------------

EQUITY SECURITIES
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                 <C>
Common Stock                                                                           I                   I
----------------------------------------------------------------------------------------------------------------------
Warrants                                                                               I                   I
----------------------------------------------------------------------------------------------------------------------
Preferred Stock                                                                        I                   I
----------------------------------------------------------------------------------------------------------------------



                                       34
<PAGE>

----------------------------------------------------------------------------------------------------------------------
                                                                               DWS Mid Cap Growth    DWS Small Cap
INVESTMENT PRACTICE                                                                   Fund            Growth Fund
----------------------------------------------------------------------------------------------------------------------
KEY TO TABLE:

I        Permitted without stated limit

II       Permitted without stated limit, but not expected to be used to a significant extent

X        Not permitted

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

20% Roman type (e.g. 20%) represents an investment limitation as a percentage of total Fund assets; does not
indicate actual use
----------------------------------------------------------------------------------------------------------------------
                                                                               DWS Mid Cap Growth    DWS Small Cap
INVESTMENT PRACTICE                                                                   Fund            Growth Fund
----------------------------------------------------------------------------------------------------------------------
Convertible Securities                                                                 I                   I
----------------------------------------------------------------------------------------------------------------------
Medium Capitalization Stocks                                                      80% (total)             II
----------------------------------------------------------------------------------------------------------------------
Small Capitalization Stocks                                                            II             80% (total)
----------------------------------------------------------------------------------------------------------------------
Micro Capitalization Stocks                                                            II                 II
----------------------------------------------------------------------------------------------------------------------

FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
----------------------------------------------------------------------------------------------------------------------
Short-Term Instruments                                                            20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Obligations of Banks and Other Financial Institutions                             20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Certificates of Deposit and Bankers' Acceptances                                  20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Commercial Paper                                                                  20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Variable Rate Master Demand Notes                                                 20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
U.S. Government Securities                                                        20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Zero Coupon Securities and Deferred Interest Bonds                                20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------

DERIVATIVE SECURITIES (OPTIONS)
----------------------------------------------------------------------------------------------------------------------
Options on Securities                                                                  I                   I
----------------------------------------------------------------------------------------------------------------------
Options on Securities Indices                                                          I                   I
----------------------------------------------------------------------------------------------------------------------
Options on Non-US Securities Indices                                                   I                   I
----------------------------------------------------------------------------------------------------------------------

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

DERIVATIVE SECURITIES (HEDGING STRATEGIES)
----------------------------------------------------------------------------------------------------------------------
Hedging Strategies                                                                     I                   I
----------------------------------------------------------------------------------------------------------------------

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
----------------------------------------------------------------------------------------------------------------------
Government Guaranteed Mortgage-Backed Securities                                  20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Ginnie Mae Certificates                                                           20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Fannie Mae Certificates                                                           20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Freddie Mac Certificates                                                          20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Asset-Backed Securities                                                           20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------

SECURITIES OF NON-U.S. ISSUERS
----------------------------------------------------------------------------------------------------------------------



                                       35
<PAGE>

----------------------------------------------------------------------------------------------------------------------
                                                                               DWS Mid Cap Growth    DWS Small Cap
INVESTMENT PRACTICE                                                                   Fund            Growth Fund
----------------------------------------------------------------------------------------------------------------------
KEY TO TABLE:

I        Permitted without stated limit

II       Permitted without stated limit, but not expected to be used to a significant extent

X        Not permitted

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

20% Roman type (e.g. 20%) represents an investment limitation as a percentage of total Fund assets; does not
indicate actual use
----------------------------------------------------------------------------------------------------------------------
                                                                               DWS Mid Cap Growth    DWS Small Cap
INVESTMENT PRACTICE                                                                   Fund            Growth Fund
----------------------------------------------------------------------------------------------------------------------
Foreign Securities & Depository Receipts                                          20% (total)         20% (total)
(ADRs, EDRs, GDRs and IDRs)
----------------------------------------------------------------------------------------------------------------------
Foreign Corporate Debt Securities                                                 20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Foreign Government Debt Securities                                                20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------

CURRENCY MANAGEMENT
----------------------------------------------------------------------------------------------------------------------
Currency Exchange Transactions                                                         II                 II
----------------------------------------------------------------------------------------------------------------------
Currency Hedging Transactions                                                          II                 II
----------------------------------------------------------------------------------------------------------------------
Cross Hedging                                                                          II                 II
----------------------------------------------------------------------------------------------------------------------
Forward Currency Exchange Contracts                                                    II                 II
----------------------------------------------------------------------------------------------------------------------
Options on Foreign Currencies                                                          II                 II
----------------------------------------------------------------------------------------------------------------------

OTHER INVESTMENTS AND INVESTMENT PRACTICES
----------------------------------------------------------------------------------------------------------------------
Illiquid Securities                                                                15% (net)           15% (net)
----------------------------------------------------------------------------------------------------------------------
When-Issued and Delayed Delivery Securities                                       15% (total)         15% (total)
----------------------------------------------------------------------------------------------------------------------
Repurchase Agreements                                                             20% (total)         20% (total)
----------------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements                                                    33 1/3% (net)       33 1/3% (net)
----------------------------------------------------------------------------------------------------------------------
Mortgage Dollar Rolls                                                            33 1/3% (net)       33 1/3% (net)
----------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities                                                   30% (total)         30% (total)
----------------------------------------------------------------------------------------------------------------------
Borrowing                                                                        33 1/3% (net)       33 1/3% (net)
----------------------------------------------------------------------------------------------------------------------
Short Sales                                                                        25% (net)           25% (net)
----------------------------------------------------------------------------------------------------------------------
Concentration in Any One Industry                                                 25% (total)         25% (total)
----------------------------------------------------------------------------------------------------------------------
Other Investment Companies                                                        10% (total)         10% (total)
----------------------------------------------------------------------------------------------------------------------
Temporary Defensive Investments                                                       100%               100%
----------------------------------------------------------------------------------------------------------------------


DWS Micro Cap Fund

------------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE                                                                       DWS Micro Cap Fund
------------------------------------------------------------------------------------------------------------------------




                                       36
<PAGE>

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

INVESTMENT PRACTICE
----------------------------------------------------------------------------------------------------------------------
KEY TO TABLE:

I        Permitted without stated limit
II       Permitted without stated limit, but not expected to be used to a significant extent
X        Not permitted

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

20% Roman type (e.g.  20%) represents an investment limitation as a percentage of total Fund assets; does not indicate
actual use
------------------------------------------------------------------------------------------------------------------------

EQUITY SECURITIES
-------------------------------------------------------------------------------- ---------------------------------------
Common Stock                                                                     I
-------------------------------------------------------------------------------- ---------------------------------------
Warrants                                                                         I
-------------------------------------------------------------------------------- ---------------------------------------
Preferred Stock                                                                  5%
-------------------------------------------------------------------------------- ---------------------------------------
Convertible Securities                                                           I
-------------------------------------------------------------------------------- ---------------------------------------
Medium-Capitalization Stocks                                                     II
-------------------------------------------------------------------------------- ---------------------------------------
Small Capitalization Stocks                                                      I
-------------------------------------------------------------------------------- ---------------------------------------
Micro Capitalization Stocks                                                      At least 80%
------------------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
-------------------------------------------------------------------------------- ---------------------------------------
US Government Securities                                                         20%
-------------------------------------------------------------------------------- ---------------------------------------
Short-Term Instruments                                                           20%
-------------------------------------------------------------------------------- ---------------------------------------
Obligations of Banks and Other Financial Institutions                            20%
-------------------------------------------------------------------------------- ---------------------------------------
Certificates of Deposit and Bankers' Acceptances                                 20%
-------------------------------------------------------------------------------- ---------------------------------------
Commercial Paper                                                                 20%
-------------------------------------------------------------------------------- ---------------------------------------
Other Debt Obligations                                                           20%
------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (OPTIONS)
-------------------------------------------------------------------------------- ---------------------------------------
Options on Securities                                                            I
-------------------------------------------------------------------------------- ---------------------------------------
Protective Puts                                                                  20%
-------------------------------------------------------------------------------- ---------------------------------------
Options on Securities Indices                                                    I
-------------------------------------------------------------------------------- ---------------------------------------
Options on Non-US Securities Indices                                             I
------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
-------------------------------------------------------------------------------- ---------------------------------------
Futures Contracts                                                                I
-------------------------------------------------------------------------------- ---------------------------------------
Futures Contracts on Securities Indices                                          I
-------------------------------------------------------------------------------- ---------------------------------------
Options on Futures Contracts (including Contracts on Securities Indices)         I
-------------------------------------------------------------------------------- ---------------------------------------
Purchased protective puts                                                        25%
------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (HEDGING STRATEGIES)
-------------------------------------------------------------------------------- ---------------------------------------
Hedging Strategies                                                               I
------------------------------------------------------------------------------------------------------------------------
SECURITIES OF NON-US ISSUERS
-------------------------------------------------------------------------------- ---------------------------------------
Foreign Securities & Depository Receipts                                         20%
(ADRs, EDRs, GDRs and IDRs)
-------------------------------------------------------------------------------- ---------------------------------------
Foreign Corporate Debt Securities                                                20%
-------------------------------------------------------------------------------- ---------------------------------------
Foreign Government Debt Securities                                               20%
------------------------------------------------------------------------------------------------------------------------
CURRENCY MANAGEMENT
-------------------------------------------------------------------------------- ---------------------------------------
Currency Exchange Transactions                                                   II
-------------------------------------------------------------------------------- ---------------------------------------
Currency Hedging Transactions                                                    II
-------------------------------------------------------------------------------- ---------------------------------------
Cross Hedging                                                                    II
-------------------------------------------------------------------------------- ---------------------------------------
Forward Currency Exchange Contracts                                              II
-------------------------------------------------------------------------------- ---------------------------------------
Options on Foreign Currencies                                                    II
------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS AND INVESTMENT PRACTICES
-------------------------------------------------------------------------------- ---------------------------------------
Illiquid Securities                                                              15%
-------------------------------------------------------------------------------- ---------------------------------------
When-Issued and Delayed Delivery Securities                                      33 1/3%
-------------------------------------------------------------------------------- ---------------------------------------
Repurchase Agreements                                                            20%
-------------------------------------------------------------------------------- ---------------------------------------
Reverse Repurchase Agreements                                                    33%
-------------------------------------------------------------------------------- ---------------------------------------




                                       37
<PAGE>


----------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE                                                            DWS Micro Cap Fund
----------------------------------------------------------------------------------------------------------------------
KEY TO TABLE:

I        Permitted without stated limit
II       Permitted without stated limit, but not expected to be used to a significant extent
X        Not permitted

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

20% Roman type (e.g.  20%) represents an investment limitation as a percentage of total Fund assets; does not indicate
actual use
------------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities                                                  33 1/3%
-------------------------------------------------------------------------------- ---------------------------------------
Borrowing                                                                        33 1/3%
-------------------------------------------------------------------------------- ---------------------------------------
Short Sales                                                                      II
-------------------------------------------------------------------------------- ---------------------------------------
Other Investment Companies                                                       10%
-------------------------------------------------------------------------------- ---------------------------------------
Temporary Defensive Investments                                                  100%
-------------------------------------------------------------------------------- ---------------------------------------
Non-Diversification                                                              25%
-------------------------------------------------------------------------------- ---------------------------------------
Concentration in Any One Industry                                                25%
-------------------------------------------------------------------------------- ---------------------------------------
</TABLE>


Portfolio Holdings


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

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

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

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





                                       38
<PAGE>



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

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

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

                             MANAGEMENT OF THE FUNDS

Investment Advisor

Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is
part of Deutsche  Asset  Management,  is the  investment  advisor for the Funds.
Under the supervision of the Board of Trustees of each Fund,  with  headquarters
at 345 Park Avenue,  New York, New York 10154,  DIMA makes the Funds' investment
decisions,  buys and sells  securities for the Funds and conducts  research that
leads to these  purchase  and sale  decisions.  The Advisor  manages each Fund's
daily investment and business affairs subject to the policies established by the
Board


                                       39
<PAGE>

of Trustees.  DIMA and its  predecessors  have more than 80 years of  experience
managing  mutual  funds.  DIMA  provides  a full  range of  investment  advisory
services to institutional and retail clients.  The Funds' investment  advisor is
also responsible for selecting brokers and dealers and for negotiating brokerage
commissions and dealer charges. On December 31, 2006, Deutsche Asset Management,
Inc.  ("DAMI")  merged  into  DIMA.  Prior to  December  31,  2006  DAMI was the
investment  advisor to the  Funds.  As a result of the  merger,  DIMA is now the
investment advisor to the Funds.


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


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

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

Investment Management Agreements


The Board and the  shareholders  of each Fund  approved an amended and  restated
investment management agreement (the "Investment  Management Agreement") between
the Funds and DIMA.  The Investment  Management  Agreement  became  effective on
December 31, 2006 and was last  approved by the Funds'  Board on  September  18,
2007.  Pursuant to the Investment  Management  Agreement,  the Advisor  provides
continuing  investment management of the assets of the Funds. In addition to the
investment  management of the assets of the Funds,  the Advisor  determines  the
investments  to be made for the  Funds,  including  what  portion  of its assets
remain  uninvested  in cash or cash  equivalents,  and with whom the  orders for
investments  are placed,  consistent with the Funds' policies as stated in their
Prospectuses  and SAIs, or as adopted by the Funds' Board. The Advisor will also
monitor,  to the extent not monitored by a Fund's  administrator or other agent,
the  Funds'  compliance  with  its  investment  and  tax  guidelines  and  other
compliance policies.


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


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


                                       40
<PAGE>


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

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

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

In addition,  the Board and shareholders  approved a subadvisor  approval policy
for each Fund (the "Subadvisor Approval Policy"). The Subadvisor Approval Policy
permits the Advisor,  subject to the approval of the Board, including a majority
of its  independent  board members,  to appoint and replace  subadvisors  and to
amend sub-advisory  contracts without obtaining shareholder approval.  Under the
Subadvisor Approval Policy, the Board,  including its independent board members,
will continue to evaluate and approve all new sub-advisory contracts between the
Advisor and any subadvisor,  as well as all changes to any existing sub-advisory
contract. A Fund cannot implement the Subadvisor Approval Policy without the SEC
either  adopting  revisions  to certain  rules (as it  proposed to do in October
2003) or granting a Fund exemptive relief from such existing rules. In the event
that a Fund  received  exemptive  relief  or the SEC  adopted  revisions  to its
current rules,  the Fund and the Advisor would be subject to certain  conditions
imposed  by the SEC (and  certain  conditions  that may be imposed in the future
within either exemptive relief or a rule) to ensure that the interests of a Fund
and its  shareholders are adequately  protected  whenever the Advisor acts under
the Subadvisor Approval Policy, including any shareholder notice requirements.


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

Fund                                             Management Fee Rate
----                                             -------------------

DWS Mid Cap Growth Fund                         0.650% to $500 million
                                                0.600% next $1 billion
                                               0.550% next $2.5 billion
                                               0.540% next $2.5 billion
                                               0.530% next $2.5 billion
                                               0.520% next $2.5 billion
                                                  0.510% thereafter
--------------------------------------------------------------------------------

DWS Small Cap Growth Fund                               0.650%

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


DWS Micro Cap Fund                              1.250% to $250 million
                                               1.100% next $250 million
                                               0.95% next $500 million
                                                   0.80% thereafter



                                       41
<PAGE>



Prior to July 1,  2006,  DWS Micro Cap Fund  paid the  Advisor a monthly  fee of
1.50% of average daily net assets.





From  December 20, 2004 through  September 18, 2005 DWS Mid Cap Growth Fund paid
the Advisor's predecessor a monthly fee at an annual rate of:

            Average Daily Net Assets              DWS Mid Cap Growth Fund
            ------------------------              -----------------------


                $0 - $500 million                          0.65%
           $500 million - $1.5 billion                     0.60%
          $1.5 billion - $11.5 billion                     0.55%
               Over $11.5 billion                          0.51%


From  September  19, 2005 through  December 30, 2006 DWS Mid Cap Growth Fund was
obligated to pay the Advisor's predecessor a monthly fee at an annual rate of:


            Average Daily Net Assets         DWS Mid Cap Growth Fund
            ------------------------         -----------------------

                $0 - $500 million                     0.65%
           $500 million - $1.5 billion                0.60%
           $1.5 billion - $4.0 billion                0.55%
           $4.0 billion - $6.5 billion                0.54%
           $6.5 billion - $9.0 billion                0.53%
          $9.0 billion - $11.5 billion                0.52%
               Over $11.5 billion                     0.51%



DWS Mid Cap Growth Fund. For the fiscal year ended  September 30, 2007, the Fund
paid the Advisor a fee in the amount of  $7,925,087.  For the fiscal years ended
September 30, 2006 and 2005*, the Fund paid the Advisor's  predecessor  advisory
fees of $8,308,591 and $5,679,340,  respectively, in compensation for investment
advisory services provided to DWS Mid Cap Growth Fund.

Through January 21, 2009, the Advisor has contractually agreed to waive all or a
portion of its management fee and reimburse or pay operating expenses of DWS Mid
Cap Growth Fund to the extent  necessary to maintain  DWS Mid Cap Growth  Fund's
total  operating  expenses at 1.25% for Class A shares,  2.00% for Class B and C
shares and 1.00% for  Institutional  shares,  excluding certain expenses such as
extraordinary expenses, taxes, brokerage and interest.



                                       42
<PAGE>


Only the Fund's Board of Trustees may change these contractual fee waivers.

DWS Small Cap Growth Fund.  For the fiscal year ended  September  30, 2007,  the
Fund paid the Advisor a fee in the amount of  $2,813,970.  For the fiscal  years
ended  September  30, 2006 and 2005*,  the Fund paid the  Advisor's  predecessor
advisory fees of $3,441,328 and $3,246,753,  respectively,  in compensation  for
investment advisory services provided to DWS Small Cap Growth Fund.

Through January 31, 2010, the Advisor has contractually agreed to waive all or a
portion of its  management  fee and reimburse or pay  operating  expenses of DWS
Small Cap Growth Fund to the extent  necessary  to maintain DWS Small Cap Growth
Fund's total operating  expenses at 1.25% for Class A shares,  2.00% for Class B
and C shares,  and 1.00% for  Institutional  shares,  excluding certain expenses
such as extraordinary expenses, taxes, brokerage and interest.

Only the Fund's Board of Trustees may change these contractual fee waivers.

DWS Micro Cap Fund. For the fiscal year ended  September 30, 2007, the Fund paid
the Advisor a fee in the amount of $890,605 (of which $207,321 was waived).  For
the fiscal years ended September 30, 2006 and 2005*, the Fund paid the Advisor's
predecessor  net advisory fees of $1,464,791  (of which $342,282 was waived) and
$1,512,672 (of which $322,867 was waived), respectively.

*        Prior to June 1,  2006 for DWS Mid Cap  Growth  Fund and DWS  Small Cap
         Growth  Fund and July 1,  2006  for DWS  Micro  Cap  Fund,  these  fees
         included an administrative service fee.

Effective   February  1,  2008,  through  January  31,  2009,  the  Advisor  has
contractually  agreed to waive all or a portion of its fees and reimburse or pay
certain  operating  expenses  of DWS Micro Cap Fund so that the total  operating
expenses  will not exceed  1.77%,  2.52%,  2.52% and 1.52% for Class A, Class B,
Class C and Institutional Class shares, respectively, excluding certain expenses
such as extraordinary  expenses,  taxes, brokerage and interest. The Advisor had
contractually agreed

                                       43
<PAGE>

through  January 31, 2008 to waive a portion of its fees and reimburse  expenses
so that total annual operating  expenses would not exceed 1.63%, 2.38% and 2.38%
for  Class  A,  Class B and  Class C  shares,  respectively,  excluding  certain
expenses  such  as  extraordinary  expenses,  taxes,  brokerage,   interest  and
organizational and offering expenses, and proxy expenses.

Only the Fund's Board of Trustees may change these contractual fee waivers.


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

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

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

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

Compensation of Portfolio Managers


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

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

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

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

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

                                       44
<PAGE>

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

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

Fund Ownership of Portfolio Managers

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

<TABLE>
<CAPTION>
                                 DWS Small Cap Growth   DWS Mid Cap Growth                           Dollar Range of All
Name of Portfolio Manager                 Fund                 Fund            DWS Micro Cap Fund   DWS Fund Shares Owned
-------------------------                 ----                 ----            ------------------   ---------------------
<S>                                            <C>                  <C>                    <C>                 <C>
Joseph Axtell                         $1 - $10,000         $1 - $10,000                $0             $10,001 - $50,000
Robert S. Janis                   $100,001 - $500,000   $100,001 - $500,000   $100,001 - $500,000      Over $1,000,000

Conflicts of Interest

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

DWS Small Cap Growth Fund

Other SEC Registered Investment Companies Managed:

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

Joseph Axtell                              8            $3,557,251,088               0                    $0
Robert S. Janis                            5            $1,746,280,328               0                    $0


                                       45
<PAGE>

DWS Mid Cap Growth Fund

Other SEC Registered Investment Companies Managed:

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

Joseph Axtell                              8             $2,677,481,222              0                    $0
Robert S. Janis                            5               $866,510,462              0                    $0

DWS Micro Cap Fund

Other SEC Registered Investment Companies Managed:

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

Joseph Axtell                              8            $3,880,350,813               0                    $0
Robert S. Janis                            5            $2,203,615,843               0                    $0

DWS Small Cap Growth Fund

Other Pooled Investment Vehicles Managed:

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

Joseph Axtell                             0                   $0                     0                    $0
Robert S. Janis                           0                   $0                     0                    $0

DWS Mid Cap Growth Fund

Other Pooled Investment Vehicles Managed:

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

Joseph Axtell                             0                   $0                     0                    $0
Robert S. Janis                           0                   $0                     0                    $0


                                       46
<PAGE>

DWS Micro Cap Fund

Other Pooled Investment Vehicles Managed:

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

Joseph Axtell                             0                   $0                     0                    $0
Robert S. Janis                           0                   $0                     0                    $0

DWS Small Cap Growth Fund

Other Accounts Managed:

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

Joseph Axtell                             1              $100,942,734                0                   $0
Robert S. Janis                           1              $100,942,734                0                   $0

DWS Mid Cap Growth Fund

Other Accounts Managed:

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

Joseph Axtell                             1              $100,942,734                0                   $0
Robert S. Janis                           1              $100,942,734                0                   $0

DWS Micro Cap Fund

Other Accounts Managed:

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

Joseph Axtell                             1              $100,942,734                0                   $0
Robert S. Janis                           1              $100,942,734                0                   $0
</TABLE>

                                       47
<PAGE>

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

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

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

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

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

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

The Advisor is owned by Deutsche Bank AG, a  multi-national  financial  services
company.  Therefore,  the Advisor is affiliated  with a variety of entities that
provide, and/or engage in commercial banking, insurance,  brokerage,  investment
banking,  financial  advisory,  broker-dealer  activities  (including  sales and
trading),  hedge funds, real estate and private equity investing, in addition to
the provision of investment  management services to institutional and individual
investors.  Since  Deutsche  Bank AG, its  affiliates,  directors,  officers and
employees (the "Firm") are engaged in businesses  and have interests  other than
managing  asset  management  accounts,   such  other  activities  involve  real,
potential or apparent  conflicts of interest.  These  interests  and  activities
include potential  advisory,


                                       48
<PAGE>

transactional  and financial  activities  and other  interests in securities and
companies  that may be directly or indirectly  purchased or sold by the Firm for
its clients'  advisory  accounts.  These are  considerations  of which  advisory
clients  should be aware and which  may  cause  conflicts  that  could be to the
disadvantage  of the  Advisor's  advisory  clients.  The Advisor has  instituted
business and compliance  policies,  procedures and disclosures that are designed
to identify, monitor and mitigate conflicts of interest and, as appropriate,  to
report them to the Fund's Board.





                                       49
<PAGE>




                                       50
<PAGE>




                                       51
<PAGE>



Codes of Ethics


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



Regulatory Matters and Legal Proceedings

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

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


                                       52
<PAGE>

their ability to perform under their investment  management  agreements with the
DWS funds.  The  above-described  amounts are not material to Deutsche Bank, and
have already been reserved.

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

In addition,  DeAM is subject to certain  further  undertakings  relating to the
governance  of the mutual funds,  including  that at least 75% of the members of
the  Boards  of  Trustees/Directors  overseeing  the DWS  Funds  continue  to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be  independent  of DeAM;  DeAM  maintain  existing  management  fee
reductions  for  certain  funds  for a period  of five  years  and not  increase
management  fees for these certain funds during this period;  the funds retain a
senior  officer (or  independent  consultants,  as applicable)  responsible  for
assisting in the review of fee  arrangements  and  monitoring  compliance by the
funds and the investment advisors with securities laws,  fiduciary duties, codes
of ethics and other compliance policies,  the expense of which shall be borne by
DeAM; and periodic account  statements,  fund prospectuses and the mutual funds'
web site contain  additional  disclosure  and/or tools that assist  investors in
understanding  the fees and costs associated with an investment in the funds and
the impact of fees and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State regarding
market timing matters. The terms of the Illinois settlement provide for investor
education  contributions  totaling approximately $4 million and a payment in the
amount of $2 million to the Securities Audit and Enforcement Fund.

On  September  28,  2006,  the SEC and the National  Association  of  Securities
Dealers  ("NASD")  (now  known as FINRA)  announced  final  agreements  in which
Deutsche   Investment   Management   Americas  Inc.  ("DIMA"),   Deutsche  Asset
Management, Inc. ("DAMI") and Scudder Distributors,  Inc. ("DWS-SDI") (now known
as DWS Scudder Distributors,  Inc.) settled administrative proceedings regarding
disclosure of brokerage  allocation  practices in  connection  with sales of the
Scudder Funds' (now known as the DWS Scudder Funds) shares during 2001-2003. The
agreements  with the SEC and NASD are  reflected in orders  which  state,  among
other  things,  that DIMA and DAMI failed to  disclose  potential  conflicts  of
interest to the funds' Boards and to  shareholders  relating to DWS-SDI's use of
certain  funds'  brokerage  commissions  to  reduce  revenue  sharing  costs  to
broker-dealer  firms  with whom it had  arrangements  to market  and  distribute
Scudder Fund shares.  These directed  brokerage  practices were  discontinued in
October 2003.

Under the terms of the  settlements,  in which DIMA,  DAMI and  DWS-SDI  neither
admitted  nor denied any of the  regulators'  findings,  DIMA,  DAMI and DWS-SDI
agreed to pay  disgorgement,  prejudgment  interest  and civil  penalties in the
total amount of $19.3 million. The portion of the settlements distributed to the
funds was approximately $17.8 million and was paid to the funds as prescribed by
the settlement  orders based upon the amount of brokerage  commissions from each
fund used to satisfy revenue sharing  agreements  with  broker-dealers  who sold
fund shares.

As part of the  settlements,  DIMA,  DAMI and DWS-SDI  also agreed to  implement
certain measures and undertakings relating to revenue sharing payments including
making  additional  disclosures  in the funds'  Prospectuses  or  Statements  of
Additional  Information,  adopting or modifying relevant policies and procedures
and providing regular reporting to the fund Boards.

Additional  information announced by DeAM regarding the terms of the settlements
is available at www.dws-scudder.com/regulatory_settlements.

                                       53
<PAGE>

The matters alleged in the regulatory  settlements described above also serve as
the general basis of a number of private class action lawsuits involving the DWS
funds. These lawsuits name as defendants various persons,  including certain DWS
funds,  the  funds'  investment  advisors  and  their  affiliates,  and  certain
individuals,  including  in some cases fund  Trustees/Directors,  officers,  and
other parties.  Each DWS fund's  investment  advisor has agreed to indemnify the
applicable  DWS funds in connection  with these  lawsuits,  or other lawsuits or
regulatory actions that may be filed making similar allegations.

Based on currently available information, the funds' investment advisors believe
the likelihood that the pending lawsuits will have a material adverse  financial
impact on a DWS fund is remote and such  actions  are not  likely to  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.




                             FUND SERVICE PROVIDERS

Administrator


DIMA,  located  at 345 Park  Avenue,  New York,  New York  10154,  serves as the
Trust's  administrator  (the   "Administrator").   The  Funds  entered  into  an
administrative  services agreement with the Administrator  (the  "Administrative
Services  Agreement"),   pursuant  to  which  the  Administrator  provides  most
administrative  services to the Funds,  including,  among others,  providing the
Funds with  personnel,  preparing and making  required  filings on behalf of the
Funds, maintaining books and records for the Funds, and monitoring the valuation
of Funds securities. For all services provided under the Administrative Services
Agreement,  each  Fund  pays the  Administrator  a fee of  0.10%  of the  Fund's
respective average daily net assets.


                                       54
<PAGE>



Under the Administrative  Services Agreement,  DIMA is obligated on a continuous
basis to provide  such  administrative  services as the Board of Trustees of the
Funds  reasonably  deems necessary for the proper  administration  of the Funds.
DIMA provides the Funds with personnel;  arranges for the preparation and filing
of the Funds' tax returns; prepares and submits reports and meeting materials to
the Board and the Funds' shareholders;  prepares and files updates to the Funds'
Prospectuses  and SAIs as well as other reports required to be filed by the SEC;
maintains the Funds'  records;  provides each Fund with office space,  equipment
and  services;  supervises,   negotiates  the  contracts  of  and  monitors  the
performance  of third parties  contractors;  oversees the tabulation of proxies;
monitors the  valuation of portfolio  securities  and monitors  compliance  with
Board-approved valuation procedures;  assists in establishing the accounting and
tax policies of each Fund;  assists in the resolution of accounting  issues that
may arise with  respect to each  Fund;  establishes  and  monitors  each  Fund's
operating expense budgets;  reviews and processes each Fund's bills;  assists in
determining  the amount of dividends and  distributions  available to be paid by
each Fund, prepares and arranges dividend notifications and provides information
to agents to effect payments thereof; provides to the Board periodic and special
reports;  provides  assistance with investor and public relations  matters;  and
monitors  the  registration  of shares under  applicable  federal and state law.
Pursuant to the  Administrative  Services  Agreement,  the Advisor provides fund
accounting  services  for  each  Fund.  The  Administrative  Services  Agreement
provides that the Advisor will not be liable under the  Administrative  Services
Agreement  except  for  willful  misfeasance,  bad  faith or  negligence  in the
performance of its duties or from the reckless disregard by it of its duties and
obligations thereunder.

The fees paid by a Fund to the Advisor pursuant to the  Administrative  Services
Agreement  are  reduced  by the  amount of any  credits  received  from a Fund's
custodian for cash balances.

Pursuant to an agreement  between the  Administrator  and SSB, the Administrator
has delegated certain administrative functions to SSB. The costs and expenses of
such delegation are borne by the Administrator, not by a Fund.


Prior to July 1,  2006,  Investment  Company  Capital  Corp.  ("ICCC" ), was the
administrator  for DWS Mid Cap Growth Fund and DWS Small Cap Growth  Fund.  ICCC
received a fee (the  "Administrator  Service Fee") of 0.40% for Class A, B, C, S
and  Institutional  Class shares of DWS Small Cap Growth Fund, 0.45% for Class S
and 0.40% for Class A, B, C and Institutional Class shares of DWS Mid Cap Growth
Fund.  Effective  June 1,  2006,  the  Administration  Agreement  with  ICCC was
terminated and the Funds entered into an Administration  Services Agreement with
DIMA.

Prior to July 1, 2006, DAMI was the  administrator  for DWS Micro Cap Fund. DAMI
received  a fee of  0.22% of the  average  daily  net  assets  of the Fund  (the
"Administrator   Service  Fee").  Effective  July  1,  2006  the  Administration
Agreement with DAMI was  terminated and the Fund entered into an  Administration
Services Agreement with DIMA.

The following administration fees were paid to DIMA by the Funds:

<TABLE>
<CAPTION>
DWS Mid Cap Growth Fund                        Administration Fee                     Unpaid at Fiscal Year End
-----------------------                        ------------------                     -------------------------
<S>                                                 <C>                                        <C>
2007                                                $1,279,181                                 $101,228
2006*                                               $416,391                                   $101,784


DWS Small Cap Growth Fund                    Administration Fee                    Unpaid at Fiscal Year End
-------------------------                    ------------------                    -------------------------

2007                                                $432,919                                $31,647
2006*                                               $168,484                                $40,707


                                       55
<PAGE>

DWS Micro Cap Fund                           Administration Fee                    Unpaid at Fiscal Year End
------------------                           ------------------                    -------------------------

2007                                                $71,248                                 $5,394
2006**                                              $23,088                                 $7,332
</TABLE>

*        For the period from June 1, 2006 through September 30, 2006.
**       For the period from July 1, 2006 through September 30, 2006

For the period  October 1, 2005 through May 31, 2006 for DWS Mid Cap Growth Fund
and DWS Small Cap Growth Fund and through  June 30, 2006 for DWS Micro Cap Fund,
the Administrator Service Fees charged to the Funds were as follows:


DWS Mid Cap Growth Fund                      Administrator Service Fee
-----------------------                      -------------------------

Class A                                            $1,543,354
Class B                                              $141,509
Class C                                               $90,333
Institutional Class                                $1,204,941

DWS Small Cap Growth Fund                    Administrator Service Fee
-------------------------                    -------------------------


Class A                                              $231,533
Class B                                               $20,688
Class C                                               $27,470
Institutional Class                                   $13,015

DWS Micro Cap Fund            Administrator Service Fee             Waived
------------------            -------------------------             ------

Class A                                $47,462                     $37,604
Class B                                $8,351                       $6,738
Class C                                $15,601                     $12,602
Institutional Class                    $70,718                     $54,154


The following fees were paid for the fiscal year ended September 30, 2005:

DWS Mid Cap Growth Fund                     Administrator Service Fee
-----------------------                     -------------------------

Class A                                            $1,757,581
Class B                                              $112,070
Class C                                               $64,567
Institutional Class                                $1,496,513


DWS Small Cap Growth Fund                   Administrator Service Fee
-------------------------                   -------------------------

Class A                                              $267,174
Class B                                               $29,601
Class C                                               $34,999
Institutional Class                                   $14,996


                             Administrator Service Fee          Waived
                             -------------------------          ------

DWS Micro Cap Fund                   $222,333                  $172,823
------------------


                                       56
<PAGE>



Distributor


DWS Scudder Distributors, Inc. ("DWS-SDI" or the "Distributor") is the principal
distributor for shares of the Funds.  DWS-SDI is a registered  broker-dealer and
is affiliated with DIMA. The principal  business address of DWS-SDI is 222 South
Riverside Plaza, Chicago, IL 60606.


The terms and conditions of the  Distribution  Agreement are exactly the same as
the Distribution  Agreement with ICC Distributors,  Inc., the former distributor
of the  Funds.  DWS-SDI  enters  into a Selling  Group  Agreement  with  certain
broker-dealers  (each  a  "Participating  Dealer").  If a  Participating  Dealer
previously had agreements in place with DWS-SDI and ICC Distributors,  Inc., the
DWS-SDI  Agreement  controls.  If the  Participating  Dealer  did  not  have  an
agreement with DWS-SDI,  then the terms of the assigned ICC  Distributors,  Inc.
agreement remain in effect.  These Selling Group Agreements may be terminated by
their  terms  or by the  terms of the  Distribution  Agreement,  as  applicable.
DWS-SDI is a wholly  owned  subsidiary  of  Deutsche  Bank AG. The  address  for
DWS-SDI is 222 South Riverside Plaza, Chicago, IL 60606.

Class A, B and C Shares  Only.  With  respect  to Class A, B and C shares of the
Funds,  each Fund may enter into Shareholder  Servicing  Agreements with certain
financial institutions to act as Shareholder Servicing Agents, pursuant to which
the Distributor  will allocate a portion of its distribution fee as compensation
for such financial  institutions'  ongoing shareholder  services.  The Funds may
also enter into Shareholder  Servicing  Agreements pursuant to which the Advisor
or its  affiliates  will provide  compensation  out of their own  resources  for
ongoing  shareholder  services.  Currently,  banking laws and regulations do not
prohibit a financial  holding  company  affiliate  from acting as distributor or
Shareholder  Servicing  Agent or in other  capacities for investment  companies.
Should  future  legislative,  judicial  or  administrative  action  prohibit  or
restrict the activities of the Shareholder  Servicing  Agents in connection with
the  Shareholder  Servicing  Agreements,  the  Trust  may be  required  to alter
materially  or  discontinue  its  arrangements  with the  Shareholder  Servicing
Agents. Such financial  institutions may impose separate fees in connection with
these services and investors  should review the  Prospectuses and this Statement
of  Additional  Information  in  conjunction  with  any such  institution's  fee
schedule.

Effective  January  1,  2006,  DWS-SDI  will no longer  advance  the first  year
distribution  fee and  service  fee to firms  for  sales  of  Class C shares  to
employer  sponsored  benefit plans using the OmniPlus  subaccount record keeping

                                       57
<PAGE>

system made  available  through ADP, Inc.  under an alliance with DWS-SDI and it
affiliates.  DWS-SDI is compensated  by a Fund for services as  distributor  and
principal underwriter for Class C shares.

As compensation for providing distribution and shareholder services as described
above for the Class A shares,  the  Distributor  receives  an annual  fee,  paid
monthly,  equal to 0.25% of the average  daily net assets of the Class A shares.
With respect to the Class A shares,  the  Distributor  expects to allocate up to
all of its fee to Participating  Dealers and Shareholder  Servicing  Agents.  As
compensation for providing  distribution  and shareholder  services as described
above for the Class B and C shares, the Distributor receives an annual fee, paid
monthly,  equal to 0.75%  of their  respective  average  daily  net  assets.  In
addition,  with respect to the Class B and C shares, the Distributor  receives a
shareholder servicing fee at an annual rate of 0.25% of their respective average
daily net assets.



                                       58
<PAGE>


Expenses  of the Funds paid in  connection  with the Rule  12b-1  Plans for each
class of shares are set forth below.  A portion of the  marketing  and sales and
operating expenses shown below could be considered overhead expenses.

<TABLE>
<CAPTION>
-------------------- ------------ ----------------------------------------------------
                                   12b-1 Compensation to Underwriter for the Fiscal
                                            Year Ending September 30, 2007
-------------------- ------------ --------------- ------------------ -----------------
                                      12b-1             12b-1             12b-1
                                    Distribution      Shareholder       Compensation
                                       Fees         Services Fees     Paid to Firms
-------------------- ------------ --------------- ------------------ -----------------
<S>                                           <C>           <C>               <C>
DWS Micro Cap Fund   Class A                  $0            $64,273           $87,204
-------------------- ------------ --------------- ------------------ -----------------
                     Class B             $29,773             $9,273           $15,590
-------------------- ------------ --------------- ------------------ -----------------
                     Class C             $61,955            $18,443          $113,739
-------------------- ------------ --------------- ------------------ -----------------
                     Class S                  $0                 $0                $0
-------------------- ------------ --------------- ------------------ -----------------
DWS Mid Cap Growth   Class A                  $0         $1,356,201        $1,765,081
Fund
-------------------- ------------ --------------- ------------------ -----------------
                     Class B            $279,012            $91,228          $155,444
-------------------- ------------ --------------- ------------------ -----------------
                     Class C            $219,413            $70,803          $328,416
-------------------- ------------ --------------- ------------------ -----------------
                     Class S                  $0                 $0                $0
-------------------- ------------ --------------- ------------------ -----------------
DWS Small Cap        Class A                  $0           $179,785          $201,136
Growth Fund
-------------------- ------------ --------------- ------------------ -----------------
                     Class B             $38,687            $12,675           $25,477
-------------------- ------------ --------------- ------------------ -----------------
                     Class C             $71,916            $22,007           $98,434
-------------------- ------------ --------------- ------------------ -----------------
                     Class S                  $0                 $0                $0
-------------------- ------------ --------------- ------------------ -----------------



-------------------- ------------ ---------------------------------------------------------------------------
                                                  Other Expenses Paid by Underwriter for the
                                                    Fiscal Year Ending September 30, 2007
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                                  Advertising, Sales,
                                     Literature and                     Marketing    Postage
                                      Promotional        Prospectus     and Sales      and        Imputed
                                       Materials          Printing       Expenses     Mailing     Interest
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
DWS Micro Cap Fund   Class A                   $53,844         $5,831       $12,273      $3,246           $0
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class B                      $810            $73          $174         $59       $3,812
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class C                    $7,680           $710        $1,664        $528            0
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class S                        $0             $0            $0          $0           $0
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
DWS Mid Cap Growth   Class A                  $223,418        $19,811       $49,681     $15,914            0
Fund
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class B                    $9,219           $841        $2,049        $674     $345,956
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class C                   $21,832         $1,952        $4,704      $1,518           $0
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class S                        $0             $0            $0          $0           $0
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
DWS Small Cap        Class A                  $179,324        $16,441       $38,773     $10,912           $0
Growth Fund
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class B                    $1,268           $143          $264        $103      $37,172
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class C                    $9,309           $761        $1,961        $636           $0
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
                     Class S                        $0             $0            $0          $0           $0
-------------------- ------------ --------------------- -------------- ------------- ----------- ------------
</TABLE>


                                       59
<PAGE>

Pursuant  to Rule  12b-1  under  the  1940  Act,  investment  companies  may pay
distribution expenses,  directly or indirectly,  only pursuant to a plan adopted
by the investment  company's board and approved by its  shareholders.  The Funds
have  adopted  plans of  distribution  for  their  Class A, B and C Shares  (the
"Plans").  Under  each  Plan,  the  Funds  pay  a fee  to  the  Distributor  for
distribution  and other  shareholder  servicing  assistance  as set forth in the
Distribution  Agreement,  and the Distributor is authorized to make payments out
of its fee to Participating  Dealers and Shareholder Servicing Agents. The Plans
will remain in effect from year to year as  specifically  approved  (a) at least
annually by the Board of Trustees and (b) by the affirmative  vote of a majority
of the  Independent  Trustees,  by votes cast in person at a meeting  called for
such purpose.



Shareholders  of Class B and  Class C of the Funds  have  approved  Amended  and
Restated Rule 12b-1 Plans (each, an "Amended Plan") for those classes. Under the
Amended Plan,  each Fund will pay a shareholder  servicing fee at an annual rate
of up to 0.25% of the average daily net assets of its Class B and Class C shares
to its Distributor in addition to a distribution  fee at an annual rate of up to
0.75%  of  such  assets.   Pursuant  to  each  Amended  Plan,   shareholder  and
administrative  services are provided to the Fund on behalf of its Class B and C
shareholders under each Fund's Services Agreement with its Distributor.  Because
12b-1 fees are paid out of Fund  assets on an  ongoing  basis,  they will,  over
time,  increase the cost of an investment  and may cost more than other types of
sales charges.

The Amended Plans for Class B and Class C shares provide alternative methods for
paying  sales  charges and may help the Funds grow or maintain  asset  levels to
provide  operational  efficiencies  and  economies of scale.  Rule 12b-1 service
plans provide  compensation to the Funds' Distributor for post-sales  servicing.
Since each Distribution Agreement provides for fees payable as an expense of the
Class B shares and the Class C shares  that are used by the  Distributor  to pay
for distribution  and services for those classes,  the agreement is approved and
reviewed  separately for the Class B shares and the Class C shares in accordance
with Rule  12b-1  under the 1940 Act,  which  regulates  the  manner in which an
investment   company  may,   directly  or  indirectly,   bear  the  expenses  of
distributing  its  shares.  The  Distribution  Agreement  may not be  amended to
increase the fee to be paid by a Fund with respect to a class  without  approval
by a majority of the  outstanding  voting  securities of such class of the Fund.
Similarly,  the Services  Agreement is approved and reviewed  separately for the
Class A shares, Class B shares and Class C shares in accordance with Rule 12b-1.

If an Amended Plan is terminated in accordance with its terms, the obligation of
a Fund to make  payments to the  Distributor  pursuant to the Amended  Plan will
cease  and  that  Fund  will  not be  required  to make  any  payments  past the
termination  date.  Thus,  there  is no legal  obligation  for a Fund to pay any
expenses  incurred by the  Distributor  other than fees already payable under an
Amended  Plan,  if for any reason the Amended Plan is  terminated  in accordance
with its terms.  Future fees under the Amended Plan may or may not be sufficient
to reimburse the Distributor for its expenses incurred.

If a Rule 12b-1 Plan is terminated in accordance with its terms,  the obligation
of the  applicable  Fund to make payments to DWS-SDI  pursuant to the Rule 12b-1
Plan will  cease  and the Fund will not be  required  to make any  payments  not
previously accrued past the termination date. Thus, there is no legal obligation
for a Fund to pay any expenses  incurred by DWS-SDI  other than fees  previously
accrued  and payable  under a Rule 12b-1 Plan,  if for any reason the Rule 12b-1
Plan is  terminated  in  accordance  with its terms.  Future fees under the Rule
12b-1  Plan may or may not be  sufficient  to  cover  DWS-SDI  for its  expenses
incurred. On the other hand, under certain circumstances,


                                       60
<PAGE>

DWS-SDI might collect in the aggregate  over certain  periods more in fees under
the Rule  12b-1 Plan than it has  expended  over that same  period in  providing
distribution  services  for a Fund.  In  connection  with  Class B  shares,  for
example, if shares of a Fund were to appreciate (resulting in greater asset base
against  which Rule 12b-1 fees are charged) and sales of the Fund's  shares were
to decline  (resulting  in lower  expenditures  by DWS-SDI  under the Rule 12b-1
Plan), fees payable could exceed expenditures. This may also happen over certain
periods shorter than the life of the Rule 12b-1 Plan simply due to the timing of
expenses  incurred  by DWS-SDI  that is not  matched  to the timing of  revenues
received  (e.g.,  a  sales  commission  may be  paid by  DWS-SDI  related  to an
investment  in year 1,  while the Rule  12b-1  fee to  DWS-SDI  related  to that
investment  may accrue  during year 1 through year 6 prior to  conversion of the
investment to Class A shares).  As a result, if DWS-SDI's expenses are less than
the Rule 12b-1 fees, DWS-SDI will retain its full fees and make a profit.


Under the Plans,  amounts  allocated to  Participating  Dealers and  Shareholder
Servicing  Agents may not exceed amounts  payable to the  Distributor  under the
Plans.  Payments under the Plans are made as described  above  regardless of the
Distributor's actual cost of providing  distribution services and may be used to
pay the Distributor's  overhead expenses. If the cost of providing  distribution
services to the Class A Shares is less than 0.25% of such class's  average daily
net assets for any period or if the cost of providing  distribution  services to
the Class B and C Shares is less than 0.75% of such  class's  average  daily net
assets for any period,  the unexpended  portion of the distribution  fees may be
retained by the Distributor.  The Plans do not provide for any charges to a Fund
for excess amounts expended by the Distributor and, if any Plan is terminated in
accordance  with its terms,  the  obligation of the Fund to make payments to the
Distributor  pursuant  to such Plan will cease and the Fund will not be required
to make any payments past the date the  Distribution  Agreement  terminates with
respect to that class.  In return for payments  received  pursuant to the Plans,
the Distributor pays the  distribution-related  expenses of the Funds, including
one or more of the  following:  advertising  expenses;  printing  and mailing of
prospectuses  to other than current  shareholders;  compensation  to dealers and
sales personnel; and interest, carrying or other financing charges.

During the fiscal  year ended  September  30,  2007,  the  Distributor  received
commissions  on the sale of the DWS Mid Cap Growth Fund's Class A and contingent
deferred  sales  charges on the DWS Mid Cap Growth  Fund's  Class A, Class B and
Class C Shares as follows:

Class A Commissions                                          $23,544
Class A Contingent Deferred Sales Charge                      $1,175
Class B Contingent Deferred Sales Charge                     $88,507
Class C Contingent Deferred Sales Charge                      $1,932

During the fiscal  year ended  September  30,  2007,  the  Distributor  received
commissions  on the  sale  of the  DWS  Small  Cap  Growth  Fund's  Class  A and
contingent  deferred  sales  charges on the DWS Small Cap Growth Fund's Class A,
Class B and Class C Shares as follows:  and retained from such  commissions  and
sales charges the following amounts:

Class A Commissions                                         $239,113
Class A Contingent Deferred Sales Charge                        $469
Class B Contingent Deferred Sales Charge                     $20,295
Class C Contingent Deferred Sales Charge                        $520

During the fiscal  year ended  September  30,  2007,  the  Distributor  received
commissions on the sale of DWS Micro Cap Fund's Class A and contingent  deferred
sales charges on the DWS Micro Cap Fund's Class A, Class B and Class C shares as
follows:

Class A Commissions                                           $5,568
Class A Contingent Deferred Sales Charge                      $2,316
Class B Contingent Deferred Sales Charge                      $7,571
Class C Contingent Deferred Sales Charge                      $1,326


                                       61
<PAGE>

Custodian


Each Fund  employs  SSB, 225 Franklin  Street,  Boston,  Massachusetts  02110 as
custodian.  SSB has entered into agreements with foreign subcustodians  approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank  AG,  an  affiliate  of  the  Investment   Advisor,  as  subcustodian  ("DB
Subcustodian") in certain  countries.  To the extent a Fund holds any securities
in the  countries in which SSB uses DB  Subcustodian  as a  subcustodian,  those
securities  will be held by DB  Subcustodian as part of a larger omnibus account
in the name of SSB (the "Omnibus  Account").  For its services,  DB Subcustodian
receives (1) an annual fee based on a percentage of the average daily net assets
of the Omnibus Account and (2) transaction  charges with respect to transactions
that occur within the Omnibus Account.

Transfer Agent and Shareholder Service Agent

DWS Scudder Investments Service Company ("DWS-SISC") serves as transfer agent of
the Funds pursuant to a transfer  agency  agreement.  Under its transfer  agency
agreement with the Trust, DWS-SISC maintains the shareholder account records for
the Funds, handles certain communications between shareholders and the Trust and
causes to be distributed any dividends and  distributions  payable by the Trust.
DWS-SISC may be reimbursed by the Funds for its out-of-pocket expenses.

The Transfer  Agent  receives an annual  service fee for each account of a Fund,
based on the type of account.  For open retail  accounts,  the fee is a flat fee
ranging from $20.00 to $27.50 per account,  for open  wholesale  money funds the
fee is $32.50 per account, while for certain retirement accounts serviced on the
recordkeeping system of ADP, Inc., the fee is a flat fee up to $3.46 per account
(as of October  2006,  indexed to  inflation)  plus an asset  based fee of up to
0.25% of  average  net  assets.  1/12th of the  annual  service  charge for each
account is  charged  and  payable to the  Transfer  Agent each  month.  A fee is
charged for any account  which at any time during the month had a share  balance
in the  Fund.  Smaller  fees are also  charged  for  closed  accounts  for which
information  must be retained on the Transfer Agent's system for up to 18 months
after closing for tax reporting purposes.

Certain  out-of-pocket  expenses  incurred  by  the  Transfer  Agent,  including
expenses of printing and mailing  routine fund  disclosure  documents,  costs of
record retention and transaction  processing costs are reimbursed by the Fund or
are paid  directly  by the  Fund.  Certain  additional  out-of-pocket  expenses,
including costs of computer  hardware and software,  third party  record-keeping
and processing of proxy statements,  may only be reimbursed by the Fund with the
prior approval of the Fund's Board.





For the fiscal year ended  September 30, 2006, the amounts  charged to the Funds
by DWS-SISC were as follows:

<TABLE>
<CAPTION>
Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------
<S>                                         <C>                     <C>                           <C>
DWS Mid Cap Growth Fund                   Class A                 $297,719                      $171,409
DWS Mid Cap Growth Fund                   Class B                 $102,364                       $74,133
DWS Mid Cap Growth Fund                   Class C                  $32,244                       $12,018



                                       62
<PAGE>

Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------

DWS Mid Cap Growth Fund                Institutional               $76,042                       $10,774
                                           Class

DWS Small Cap Growth Fund                 Class A                  $74,160                       $50,241
DWS Small Cap Growth Fund                 Class B                  $12,068                        $9,158
DWS Small Cap Growth Fund                 Class C                   $9,163                        $1,244
DWS Small Cap Growth Fund              Institutional                $1,543                            --
                                           Class

Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------

DWS Micro Cap Fund                        Class A                  $18,172                       $17,122
DWS Micro Cap Fund                        Class B                   $3,690                        $3,145
DWS Micro Cap Fund                        Class C                   $3,796                        $3,121
DWS Micro Cap Fund                     Institutional                $6,930                        $5,726
                                           Class

For the fiscal year ended  September 30, 2007, the amounts  charged to the Funds
by DWS-SISC were as follows:

Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------

DWS Mid Cap Growth Fund                   Class A                 $908,565                             --
DWS Mid Cap Growth Fund                   Class B                 $142,290                       $58,052
DWS Mid Cap Growth Fund                   Class C                  $86,704                       $19,075
DWS Mid Cap Growth Fund                Institutional              $407,849                      $101,761
                                           Class

Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------

DWS Small Cap Growth Fund                 Class A                 $116,123                       $90,316
DWS Small Cap Growth Fund                 Class B                  $20,981                       $13,242
DWS Small Cap Growth Fund                 Class C                  $27,598                       $15,087
DWS Small Cap Growth Fund              Institutional               $11,557                             --
                                           Class

Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------

DWS Micro Cap Fund                        Class A                  $60,841                       $60,841
DWS Micro Cap Fund                        Class B                  $12,318                       $12,318
DWS Micro Cap Fund                        Class C                  $18,809                       $18,809
DWS Micro Cap Fund                     Institutional                $4,876                        $4,876
                                           Class
</TABLE>


Pursuant to a sub-transfer  agency  agreement  between DWS-SISC and DST Systems,
Inc. ("DST"),  DWS-SISC has delegated certain transfer agent and dividend paying
agent  functions to DST. The costs and expenses of such  delegation are borne by
DWS-SISC, not by the Funds.

Each Fund, or the Advisor (including any affiliate of the Advisor), or both, may
pay   unaffiliated   third  parties  for  providing   recordkeeping   and  other
administrative  services with respect to beneficial  owners of Fund shares whose
interests are generally held in an omnibus account.




DWS-SISC acts as a Shareholder  Service Agent pursuant to its agreement with the
Trust  and  receives  no  additional   compensation  from  the  Funds  for  such
shareholder  services.  The service fees of any other Service Agents,  including
broker-dealers, will be paid by DWS-SISC from its fees. The services provided by
a Service Agent may include establishing and maintaining  shareholder  accounts,
processing  purchase  and  redemption  transactions,  arranging  for bank wires,
performing shareholder sub-accounting,  answering client inquiries regarding the
Trust, assisting clients


                                       63
<PAGE>

in changing  dividend  options,  account  designations and addresses,  providing
periodic  statements  showing the client's account balances,  transmitting proxy
statements,  periodic reports,  updated prospectuses and other communications to
shareholders  and,  with  respect  to  meetings  of  shareholders,   collecting,
tabulating and forwarding to the Trust executed proxies and obtaining such other
information  and  performing  such other  services as the Transfer  Agent or the
Service Agent's  clients may reasonably  request and agree upon with the Service
Agent.  Service Agents may separately charge their clients  additional fees only
to cover  provision of  additional  or more  comprehensive  services not already
provided  under  the  agreement  with  DWS-SISC,  or of the  type or  scope  not
generally offered by a mutual fund, such as cash management services or enhanced
retirement  or  trust  reporting.  In  addition,  investors  may  be  charged  a
transaction  fee if they effect  transactions  in Fund shares  through a Service
Agent. Each Service Agent has agreed to transmit to the shareholders who are its
customers appropriate disclosures of any fees that it may charge them directly.


Legal Counsel

Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019,  serves as
Counsel to the Trust and each Fund.

Ropes & Gray LLP, One International  Place,  Boston,  Massachusetts  02110-2624,
serves as counsel to the Independent Trustees to the Trust.

Independent Registered Public Accounting Firm

PricewaterhouseCoopers  LLP,  125 High  Street,  Boston,  MA 02110,  acts as the
Independent Registered Public Accounting Firm for each Fund.

                             PORTFOLIO TRANSACTIONS


The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio  securities,  including  the  allocation  of  brokerage.  With
respect to those  funds for which a  sub-investment  advisor  manages the fund's
investments,  references in this section to the "Advisor" should be read to mean
the Sub-Advisor, except as noted below.

The  policy of the  Advisor  in  placing  orders  for the  purchase  and sale of
securities  for the Funds is to seek best  execution,  taking into  account such
factors,   among  others,   as  price;   commission  (where   applicable);   the
broker-dealer's   ability  to  ensure  that  securities  will  be  delivered  on
settlement date; the willingness of the  broker-dealer to commit its capital and
purchase  a  thinly  traded   security  for  its  own  inventory;   whether  the
broker-dealer   specializes  in  block  orders  or  large  program  trades;  the
broker-dealer's  knowledge of the market and the security;  the  broker-dealer's
ability to  maintain  confidentiality;  the  broker-dealer's  ability to provide
access to new  issues;  the  broker-dealer's  ability  to provide  support  when
placing a difficult trade;  the financial  condition of the  broker-dealer;  and
whether the broker-dealer has the infrastructure and operational capabilities to
execute  and  settle  the trade.  The  Advisor  seeks to  evaluate  the  overall
reasonableness of brokerage  commissions with commissions  charged on comparable
transactions  and compares the brokerage  commissions (if any) paid by the Funds
to reported commissions paid by others. The Advisor routinely reviews commission
rates,  execution  and  settlement  services  performed  and makes  internal and
external comparisons.

Commission rates on transactions in equity securities on US securities exchanges
are  subject  to  negotiation.   Commission  rates  on  transactions  in  equity
securities on foreign  securities  exchanges are generally fixed.  Purchases and
sales of  fixed-income  securities and certain  over-the-counter  securities are
effected  on  a  net  basis,  without  the  payment  of  brokerage  commissions.
Transactions  in  fixed  income  and  certain  over-the-counter  securities  are
generally  placed by the  Advisor  with the  principal  market  makers for these
securities  unless the Advisor  reasonably  believes more favorable  results are
available elsewhere.  Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices.  Purchases of  underwritten  issues
will  include  an  underwriting  fee  paid  to  the  underwriter.  Money  market
instruments are normally purchased in principal  transactions  directly from the
issuer or from an underwriter or market maker.


                                       64
<PAGE>

It is  likely  that the  broker-dealers  selected  based  on the  considerations
described in this section will include  firms that also sell shares of the Funds
to their  customers.  However,  the Advisor does not consider sales of shares of
the Funds as a factor in the selection of  broker-dealers  to execute  portfolio
transactions  for the Funds  and,  accordingly,  has  implemented  policies  and
procedures  reasonably designed to prevent its traders from considering sales of
shares of the Funds as a factor in the  selection of  broker-dealers  to execute
portfolio transactions for the Funds.

The Advisor is  permitted  by Section  28(e) of the  Securities  Exchange Act of
1934, as amended ("1934 Act"), when placing  portfolio  transactions for a Fund,
to cause the Fund to pay brokerage  commissions  in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage  services if the Advisor determines that such commissions
are  reasonable in relation to the overall  services  provided.  The Advisor may
from  time to time,  in  reliance  on  Section  28(e) of the 1934  Act,  execute
portfolio  transactions with  broker-dealers that provide research and brokerage
services to the Advisor.  Consistent  with the Advisor's  policy  regarding best
execution,  where more than one broker is  believed  to be capable of  providing
best execution for a particular  trade, the Advisor may take into  consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute  the trade.  Although  certain  research  and  brokerage  services  from
broker-dealers may be useful to a Fund and to the Advisor,  it is the opinion of
the Advisor that such information only supplements its own research effort since
the  information  must still be analyzed,  weighed and reviewed by the Advisor's
staff. To the extent that research and brokerage  services of value are received
by the Advisor,  the Advisor may avoid expenses that it might  otherwise  incur.
Research and brokerage  services  received from a broker-dealer may be useful to
the Advisor and its affiliates in providing  investment  management  services to
all or some of its  clients,  which  includes  a Fund.  Services  received  from
broker-dealers  that executed  securities  transactions for a Portfolio will not
necessarily be used by the Advisor specifically to service such Fund.

Research and brokerage services provided by broker-dealers may include,  but are
not limited to,  information on the economy,  industries,  groups of securities,
individual   companies,   statistical   information,   accounting  and  tax  law
interpretations,  political developments, legal developments affecting portfolio
securities,  technical  market action,  pricing and appraisal  services,  credit
analysis,  risk measurement  analysis,  performance analysis and measurement and
analysis of corporate responsibility issues. Research and brokerage services are
typically  received  in the form of written  or  electronic  reports,  access to
specialized  financial  publications,  telephone  contacts and personal meetings
with  security  analysts,  but may also be  provided  in the form of  access  to
various  computer  software and meetings  arranged  with  corporate and industry
representatives.

The Advisor may also select  broker-dealers  and obtain from them  research  and
brokerage  services that are used in connection  with executing  trades provided
that such services are consistent  with  interpretations  under Section 28(e) of
the 1934 Act.  Typically,  these  services  take the form of  computer  software
and/or  electronic  communication  services  used by the  Advisor to  facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations thereunder.  Currently,
it  is  the  Advisor's  policy  that  Sub-Advisors  may  not  execute  portfolio
transactions on behalf of the Funds to obtain third party research and brokerage
services.  The  Advisor  may, in the future,  change  this  policy.  Regardless,
certain  Sub-Advisors may, as matter of internal policy, limit or preclude third
party research and brokerage services.

The Advisor may use brokerage  commissions to obtain certain brokerage  products
or services that have a mixed use (i.e., it also serves a function that does not
relate to the investment  decision-making process). In those circumstances,  the
Advisor  will make a good faith  judgment to evaluate  the various  benefits and
uses to which it  intends to put the mixed use  product or service  and will pay
for that portion of the mixed use product or service that it reasonably believes
does not constitute research and brokerage services with its own resources.

DIMA will  monitor  regulatory  developments  and market  practice in the use of
client  commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment  decisions for each Fund and for other investment accounts managed by
the  Advisor  are  made  independently  of each  other  in  light  of  differing
conditions. However, the same investment decision may be made


                                       65
<PAGE>

for two or more of such accounts. In such cases,  simultaneous  transactions are
inevitable.  To the extent  permitted  by law,  the  Advisor may  aggregate  the
securities to be sold or purchased for a Fund with those to be sold or purchased
for  other  accounts  in  executing  transactions.  Purchases  or sales are then
averaged  as to price  and  commission  and  allocated  as to amount in a manner
deemed equitable to each account. While in some cases this practice could have a
detrimental  effect  on the  price  paid or  received  by, or on the size of the
position  obtained or disposed of for,  the Fund,  in other cases it is believed
that the  ability to engage in volume  transactions  will be  beneficial  to the
Fund.

DIMA and its affiliates and the Funds' management team manage other mutual funds
and separate accounts,  some of which use short sales of securities as a part of
its  investment  strategy.  The  simultaneous   management  of  long  and  short
portfolios creates potential conflicts of interest including the risk that short
sale activity could adversely affect the market value of the long positions (and
vice  versa),  the  risk  arising  from  sequential  orders  in long  and  short
positions,  and the risks associated with receiving  opposing orders at the same
time.

DIMA has adopted procedures that it believes are reasonably designed to mitigate
these  potential  conflicts  of interest.  Incorporated  in the  procedures  are
specific  guidelines  developed to ensure fair and  equitable  treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory  reviews,  as well as compliance  oversight to ensure
that  potential  conflicts  of interest  relating  to this type of activity  are
properly addressed.

Deutsche Bank AG or one of its affiliates (or in the case of a Sub-Advisor,  the
Sub-Advisor  or one of its  affiliates)  may act as a broker  for the  Funds and
receive brokerage commissions or other transaction-related compensation from the
Funds in the purchase and sale of securities, options or futures contracts when,
in the judgment of the Advisor,  and in accordance with  procedures  approved by
the Funds'  Boards,  the  affiliated  broker  will be able to obtain a price and
execution at least as favorable as those obtained from other  qualified  brokers
and if, in the  transaction,  the  affiliated  broker  charges  the Funds a rate
consistent  with that charged to  comparable  unaffiliated  customers in similar
transactions.





                                       66
<PAGE>




                                       67
<PAGE>



Pursuant to  procedures  determined  by the  Trustees and subject to the general
policies  of the Fund and Section  17(e) of the 1940 Act,  the Advisor may place
securities  transactions  with brokers with whom it is  affiliated  ("Affiliated
Brokers").


For the fiscal year ended  September  30, 2005,  each Fund paid the following in
brokerage commissions:

DWS Small Cap Growth Fund                                    $1,786,966
DWS Mid Cap Growth Fund                                      $1,829,612
DWS Micro Cap Fund                                             $458,539

For the fiscal year ended  September  30, 2006,  each Fund paid the following in
brokerage commissions:

DWS Mid Cap Growth Fund                                    $1,801,405
DWS Small Cap Growth Fund                                  $1,190,469
DWS Micro Cap Fund                                           $389,581

For the fiscal year ended  September  30, 2007,  each Fund paid the following in
brokerage commissions:

DWS Mid Cap Growth Fund                                      $1,506,949
DWS Small Cap Growth Fund                                      $833,006
DWS Micro Cap Fund                                             $287,167


Each Fund did not pay any affiliated  brokerage  commissions for its most recent
fiscal year end.

Securities  of Regular  Broker-Dealers.  Each Fund is required  to identify  any
securities  of its "regular  brokers or dealers" (as such term is defined in the
1940 Act) which the Fund has acquired during its most recent fiscal year.


At September 30, 2007, the DWS Mid Cap Growth Fund held the following securities
of its regular brokers or dealers:





<TABLE>
<CAPTION>
Name of Regular Broker or Dealer or Parent (Issuer)            Value of Securities Owned as of September 30, 2007
---------------------------------------------------            --------------------------------------------------

<S>                                                                              <C>
Eaton Vance Corp.                                                                $12,663,000
Affiliated Managers Group, Inc.                                                  $57,188,000
T. Rowe Price Group, Inc.                                                        $28,937,000

At  September  30,  2007,  the DWS Small  Cap  Growth  Fund  held the  following
securities of its regular brokers or dealers:

                                       68
<PAGE>

Name of Regular Broker or Dealer or Parent (Issuer)            Value of Securities Owned as of September 30, 2007
---------------------------------------------------            --------------------------------------------------

FCStone Group Inc.                                                                $4,173,000
</TABLE>

As of September 30, 2007,  DWS Micro Cap Fund did not hold any securities of its
regular broker dealers.


Portfolio Turnover


The  portfolio  turnover  rates for the fiscal years ended 2007 and 2006 were as
follows:


                                        2007                2006
                                        ----                ----


DWS Mid Cap Growth Fund                 56%                  53%
DWS Small Cap Growth Fund               64%                  74%
DWS Micro Cap Fund                      73%                 100%


These  rates  will  vary  from  year  to  year.  High  turnover  rates  increase
transaction  costs and may increase net short-term  capital  gains.  The Advisor
considers these effects when  evaluating the anticipated  benefits of short-term
investing.

                        PURCHASE AND REDEMPTION OF SHARES

General  Information.  Policies and procedures  affecting  transactions  in Fund
shares can be changed at any time without  notice,  subject to  applicable  law.
Transactions may be contingent upon proper  completion of application  forms and
other  documents  by  shareholders   and  their  receipt  by  a  Fund's  agents.
Transaction  delays  in  processing  (and  changing  account  features)  due  to
circumstances  within or beyond the  control of a Fund and its agents may occur.
Shareholders  (or their financial  service firms) are responsible for all losses
and  fees  resulting  from  bad  checks,  cancelled  orders  or the  failure  to
consummate transactions effected pursuant to instructions reasonably believed to
be genuine.

A  distribution  will be  reinvested in shares of the same Fund and class if the
distribution check is returned as undeliverable.

Orders  will be  confirmed  at a price based on the net asset value of each Fund
next determined after receipt in good order by DWS-SDI of the order  accompanied
by payment.  Orders received by dealers or other financial  services firms prior
to the  determination  of net asset value and  received in good order by DWS-SDI
prior to the determination of net asset value will be confirmed at a price based
on the net asset value next determined after receipt by DWS-SDI ("trade date").

Certificates. Share certificates will not be issued. Share certificates now in a
shareholder's  possession may be sent to the transfer agent for cancellation and
book-entry  credit to such  shareholder's  account.  Certain telephone and other
procedures   require   book-entry   holdings.   Shareholders   with  outstanding
certificates bear the risk of loss.


Use of Financial  Services  Firms.  Investment  dealers and other firms  provide
varying  arrangements  for their  clients to  purchase  and redeem  each  Fund's
shares,  including  higher minimum  investments,  and may assess  transaction or
other  fees.  Firms may  arrange  with their  clients  for other  investment  or
administrative  services.  Such  firms may  independently  establish  and charge
additional amounts to their clients for such services.  Firms also may hold each
Fund's  shares in  nominee  or  street  name as agent for and on behalf of their
customers. In such instances, each Fund's transfer agent, DWS-SISC, will have no
information   with   respect  to  or  control  over  the  accounts  of  specific
shareholders.  Such  shareholders  may  obtain  access  to  their  accounts  and
information  about their  accounts only from their firm.  Certain of these firms
may receive  compensation  from each Fund through the Shareholder  Service Agent
for  record-keeping  and other expenses relating to these nominee  accounts.  In
addition,  certain  privileges  with respect to the purchase and  redemption  of
shares or the reinvestment of dividends may not be available through such firms.
Some firms may  participate in a program  allowing them access to their clients'
accounts for servicing including, without limitation,  transfers of


                                       69
<PAGE>

registration  and dividend  payee  changes,  and may perform  functions  such as
generation of  confirmation  statements and  disbursement of cash dividends Such
firms,  including affiliates of DWS-SDI, may receive compensation from each Fund
through the Shareholder Service Agent for these services.


Each Fund will be deemed to have received a purchase or redemption order when an
authorized  broker,  service  organization  or,  if  applicable,  an  authorized
designee, accepts the order. Shares of the Funds may be purchased or redeemed on
any business  day at the net asset value next  determined  after  receipt of the
order,  in good order,  by the  Transfer  Agent.  Investors  who invest  through
authorized  brokers,  service  organizations or their designated  intermediaries
should submit purchase and redemption  orders directly to their broker,  service
organization or designated  intermediary.  The broker or intermediary may charge
you a transaction fee.


Each Fund has authorized one or more financial service  institutions,  including
certain members of FINRA other than the Distributor ("financial  institutions"),
to accept purchase and redemption  orders for the Funds' shares.  Such financial
institutions  may also  designate  other parties,  including plan  administrator
intermediaries,  to accept purchase and redemption orders on each Fund's behalf.
Orders for  purchases or  redemptions  will be deemed to have been received by a
Fund when  such  financial  institutions  or, if  applicable,  their  authorized
designees accept the orders. Subject to the terms of the contract between a Fund
and the financial institution,  ordinarily orders will be priced at a Fund's net
asset value next computed after acceptance by such financial  institution or its
authorized   designees  and  accepted  by  a  Fund.  Further,  if  purchases  or
redemptions  of a  Fund's  shares  are  arranged  and  settlement  is made at an
investor's  election through any other authorized  financial  institution,  that
financial institution may, at its discretion, charge a fee for that service. The
Board of Trustees and the Distributor, also a Fund's principal underwriter, each
has the right to limit the amount of purchases by, and to refuse to sell to, any
person.  The Trustees and the  Distributor may suspend or terminate the offering
of shares of the Fund at any time for any reason.


DWS-SDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents  ("DWS Scudder  Wholesalers").  Generally,  DWS Scudder
Wholesalers  market shares of the DWS funds to financial  advisors,  who in turn
may  recommend  that  investors  purchase  shares of a DWS fund.  The Plan is an
incentive program that combines a monthly  incentive  component with a quarterly
strategic bonus component.  Under the Plan, DWS Scudder Wholesalers will receive
a monetary  monthly  incentive based on the amount of sales generated from their
marketing of the funds,  and that incentive will differ depending on the product
category of the fund. Each fund is assigned to one of four product categories --
"Core,"  "Strategic,"  "Satellite"  or "Non-CSS"  -- taking into  consideration,
among other things, the following criteria, where applicable:

o        The Fund's 3-year performance;
o        The Fund's Morningstar rating;
o        Market size for the fund category;
o        The Fund's size, including sales and redemptions of the Fund's shares;
o        The length of time the Fund's Portfolio Managers have managed the Fund;
         and
o        The Fund's consistency with DWS Scudder's branding.

This  information  and other factors are  presented to a committee  comprised of
representatives  from  various  groups  within  DWS  Scudder,  who  review  on a
quarterly basis the funds assigned to each product category described above, and
make any  changes to those  assignments  at that time.  No one  factor,  whether
positive or negative,  determines a fund's  placement in a given  category;  all
these factors together are considered, and the designation of funds in the Core,
Strategic and Satellite categories represents management's judgment based on the
above criteria.  In addition,  management may consider a fund's profile over the
course  of  several  review  periods  before  making  a change  to its  category
assignment.  These  category  assignments  will be posted  quarterly  to the DWS
funds' Web site at www.dws-scudder.com, approximately one month after the end of
each quarter.  DWS Scudder Wholesalers will receive the highest compensation for
Core and Strategic  funds,  less for Satellite  funds and the lowest for Non-CSS
funds.   The  level  of   compensation   among  these   categories   may  differ
significantly.

In the normal course of business,  DWS Scudder will from time to time  introduce
new funds into the DWS family of funds. As a general rule, all new funds will be
placed in the  Strategic  compensation  category  for a  minimum  period of four
consecutive quarters, and DWS Scudder Wholesalers will be paid at a rate that is
equivalent to that of the


                                       70
<PAGE>

Core  Fund  category.  After  that  four  quarter  period,  each new fund in the
Strategic  category will be reviewed by the committee and either assigned to one
of the four categories or continued as a Strategic fund at that time.

The prospect of receiving,  or the receipt of, additional  compensation by a DWS
Scudder  Wholesaler  under the Plan may provide an incentive to favor  marketing
the Core,  Strategic  or  Satellite  funds  over the  Non-CSS  funds.  The Plan,
however,  will not change  the price that you pay for shares of a Fund.  The DWS
Scudder  Compliance  Department  monitors DWS Scudder Wholesaler sales and other
activity  in an  effort  to  detect  unusual  activity  in  the  context  of the
compensation  structure under the Plan. However,  investors may wish to take the
Plan  and the  product  category  of the  fund  into  account  when  considering
purchasing a fund or evaluating any recommendations relating to fund shares.




Telephone  and  Electronic  Transaction  Procedures.  Shareholders  have various
telephone,  Internet, wire and other electronic privileges available.  Each Fund
or its agents may be liable for any  losses,  expenses  or costs  arising out of
fraudulent or unauthorized instructions pursuant to these privileges unless such
Fund or its  agents  reasonably  believe,  based  upon  reasonable  verification
procedures, that the instructions were genuine.  Verification procedures


                                       71
<PAGE>

include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.  During periods when
it is difficult to contact the Shareholder Service Agent, it may be difficult to
use telephone, wire and other privileges.


QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via
the Automated  Clearing House System (minimum $50 and maximum  $250,000) from or
to a shareholder's bank, savings and loan, or credit union account in connection
with the purchase or  redemption  of Fund shares.  Shares  purchased by check or
through  QuickBuy and QuickSell or Direct Deposit may not be redeemed under this
privilege  until  such  Shares  have been owned for at least 10  calendar  days.
QuickBuy and  QuickSell  cannot be used with  passbook  savings  accounts or for
certain tax-deferred plans.




Tax-Sheltered   Retirement   Plans.  The  Shareholder   Service  Agent  provides
retirement  plan  services  and  documents  and DWS-SDI can  establish  investor
accounts in any of the following types of retirement plans:

o        Traditional,  Roth and Education IRAs. This includes Savings  Incentive
         Match Plan for  Employees  of Small  Employers  ("SIMPLE"),  Simplified
         Employee Pension Plan ("SEP") IRA accounts and prototype documents.

o        403(b)(7)  Custodial  Accounts.  This  type  of plan  is  available  to
         employees of most non-profit organizations.

o        Prototype  money  purchase  pension  and  profit-sharing  plans  may be
         adopted by employers.

Brochures  describing  these plans as well as model defined  benefit plans,  457
plans, 401(k) plans, SIMPLE 401(k) plans and materials for establishing them are
available from the Shareholder  Service Agent upon request.  Additional fees and
transaction  policies and procedures may apply to such plans.  Investors  should
consult with their own tax advisors before establishing a retirement plan.

Purchases

Each Fund reserves the right to withdraw all or any part of the offering made by
its Prospectuses  and to reject purchase orders for any reason.  Also, from time
to time,  each Fund may  temporarily  suspend  the  offering of any class of its
shares to new investors.  During the period of such suspension,  persons who are
already  shareholders of such class of such Fund may be permitted to continue to
purchase additional shares of such class and to have dividends reinvested.

To help the  government  fight the  funding of  terrorism  and money  laundering
activities,  federal law requires all financial  institutions to obtain,  verify
and record  information  that identifies  each person who opens an account.  For
more information, please see "Policies You Should Know About" in the Prospectus.

Financial Services Firms' Compensation. Banks and other financial services firms
may provide  administrative  services  related to order placement and payment to
facilitate  transactions  in shares of each Fund for their clients,  and DWS-SDI
may pay them a  transaction  fee up to the level of the  discount or  commission
allowable or payable to dealers.


DWS-SDI may,  from time to time,  pay or allow to firms a 1%  commission  on the
amount  of shares of each Fund  sold  under the  following  conditions:  (i) the
purchased  shares are held in a DWS  Scudder  IRA  account,  (ii) the shares are
purchased as a direct "roll over" of a distribution from a qualified  retirement
plan account  maintained on


                                       72
<PAGE>

the subaccount  record keeping system  maintained for DWS-branded  plans by ADP,
Inc.  under an alliance with DWS-SDI and its  affiliates,  (iii) the  registered
representative  placing the trade is a member of the Executive  Council, a group
of persons  designated by DWS-SDI in  acknowledgment  of their dedication to the
employee  benefit plan area and (iv) the purchase is not otherwise  subject to a
commission.  In addition to the discounts or commissions described herein and in
the Prospectuses,  DWS-SDI may pay or allow additional discounts, commissions or
promotional  incentives,  in the form of cash, to firms that sell shares of each
Fund. In some instances,  such amounts may be offered only to certain firms that
sell or are  expected to sell during  specified  time  periods  certain  minimum
amounts of shares of each Fund, or other Funds underwritten by DWS-SDI.


Upon  notice to all  dealers,  DWS-SDI  may  re-allow  to dealers up to the full
applicable Class A sales charge during periods and for transactions specified in
such notice and such re-allowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is re-allowed,  such
dealers  may be deemed to be  underwriters  as that term is  defined in the 1933
Act.


DWS-SDI may in its discretion  compensate  investment dealers or other financial
services firms in connection with the sale of Class A shares of each Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege and one of
the three following compensation schedules up to the following amounts:


<TABLE>
<CAPTION>
                       Compensation Schedule #1                                  Compensation Schedule #2:
                       ------------------------                                  -------------------------


                           Retail Sales and
                       DWS Scudder Flex Plan(1)                               DWS Scudder Retirement Plans(2)
                       ------------------------                               -------------------------------

             Amount of                 As a Percentage of Net Asset       Amount of Shares      As a Percentage of
            Shares Sold                            Value                        Sold             Net Asset Value
            -----------                            -----                        ----             ---------------
<S>                                                   <C>                         <C>                     <C>
$1 million to $3 million (equity                   1.00%                  Over $3 million          0.00%-0.50%
funds)

Over $3 million to $50 million                     0.50%

Over $50 million                                   0.25%
</TABLE>



                      Compensation Schedule #3:
                    DWS Scudder Choice Plans(3)
                    ---------------------------
             Amount of                      As a Percentage of
            Shares Sold                       Net Asset Value
            -----------                       ---------------

    All amounts (equity funds)                     1.00%

(1)      For purposes of determining the appropriate commission percentage to be
         applied to a particular sale under the foregoing schedule, DWS-SDI will
         consider the cumulative  amount  invested by the purchaser in each


                                       73
<PAGE>

         Fund and other  Funds  listed  under  "Class A  Purchases  --  Combined
         Purchases,"  including purchases pursuant to the "Combined  Purchases,"
         "Letter of Intent"  and  "Cumulative  Discount"  features  referred  to
         below.


(2)      Compensation  Schedule 2 applies to employer sponsored employee benefit
         plans  using  the  OmniPlus   subaccount  record  keeping  system  made
         available  through  ADP,  Inc.  under an alliance  with DWS-SDI and its
         affiliates.


(3)      DWS-SDI compensates UBS Financial Services at a rate of 0.50%.

DWS-SDI  compensates  firms for sales of Class B shares at the time of sale at a
commission  rate of up to 3.75%  of the  amount  of  Class B  shares  purchased.
DWS-SDI is  compensated  by the Fund for services as  distributor  and principal
underwriter for Class B shares.  Except as provided below,  for sales of Class C
shares,  DWS-SDI advances to firms the first year  distribution fee at a rate of
0.75% of the  purchase  price of such shares,  and, for periods  after the first
year,  DWS-SDI  currently  pays firms for sales of Class C shares a distribution
fee, payable quarterly, at an annual rate of 0.75% of net assets attributable to
Class C shares  maintained and serviced by the firm. For sales of Class C shares
to employer  sponsored  employee  benefit  plans using the  OmniPlus  subaccount
record keeping  system made  available  through ADP, Inc. under an alliance with
DWS-SDI and its affiliates, DWS-SDI does not advance the first year distribution
fee and for  periods  after the date of sale,  DWS-SDI  currently  pays  firms a
distribution  fee,  payable  quarterly,  at an annual rate of 0.75% based on net
assets as of the last business day of the month  attributable  to Class C shares
maintained  and  serviced by the firm.  DWS-SDI is  compensated  by the Fund for
services as distributor and principal underwriter for Class C shares.

Revenue Sharing

In light of recent  regulatory  developments,  the Advisor,  the Distributor and
their affiliates have undertaken to furnish certain additional information below
regarding  the  level  of  payments  made  by them to  selected  affiliated  and
unaffiliated  brokers,  dealers,  participating  insurance  companies  or  other
financial  intermediaries  ("financial  advisors") in  connection  with the sale
and/or  distribution  of  Fund  shares  or the  retention  and/or  servicing  of
investors and Fund shares ("revenue sharing").

The  Advisor,  the  Distributor  and/or  their  affiliates  may  pay  additional
compensation,  out of their own  assets and not as an  additional  charge to the
Fund, to financial  advisors in connection with the sale and/or  distribution of
Fund shares or the retention and/or servicing of Fund investors and Fund shares.
Such revenue  sharing  payments are in addition to any  distribution  or service
fees  payable  under any Rule  12b-1 or  service  plan of any fund,  any  record
keeping/sub-transfer  agency/networking  fees  payable  by the  Fund  (generally
through the  Distributor  or an  affiliate)  and/or the  Distributor  to certain
financial   advisors  for  performing  such  services  and  any  sales  charges,
commissions,   non-cash  compensation  arrangements  expressly  permitted  under
applicable  rules of FINRA or other  concessions  described  in the fee table or
elsewhere in the  Prospectuses or the SAI as payable to all financial  advisors.
For example, the Advisor, the Distributor and/or their affiliates may compensate
financial  advisors  for  providing  the Fund with "shelf  space" or access to a
third  party  platform  or fund  offering  list,  or  other  marketing  programs
including, without limitation, inclusion of the Fund on preferred or recommended
sales  lists,  mutual  fund  "supermarket"  platforms  and  other  formal  sales
programs;  granting the  Distributor  access to the  financial  advisor's  sales
force;  granting the Distributor access to the financial  advisor's  conferences
and meetings;  assistance  in training and  educating  the  financial  advisor's
personnel; and, obtaining other forms of marketing support. The level of revenue
sharing payments made to financial advisors may be a fixed fee or based upon one
or more of the following factors:  gross sales,  current assets and/or number of
accounts of the Fund attributable to the financial advisor,  the particular fund
or fund type or other  measures  as agreed to by the  Advisor,  the  Distributor
and/or their affiliates and the financial  advisors or any combination  thereof.
The amount of these payments is determined at the discretion of the Advisor, the
Distributor  and/or their affiliates from time to time, may be substantial,  and
may be different for different  financial  advisors  based on, for example,  the
nature of the services provided by the financial advisor.

The Advisor,  the  Distributor  and/or their  affiliates  currently make revenue
sharing  payments  from  their own  assets in  connection  with the sale  and/or
distribution of DWS Fund shares, or the retention and/or servicing of investors,
to financial  advisors in amounts that  generally  range from .01% up to .50% of
assets of the Fund serviced and


                                       74
<PAGE>

maintained  by the  financial  advisor,  .10%  to  .25%  of  sales  of the  Fund
attributable to the financial advisor, a flat fee of $12,500 up to $500,000,  or
any combination  thereof.  These amounts are subject to change at the discretion
of the Advisor,  the  Distributor  and/or their  affiliates.  Receipt of, or the
prospect  of  receiving,  this  additional  compensation,   may  influence  your
financial advisor's recommendation of this Fund or of any particular share class
of the Fund. You should review your financial advisor's compensation  disclosure
and/or talk to your  financial  advisor to obtain more  information  on how this
compensation may have influenced your financial advisor's recommendation of this
Fund.

The Advisor,  the Distributor and/or their affiliates may also make such revenue
sharing  payments  to  financial  advisors  under the terms  discussed  above in
connection  with  the  distribution  of both  DWS  funds  and  non-DWS  funds by
financial  advisors to retirement plans that obtain record keeping services from
ADP, Inc. on the DWS Scudder branded  retirement plan platform (the  "Platform")
with the level of revenue  sharing  payments  being based upon sales of both the
DWS funds and the  non-DWS  funds by the  financial  advisor on the  Platform or
current  assets  of both  the DWS  funds  and the  non-DWS  funds  serviced  and
maintained by the financial advisor on the Platform.

As of the  date  hereof,  the  Fund  has been  advised  that  the  Advisor,  the
Distributor  and their  affiliates  expect that the following firms will receive
revenue sharing payments at different points during the coming year as described
above:

Channel: Broker-Dealers and Financial Advisors

A G Edwards & Sons Inc.
AIG Advisors Group
Ameriprise
Cadaret, Grant & Co. Inc.
Capital Analyst, Incorporated
Citigroup Global Markets, Inc. (dba Smith Barney)
Commonwealth Equity Services, LLP (dba Commonwealth Financial Network)
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Group
LaSalle Financial Services, Inc. (dba ABN Amro)
Linsco/Private Ledger Corp.
Marsh Insurance and Investment Company
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
Pacific Select Distributors Group
Raymond James & Associates
Raymond James Financial Services
RBC Dain Rauscher, Inc
Securities America, Inc.
UBS Financial Services
Wells Fargo Investments, LLC

Channel: Cash Product Platform

ADP Clearing & Outsourcing
Allegheny Investments LTD
Bank of New York (Hare & Co.)
Bear, Stearns Securities Corp.
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange

                                       75
<PAGE>

Citibank NA
D.A. Davidson & Company
Deutsche Bank Securities Inc.
Deutsche Bank Trust Company Americas
Emmett A. Larkin Company
Fiduciary Trust Co. - International
H.C. Denison Co.
Huntleigh Securities
Investors Bank & Trust
JPMorgan Chase
Lincoln Investment Planning
Linsco Private Ledger Financial Services
Mellon Financial Markets LLC
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Romano Brothers and Company
SAMCO Capital Markets (Fund Services, Inc.)
Smith Moore & Company
State Street Bank & Trust Co.
Sungard Institutional Brokerage Inc.
US Bancorp
UBS Financial Services Inc.
William Blair & Company

Channel: Third Party Insurance Platforms

Acacia National Life Insurance
Allmerica Financial Life Insurance Company
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
American General Life Insurance Company
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
Genworth Life Insurance Company of New York
Genworth Life and Annuity Insurance Company
Great West Life and Annuity Insurance Company
Hartford Life Insurance Company
ICMG Registered Variable Life
Integrity Life Insurance Company
John Hancock Life Insurance companies
Kemper Investors Life Insurance Company
Lincoln Benefit Life Insurance Company
Lincoln Life & Annuity Company of New York
Lincoln National Life Insurance Company
Massachusetts Mutual Life Insurance Group
MetLife Group
Minnesota Life Insurance Company
Mutual of America Life Insurance Company

                                       76
<PAGE>

National Life Insurance Company
National Integrity Life Insurance Company
Nationwide Group
New York Life Insurance and Annuity Corporation
Phoenix Life Insurance Company
Protective Life Insurance
Provident Mutual Life Insurance
Prudential Insurance Company of America
Sun Life GroupSymetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

Any additions,  modifications or deletions to the financial advisors  identified
above that have occurred since the date hereof are not reflected.

The Advisor,  the  Distributor  or their  affiliates  may enter into  additional
revenue sharing arrangements or change or discontinue existing arrangements with
financial advisors at any time without notice.

The  prospect  of  receiving,  or the  receipt  of  additional  compensation  or
promotional  incentives  described above by financial  advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS Funds or a particular  DWS Fund over sales of shares of mutual
funds (or  non-mutual  fund  investments)  with  respect to which the  financial
advisor does not receive additional compensation or promotional  incentives,  or
receives  lower levels of additional  compensation  or  promotional  incentives.
Similarly,  financial advisors may receive different  compensation or incentives
that may influence  their  recommendation  of any particular  share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that the Fund receives
to invest on behalf of an investor and will not increase Fund expenses.  You may
wish to take  such  payment  arrangements  into  account  when  considering  and
evaluating  any  recommendations  relating to Fund shares and you should discuss
this matter with your  financial  advisor  and review your  financial  advisor's
disclosures.





                                       77
<PAGE>




                                       78
<PAGE>




                                       79
<PAGE>




                                       80
<PAGE>




                                       81
<PAGE>



Class A Purchases.  The public  offering  price of Class A shares for purchasers
choosing  the initial  sales  charge  alternative  is the net asset value plus a
sales charge, as set forth below.

<TABLE>
<CAPTION>

                                                                             Sales Charge
                                                                             ------------
                                                                                                Allowed to Dealers
                                                    As a Percentage of    As a Percentage of    as a Percentage of
Amount of Purchase                                   Offering Price*       Net Asset Value**      Offering Price
------------------                                   --------------        ---------------        --------------
<S>                                                        <C>                    <C>                   <C>

Less than $50,000                                          5.75%                  6.10%                 5.20%
$50,000 but less than $100,000                             4.50                   4.71                  4.00
$100,000 but less than $250,000                            3.50                   3.63                  3.00
$250,000 but less than $500,000                            2.60                   2.67                  2.25
$500,000 but less than $1 million                          2.00                   2.04                  1.75
$1 million and over                                        0.00***                0.00***               0.00****
</TABLE>


*        The offering price includes the sales charge.

**       Rounded to the nearest one-hundredth percent.

***      Redemption  of shares  may be subject to a  contingent  deferred  sales
         charge as discussed below.

****     Commission is payable by DWS-SDI as discussed below.

                                       82
<PAGE>

Class A  Quantity  Discounts.  An  investor  or the  investor's  dealer or other
financial  services  firm must notify the  Shareholder  Service Agent or DWS-SDI
whenever  a  quantity  discount  or  reduced  sales  charge is  applicable  to a
purchase.  In order to qualify  for a lower  sales  charge,  all orders  from an
organized  group will have to be placed  through a single  investment  dealer or
other firm and identified as originating from a qualifying purchaser.

Combined  Purchases.  A  Fund's  Class A  shares  may be  purchased  at the rate
applicable to the sales charge discount  bracket  attained by combining same day
investments in Class A shares of any DWS Funds that bear a sales charge.

Letter of Intent.  The reduced sales charges for Class A shares, as shown in the
applicable prospectus,  also apply to the aggregate amount of purchases of Class
A shares of DWS Funds that bear a sales  charge made by any  purchaser  within a
24-month period under a written Letter of Intent ("Letter") provided by DWS-SDI.
The Letter,  which imposes no obligation to purchase or sell additional  Class A
shares,  provides  for a price  adjustment  depending  upon  the  actual  amount
purchased  within  such  period.  The Letter  provides  that the first  purchase
following  execution  of the  Letter  must be at least 5% of the  amount  of the
intended  purchase,  and that 5% of the amount of the intended purchase normally
will be held in escrow in the form of shares pending  completion of the intended
purchase.  If the total  investments under the Letter are less than the intended
amount and thereby  qualify only for a higher sales charge than  actually  paid,
the  appropriate  number of escrowed  shares are redeemed and the proceeds  used
toward  satisfaction  of the obligation to pay the increased  sales charge.  The
Letter  for  an  employer-sponsored  employee  benefit  plan  maintained  on the
subaccount  record keeping system available  through ADP, Inc. under an alliance
with DWS-SDI and its affiliates may have special provisions regarding payment of
any  increased  sales charge  resulting  from a failure to complete the intended
purchase under the Letter.  A shareholder  may include the value (at the maximum
offering price,  which is determined by adding the maximum applicable sales load
charged to the net asset  value) of all Class A shares of such DWS Funds held of
record as of the  initial  purchase  date under the  Letter as an  "accumulation
credit" toward the  completion of the Letter,  but no price  adjustment  will be
made on such shares.

Class A Cumulative  Discount.  Class A shares of a Fund may also be purchased at
the rate  applicable to the discount  bracket  attained by adding to the cost of
shares being purchased, the value of all Class A shares of DWS Funds that bear a
sales charge (computed at the maximum offering price at the time of the purchase
for which the discount is  applicable)  already  owned by the investor or his or
her immediate family member (including the investor's spouse or life partner and
children or stepchildren age 21 or younger).

For purposes of the Combined Purchases, Letter of Intent and Cumulative Discount
features  described above,  employer  sponsored employee benefit plans using the
Flex  subaccount  record  keeping  system  available  through ADP, Inc. under an
alliance with DWS-SDI and its affiliates may include:  (a) Money Market Funds as
"DWS  Funds," (b) all classes of shares of any DWS Fund and (c) the value of any
other plan  investments,  such as guaranteed  investment  contracts and employer
stock,  maintained on such subaccount record keeping system.  Once eligible plan
assets under this provision reach the $1,000,000  threshold,  a later decline in
assets  below the  $1,000,000  threshold  will not affect the plan's  ability to
continue to purchase Class A shares at net asset value.


Class A NAV Sales. Class A shares may be sold at net asset value to:

(a)      a current  or former  director  or trustee  of  Deutsche  or DWS mutual
         funds;

(b)      an  employee  (including  the  employee's  spouse or life  partner  and
         children or  stepchildren  age 21 or  younger) of Deutsche  Bank or its
         affiliates or of a subadvisor to any fund in the DWS family of funds or
         of a  broker-dealer  authorized  to sell  shares of the Fund or service
         agents of the Funds;

(c)      certain  professionals  who assist in the promotion of DWS mutual funds
         pursuant to personal services contracts with DWS-SDI, for themselves or
         members of their  families.  DWS-SDI in its  discretion  may compensate
         financial  services  firms  for  sales  of Class A  shares  under  this
         privilege at a commission rate of 0.50% of the amount of Class A shares
         purchased;

(d)      any trust, pension,  profit-sharing or other benefit plan for only such
         persons listed under the preceding paragraphs (a) and (b);


                                       83
<PAGE>

(e)      persons who purchase such shares  through bank trust  departments  that
         process  such  trades  through an  automated,  integrated  mutual  fund
         clearing program provided by a third party clearing firm;

(f)      selected  employees  (including  their  spouses  or life  partners  and
         children  or  stepchildren  age  21 or  younger)  of  banks  and  other
         financial services firms that provide  administrative  services related
         to order placement and payment to facilitate  transactions in shares of
         the Fund for their clients pursuant to an agreement with DWS-SDI or one
         of its  affiliates.  Only those employees of such banks and other firms
         who  as  part  of  their  usual  duties  provide  services  related  to
         transactions in Fund shares qualify;

(g)      unit  investment  trusts  sponsored  by Ranson &  Associates,  Inc. and
         unitholders of unit investment trusts sponsored by Ranson & Associates,
         Inc. or its predecessors through reinvestment programs described in the
         prospectuses of such trusts that have such programs;

(h)      through certain  investment  advisors  registered  under the Investment
         Advisers Act of 1940 and other  financial  services firms acting solely
         as  agent  for  their  clients,   that  adhere  to  certain   standards
         established  by DWS-SDI,  including a  requirement  that such shares be
         sold for the benefit of their  clients  participating  in an investment
         advisory program or agency commission  program under which such clients
         pay a fee to  the  investment  advisor  or  other  firm  for  portfolio
         management  or agency  brokerage  services.  Such  shares  are sold for
         investment  purposes and on the condition  that they will not be resold
         except through redemption or repurchase by the Fund;

(i)      employer  sponsored  employee  benefit plans using the Flex  subaccount
         recordkeeping system ("Flex Plans") made available through ADP under an
         alliance with DWS-SDI and its affiliates,  established prior to October
         1, 2003,  provided  that the Flex Plan is a  participant-directed  plan
         that has not less than 200 eligible employees;

(j)      investors investing $1 million or more, either as a lump sum or through
         the "Combined  Purchases," "Letter of Intent" and "Cumulative Discount"
         features referred to above (collectively, the "Large Order NAV Purchase
         Privilege"). The Large Order NAV Purchase Privilege is not available if
         another net asset value purchase privilege is available;

(k)      defined contribution investment only plans with a minimum of $1,000,000
         in plan assets regardless of the amount allocated to the DWS funds;

In addition, Class A shares may be sold at net asset value in connection with:

(l)      the  acquisition  of the  assets  of or merger  or  consolidation  with
         another investment  company,  or to shareholders in connection with the
         investment or reinvestment  of income and capital gain  dividends,  and
         under other circumstances  deemed appropriate by DWS-SDI and consistent
         with regulatory requirements; and

(m)      a  direct  "roll  over"  of a  distribution  from a Flex  Plan  or from
         participants in employer sponsored employee benefit plans maintained on
         the OmniPlus  subaccount  record keeping system made available  through
         ADP, Inc. under an alliance with DWS-SDI and its affiliates  into a DWS
         Scudder IRA;

(n)      reinvestment of fund dividends and distributions;

(o)      exchanging  an  investment in Class A shares of another fund in the DWS
         family of funds for an investment in the fund.

Class A shares also may be purchased at net asset value in any amount by members
of the plaintiff class in the proceeding known as Howard and Audrey Tabankin, et
al. v. Kemper  Short-Term  Global  Income Fund, et al., Case No. 93 C 5231 (N.D.
IL). This privilege is generally non-transferable and continues for the lifetime
of individual class members and for a ten-year period for  non-individual  class
members.  To make a  purchase  at net asset  value  under  this  privilege,  the
investor  must,  at the time of  purchase,  submit a  written  request  that the
purchase be


                                       84
<PAGE>

processed at net asset value pursuant to this privilege specifically identifying
the purchaser as a member of the "Tabankin  Class." Shares  purchased under this
privilege  will be  maintained  in a separate  account that includes only shares
purchased  under this  privilege.  For more details  concerning  this privilege,
class  members  should  refer to the  Notice  of (i)  Proposed  Settlement  with
Defendants; and (ii) Hearing to Determine Fairness of Proposed Settlement, dated
August 31, 1995, issued in connection with the aforementioned  court proceeding.
For sales of Fund shares at net asset value pursuant to this privilege,  DWS-SDI
may in its discretion pay investment  dealers and other financial services firms
a concession,  payable quarterly, at an annual rate of up to 0.25% of net assets
attributable to such shares  maintained and serviced by the firm. A firm becomes
eligible for the concession based upon assets in accounts attributable to shares
purchased  under this privilege in the month after the month of purchase and the
concession  continues until  terminated by DWS-SDI.  The privilege of purchasing
Class A shares  of the Fund at net  asset  value  under  this  privilege  is not
available if another net asset value purchase privilege also applies.





                                       85
<PAGE>




Class B Purchases.  Class B shares of a Fund are offered at net asset value.  No
initial  sales charge is imposed.  Class B shares sold without an initial  sales
charge allow the full amount of the investor's  purchase  payment to be invested
in Class B shares  for his or her  account.  Class B  shares  have a  contingent
deferred  sales charge of 4.00% that  declines over time (for shares sold within
six  years  of  purchase)  and Rule  12b-1  fees,  as  described  in the  Funds'
Prospectuses  and SAI.  Class B shares  automatically  convert to Class A shares
after six years.


Class C Shares.  Class C shares of a Fund are  offered  at net asset  value.  No
initial sales charge is imposed,  which allows the full amount of the investor's
purchase payment to be invested in Class C shares for his or her account.  Class
C shares are subject to a contingent  deferred sales charge of 1.00% (for shares
sold within one year of  purchase)  and Rule 12b-1 fees,  as  described  in each
Fund's prospectus and Statement of Additional Information.

Multi-Class  Suitability.  DWS-SDI  has  established  the  following  procedures
regarding  the  purchase  of Class A,  Class B and  Class C  shares.  Orders  to
purchase  Class B shares of  $100,000  or more and  orders to  purchase  Class C
shares  of  $500,000  or more  will be  declined  with the  exception  of orders
received  from firms acting for clients  whose shares will be held in an omnibus
account and employer-sponsored  employee benefit plans using the Flex subaccount
record keeping system ("Flex  System")  maintained by ADP under an alliance with
DWS-SDI and its affiliates ("DWS Scudder Flex Plans").

The following provisions apply to DWS Scudder Flex Plans.

a.       Class B Share DWS Scudder Flex Plans. Class B shares have not been sold
         to DWS  Scudder  Flex Plans that were  established  on the Flex  System
         after  October 1,  2003.  Orders to  purchase  Class B shares for a DWS
         Scudder  Flex Plan  established  on the Flex System prior to October 1,
         2003 that has regularly been purchasing Class B shares will be invested
         instead  in  Class A  shares  at net  asset  value  when  the  combined

                                       86
<PAGE>

         subaccount value in DWS Funds or other eligible assets held by the plan
         is  $100,000  or more.  This  provision  will be imposed  for the first
         purchase  after  eligible plan assets reach the $100,000  threshold.  A
         later  decline in assets below the $100,000  threshold  will not affect
         the plan's  ability to continue to purchase Class A shares at net asset
         value.

b.       Class C Share DWS Scudder Flex Plans. Orders to purchase Class C shares
         for a  DWS  Scudder  Flex  Plan,  regardless  of  when  such  plan  was
         established  on the Flex  System,  will be invested  instead in Class A
         shares at net asset  value when the  combined  subaccount  value in DWS
         Funds or other eligible  assets held by the plan is $1,000,000 or more.
         This  provision  will be imposed for the first  purchase after eligible
         plan assets reach the $1,000,000  threshold.  A later decline in assets
         below the  $1,000,000  threshold  will not affect the plan's ability to
         continue to purchase Class A shares at net asset value.

c.       Class C Share DWS Scudder  Choice  Plans.  Orders to  purchase  Class C
         shares for a DWS Scudder Choice Plan that has been regularly purchasing
         Class C shares will be invested  instead in Class A shares at net asset
         value when the combined subaccount value in DWS Funds or other eligible
         assets held by the plan is $1,000,000 or more.  This  provision will be
         imposed for purchases  made  beginning in the month after eligible plan
         assets reach the $1,000,000  threshold.  In addition, as a condition to
         being permitted to use the Choice Plan platform, plans must agree that,
         within  one month  after  eligible  plan  assets  reach the  $1,000,000
         threshold,  all  existing  Class  C  shares  held in the  plan  will be
         automatically converted to Class A shares.

The procedures above described in (a), (b) and (c) do not reflect in any way the
suitability of a particular class of shares for a particular investor and should
not be  relied  upon  as  such.  A  suitability  determination  must  be made by
investors with the assistance of their financial representative.

Purchase of Institutional Class Shares.  Information on how to buy Institutional
Class shares is set forth in the section entitled "Buying and Selling Shares" in
the Fund's prospectus.  The following supplements that information.  The minimum
initial  investment for  Institutional  Class shares is $1,000,000.  The minimum
initial investment requirement is waived for shareholders with existing accounts
prior to August 13, 2004 who met the  previous  minimum  investment  eligibility
requirement.  There is no  minimum  subsequent  investment  requirement  for the
Institutional  Class shares.  This minimum  amount may be changed at any time in
management's discretion.

To sell shares in a retirement  account  other than an IRA, your request must be
made in writing,  except for exchanges to other eligible funds in the DWS family
of funds, which can be requested by phone or in writing.


Automatic  Investment  Plan.  A  shareholder  may  purchase  shares of each Fund
through an automatic  investment program.  With the Direct Deposit Purchase Plan
("Direct Deposit"), investments are made automatically (minimum $500 and maximum
$250,000  for initial  investments  and a minimum of $50 and maximum of $250,000
for subsequent  investments) from the shareholder's  account at a bank,  savings
and loan or credit union into the shareholder's  Fund account.  Termination by a
shareholder  will become  effective  within  thirty  days after the  Shareholder
Service  Agent has  received  the request.  A Fund may  immediately  terminate a
shareholder's  Direct  Deposit  in the  event  that  any item is  unpaid  by the
shareholder's financial institution.

Minimum Subsequent  Investment Policies.  For current shareholders of Class A, B
or C  shares  there  is a $50  minimum  investment  requirement  for  subsequent
investments in a Fund. There is no minimum subsequent investment  requirement in
Class A shares for investments on behalf of  participants  in certain  fee-based
and wrap  programs  offered  through  financial  intermediaries  approved by the
Advisor or for Institutional Class shareholders.


Payroll  Investment  Plans. A shareholder  may purchase  shares through  Payroll
Direct Deposit or Government  Direct  Deposit.  Under these  programs,  all or a
portion of a shareholder's  net pay or government check is invested each payment
period.  A shareholder may terminate  participation  in these programs by giving
written  notice  to  the  shareholder's   employer  or  government   agency,  as
appropriate.  (A reasonable  time to act is required.) A Fund is not responsible
for the  efficiency of the employer or  government  agency making the payment or
any financial institutions transmitting payments.

                                       87
<PAGE>

It is our policy to offer purchase  privileges to current or former directors or
trustees of the Deutsche or DWS Scudder mutual funds,  employees,  their spouses
or life  partners  and children or  step-children  age 21 or younger of Deutsche
Bank or its  affiliates or a sub-adviser  to any fund in the DWS family of funds
or a broker-dealer authorized to sell shares of the funds. Qualified individuals
will  generally  be  allowed  to  purchase  shares in the class  with the lowest
expense ratio,  usually the Institutional Class shares. If a Fund does not offer
Institutional  Class shares,  these  individuals  will be allowed to buy Class A
shares at NAV.  The Funds also  reserve the right to waive the  minimum  account
balance  requirement for employee and director accounts.  Fees generally charged
to IRA accounts will be charged to accounts of employees and directors.


Expedited Purchase Procedures for Existing  Shareholders.  Shareholders of other
DWS Funds who have  submitted an account  application  and have  certified a tax
identification  number, clients having a regular investment counsel account with
the Advisor or its affiliates and members of their immediate families,  officers
and  employees  of the  Advisor  or of any  affiliated  organization  and  their
immediate  families,  members of FINRA, and banks may open an account by wire by
calling (800) 621-1048 for instructions. The investor must send a duly completed
and signed  application to the applicable Fund promptly.  A subsequent  purchase
order may be placed by telephone,  etc. by established  shareholders  (except by
DWS Scudder  Individual  Retirement Account (IRA), DWS Scudder Horizon Plan, DWS
Scudder Profit Sharing and Money Purchase  Pension Plans, DWS Scudder 401(k) and
DWS Scudder 403(b) Plan holders), members of FINRA, and banks.


Redemptions

Redemption fee. Each Fund imposes a redemption fee of 2% of the total redemption
amount  (calculated  at net asset  value,  without  regard to the  effect of any
contingent  deferred sales charge; any contingent  deferred sales charge is also
assessed on the total redemption  amount without regard to the assessment of the
2% redemption  fee) on all Fund shares  redeemed or exchanged  within 15 days of
buying  them  (either by  purchase  or  exchange).  The  redemption  fee is paid
directly to the Fund, and is designed to encourage  long-term  investment and to
offset  transaction  and other costs  associated  with  short-term  or excessive
trading. For purposes of determining whether the redemption fee applies,  shares
held the longest  time will be treated as being  redeemed  first and shares held
the shortest time will be treated as being  redeemed last. The redemption fee is
applicable  to fund  shares  purchased  either  directly  or through a financial
intermediary,   such  as  a  broker-dealer.   Transactions   through   financial
intermediaries  typically  are  placed  with the fund on an  omnibus  basis  and
include  both  purchase  and sale  transactions  placed on  behalf  of  multiple
investors. These purchase and sale transactions are generally netted against one
another and placed on an aggregate  basis;  consequently  the  identities of the
individuals on whose behalf the  transactions are placed generally are not known
to the Funds.  For this reason,  the Funds have  undertaken to notify  financial
intermediaries  of their  obligation  to assess the  redemption  fee on customer
accounts  and to collect and remit the  proceeds to the Funds.  However,  due to
operational   requirements,   the  intermediaries'   methods  for  tracking  and
calculating the fee may be inadequate or differ in some respects from each Fund.

General.  Policies and procedures  affecting  transactions in Fund shares can be
changed at any time without notice,  subject to applicable law. Transactions may
be contingent upon proper completion of application forms and other documents by
shareholders  and  their  receipt  by a Fund's  agents.  Transaction  delays  in
processing (and changing account features) due to circumstances within or beyond
the control of a Fund and its agents may occur. Shareholders (or their financial
service  firms)  are  responsible  for all losses  and fees  resulting  from bad
checks,  cancelled  orders or the failure to  consummate  transactions  effected
pursuant to instructions reasonably believed to be genuine.


In addition,  each fund reserves the right to suspend or postpone redemptions as
permitted  pursuant  to Section  22(e) of the  Investment  Company  Act of 1940.
Generally, those circumstances are when 1) the New York Stock Exchange is closed
other than  customary  weekend or holiday  closings;  2) trading on the New York
Stock Exchange is restricted; 3) an emergency exists which makes the disposal of
securities  owned by a fund or the fair  determination  of the value of a fund's
net assets not  reasonably  practicable;  or 4) the SEC,  by order,  permits the
suspension of the right of redemption.  Redemption  payments by wire may also be
delayed  in the event of a  non-routine  closure  of the  Federal  Reserve  wire
payment  system.  A  request  for  repurchase  (confirmed   redemption)  may  be
communicated  by a  shareholder  through a financial  services  firm to DWS-SDI,
which firm must promptly submit orders to be effective.



                                       88
<PAGE>

Redemption  requests  must be  unconditional.  Redemption  requests (and a stock
power for certificated  shares) must be duly endorsed by the account holder.  As
specified  in the  Prospectuses,  signatures  may  need  to be  guaranteed  by a
commercial bank, trust company,  savings and loan  association,  federal savings
bank,  member  firm  of  a  national  securities  exchange  or  other  financial
institution  permitted by SEC rule.  Additional  documentation  may be required,
particularly  from   institutional  and  fiduciary  account  holders,   such  as
corporations,  custodians  (e.g.,  under the Uniform  Transfers  to Minors Act),
executors, administrators, trustees or guardians.

If the proceeds of the  redemption  (prior to the  imposition of any  contingent
deferred sales charges) are $100,000 or less and the proceeds are payable to the
shareholder of record at the address of record,  normally a telephone request or
a written  request by any one account  holder  without a signature  guarantee is
sufficient for  redemptions by individual or joint account  holders,  and trust,
executor  and  guardian  account  holders,  provided  the  trustee,  executor or
guardian  is named in the  account  registration.  Other  institutional  account
holders may  exercise  this special  privilege of redeeming  shares by telephone
request or  written  request  without  signature  guarantee  subject to the same
conditions as individual account holders,  provided that this privilege has been
pre-authorized by the institutional account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed.  This privilege may not be
used to  redeem  shares  held in  certificated  form  and may not be used if the
shareholder's account has had an address change within 15 days of the redemption
request.

Wires.  Delivery of the proceeds of a wire redemption of $250,000 or more may be
delayed  by a Fund for up to  seven  days if a Fund or the  Shareholder  Service
Agent deems it appropriate under then-current market conditions.  The ability to
send wires is limited by the business hours and holidays of the firms  involved.
Neither Fund is responsible for the efficiency of the federal wire system or the
account  holder's  financial  services  firm or  bank.  The  account  holder  is
responsible  for any charges  imposed by the account  holder's  firm or bank. To
change the  designated  account  to receive  wire  redemption  proceeds,  send a
written request to the Shareholder  Service Agent with signatures  guaranteed as
described above or contact the firm through which Fund shares were purchased.

Automatic  Withdrawal  Plan.  The owner of $5,000 or more of a class of a Fund's
shares at the offering  price (net asset value plus,  in the case of Class A and
Class C shares,  the initial  sales charge) may provide for the payment from the
owner's  account  of any  requested  dollar  amount to be paid to the owner or a
designated  payee  monthly,  quarterly,  semiannually  or  annually.  The $5,000
minimum account size is not applicable to IRAs. The minimum  periodic payment is
$50. The maximum  annual rate at which shares subject to CDSC may be redeemed is
12% of the net asset value of the account. Shares are redeemed so that the payee
should receive  payment  approximately  the first of the month.  Investors using
this Plan must reinvest Fund distributions.


Non-retirement plan shareholders may establish an Automatic Withdrawal Plan (the
"Automatic   Withdrawal  Plan")  to  receive  monthly,   quarterly  or  periodic
redemptions  from his or her account for any  designated  amount of $50 or more.
Shareholders  may designate  which day they want the automatic  withdrawal to be
processed.  The check  amounts may be based on the  redemption of a fixed dollar
amount,  fixed share amount,  percent of account value or declining balance. The
Automatic  Withdrawal  Plan  provides  for income  dividends  and capital  gains
distributions,  if any, to be reinvested in additional  shares.  Shares are then
liquidated  as  necessary  to  provide  for  withdrawal   payments.   Since  the
withdrawals are in amounts  selected by the investor and have no relationship to
yield or income,  payments  received  cannot be considered as yield or income on
the investment and the resulting liquidations may deplete or possibly extinguish
the  initial   investment  and  any  reinvested   dividends  and  capital  gains
distributions. Any such requests must be received by the transfer agent ten days
prior to the date of the first  automatic  withdrawal.  An Automatic  Withdrawal
Plan may be terminated at any time by the shareholder, the Trust or its agent on
written notice,  and will be terminated when all Fund shares under the Automatic
Withdrawal  Plan have been  liquidated or upon receipt by the Trust of notice of
death of the shareholder.

The purchase of Class A shares while  participating  in an Automatic  Withdrawal
Plan will  ordinarily be  disadvantageous  to the investor  because the investor
will be paying a sales  charge on the  purchase  of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, a Fund will not knowingly permit additional investments of less
than $2,000 if the investor is at the same time making systematic withdrawals.


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<PAGE>

Contingent  Deferred Sales Charge (CDSC).  The following example will illustrate
the operation of the CDSC.  Assume that an investor  makes a single  purchase of
$10,000 of the Fund's  Class B shares and that 16 months  later the value of the
shares has grown by $1,000  through  reinvested  dividends  and by an additional
$1,000 of share appreciation to a total of $12,000. If the investor were then to
redeem the entire  $12,000 in share  value,  the CDSC would be payable only with
respect to $10,000  because  neither the $1,000 of reinvested  dividends nor the
$1,000 of share  appreciation  is subject to the charge.  The charge would be at
the rate of 3.00%  ($300)  because it was in the second year after the  purchase
was made.

The rate of the CDSC is  determined  by the length of the  period of  ownership.
Investments  are tracked on a monthly  basis.  The period of ownership  for this
purpose  begins the first day of the month in which the order for the investment
is received.  For example, an investment made in March of the year of investment
will be eligible for the second  year's  charge if redeemed on or after March of
the following  year. In the event no specific  order is requested when redeeming
shares  subject  to a  CDSC,  the  redemption  will be made  first  from  shares
representing reinvested dividends and then from the earliest purchase of shares.
DWS-SDI  receives  any  CDSC  directly.  The  charge  will not be  imposed  upon
redemption of reinvested dividends or share appreciation.


The Class A CDSC will be waived in the event of:

(a)      redemptions  by  a   participant-directed   qualified  retirement  plan
         described in Code Section 401(a), a participant-directed  non-qualified
         deferred   compensation  plan  described  in  Code  Section  457  or  a
         participant-directed   qualified  retirement  plan  described  in  Code
         Section 403(b)(7) which is not sponsored by a K-12 school district;


(b)      redemptions  by  employer-sponsored  employee  benefit  plans using the
         subaccount record keeping system made available through ADP, Inc. under
         an alliance with DWS-SDI and its affiliates;


(c)      redemption  of shares of a  shareholder  (including a registered  joint
         owner) who has died or is disabled (under certain circumstances);


(d)      redemption  of shares of a  shareholder  (including a registered  joint
         owner) who after purchase of the shares being redeemed  becomes totally
         disabled  (as  evidenced  by a  determination  by  the  federal  Social
         Security Administration);


(e)      redemptions under the Fund's Automatic  Withdrawal Plan at a maximum of
         12% per year of the net asset value of the account;


(f)      redemptions  of  shares  whose  dealer  of  record  at the  time of the
         investment  notifies  DWS-SDI that the dealer waives the  discretionary
         commission applicable to such Large Order NAV Purchase; and


(g)      redemptions for certain loan advances,  hardship  provisions or returns
         of excess contributions from retirement plans.

The Class B CDSC will be waived  for the  circumstances  set forth in items (c),
(d), (e) and (g) for Class A shares. In addition, this CDSC will be waived:

(h)      for redemptions made pursuant to any IRA systematic withdrawal based on
         the  shareholder's  life  expectancy  including,  but not  limited  to,
         substantially  equal periodic  payments  described in Internal  Revenue
         Code Section 72(t)(2)(A)(iv) prior to age 59 1/2;


(i)      for redemptions to satisfy required minimum  distributions after age 70
         1/2 from an IRA account (with the maximum amount subject to this waiver
         being based only upon the shareholder's DWS Scudder IRA accounts); and


(j)      in connection with the following redemptions of shares held by employer
         sponsored  employee benefit plans  maintained on the subaccount  record
         keeping  system  made  available  through  ADP under an  alliance  with

                                       90
<PAGE>

         DWS-SDI and its affiliates:  (1) to satisfy  participant  loan advances
         (note that loan repayments constitute new purchases for purposes of the
         CDSC and the conversion  privilege),  (2) in connection with retirement
         distributions  (limited  at any one time to 12% of the  total  value of
         plan assets invested in the Fund), (3) in connection with distributions
         qualifying under the hardship  provisions of the Internal Revenue Code,
         (4) representing  returns of excess contributions to such plans and (5)
         in connection  with direct "roll over"  distributions  from a Flex Plan
         into a DWS  Scudder  IRA under the  Class A net  asset  value  purchase
         privilege.


The Class C CDSC will be waived  for the  circumstances  set forth in items (b),
(c), (d), (e) and (g) for Class A shares and for the  circumstances set forth in
items (h) and (i) for Class B shares. In addition, this CDSC will be waived for:

(k)      redemption  of shares by an employer  sponsored  employee  benefit plan
         that offers  funds in addition to DWS Funds and whose  dealer of record
         has waived the  advance of the first year  administrative  service  and
         distribution  fees applicable to such shares and agrees to receive such
         fees quarterly; and


(l)      redemption  of  shares  purchased  through  a  dealer-sponsored   asset
         allocation  program  maintained  on an  omnibus  record-keeping  system
         provided  the dealer of record had waived the advance of the first year
         administrative services and distribution fees applicable to such shares
         and has agreed to receive such fees quarterly.





                                       91
<PAGE>



In-kind  Redemptions.  Each Fund  reserves  the right to honor any  request  for
redemption or repurchase  by making  payment in whole or in part in  securities.
These  securities will be chosen by the fund and valued as they are for purposes
of computing a Fund's net asset value. A redeeming shareholder who receives such
securities will be subject to federal income tax in the same manner as if a cash
distribution had been received.  A shareholder may incur transaction expenses in
converting these securities to cash.

Exchanges

Shareholders  may request a taxable  exchange of their  shares for shares of the
corresponding  class of other DWS Funds  without  imposition  of a sales charge,
subject to the provisions  below. For purposes of calculating any CDSC,  amounts
exchanged retain their original cost and purchase date.

Shares of money  market  funds that were  acquired  by purchase  (not  including
shares acquired by dividend  reinvestment)  are subject to the applicable  sales
charge on exchange.


Shares of money  market  funds that were  acquired  by purchase  (not  including
shares acquired by dividend  reinvestment)  are subject to the applicable  sales
charge on exchange.  Certain series of DWS Target Fund are available on exchange
only during the offering  period for such series as described in the  applicable
prospectus.  Tax Free Money Fund --  Investment  Class,  NY Tax-Free  Money Fund
--Investment Class, Treasury Money Fund --Investment Class, Money Market Fund --
Investment  Class,  Cash  Management  Fund  Institutional,  Cash  Reserves  Fund
Institutional,  Treasury Money Fund -- Institutional  Class,  Cash Reserve Fund,
Inc. Prime Series,  Tax-Exempt  California Money Market Fund, Cash Account Trust
and Investors  Cash Trust are available on exchange but only through a financial
services  firm having a services  agreement  with DWS-SDI.  All exchanges  among
money  funds  must  meet   applicable   investor   eligibility   and  investment
requirements.  Exchanges  may only be made for funds that are available for sale
in the shareholder's state of residence.  Currently, Tax-Exempt California Money
Market Fund is available for sale only in California.




                                       92
<PAGE>



Shareholders must obtain prospectuses of the Funds they are exchanging into from
dealers, other firms or DWS-SDI.  Exchanges are taxable transactions for federal
income tax purposes.

Automatic Exchange Plan. The owner of $1,000 or more of any class of shares of a
DWS Fund may  authorize  the  automatic  exchange  of a  specified  amount  ($50
minimum) of such  shares for shares of the same class of another  such DWS Fund.
Exchanges will be made automatically  until the shareholder or a Fund terminates
the  privilege.  Exchanges  are  subject to the terms and  conditions  described
above.

Multi-Class  Conversions.  For purposes of conversion to Class A shares,  shares
purchased  through the  reinvestment of dividends and other  distributions  paid
with respect to Class B shares in a shareholder's Fund account will be converted
to Class A shares on a pro rata basis.

Purchases In-Kind

Each Fund may, at its own option,  accept securities in payment for shares.  The
securities  delivered  in payment for shares are valued by the method  described
under "Net Asset Value" as of the day the Fund receives the securities. This may
be a taxable  transaction  to the  shareholder.  (Consult  your tax  advisor for
future tax  guidance.)  Securities may be accepted in payment for shares only if
they are,  in the  judgment  of the  Advisor,  appropriate  investments  for the
applicable  Fund. In addition,  securities  accepted in payment for shares must:
(1) meet the investment  objective and policies of the acquiring  Fund;  (ii) be
acquired by the  applicable  Fund for  investment  and not for resale;  (iii) be
liquid  securities  which are not  restricted  as to  transfer  either by law or
liquidity  of the  market;  and (iv) if  stock,  have a value  which is  readily
ascertainable as evidenced by a listing on a stock exchange or  over-the-counter
market  or by  readily  available  market  quotations  from  a  dealer  in  such
securities.  Each Fund  reserves the right to accept or reject at its own option
any and all securities offered in payment for its shares.

                                    DIVIDENDS

Each Fund intends to follow the practice of  distributing  substantially  all of
its investment company taxable income, which includes any excess of net realized
short-term  capital gains over net realized long-term capital losses. A Fund may
follow the practice of distributing the entire excess of net realized  long-term
capital gains over net realized  short-term capital losses.  However,  each Fund
may retain all or part of such gain for  reinvestment  after  paying the related
federal taxes, for which shareholders may then be able to claim a credit against
their federal tax liability. If a Fund does not distribute the amount of capital
gain  and/or  ordinary  income  required  to be  distributed  by an  excise  tax
provision  of the Code,  the Fund may be subject to that  excise tax. In certain
circumstances,  a Fund may determine that it is in the interest of  shareholders
to distribute less than the required amount.

Each Fund  intends  to  distribute  dividends  from its net  investment  income,
excluding short-term capital gains,  annually in December.  Each Fund intends to
distribute  net  realized  capital  gains  after  utilization  of  capital  loss
carryforwards,  if any, in December to prevent  application  of a federal excise
tax. An additional distribution may be made, if necessary.

Any dividends or capital gains  distributions  declared in October,  November or
December  with a record  date in such a month  and  paid  during  the  following
January will be treated by  shareholders  for federal  income tax purposes as if
received on December 31 of the calendar year declared.

The level of income  dividends  per share (as a  percentage  of net asset value)
will be lower for Class B and Class C shares  than for Class A shares  primarily
as a result of the higher  distribution  services fee  applicable to Class B and
Class C shares. Distributions of capital gains, if any, will be paid in the same
amount for each class.

                                       93
<PAGE>

Income  dividends  and  capital  gain  distributions,  if any, of a Fund will be
credited to shareholder accounts in full and fractional shares of the same class
of the Fund at net asset  value on the  reinvestment  date,  except  that,  upon
written request to the  Shareholder  Service Agent, a shareholder may select one
of the following options:

(1)      To receive income including  short-term  capital gain dividends in cash
         and long-term capital gain dividends in shares of the same class at net
         asset value; or

(2)      To receive income dividends and capital gain distributions in cash.

Dividends and distributions  will be reinvested in shares of the same class of a
Fund unless  shareholders  indicate in writing that they wish to receive them in
cash or in  shares of other DWS Funds  with  multiple  classes  of shares or DWS
Funds as  provided  in the  Prospectuses.  To use this  privilege  of  investing
dividends of a Fund in shares of another DWS Fund,  shareholders must maintain a
minimum account value of $1,000 in each Fund  distributing  the dividends.  Each
Fund will reinvest  dividend and distribution  checks (and future  dividends) in
shares of that same Fund and class if  checks  are  returned  as  undeliverable.
Dividends and other distributions of each Fund in the aggregate amount of $10 or
less are automatically  reinvested in shares of such Fund unless the shareholder
requests that such policy not be applied to the shareholder's account.

If an investment is in the form of a retirement  plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.

If  a  shareholder   has  elected  to  reinvest  any   dividends   and/or  other
distributions,  such  distributions  will be made in  shares  of that  Fund  and
confirmations will be mailed to each shareholder. If a shareholder has chosen to
receive  cash, a check will be sent.  Dividends of  investment  company  taxable
income and distributions of net realized capital gains are taxable, whether made
in shares or cash.

Each dividend and distribution is accompanied by a brief explanation of the form
and  character  of the  distribution.  The  characterization  of  dividends  and
distributions on such  correspondence may differ from the  characterization  for
federal  tax  purposes.  In  January  of each  year,  each  Fund  issues to each
shareholder  a statement of the federal  income tax status of all  dividends and
distributions in the prior calendar year.

Each Fund may at any time vary its foregoing dividend and distribution practices
and,  therefore,  reserves the right from time to time to either  distribute  or
retain for reinvestment such of its net investment income and its net short-term
and long-term  capital gains as its Board determines  appropriate under the then
current circumstances. In particular, and without limiting the foregoing, a Fund
may make  additional  dividends of net  investment  income or  distributions  of
capital   gain  net  income  in  order  to  satisfy  the  minimum   distribution
requirements contained in the Code.

                                      TAXES

The following is intended to be a general  summary of certain federal income tax
consequences of investing in a Fund. It is not intended as a complete discussion
of all such  consequences,  nor does it purport to deal with all  categories  of
investors.  Investors are  therefore  advised to consult with their tax advisors
before  making an  investment  in a Fund.  The  summary  is based on the laws in
effect  on the  date  of this  SAI  and  existing  judicial  and  administrative
interpretations  thereof,  all of which are  subject  to change,  possibly  with
retroactive effect.

Taxation  of the Funds.  Each Fund has  elected  to be  treated  as a  regulated
investment  company  under  Subchapter  M of the Code and has  qualified as such
since its inception. Each Fund intends to continue to so qualify in each taxable
year as required  under the Code in order to avoid payment of federal income tax
at the Fund level. In order to qualify as a regulated investment company, a Fund
must  meet  certain  requirements  regarding  the  source  of  its  income,  the
diversification of its assets, and the distribution of its income:

(a) Each Fund must  derive at least  90% of its  gross  income  from  dividends,
interest,  payments with respect to certain securities loans, and gains from the
sale of stock, securities and foreign currencies, or other income (including but
not limited to gains from options,  futures,  or forward contracts) derived with
respect to its business of


                                       94
<PAGE>

investing in such stock, securities,  or currencies and, for tax years beginning
after  October 22,  2004,  net income  derived  from an interest in a "qualified
publicly  traded  partnership"  (i.e.,  a  partnership  that  is  traded  on  an
established  security  market or tradable on a  secondary  market,  other than a
partnership  that  derives 90 percent of its income  from  interest,  dividends,
capital gains, and other traditional permitted mutual fund income).

(b) Each Fund must diversify its holdings so that, at the end of each quarter of
its taxable  year,  (i) at least 50% of the market value of the Fund's assets is
represented  by cash and cash items,  US  government  securities,  securities of
other regulated investment companies, and other securities limited in respect of
any one issuer of such other  securities  to a value not greater  than 5% of the
value of the Fund's  total  assets  and to not more than 10% of the  outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the  securities  (other than those of the US Government or
other regulated investment  companies) of any one issuer, of two or more issuers
that the Fund  controls  and that are engaged in the same,  similar,  or related
trades or businesses  or in the  securities  of one or more  qualified  publicly
traded partnership.

(c) Each Fund is required to distribute to its  shareholders at least 90% of its
taxable  and  tax-exempt  net  investment  income  (including  the excess of net
short-term  capital gain over net long-term capital losses) and generally is not
subject to federal  income tax to the extent that it  distributes  annually such
net  investment  income and net realized  capital  gains in the manner  required
under the Code.

If for any taxable year a Fund does not qualify for the special  federal  income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal  income tax at regular  corporate  rates (without any
deduction for distributions to its  shareholders),  and all  distributions  from
earnings and profits,  including any  distributions of net tax-exempt income and
net long-term capital gains, will be taxable to shareholders as ordinary income.
Such  distributions  would be eligible (i) to be treated as  qualified  dividend
income  in the  case of  shareholders  taxed  as  individuals  and  (ii) for the
dividends received deduction in the case of corporate shareholders. In addition,
a Fund could be required to recognize  unrealized  gains, pay substantial  taxes
and  interest  and  make  substantial  distributions  before  requalifying  as a
regulated investment company that is accorded special tax treatment.

Each Fund is subject to a 4% nondeductible excise tax on amounts required to be,
but that are not,  distributed under a prescribed formula.  The formula requires
payment to shareholders during a calendar year of distributions  representing at
least 98% of a Fund's taxable ordinary income for the calendar year and at least
98% of the excess of its capital gains over capital losses  realized  during the
one-year  period  ending  October  31 (in most  cases)  of such  year as well as
amounts  that were  neither  distributed  nor taxed to the Fund during the prior
calendar year.  Although each Fund's  distribution  policies should enable it to
avoid  excise  tax  liability,  a Fund may  retain  (and be subject to income or
excise tax on) a portion of its capital gain or other income if it appears to be
in the interest of the Fund.

Taxation of Fund  Distributions.  Distributions  from a Fund  generally  will be
taxable to shareholders as ordinary income to the extent derived from investment
income and net  short-term  capital  gains.  Distributions  of net capital gains
(that is, the excess of net gains from the sale of capital assets held more than
one year over net losses from the sale of capital  assets held for not more than
one year)  properly  designated  as capital  gain  dividends  will be taxable to
shareholders as long-term capital gain, regardless of how long a shareholder has
held the shares in the Fund.

Long-term  capital gain rates  applicable to individuals  have been  temporarily
reduced -- in general,  to 15% with lower rates applying to taxpayers in the 10%
and 15% rate brackets -- for taxable years  beginning on or before  December 31,
2010.

For taxable years beginning on or before December 31, 2010,  "qualified dividend
income"  received  by an  individual  will be taxed at the rates  applicable  to
long-term capital gain provided holding period and other requirements are met at
both the shareholder and Fund level.  Qualified dividend income does not include
interest  from  fixed-income  securities.  In  order  for  some  portion  of the
dividends  received by a shareholder of a Fund to be qualified  dividend income,
the Fund must meet holding  period and other  requirements  with respect to some
portion of the dividend-paying  stocks in its portfolio and the shareholder must
meet holding period and other  requirements with respect to the Fund's shares. A
dividend will not be treated as qualified dividend income (at either the Fund or
shareholder  level) (1) if the dividend is received with respect to any share of
stock held for fewer than 61 days during the


                                       95
<PAGE>

121-day  period  beginning on the date which is 60 days before the date on which
such share becomes ex-dividend with respect to such dividend (or, in the case of
certain  preferred  stock,  for fewer  than 91 days  during the  181-day  period
beginning  90 days before such date),  (2) to the extent that the  recipient  is
under an  obligation  (whether  pursuant to a short sale or  otherwise)  to make
related payments with respect to positions in  substantially  similar or related
property,  or (3) if the recipient elects to have the dividend income treated as
investment  income for purposes of the limitation on deductibility of investment
interest.  In order for a dividend paid by a foreign  corporation  to constitute
"qualified  dividend  income," the foreign  corporation must (1) be eligible for
the benefits of a comprehensive income tax treaty with the United States (or the
stock on which the dividend is paid must be readily  tradable on an  established
securities  market in the  United  States),  and (2) not be treated as a passive
foreign investment company.

In  general,  distributions  of  investment  income  designated  by a  regulated
investment  company as derived from qualified dividend income will be treated as
qualified dividend income by a shareholder taxed as an individual,  provided the
shareholder meets the holding period and other requirements described above with
respect to the Fund's shares.

If the aggregate  qualified dividends received by a Fund during any taxable year
are 95% or more of its gross income  (excluding net long-term  capital gain over
net short-term  capital  loss),  then 100% of the Fund's  dividends  (other than
properly  designated  capital gain  dividends) will be eligible to be treated as
qualified dividend income. For this purpose,  the only gain included in the term
"gross income" is the excess of net  short-term  capital gain over net long-term
capital loss.

Capital  gains  distributions  may  be  reduced  if  a  Fund  has  capital  loss
carryforwards  or  post-October  loss  deferrals  available.  Any  capital  loss
carryforwards  and any  post-October  loss deferrals to which a Fund is entitled
are disclosed in the Fund's annual and semi-annual reports to shareholders.

All  distributions by a Fund result in a reduction in the net asset value of the
Fund's  shares.  Should  a  distribution  reduce  the net  asset  value  below a
shareholder's  cost basis,  such distribution may nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above,  even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular,  investors  should be careful to consider  the tax  implications  of
buying  shares just prior to a  distribution.  The price of shares  purchased at
that  time  may  include  the  amount  of the  forthcoming  distribution.  Those
purchasing just prior to a distribution will receive a partial return of capital
upon the distribution, which may nevertheless be taxable to them.

Sale or  Redemption of Shares.  The sale,  exchange or redemption of shares of a
Fund may give rise to a gain or loss. In general, any gain or loss realized upon
a taxable  disposition  of shares will be treated as  long-term  capital gain or
loss if the shares have been held for more than 12 months.  Otherwise,  the gain
or loss on the  taxable  disposition  of  shares of a Fund  will be  treated  as
short-term  capital  gain or loss.  However,  any loss  realized  upon a taxable
disposition  of shares held for six months or less will be treated as long-term,
rather  than   short-term,   to  the  extent  of  any  long-term   capital  gain
distributions  received (or deemed  received) by the shareholder with respect to
the shares. All or a portion of any loss realized upon a taxable  disposition of
shares of a Fund will be disallowed if other  substantially  identical shares of
the Fund are purchased within 30 days before or after the disposition. In such a
case,  the basis of the newly  purchased  shares will be adjusted to reflect the
disallowed loss.

Dividends Received Deduction.  Dividends from domestic corporations may comprise
a substantial part of each Fund's gross income. If any such dividends constitute
a portion of a Fund's gross income, a portion of the income distributions of the
Fund  may  be  eligible  for  the  70%  deduction  for  dividends   received  by
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the shares of
the Fund with  respect  to which the  dividends  are  received  are  treated  as
debt-financed  under  federal  income tax law and is  eliminated if either those
shares or the shares of the Fund are deemed to have been held by the Fund or the
shareholder, as the case may be, for fewer than 46 days during the 91-day period
beginning 45 days before the shares become ex-dividend.

Foreign  Taxation.  Foreign  withholding  or other foreign taxes with respect to
income  (possibly  including,  in some cases,  capital gains) on certain foreign
securities may occur.  These taxes may be reduced or eliminated  under the


                                       96
<PAGE>

terms of an  applicable  US income tax treaty.  As it is not expected  that more
than 50% of the value of either  Fund's total assets will consist of  securities
issued by foreign  corporations,  the Funds will not be eligible to pass through
to shareholders  their  proportionate  share of any foreign taxes paid, with the
result that shareholders will not be able to include in income,  and will not be
entitled to take any credits or deductions for, such foreign taxes.

Passive Foreign  Investment  Companies.  Equity investments by a Fund in certain
"passive foreign investment  companies"  ("PFICs") could potentially subject the
Fund to a US federal income tax (including  interest  charges) on  distributions
received from the company or on proceeds received from the disposition of shares
in the company,  which tax cannot be eliminated by making  distributions to Fund
shareholders. However, a Fund may elect to avoid the imposition of that tax. For
example, a Fund may elect to treat a PFIC as a "qualified electing fund" (a "QEF
election"),  in which case the Fund will be required to include its share of the
company's  income  and net  capital  gains  annually,  regardless  of whether it
receives any distribution from the company.  A Fund also may make an election to
mark the gains (and to a limited  extent the  losses) in such  holdings  "to the
market" as though it had sold and repurchased its holdings in those PFICs on the
last day of the Fund's  taxable  year.  Such  gains and  losses  are  treated as
ordinary  income and loss. The QEF and  mark-to-market  elections may accelerate
the  recognition of income (without the receipt of cash) and increase the amount
required to be distributed by a Fund to avoid  taxation.  Making either of these
elections therefore may require a Fund to liquidate other investments (including
when it is not  advantageous  to do so) to meet  its  distribution  requirement,
which also may  accelerate  the  recognition of gain and affect the Fund's total
return. Dividends paid by PFICs will not be eligible to be treated as "qualified
dividend income."

Tax Effects of Certain Transactions. A Fund's use of options, futures contracts,
forward  contracts  (to  the  extent  permitted)  and  certain  other  strategic
transactions  will be subject to special  tax rules  (including  mark-to-market,
constructive sale, straddle,  wash sale, short sale and other rules), the effect
of which may be to accelerate  income,  defer losses,  cause  adjustments in the
holding  periods of portfolio  securities,  convert  capital gains into ordinary
income and convert  short-term  capital  losses into long-term  capital  losses.
These  rules  could  therefore  affect  the  amount,  timing  and  character  of
distributions to investors.

Transactions in foreign currencies, foreign investment currency-denominated debt
securities and certain foreign  currency  options,  futures  contracts,  forward
contracts and similar  instruments  (to the extent  permitted)  may give rise to
ordinary  income  or  loss to the  extent  such  income  or  loss  results  from
fluctuations in the value of the foreign currency concerned.

A Fund's  investment  in zero  coupon  bonds and other debt  obligations  having
original issue discount may cause the Fund to recognize taxable income in excess
of any cash received from the investment.

Under  current law, a Fund serves to block  unrelated  business  taxable  income
("UBTI") from being realized by its tax-exempt shareholders. Notwithstanding the
foregoing,  a  tax-exempt  shareholder  could  realize  UBTI  by  virtue  of its
investment in a Fund if either:  (1) the Fund invests in real estate  investment
trusts ("REITs") that hold residual interests in real estate mortgage investment
conduits ("REMICs"); or (2) shares in the Fund constitute debt-financed property
in the hands of the  tax-exempt  shareholder  within the meaning of Code Section
514(b).  If a  charitable  remainder  trust (as  defined  in Code  Section  664)
realizes any UBTI for a taxable year, it will lose its tax-exempt status for the
year. The Funds may invest in REITs that hold residential investments in REMICs.

Other Tax Considerations.  Under the backup withholding  provisions of the Code,
redemption  proceeds as well as  distributions  may be subject to federal income
tax withholding for certain shareholders,  including those who fail to furnish a
Fund with their taxpayer  identification  numbers and certifications as to their
tax status.

Shareholders of a Fund may be subject to state and local taxes on  distributions
received from the Fund and on redemptions of the Fund's shares.

Special tax rules apply to investments  through defined  contribution  plans and
other  tax-qualified  plans.  Shareholders  should consult their tax advisors to
determine  the  suitability  of shares of a Fund as an  investment  through such
plans and the precise effect of an investment on their particular tax situation.

                                       97
<PAGE>

Under recently promulgated Treasury regulations,  if a shareholder  recognizes a
loss with  respect to a Fund's  shares of $2  million or more for an  individual
shareholder or $10 million or more for a corporate shareholder,  the shareholder
must file with the Internal Revenue Service a disclosure statement on Form 8886.
Direct shareholders of portfolio securities are in many cases excepted from this
reporting requirement,  but under current guidance,  shareholders of a regulated
investment  company are not  excepted.  Future  guidance  may extend the current
exception  from  this  reporting  requirement  to  shareholders  of  most or all
regulated investment  companies.  The fact that a loss is reportable under these
regulations  does not affect the legal  determination  of whether the taxpayer's
treatment of the loss is proper.  Shareholders should consult their tax advisors
to determine the applicability of these regulations in light of their individual
circumstances.

Taxation  of  Non-US  Shareholders.   Dividends  paid  by  the  Fund  to  non-US
shareholders are generally subject to withholding tax at a 30% rate or a reduced
rate  specified by an  applicable  income tax treaty to the extent  derived from
investment  income and short-term  capital  gains.  In order to obtain a reduced
rate of  withholding,  a non-US  shareholder  will be required to provide an IRS
Form  W-8BEN  certifying  its  entitlement  to  benefits  under  a  treaty.  The
withholding tax does not apply to regular dividends paid to a non-US shareholder
who  provides a Form  W-8ECI,  certifying  that the  dividends  are  effectively
connected with the non-US  shareholder's  conduct of a trade or business  within
the United States.  Instead, the effectively connected dividends will be subject
to regular US income tax as if the non-US  shareholder were a US shareholder.  A
non-US corporation receiving effectively connected dividends may also be subject
to  additional  "branch  profits  tax" imposed at a rate of 30% (or lower treaty
rate).

In general,  United States federal withholding tax will not apply to any gain or
income realized by a non-US  shareholder in respect of any  distributions of net
long-term  capital gains over net  short-term  capital  losses,  exempt-interest
dividends, or upon the sale or other disposition of shares of a Fund.

Recently enacted  legislation  would generally exempt from United States federal
withholding  tax  properly-designated  dividends that (i) are paid in respect of
the Fund's  "qualified  net interest  income"  (generally,  the Fund's US source
interest  income,  other than certain  contingent  interest  and  interest  from
obligations  of a corporation or partnership in which the Fund is at least a 10%
shareholder, reduced by expenses that are allocable to such income) and (ii) are
paid in respect of the Fund's "qualified  short-term  capital gains" (generally,
the excess of the Fund's net short-term  capital gain over the Fund's  long-term
capital loss for such taxable year).  This  legislation  would apply for taxable
years  beginning after December 31, 2004 and before January 1, 2008. In order to
qualify for this exemption from withholding,  a non-US  shareholder will need to
comply with applicable certification  requirements relating to its non-US status
(including, in general, furnishing an IRS Form W-8BEN or substitute Form).

Special rules apply to foreign persons who receive  distributions  from the Fund
that are attributable to gain from "US real property interests" ("USRPIs").  The
Code  defines  USRPIs to include  direct  holdings of US real  property  and any
interest  (other than an interest  solely as a  creditor)  in "US real  property
holding  corporations." The Code defines a US real property holding  corporation
as any corporation  whose USRPIs make up more than 50 percent of the fair market
value of its USRPIs,  its interests in real property  located outside the United
States,  plus any other assets it uses in a trade or business.  In general,  the
distribution  of gains  from  USRPIs to  foreign  shareholders  is subject to US
federal  income tax  withholding  at a rate of 35% and  obligates  such  foreign
shareholder to file a US tax return.  To the extent a distribution  to a foreign
shareholder  is  attributable  to  gains  from the sale or  exchange  of  USRPIs
recognized by a REIT or (between December 31, 2004 and December 31, 2007) a RIC,
the Code treats that gain as treated as the distribution of gain from a USRPI to
a foreign  shareholder  which would be subject to US withholding  tax of 35% and
would result in US tax filing obligations for the foreign shareholder.

However, a foreign  shareholder  achieves a different result with respect to the
gains  from the sale of  USRPIs  if the  REIT or RIC is less  than 50%  owned by
foreign  persons at all times  during  the  testing  period,  or if such gain is
realized from the sale of any class of stock in a REIT which is regularly traded
on an established US securities  market and the REIT shareholder owned less than
5% of such class of stock at all times during the taxable  year.  In such event,
the gains are treated as dividends paid to a non-US shareholder.

                                       98
<PAGE>


The  foregoing  is only a summary of  certain  material  US  federal  income tax
consequences  affecting the Funds and its shareholders.  Current and prospective
shareholders  are advised to consult  their own tax advisors with respect to the
particular tax consequences to them of an investment in a Fund.


                                 NET ASSET VALUE

The net  asset  value  per  share of each  Fund is  computed  as of the close of
regular  trading on the  Exchange  on each day the  Exchange is open for trading
(the "Value  Time").  The Exchange is  scheduled  to be closed on the  following
holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday,  Memorial Day,  Independence Day, Labor Day, Thanksgiving and Christmas,
and on the  preceding  Friday or  subsequent  Monday when one of these  holidays
falls on a  Saturday  or  Sunday,  respectively.  Net  asset  value per share is
determined  separately  for each  class of shares by  dividing  the value of the
total  assets of the Fund  attributable  to the shares of that  class,  less all
liabilities  attributable  to that class,  by the total number of shares of that
class  outstanding.  The per  share net  asset  value  may be lower for  certain
classes of a Fund because of higher expenses borne by these classes.

An equity  security is valued at its most  recent  sale price on the  security's
primary  exchange  or OTC market as of the Value Time.  Lacking  any sales,  the
security is valued at the calculated  mean between the most recent bid quotation
and the most recent asked quotation (the "Calculated  Mean") on such exchange or
OTC  market  as of the  Value  Time.  If it is not  possible  to  determine  the
Calculated Mean, the security is valued at the most recent bid quotation on such
exchange  or OTC market as of the Value  Time.  In the case of  certain  foreign
exchanges  or OTC  markets,  the closing  price  reported by the exchange or OTC
market  (which may  sometimes  be  referred  to as the  "official  close" or the
"official  closing  price" or other similar  term) will be  considered  the most
recent sale price.

Debt securities are valued as follows.  Money market instruments  purchased with
an  original or  remaining  maturity  of 60 days or less,  maturing at par,  are
valued at amortized  cost.  Other money market  instruments  are valued based on
information  obtained from an approved  pricing agent or, if such information is
not readily  available,  by using  matrix  pricing  techniques  (formula  driven
calculations based primarily on current market yields). Bank loans are valued at
prices supplied by an approved  pricing agent (which are intended to reflect the
mean between the bid and asked prices), if available,  and otherwise at the mean
of the most recent bid and asked quotations or evaluated  prices, as applicable,
based  on   quotations   or  evaluated   prices   obtained   from  one  or  more
broker-dealers.  Privately  placed  debt  securities,  other than Rule 144A debt
securities,  initially are valued at cost and  thereafter  based on all relevant
factors  including  type  of  security,  size of  holding  and  restrictions  on
disposition.  Municipal  debt  securities  are valued at prices  supplied  by an
approved  pricing  agent (which are intended to reflect the mean between the bid
and asked  prices),  if available,  and otherwise at the mean of most recent bid
and asked  quotations or evaluated  price obtained from a  broker-dealer.  Other
debt securities are valued at prices  supplied by an approved  pricing agent, if
available, and otherwise at the most recent bid quotation or evaluated price, as
applicable,  obtained from one or more broker-dealers.  If it is not possible to
value a particular debt security pursuant to the above methods,  the security is
valued on the basis of factors including (but not limited to) maturity,  coupon,
creditworthiness, currency denomination, and the movement of the market in which
the security is normally traded.

An exchange-traded option contract on securities, currencies and other financial
instruments  is valued at its most recent sale price on the  relevant  exchange.
Lacking any sales,  the option contract is valued at the Calculated  Mean. If it
is not possible to determine the Calculated  Mean, the option contract is valued
at the most recent bid quotation in the case of a purchased  option  contract or
the most recent asked  quotation in the case of a written  option  contract,  in
each case as of the Value Time. An option contract on securities, currencies and
other financial instruments traded in the OTC market is valued on the Value Date
at the evaluated price provided by the  broker-dealer  with which it was traded.
Futures contracts (and options thereon) are valued at the most recent settlement
price, if available,  on the exchange on which they are traded most extensively.
With the  exception of stock index futures  contracts  that trade on the Chicago
Mercantile Exchange,  closing settlement times are prior to the close of trading
on the  Exchange.  For stock index futures  contracts  that trade on the Chicago
Mercantile  Exchange,  closing  settlement  prices  are  normally  available  at
approximately  4:20 p.m. Eastern time. If no settlement price is available,  the
last traded price on such exchange will be used.

If market quotations for Fund assets are not readily available or the value of a
Fund asset as determined in accordance with  Board-approved  procedures does not
represent  the fair market value of the Fund asset,  the value of


                                       99
<PAGE>

the Fund asset is taken to be an amount which,  in the opinion of the applicable
Fund's Pricing Committee (or, in some cases, the Board's  Valuation  Committee),
represents  fair market  value.  The value of other  holdings is determined in a
manner which is intended to fairly reflect the fair market value of the asset on
the valuation date,  based on valuation  procedures  adopted by the Funds' Board
and overseen primarily by the Funds' Pricing Committee.

                              TRUSTEES AND OFFICERS


The following table presents certain information  regarding the Board Members of
the Trust.  Each Board Member's year of birth is set forth in parentheses  after
his or her name.  Unless  otherwise  noted, (i) each Board Member has engaged in
the principal occupation(s) noted in the table for at least the most recent five
years,  although not  necessarily in the same capacity,  and (ii) the address of
each Board  Member  that is not an  "interested  person" (as defined in the 1940
Act) of the Trust or the Advisor (each, an "Independent  Board Member"),  is c/o
Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for
each Board  Member is until the election and  qualification  of a successor,  or
until  such Board  Member  sooner  dies,  resigns,  is  removed or as  otherwise
provided in the governing documents of the Trust. Because the Fund does not hold
an annual  meeting of  shareholders,  each Board  Member will hold office for an
indeterminate  period.  The Board  Members may also serve in similar  capacities
with other funds in the DWS fund complex.  The Length of Time Served  represents
the year in which the Board Member joined the board of one or more DWS funds now
overseen by the Board.

Independent Board Members

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time         Business Experience and                                               in DWS Fund
 Served                     Directorships During the Past 5 Years                                 Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                               <C>                                                                  <C>
Dawn-Marie Driscoll (1946)  President, Driscoll Associates (consulting firm); Executive Fellow,          76
Chairperson since 2006      Center for Business Ethics, Bentley College; formerly, Partner,
Board Member since          Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and
1987                        General Counsel, Filene's (1978-1988). Directorships: Trustee of 8
                            open-end mutual funds managed by Sun Capital Advisers, Inc. (since
                            2007); Director of ICI Mutual Insurance Company (since 2007);
                            Advisory Board, Center for Business Ethics, Bentley College;
                            Trustee, Southwest Florida Community Foundation (charitable
                            organization); Former Directorships: Investment Company Institute
                            (audit, executive, nominating committees) and Independent Directors
                            Council (governance, executive committees)
--------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr.       Vice Chair, WGBH Educational Foundation. Directorships: Association          76
 (1943)                     of Public Television Stations; Becton Dickinson and Company(1)
 Board Member since         (medical technology company); Belo Corporation(1) (media company);
 1990                       Boston Museum of Science; Public Radio International. Former
                            Directorships: American Public Television; Concord Academy; New
                            England Aquarium; Mass. Corporation for Educational
                            Telecommunications; Committee for Economic Development; Public
                            Broadcasting Service
--------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)         Managing General Partner, Exeter Capital Partners (a series of               76
Board Member since          private equity funds). Directorships: Progressive Holding
1996                        Corporation (kitchen goods importer and distributor); Natural
                            History, Inc. (magazine publisher); Box Top Media Inc.
                            (advertising); The Kennel Shop (retailer)
--------------------------------------------------------------------------------------------------------------------



                                      100
<PAGE>

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time         Business Experience and                                               in DWS Fund
 Served                     Directorships During the Past 5 Years                                 Complex Overseen
--------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss         Clinical Professor of Finance, NYU Stern School of Business                  76
(1945)                      (1997-present); Member, Finance Committee, Association for Asian
Board Member since          Studies (2002-present); Director, Mitsui Sumitomo Insurance Group
2001                        (US) (2004-present); prior thereto, Managing Director, J.P. Morgan
                            (investment banking firm) (until 1996)
--------------------------------------------------------------------------------------------------------------------
Martin J. Gruber            Nomura Professor of Finance, Leonard N. Stern School of Business,            76
(1937)                      New York University (since September 1965); Director, Japan Equity
Board Member since          Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since
1999                        January 2000), Singapore Fund, Inc. (since January 2000), National
                            Bureau of Economic Research (since January 2006). Formerly,
                            Trustee, TIAA (pension funds) (January 1996-January 2000); Trustee,
                            CREF and CREF Mutual Funds (January 2000-March 2005); Chairman,
                            CREF and CREF Mutual Funds (February 2004-March 2005); and
                            Director, S.G. Cowen Mutual Funds (January 1985-January 2001)
--------------------------------------------------------------------------------------------------------------------
Richard J. Herring          Jacob Safra Professor of International Banking and Professor,                76
(1946)                      Finance Department, The Wharton School, University of Pennsylvania
Board Member since          (since July 1972); Co-Director, Wharton Financial Institutions
1999                        Center (since July 2000); Director, Japan Equity Fund, Inc. (since
                            September 2007), Thai Capital Fund, Inc. (since September 2007),
                            Singapore Fund, Inc. (since September 2007). Formerly, Vice Dean
                            and Director, Wharton Undergraduate Division (July 1995-June 2000);
                            Director, Lauder Institute of International Management Studies
                            (July 2000-June 2006)
--------------------------------------------------------------------------------------------------------------------
Graham E. Jones             Senior Vice President, BGK Realty, Inc. (commercial real estate)             76
(1933)                      (since 1995). Formerly, Trustee of various investment companies
Board Member since          managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley
2002                        Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005)
--------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel            President and Chief Executive Officer, The Pew Charitable Trusts             76
(1951)                      (charitable organization) (1994 to present); Trustee, Thomas
Board Member since          Jefferson Foundation (charitable organization) (1994 to present);
2002                        Trustee, Executive Committee, Philadelphia Chamber of Commerce
                            (2001 to present). Formerly, Executive Vice President, The Glenmede
                            Trust Company (investment trust and wealth management) (1983 to
                            2004); Board Member, Investor Education (charitable organization)
                            (2004-2005); Director, Viasys Health Care(1) (January 2007-June
                            2007)
--------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.      Private investor since October 2003; Trustee of 8 open-end mutual            76
(1946)                      funds managed by Sun Capital Advisers, Inc. (since October 1998).
Board Member since          Formerly, Pension & Savings Trust Officer, Sprint Corporation(1)
2002                        (telecommunications) (November 1989-September 2003)
--------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg      Retired. Formerly, Consultant (1997-2001); Director, US Government           76
(1943)                      Accountability Office (1996-1997); Partner, Fulbright & Jaworski,
Board Member since          L.L.P. (law firm) (1978-1996). Directorships: The William and Flora
1997                        Hewlett Foundation; Service Source, Inc. Former Directorships:
                            Mutual Fund Directors Forum (2002-2004), American Bar Retirement
                            Association (funding vehicle for retirement plans) (1987-1990 and
                            1994-1996)
--------------------------------------------------------------------------------------------------------------------



                                      101
<PAGE>

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time         Business Experience and                                               in DWS Fund
 Served                     Directorships During the Past 5 Years                                 Complex Overseen
--------------------------------------------------------------------------------------------------------------------
Carl W. Vogt                Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm);             74
(1936)                      formerly, President (interim) of Williams College (1999-2000);
Board Member since          formerly, President of certain funds in the Deutsche Asset
2006                        Management family of funds (formerly, Flag Investors family of
                            funds) (registered investment companies) (1999-2000).
                            Directorships: Yellow Corporation (trucking); American Science &
                            Engineering (x-ray detection equipment). Former Directorships: ISI
                            Family of Funds (registered investment companies, 4 funds
                            overseen); National Railroad Passenger Corporation (Amtrak) Waste
                            Management, Inc. (solid waste disposal); formerly, Chairman and
                            Member, National Transportation Safety Board
--------------------------------------------------------------------------------------------------------------------

Interested Board Member

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time         Business Experience and                                               in DWS Fund
 Served                     Directorships During the Past 5 Years                                 Complex Overseen
--------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(2)          Managing Director(4), Deutsche Asset Management; Head of Deutsche             82
 (1958)                     Asset Management Americas; CEO of DWS Scudder; formerly board
 Board Member since         member of DWS Investments, Germany (1999-2005); formerly, Head of
 2006                       Sales and Product Management for the Retail and Private Banking
                            Division of Deutsche Bank in Germany (1997-1999); formerly,
                            various strategic and operational positions for Deutsche Bank
                            Germany Retail and Private Banking Division in the field of
                            investment funds, tax driven instruments and asset management for
                            corporates (1989-1996)
---------------------------------------------------------------------------------------------------------------------

Officers(3)

----------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
----------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(5)        Managing Director(4), Deutsche Asset Management (2006-present); President of DWS family
 (1965)                     of funds; Director, ICI Mutual Insurance Company (since October 2007); formerly,
 President, 2006-present    Director of Fund Board Relations (2004-2006) and Director of Product Development
                            (2000-2004), Merrill Lynch Investment Managers; Senior Vice President Operations,
                            Merrill Lynch Asset Management (1999-2000)
----------------------------------------------------------------------------------------------------------------------
 John Millette(6) (1962)    Director(4), Deutsche Asset Management
 Vice President and
 Secretary, 1999-present
----------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(5)        Managing Director(4), Deutsche Asset Management (since July 2004); formerly, Executive
 (1963)                     Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds
 Chief Financial Officer,   (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset
 2004-present               Management (1994-1998)
 Treasurer, 2005-present
----------------------------------------------------------------------------------------------------------------------



                                      102
<PAGE>

----------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
----------------------------------------------------------------------------------------------------------------------
 Patricia DeFilippis(5)     Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New
 (1963)                     York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co.
 Assistant Secretary,       LLC (1998-2003)
 2005-present
----------------------------------------------------------------------------------------------------------------------
 Elisa D. Metzger(5)        Director(4), Deutsche Asset Management (since September 2005); formerly, Counsel,
 (1962)                     Morrison and Foerster LLP (1999-2005)
 Assistant Secretary,
 2005-present
----------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(6)        Managing Director(4), Deutsche Asset Management
 (1962)
 Assistant Secretary,
 2002-present
----------------------------------------------------------------------------------------------------------------------
 Paul Antosca(6)            Director(4), Deutsche Asset Management (since 2006); formerly, Vice President, The
 (1957)                     Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
----------------------------------------------------------------------------------------------------------------------
 Jack Clark (6)             Director(4), Deutsche Asset Management (since 2007); formerly, Vice President, State
 (1967)                     Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
----------------------------------------------------------------------------------------------------------------------
 Kathleen Sullivan          Director(4), Deutsche Asset Management
 D'Eramo(6)
 (1957)
 Assistant Treasurer,
 2003-present
----------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(6)         Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
----------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(5) (1972)    Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
 Anti-Money Laundering      Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations
 Compliance Officer,        Manager for AXA Financial (1999-2004)
 2007-present
----------------------------------------------------------------------------------------------------------------------
 Robert Kloby(5) (1962)     Managing Director(4), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance           Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The
 Officer, 2006-present      Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company (1984-1988)
----------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(5)  Director(4), Deutsche Asset Management (2006-present); formerly, Director, Senior Vice
 (1951)                     President, General Counsel, and Assistant Secretary, Hansberger Global Investors, Inc.
 Chief Legal Officer,       (1996-2006); Director, National Society of Compliance Professionals
 2006-present               (2002-2005)(2006-2009)
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      A publicly held company with securities  registered pursuant to Section
         12 of the Securities Exchange Act of 1934.

(2)      The  mailing  address  of Axel  Schwarzer  is c/o  Deutsche  Investment
         Management  Americas Inc.,  345 Park Avenue,  New York, New York 10154.
         Mr.  Schwarzer is an interested Board Member by virtue of his positions
         with Deutsche Asset Management.  As an interested person, Mr. Schwarzer
         receives no compensation from the Funds.

                                      103
<PAGE>

(3)      As a result of their respective positions held with the Advisor,  these
         individuals are considered  "interested  persons" of the Advisor within
         the meaning of the 1940 Act. Interested persons receive no compensation
         from the Funds.

(4)      Executive title, not a board directorship.

(5)      Address:  345 Park Avenue, New York, New York 10154.

(6)      Address: Two International Place, Boston, Massachusetts 02110.

Each Officer also holds  similar  positions for other  investment  companies for
which DIMA or an affiliate serves as the advisor.

Officer's Role with Principal Underwriter:  DWS Scudder Distributors, Inc.

 Paul H. Schubert:                         Vice President
 Caroline Pearson:                         Secretary

Information Concerning Committees and Meetings of Board Members

The  Board of the  Trust met ten (10)  times  during  the  calendar  year  ended
December 31, 2007 and each Board Member attended at least 80% of the meetings of
the Board and meetings of the committees of the Board on which such Board Member
served.

Board  Committees.  Ms.  Driscoll  has served as Chair of the Board of the Funds
since May 2006.

The Board has established the following  standing  committees:  Audit Committee,
Nominating/Corporate Governance Committee, Valuation Committee, Equity Oversight
Committee, Fixed Income Oversight Committee,  Marketing/Distribution/Shareholder
Service Committee,  Legal/Regulatory/Compliance Committee and Expense/Operations
Committee.

The Audit  Committee  assists the Board in  fulfilling  its  responsibility  for
oversight of the quality and integrity of the accounting, auditing and financial
reporting  practices  of the  applicable  Fund.  It also  makes  recommendations
regarding the selection of an independent  registered public accounting firm for
a Fund,  reviews the  independence of such firm,  reviews the scope of audit and
internal  controls,  considers and reports to the Board on matters relating to a
Fund's  accounting and financial  reporting  practices,  and performs such other
tasks as the full Board deems  necessary  or  appropriate.  The Audit  Committee
receives  annual   representations   from  the  independent   registered  public
accounting firm as to its  independence.  The members of the Audit Committee are
Keith R. Fox (Chair and Audit Committee Financial Expert),  Kenneth C. Froewiss,
Richard J. Herring, William N. Searcy, Jr. and Jean Gleason Stromberg. The Audit
Committee held nine (9) meetings during the calendar year 2007.

The  Nominating/Corporate  Governance  Committee  (i)  recommends  to the  Board
candidates  to serve as Board  Members and (ii)  oversees  and, as  appropriate,
makes  recommendations  to the Board  regarding  other  fund  governance-related
matters,  including but not limited to Board compensation practices,  retirement
policies,  self-evaluations  of effectiveness,  review of possible  conflicts of
interest  and  independence  issues  involving  Board  Members,  allocations  of
assignments  and  functions  of  committees  of the Board,  and share  ownership
policies. The members of the Nominating/Corporate Governance Committee are Henry
P.  Becton,  Jr.  (Chair),  Graham E. Jones,  Rebecca W. Rimel and Jean  Gleason
Stromberg.  The  Nominating/Corporate  Governance Committee (previously known as
the  Committee on  Independent  Directors)  held three (3)  meetings  during the
calendar year 2007.

The Valuation  Committee  oversees Fund  valuation  matters,  reviews  valuation
procedures  adopted  by the  Board,  determines  the fair  value  of the  Fund's
securities as needed in accordance  with the valuation  procedures  and performs
such other tasks as the full Board deems necessary or  appropriate.  The members
of the Valuation Committee are Keith R. Fox, Kenneth C. Froewiss (Chair), Martin
J. Gruber and Richard J. Herring.  The Valuation Committee held six (6) meetings
during the calendar year 2007.

                                      104
<PAGE>

The Board has established two Investment Oversight  Committees,  one focusing on
Funds  primarily   investing  in  equity   securities  (the  "Equity   Oversight
Committee")  and one  focusing  on Funds  primarily  investing  in fixed  income
securities  (the "Fixed Income  Oversight  Committee").  These  Committees  meet
regularly with Fund portfolio managers and other investment  personnel to review
the relevant  Funds'  investment  strategies  and  investment  performance.  The
members of the Equity  Oversight  Committee are Henry P. Becton,  Jr., Martin J.
Gruber  (Chair),  Richard J.  Herring,  Rebecca  W. Rimel and Carl W. Vogt.  The
members of the Fixed Income Oversight Committee are Dawn-Marie  Driscoll,  Keith
R. Fox, Kenneth C. Froewiss, Graham E. Jones, William N. Searcy, Jr. (Chair) and
Jean  Gleason  Stromberg.  Each  Investment  Oversight  Committee  held  six (6)
meetings during the calendar year 2007.

The  Marketing/Distribution/Shareholder   Service  Committee  oversees  (i)  the
quality, costs and types of shareholder services provided to the Funds and their
shareholders,  and (ii) the distribution-related  services provided to the Funds
and their  shareholders.  The members of the  Marketing/Distribution/Shareholder
Service Committee are Martin J. Gruber,  Richard J. Herring (Chair),  Rebecca W.
Rimel,     Jean     Gleason     Stromberg     and    Carl    W.    Vogt.     The
Marketing/Distribution/Shareholder  Service  Committee  held seven (7)  meetings
during the calendar year 2007.

The  Legal/Regulatory/Compliance  Committee  oversees (i) the significant  legal
affairs of the Funds, including the handling of pending or threatened litigation
or  regulatory  action  involving  the Funds,  (ii) general  compliance  matters
relating   to  the  Funds  and  (iii)   proxy   voting.   The   members  of  the
Legal/Regulatory/Compliance  Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie
Driscoll,  Rebecca W. Rimel,  William N. Searcy, Jr., Jean Gleason Stromberg and
Carl W. Vogt (Chair).  The  Legal/Regulatory/Compliance  Committee  held six (6)
meetings during the calendar year 2007.

The Expense/Operations Committee (i) monitors the Fund's total operating expense
levels,  (ii)  oversees the  provision of  administrative  services to the Fund,
including the Fund's custody,  fund accounting and insurance  arrangements,  and
(iii) reviews the Fund's investment advisers' brokerage practices, including the
implementation  of  related  policies.  The  members  of the  Expense/Operations
Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie  Driscoll,  Keith R. Fox and
William  N.  Searcy,  Jr.  This  committee  held seven (7)  meetings  during the
calendar year 2007.

Ad Hoc Committees.  In addition to the standing committees described above, from
time to time the Board also forms ad hoc committees to consider specific issues.

Remuneration.  Each Independent Board Member receives compensation from the Fund
for his or her services, which includes an annual retainer and an attendance fee
for each meeting attended. No additional compensation is paid to any Independent
Board Member for travel time to meetings,  attendance at directors'  educational
seminars  or  conferences,   service  on  industry  or  association  committees,
participation  as speakers at directors'  conferences or service on special fund
industry director task forces or subcommittees. Independent Board Members do not
receive any employee  benefits such as pension or retirement  benefits or health
insurance from the Fund or any fund in the DWS fund complex.

Members of the Board who are officers,  directors,  employees or stockholders of
Deutsche Asset Management or its affiliates receive no direct  compensation from
a Fund, although they are compensated as employees of Deutsche Asset Management,
or its affiliates,  and as a result may be deemed to participate in fees paid by
the Funds.  The following tables show  compensation  from the Fund and aggregate
compensation  from all of the  funds in the DWS fund  complex  received  by each
Board Member during the calendar year 2007. Mr. Schwarzer became a member of the
Board on May 5,  2006,  is an  interested  person of the Funds and  received  no
compensation  from the  Funds or any fund in the DWS  fund  complex  during  the
relevant periods.

<TABLE>
<CAPTION>
                                                     Aggregate
                                   Aggregate        Compensation        Aggregate
                                 Compensation       from DWS Mid       Compensation         Total Compensation
                                from DWS Micro      Cap Growth        from DWS Small           from Fund and
  Name of Board Member             Cap Fund            Fund          Cap Growth Fund        DWS Fund Complex(1)
  --------------------             --------            ----          ---------------        -------------------
        <S>                               <C>            <C>                 <C>                 <C>
  Henry P. Becton, Jr.(3)(4)            $160           $3,056              $1,043              $200,000



                                      105
<PAGE>
                                                     Aggregate
                                   Aggregate        Compensation        Aggregate
                                 Compensation       from DWS Mid       Compensation         Total Compensation
                                from DWS Micro      Cap Growth        from DWS Small           from Fund and
  Name of Board Member             Cap Fund            Fund          Cap Growth Fund        DWS Fund Complex(1)
  --------------------             --------            ----          ---------------        -------------------

  Dawn-Marie Driscoll(2)(3)(4)          $200           $3,836              $1,308              $253,000
  Keith R. Fox(3)(4)                    $161           $3,079              $1,050              $203,000
  Kenneth C. Froewiss(3)(4)             $159           $3,034              $1,034              $200,000
  Martin J. Gruber(3)(4)                $154           $2,943              $1,007              $198,000
  Richard J. Herring(3)(4)              $155           $2,958              $1,011              $195,000
  Graham E. Jones(3)                    $165           $3,153              $1,075              $207,000
  Rebecca W. Rimel(3)(4)                $151           $2,882                $985              $194,000
  William N. Searcy, Jr.(3)(4)          $159           $3,034              $1,034              $200,000
  Jean Gleason Stromberg(3)(4)          $150           $2,867                $981              $189,000
  Carl W. Vogt(3)(4)                    $157           $2,987              $1,022              $194,000

(1)      The DWS Fund Complex is composed of 138 funds as of December 31, 2007.

(2)      Includes  $50,000 in annual  retainer  fees in Ms.  Driscoll's  role as
         Chairperson of the Board.

(3)      For each Board Member, except Mr. Vogt, total compensation for calendar
         year 2007 includes  compensation,  as of December 31, 2007, for service
         on   the   boards   of   30   trusts/corporations   comprised   of   76
         funds/portfolios.  For Mr. Vogt total  compensation  for calendar  year
         2007   includes   compensation   for   service  on  the  boards  of  28
         trusts/corporations comprised of 74 funds/portfolios.

(4)      Aggregate  compensation  includes amounts paid to the Board Members for
         special  meetings of ad hoc committees of the board in connection  with
         the  possible  consolidation  of the various DWS Fund boards and funds,
         meetings for considering fund expense simplification  initiatives,  and
         consideration  of issues  specific  to the Funds'  direct  shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $1,000 for Mr. Becton, $1,000 for
         Ms. Driscoll,  $1,000 for Mr. Fox, $1,000 for Mr. Froewiss,  $5,000 for
         Mr. Gruber,  $1,000 for Dr. Herring,  $5,000 for Ms. Rimel,  $1,000 for
         Mr.  Searcy,  $1,000 for Ms.  Stromberg and $1,000 for Mr. Vogt.  These
         meeting fees were borne by the Advisor.

Board Member Ownership in the Fund(1)

The  following  table shows the dollar range of equity  securities  beneficially
owned by each Board  Member in the Funds and DWS Fund Complex as of December 31,
207.

                                                        Dollar Range of                         Aggregate Dollar Range
                                      Dollar Range of     Beneficial        Dollar Range of      of Ownership in all
                                        Beneficial     Ownership in DWS  Beneficial Ownership  Funds Overseen by Board
                                     Ownership in DWS   Mid Cap Growth     in DWS Small Cap    Member in the DWS Fund
Board Member                          Micro Cap Fund         Fund             Growth Fund             Complex(1)
------------                          --------------         ----             -----------             ----------

Independent Board Member:

Henry P. Becton, Jr.                       None           $1-$10,000          $1-$10,000            Over $100,000
Dawn-Marie Driscoll                        None              None          $10,001-$50,000          Over $100,000



                                      106
<PAGE>

                                                        Dollar Range of                         Aggregate Dollar Range
                                      Dollar Range of     Beneficial        Dollar Range of      of Ownership in all
                                        Beneficial     Ownership in DWS  Beneficial Ownership  Funds Overseen by Board
                                     Ownership in DWS   Mid Cap Growth     in DWS Small Cap    Member in the DWS Fund
Board Member                          Micro Cap Fund         Fund             Growth Fund             Complex(1)
------------                          --------------         ----             -----------             ----------

Keith R. Fox                               None              None                None               Over $100,000
Kenneth C. Froewiss                        None              None                None               Over $100,000
Martin J. Gruber                     $10,001-$50,000         None                None               Over $100,000
Richard J. Herring                         None        $10,001-$50,000           None               Over $100,000
Graham E. Jones                            None           $1-$10,000          $1-$10,000            Over $100,000
Rebecca W. Rimel                           None              None          $10,001-$50,000          Over $100,000
William N. Searcy, Jr.                     None              None                None               Over $100,000
Jean Gleason Stromberg                     None              None                None               Over $100,000
Carl W. Vogt                         $10,001-$50,000         None                None               Over $100,000

Interested Board Member:
------------------------

Axel Schwarzer                             None              None                None               Over $100,000

(1)      Securities  beneficially  owned as defined  under the 1934 Act  include
         direct and/or indirect ownership of securities where the Board Member's
         economic interest is tied to the securities,  employment  ownership and
         securities  when the Board  Member can exert  voting power and when the
         Board Member has  authority to sell the  securities.  The dollar ranges
         are:  None,   $1-$10,000,   $10,001-$50,000,   $50,001-$100,000,   over
         $100,000.

Ownership in Securities of the Advisor and Related Companies

As  reported to the Funds,  the  information  in the  following  table  reflects
ownership by the Independent Board Members and their immediate family members of
certain  securities as of December 31, 2007. An immediate family member can be a
spouse,  children  residing in the same  household  including  step and adoptive
children and any dependents.  The securities  represent ownership in the Advisor
or principal  underwriter  of the Fund and any persons  (other than a registered
investment company) directly or indirectly controlling,  controlled by, or under
common control with the Advisor or principal underwriter of the Funds (including
Deutsche Bank AG).

                                      107
<PAGE>

                                                                                    Value of        Percent of
                                    Owner and                                    Securities on     Class on an
Independent                     Relationship to                      Title of    an Aggregate       Aggregate
Board Member                      Board Member         Company        Class          Basis            Basis
------------                      ------------         -------        -----          -----            -----

Henry P. Becton, Jr.                                     None
Dawn-Marie Driscoll                                      None
Keith R. Fox                                             None
Kenneth C. Froewiss                                      None
Martin J. Gruber                                         None
Richard J. Herring                                       None
Graham E. Jones                                          None
Rebecca W. Rimel                                         None
William N. Searcy, Jr.                                   None
Jean Gleason Stromberg                                   None
Carl W. Vogt                                             None
</TABLE>





                                      108
<PAGE>




                                      109
<PAGE>




                                      110
<PAGE>




                                      111
<PAGE>




                                      112
<PAGE>




                                      113
<PAGE>




                                      114
<PAGE>




                                      115
<PAGE>



Securities Beneficially Owned


As of January 8, 2008,  the Board Members and officers of the Trust owned,  as a
group, less than 1% of the outstanding shares of each Fund.

To the best of the Funds'  knowledge,  as of January 8, 2008, no person owned of
record or beneficially 5% or more of any class of the Funds' outstanding shares,
except as noted below.

DWS Mid Cap Growth Fund
-----------------------

<TABLE>
<CAPTION>
Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------
<S>                                                          <C>                            <C>
JOHN HANCOCK LIFE INSURANCE                                  10,430,913.54                  31.95% of Class A
COMPANY (USA) RPS SEG FUNDS&
ACCOUNTING ET-7
BOSTON MA  022101

DWS TRUST COMPANY TTEE                                       10,041,641.57            98.39% of Institutional Class
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET REC
SALEM NH  03079-1143


DWS Small Cap Growth Fund

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                  403,628.14                    17.52% of Class A
ATTN FUND ADM (97HB3)
JACKSONVILLE FL  32246-6484

MORGAN STANLEY & CO.                                          222,315.10                       Of Class A
HARBORSIDE FINANCIAL CENTER
JERSEY CITY NJ 07311


                                      116
<PAGE>

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

HARTFORD LIFE INSURANCE COMPANY                               188,105.70                    8.17% of Class A
ATTN UIT OPERATIONS
HARTFORD CT  06104-2999

DWS TRUST COMPANY TRUSTEE                                      22,230.86                    6.00% of Class C
OXFORD INDUSTRIES INC
FBO OXFORD INDUSTRIES POOLED ACCOUNT
ATLANTA GA  30308-3306

DEUTSCHE BANK SECURITIES INC                                  276,954.07              6.56% of Institutional Shares
ATTN MUTUAL FUND DEPT 26TH FL
NEW YORK NY  10020-1104

DWS TRUST COMPANY TTEE                                       3,764,960.39            89.16% of Institutional Shares
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET REC
SALEM NH  03079-1143

CHARLES SCHWAB & CO INC                                      2,422,718.05                   32.23% of Class S
REINVEST ACCOUNT
SAN FRANCISCO CA  94104-4151

DWS TRUST COMPANY                                             971,302.53                    12.92% of Class S
FBO FARMERS GROUP INC EMPLOYEES PROFIT SHARING
SAVINGS PLAN
ATTN ASSET REC
SALEM NH  03079-1143

MERRILL LYNCH PIERCE FENNER & SMITH FOR THE SOLE              471,975.72                    6.28% of Class S
BENEFIT OFITS CUSTOMERS
ATTN SERVICE TEAM
JACKSONVILLE FL  32246-6484


DWS Micro Cap Fund
------------------

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

STATE STREET BANK & TRUST CO CUST                             168,235.12                    12.09% of Class A
FBO ADP/MORGAN STANLEY DW
WESTWOOD MA  02090-2318

NATIONAL FINANCIAL SERVICES CORP                              399,514.05              44.99% of Institutional Class
FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS
NEW YORK NY  10281-1003

CHARLES SCHWAB & CO INC                                       252,175.67              28.40% of Institutional Class
SPECIAL CUSTODY ACCOUNT
MUTUAL FUNDS DEPARTMENT
SAN FRANCISCOCA  94104-4151


                                      117
<PAGE>

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

DWS TRUST COMPANY CUST                                         68,664.79              7.73% of Institutional Class
FBO THE THRIFT PLAN OF LONZA
ATTN ASSET REC
SALEM NH  03079-1143

MORGAN STANLEY & CO.                                           51,254.32                    10.19% of Class C
HARBORSIDE FINANCIAL CENTER PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   50,163.93                    9.97% of Class C
ATTN FUND ADMINISTRATION SEC
#97JS4
JACKSONVILLE FL  32246

SAC & CO                                                       25,435.70                    5.05% of Class C
NEW YORK NY  10017-8298

CHARLES SCHWAB & CO INC                                       153,726.66                    24.44% of Class S
REINVEST ACCOUNT
SAN FRANCISCO CA  94104-4151

AST TRUST CO                                                   32,879.71                    5.23% of Class S
CUST FBO CORPORATE OFFICE PROPERTIES TRUST
EXECUTIVE DEFFERED COMP PLAN
PHOENIX AZ  85072-2129
</TABLE>





                                      118
<PAGE>




                                      119
<PAGE>




Agreement to Indemnify Independent Trustees for Certain Expenses

In connection with litigation or regulatory  action related to possible improper
market timing or other improper trading activity or possible improper  marketing
and sales  activity  in the Funds,  each Fund's  investment  advisor has agreed,
subject to  applicable  law and  regulation,  to indemnify and hold harmless the
applicable  Funds  against  any and all loss,  damage,  liability  and  expense,
arising  from  market  timing or  marketing  and sales  matters  alleged  in any
enforcement actions brought by governmental authorities involving or potentially
affecting the Funds or the investment  advisor  ("Enforcement  Actions") or that
are the basis for private  actions  brought by shareholders of the Funds against
the Funds,  their directors and officers,  the Funds' investment  advisor and/or
certain other parties ("Private Litigation"), or any proceedings or actions that
may  be  threatened  or  commenced  in  the  future  by  any  person  (including
governmental authorities), arising from or similar to the matters alleged in the
Enforcement Actions or Private Litigation.  In recognition of its undertaking to
indemnify  the  applicable  Funds  and in  light of the  rebuttable  presumption
generally  afforded to independent  directors/trustees  of investment  companies
that they have not engaged in disabling conduct,  each Fund's investment advisor
has also agreed,  subject to  applicable  law and  regulation,  to indemnify the
applicable  Funds'   Independent   Trustees  against  certain   liabilities  the
Independent  Trustees  may incur from the  matters  alleged  in any  Enforcement
Actions or Private  Litigation or arising from or similar to the matters alleged
in the Enforcement Actions or Private Litigation,  and advance expenses that may
be  incurred by the  Independent  Trustees in  connection  with any  Enforcement
Actions  or  Private  Litigation.  The  applicable  investment  advisor  is not,
however,  required to provide  indemnification and advancement of expenses:  (1)
with respect to any  proceeding  or action with respect to which the  applicable
Fund's Board  determines that the Independent  Trustee  ultimately  would not be
entitled to indemnification or (2) for any liability of the Independent  Trustee
to the  Funds or their  shareholders  to which  the  Independent  Trustee  would
otherwise  be  subject  by reason  of  willful  misfeasance,  bad  faith,  gross
negligence  or  reckless  disregard  of the  Independent  Trustee's  duties as a
director or trustee of the Funds as determined in a final  adjudication  in such
action or proceeding.  The estimated amount of any expenses that may be advanced
to the Independent Trustees or indemnity that may be payable under the indemnity
agreements is currently  unknown.  These  agreements  by each Fund's  investment
advisor will survive the  termination  of the investment  management  agreements
between the applicable investment advisor and the Funds.





                                      120
<PAGE>



                               TRUST ORGANIZATION




                                      121
<PAGE>




Each Fund is a series of DWS Advisor Funds (the "Trust"), an open-end management
investment company. The Trust is a Massachusetts  business trust organized under
the laws of Massachusetts and is governed by an Amended and Restated Declaration
of Trust dated June 27, 2006,  as may be further  amended from time to time (the
"Declaration of Trust"). Prior to July 10, 2006, DWS Micro Cap Fund was a series
of DWS Investments Trust, an open-end management investment company organized as
a  Delaware  statutory  trust.  On or about  July 10,  2006,  DWS Micro Cap Fund
acquired all the assets and assumed all the liabilities of DWS Micro Cap Fund, a
series  of  DWS  Investment  Trust  (the  "Micro  Cap  Predecessor  Fund")  in a
reorganization.

The Trust was organized on July 21, 1986 under the laws of The  Commonwealth  of
Massachusetts under the name BT Tax-Free Investment Trust and assumed its former
name of BT  Investment  Funds on May 16,  1988.  The Trust's name was changed to
Scudder  Advisor Funds effective May 16, 2003 and to DWS Advisor Funds effective
February  6, 2006.  The Board of Trustees  of the Trust is  responsible  for the
overall  management and supervision of the affairs of the Trust. The Declaration
of Trust authorizes the Board of Trustees to create separate  investment  series
or portfolios of shares.  . Mid Cap Growth Fund currently offers five classes of
shares,  Institutional  Class and Class A, B, C and S shares.  Small Cap  Growth
Fund currently offers five classes of shares,  Institutional  Class and Class A,
B, C, and S shares.  Micro Cap Fund  currently  offers  five  classes of shares,
Institutional Class and Class A, B, C and S shares. On July 14, 2006, Class AARP
shares of Mid Cap Growth Fund and Small Cap Growth Fund were merged into Class S
Shares of each Fund and are no longer  available for investment.  On October 23,
2006,  Investment Class shares of Mid Cap Growth Fund, Small Cap Growth Fund and
Micro  Cap Fund  merged  into  Class S shares  and are no longer  available  for
investment.  Effective  November 17, 2006, Class R shares of Mid Cap Growth Fund
and  Small Cap  Growth  Fund  converted  into  Class A shares  and are no longer
available for investment. Each of the Funds is a separate series of the Trust.


Prior to March 28, 2002,  Mid Cap Growth Fund and Small Cap Growth Fund invested
all of their investable  assets in diversified  open-end  management  investment
companies  having the same investment  objectives as each Fund. These investment
companies  were  Capital   Appreciation   Portfolio  and  Small  Cap  Portfolio,
respectively  (each, a "Portfolio" and collectively,  the  "Portfolios").  Since
March 28,  2002 each Fund is now  operating  as a  stand-alone  mutual fund that
directly  acquires and manages its own portfolio of  securities.  Mid Cap Growth
Fund  and  Small  Cap  Growth  Fund  may in the  future  seek to  achieve  their
investment  objectives  by  investing  all of their  net  assets  in  investment
companies  having  the  same  investment  policies  and  restrictions  as  those
applicable to each Fund.

                                      122
<PAGE>




Each Fund generally is not required to hold meetings of its shareholders.  Under
the  Declaration  of  Trust,  however,  shareholder  meetings  will  be  held in
connection  with the  following  matters to the extent  and as  provided  in the
Declaration  of Trust and as required by  applicable  law:  (a) the  election or
removal of trustees if a meeting is called for such purpose; (b) the termination
of the Trust or a Fund; (c) an amendment of the Declaration of Trust; (d) to the
same extent as stockholders of Massachusetts  business corporation as to whether
or not a court  action,  proceeding or claims should or should not be brought or
maintained  derivatively  or as a class  action  on  behalf  of the Trust or any
series or class thereof or the Shareholders;  and (e) such additional matters as
may be required by law, the Declaration of Trust,  the By-laws of a Fund, or any
registration  of a Fund  with  the  SEC or any  state,  or as the  Trustees  may
determine to be necessary or desirable.  Shareholders  also vote upon changes in
fundamental policies or restrictions.

On any  matter  submitted  to a vote of  shareholders,  all  shares of the Trust
entitled to vote shall,  except as otherwise provided in the Trust's By-Laws, be
voted in the aggregate as a single class without  regard to series or classes of
shares,  except (a) when required by applicable  law or when the Trustees  shall
have  determined that the matter affects one or more series or classes of shares
materially differently, shares shall be voted by individual series or class; and
(b) when the Trustees have determined that the matter affects only the interests
of one or more series or classes,  only  shareholders  of such series or classes
shall be entitled to vote thereon.

The  Declaration  of Trust  provides  that the  Board of  Trustees  may,  in its
discretion,  establish  minimum  investment  amounts for  shareholder  accounts,
impose  fees on  accounts  that do not  exceed a minimum  investment  amount and
involuntarily  redeem  shares in any such  account in payment of such fees.  The
Board of Trustees,  in its sole  discretion,  also may cause the Trust to redeem
all of the  shares of the Trust or one or more  series  or  classes  held by any
shareholder for any reason, to the extent permissible by the 1940 Act, including
(a) if the  shareholder  owns shares having an aggregate net asset value of less
than a specified minimum amount, (b) if a particular  shareholder's ownership of
shares would disqualify a series from being a regulated  investment company, (c)
upon a shareholder's failure to provide sufficient  identification to permit the
Trust to verify the shareholder's  identity, (d) upon a shareholder's failure to
pay for  shares  or meet or  maintain  the  qualifications  for  ownership  of a
particular  class or series of shares,  (e) if the Board of Trustees  determines
(or pursuant to policies  established by the Board it is determined)  that share
ownership by a particular  shareholder is not in the best interests of remaining
shareholders, (f) when a Fund is requested or compelled to do so by governmental
authority or applicable law and (g) upon a shareholder's  failure to comply with
a request for  information  with respect to the direct or indirect  ownership of
shares of the  Trust.  The  Declaration  of Trust also  authorizes  the Board of
Trustees to terminate a Fund or any class without shareholder approval,  and the
Trust may  suspend  the right of  shareholders  to  require  the Trust to redeem
shares to the extent permissible under the 1940 Act.

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Fund. The Declaration of Trust,  however,  disclaims  shareholder  liability for
acts or obligations  of the Fund and requires that notice of such  disclaimer be
given in each agreement,  obligation,  or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification  out of  Fund  property  for  all  losses  and  expenses  of any
shareholder held personally  liable for the obligations of the Fund and the Fund
may be  covered by  insurance  which the  Trustees  consider  adequate  to cover
foreseeable  tort claims.  Thus, the risk of a shareholder  incurring  financial
loss on account of shareholder liability is considered by the Advisor remote and
not  material,  since it is limited to  circumstances  in which a disclaimer  is
inoperative and the Fund itself is unable to meet its obligations.


                             PROXY VOTING GUIDELINES

Each Fund has delegated proxy voting responsibilities to its investment advisor,
subject to the Board's general oversight. The Fund has delegated proxy voting to
the Advisor with the direction that proxies should be voted


                                      123
<PAGE>

consistent with the Fund's best economic interests.  The Advisor has adopted its
own  Proxy  Voting  Policies  and  Procedures   ("Policies")  and  Proxy  Voting
Guidelines  ("Guidelines") for this purpose.  The Policies address,  among other
things,  conflicts of interest  that may arise between the interests of the Fund
and the  interests  of the  Advisor  and its  affiliates,  including  the Fund's
principal  underwriter.  The Guidelines set forth the Advisor's general position
on various proposals, such as:

Shareholder  Rights  -- The  Advisor  generally  votes  against  proposals  that
restrict shareholder rights.

Corporate  Governance  -- The  Advisor  generally  votes  for  confidential  and
cumulative voting and against  supermajority voting requirements for charter and
bylaw amendments.  The Advisor generally votes for proposals to restrict a chief
executive  officer from serving on more than three outside  boards of directors.
The Advisor  generally votes against proposals that require a company to appoint
a Chairman who is an independent director.

Anti-Takeover  Matters -- The Advisor generally votes for proposals that require
shareholder ratification of poison pills or that request boards to redeem poison
pills,  and votes against the adoption of poison pills if they are submitted for
shareholder ratification. The Advisor generally votes for fair price proposals.

Compensation   Matters  --  The  Advisor  generally  votes  for  executive  cash
compensation  proposals,  unless they are  unreasonably  excessive.  The Advisor
generally  votes  against  stock  option  plans  that do not meet the  Advisor's
criteria.

Routine Matters -- The Advisor generally votes for the ratification of auditors,
procedural  matters  related to the annual  meeting and changes in company name,
and against bundled proposals and adjournment.

The general provisions described above do not apply to investment companies. The
Advisor generally votes proxies solicited by investment  companies in accordance
with the  recommendations  of an  independent  third  party,  except for proxies
solicited by or with respect to investment companies for which the Advisor or an
affiliate  serves as investment  advisor or principal  underwriter  ("affiliated
investment companies").  The Advisor votes affiliated investment company proxies
in  the  same  proportion  as  the  vote  of  the  investment   company's  other
shareholders  (sometimes called "mirror" or "echo" voting).  Master fund proxies
solicited from feeder funds are voted in accordance with applicable requirements
of the 1940 Act.

Although the  Guidelines  set forth the Advisor's  general  voting  positions on
various proposals,  the Advisor may,  consistent with the Fund's best interests,
determine under some circumstances to vote contrary to those positions.

The  Guidelines  on a  particular  issue  may or may  not  reflect  the  view of
individual members of the Board or of a majority of the Board. In addition,  the
Guidelines may reflect a voting position that differs from the actual  practices
of  the  public  companies  within  the  Deutsche  Bank  organization  or of the
investment  companies for which the Advisor or an affiliate serves as investment
advisor or sponsor.

The  Advisor  may  consider  the views of a portfolio  company's  management  in
deciding how to vote a proxy or in establishing general voting positions for the
Guidelines, but management's views are not determinative.

As mentioned above, the Policies  describe the way in which the Advisor resolves
conflicts  of  interest.  To  resolve  conflicts,   the  Advisor,  under  normal
circumstances,  votes proxies in accordance with its Guidelines.  If the Advisor
departs  from  the  Guidelines  with  respect  to a  particular  proxy or if the
Guidelines do not specifically  address a certain proxy proposal, a proxy voting
committee established by the Advisor will vote the proxy. Before voting any such
proxy,  however,  the  Advisor's  conflicts  review  committee  will  conduct an
investigation to determine whether any potential  conflicts of interest exist in
connection with the particular proxy proposal. If the conflicts review committee
determines  that the Advisor has a material  conflict  of  interest,  or certain
individuals on the proxy voting committee  should be recused from  participating
in a  particular  proxy vote,  it will  inform the proxy  voting  committee.  If
notified  that the Advisor has a material  conflict,  or fewer than three voting
members are eligible to  participate  in the proxy vote,  typically  the Advisor
will  engage an  independent  third  party to vote the proxy or follow the proxy
voting recommendations of an independent third party.

                                      124
<PAGE>

Under certain circumstances,  the Advisor may not be able to vote proxies or the
Advisor  may find that the  expected  economic  costs from voting  outweigh  the
benefits  associated with voting. For example,  the Advisor may not vote proxies
on certain foreign securities due to local restrictions or customs.  The Advisor
generally  does  not vote  proxies  on  securities  subject  to  share  blocking
restrictions.

You may  obtain  information  about  how a fund  voted  proxies  related  to its
portfolio  securities  during the 12-month  period ended June 30 by visiting the
SEC's   Web   site  at   www.sec.gov   or  by   visiting   our  Web   site   at:
www.dws-scudder.com (type "proxy voting" in the search field).

                              FINANCIAL STATEMENTS


The financial statements, including the portfolio of investments, of DWS Mid Cap
Growth Fund, DWS Small Cap Growth Fund and DWS Micro Cap Fund, together with the
Report of Independent  Registered Public Accounting Firm,  Financial  Highlights
and notes to financial  statements in the Annual Report to the  Shareholders  of
each Fund dated September 30, 2007, are incorporated herein by reference and are
hereby deemed to be a part of this Statement of Additional Information.


A copy of the Funds' Reports to Shareholders  may be obtained  without charge by
contacting the Service Center at (800) 621-1048.

                             ADDITIONAL INFORMATION

The CUSIP numbers for each class of DWS Mid Cap Growth Fund are:

Class A:  23336Y508

Class B:  23336Y607

Class C:  23336Y706

Institutional Class:  23336Y805




The CUSIP numbers for each class of DWS Small Cap Growth Fund are:

Class A:  23336Y847

Class B:  23336Y839

Class C:  23336Y821

Institutional Class:  23336Y763


The CUSIP numbers for each class of DWS Micro Cap Fund are:

Class A:  23339E616

Class B:  23339E590

Class C:  23339E582

                                      125
<PAGE>

Institutional Class:  23339E566

Each Fund has a fiscal year ending September 30.


Many of the investment  changes in a Fund will be made at prices  different from
those  prevailing  at the time  they may be  reflected  in a  regular  report to
shareholders of a Fund. These  transactions  will reflect  investment  decisions
made by the Advisor in light of a Fund's investment objective and policies,  its
other portfolio holdings and tax considerations,  and should not be construed as
recommendations for similar action by other investors.

Each Fund's  prospectuses  and this  Statement of  Additional  Information  omit
certain information  contained in the Registration  Statement and its amendments
which  each Fund has filed  with the SEC  under the  Securities  Act of 1933 and
reference is hereby made to the Registration  Statement for further  information
with  respect to a Fund and the  securities  offered  hereby.  The  Registration
Statement and its  amendments  are available for inspection by the public at the
offices of the SEC in Washington, D.C.

                                      126
<PAGE>

                                    APPENDIX

Description of Moody's Corporate Bond Ratings:

Aaa - Bonds  rated Aaa are  judged  to be of the best  quality.  They  carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally  stable margin
and  principal is secure.  While the various  protective  elements are likely to
change,  such  changes  as can be  visualized  are most  unlikely  to impair the
fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards.  Together
with the Aaa group they comprise what are generally  known as high-grade  bonds.
They are rated lower than the best bonds because  margins of protection  may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater  amplitude  or  there  may be  other  elements  present  which  make the
long-term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many  favorable  investment  attributes  and are to be
considered  as  upper-medium-grade  obligations.   Factors  giving  security  to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.


Baa - Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly  protected nor poorly  secured.  Interest  payments and principal
security appear adequate for the present but certain protective  elements may be
lacking or may be  characteristically  unreliable over any great length of time.
Such  bonds  lack  outstanding  investment  characteristics  and  in  fact  have
speculative characteristics as well.


Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well  assured.  Often the  protection of interest and principal
payments may be very moderate and thereby not well safeguarded  during both good
and bad times over the future.  Uncertainty of position  characterizes  bonds in
this class.

B - Bonds  rated B generally  lack  characteristics  of a desirable  investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds  rated Caa are of poor  standing.  Such  issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds  rated Ca  represent  obligations  which  are  speculative  in a high
degree. Such issues are often in default or have other marked shortcomings.

C - Bonds  rated C are the  lowest-rated  class of bonds and can be  regarded as
having extremely poor prospects of ever attaining any real investment standing.

Moody's  applies  numerical  modifiers,  1, 2,  and 3, in  each  generic  rating
classification  from Aa through B in its corporate  bond system.  The modifier 1
indicates  that the  security  ranks in the  higher  end of its  generic  rating
category;  the  modifier 2  indicates a mid-range  ranking;  and the  modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Description of S&P Corporate Bond Ratings:

AAA - Debt rated AAA has the highest  rating  assigned by Standard & Poor's to a
debt  obligation.  Capacity to pay  interest  and repay  principal  is extremely
strong.

AA - Debt  rated  AA has a very  strong  capacity  to  pay  interest  and  repay
principal and differs from the higher-rated issues only in small degree.

                                      127
<PAGE>

A - Debt rated A has a strong  capacity  to pay  interest  and repay  principal,
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions.

BBB - Debt rated BBB is regarded as having an adequate  capacity to pay interest
and  repay  principal.   Whereas  it  normally  exhibits   adequate   protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB - Debt  rated BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate capacity to timely meet interest and principal payments.

B - Debt rated B has a greater  vulnerability  to default but  currently has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay  principal.  The B rating  category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable  vulnerability to default, and
is dependent upon favorable business,  financial and economic conditions to meet
timely  payment of interest and repayment of principal.  In the event of adverse
business,  financial,  or  economic  conditions,  it is not  likely  to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is  typically  applied to debt  subordinated  to senior  debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically  applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation  where a  bankruptcy  petition has been filed but debt service
payments are continued.

CI - The rating CI is  reserved  for income  bonds on which no interest is being
paid.

D - Debt  rated D is in  payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless S&P believes that such payments
will be made during such grace  period.  The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Description of S&P Commercial Paper Ratings:


Commercial  paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+.

Description of Moody's Commercial Paper Ratings:

The rating Prime-1 is the highest  commercial  paper rating assigned by Moody's.
Issuers rated Prime-1 (or related  supporting  institutions)  are  considered to
have a superior capacity for repayment of short-term promissory obligations.

S&P's Commercial Paper Ratings:

A is the highest  commercial  paper rating category  utilized by S&P, which uses
the  numbers  1,  1,  2  and  3  to  denote  relative   strength  within  its  A
classification.  Commercial  paper  issues  rated A by S&P  have  the  following
characteristics:  Liquidity ratios are better than industry  average.  Long-term
debt ratings are A or better.  The issuer has access to at least two  additional
channels of  borrowing.  Basic  earnings  and cash flow are in an upward  tread.
Typically, the issuer is a strong company in a well-established industry and has
superior management.

                                      128
<PAGE>

Moody's Commercial Paper Ratings:

Issuers  rated  Prime-1 (or  related  supporting  institutions)  have a superior
capacity for repayment of short-term promissory  obligations.  Prime-1 repayment
capacity will normally be evidenced by the  following  characteristics:  leading
market positions in well-established  industries;  high rates of return on funds
employed;  conservative capitalization structures with moderate reliance on debt
and  ample  asset  protection;  broad  margins  in  earnings  coverage  of fixed
financial charges and high internal cash generation;  well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers  rated  Prime-2  (or  related  supporting  institutions)  have a  strong
capacity for repayment of short-term promissory obligations.  This will normally
be evidenced by many of the characteristics  cited above but to a lesser degree.
Earnings  trends and  coverage  ratios,  while  sound,  will be more  subject to
variation. Capitalization characteristics,  while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related  supporting  institutions)  have an acceptable
capacity  for  repayment of  short-term  promissory  obligations.  The effect of
industry   characteristics  and  market  composition  may  be  more  pronounced.
Variability in earnings and  profitability may result in changes in the level of
debt protection  measurements  and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

                                      129
<PAGE>

                                             STATEMENT OF ADDITIONAL INFORMATION



INVESTMENT ADVISOR AND ADMINISTRATOR
Deutsche Investment Management Americas Inc.
345 Park Avenue
New York, NY 10154


CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

DISTRIBUTOR
DWS Scudder Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606

TRANSFER AGENT
DWS Scudder Investments Service Company
222 South Riverside Plaza
Chicago, IL 60606

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Pricewaterhousecoopers LLP
125 High Street
Boston, MA 02110


LEGAL COUNSEL
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019



No  person  has  been  authorized  to  give  any  information  or  to  make  any
representations  other than those  contained  in the Trust's  Prospectuses,  its
Statement  of  Additional  Information  or  its  official  sales  literature  in
connection  with the offering of the Trust's shares and, if given or made,  such
other  information  or  representations  must not be relied  on as  having  been
authorized  by the  Trust.  Neither  the  Prospectuses  nor  this  Statement  of
Additional  Information  constitutes  an offer in any state in which,  or to any
person to whom, such offer may not lawfully be made.


                                      130

<PAGE>



                                DWS ADVISOR FUNDS


                             DWS Mid Cap Growth Fund
                            DWS Small Cap Growth Fund
                               DWS Micro Cap Fund

                                 Class S Shares


                                February 1, 2008


                       STATEMENT OF ADDITIONAL INFORMATION



This combined Statement of Additional Information is not a prospectus and should
be read in conjunction  with the  prospectuses,  dated February 1, 2008, for DWS
Micro Cap Fund,  DWS Mid Cap Growth Fund,  and DWS Small Cap Growth Fund (each a
"Fund" and collectively the "Funds"),  each a series of DWS Advisor Funds,  (the
"Trust"),  as amended from time to time, copies of which may be obtained without
charge by contacting DWS Scudder Distributors,  Inc., 222 South Riverside Plaza,
Chicago,  Illinois  60606,  (800)  621-1148  or from the firm  from  which  this
Statement of  Additional  Information  was obtained and is available  along with
other  materials on the Securities and Exchange  Commission's  Internet Web site
(http://www.sec.gov).

The Annual Reports to  Shareholders,  dated September 30, 2007, are incorporated
herein by reference  and are deemed to be part of this  Statement of  Additional
Information.  A copy of each Fund's Annual Report may be obtained without charge
by calling the Fund at the toll-free number 1-800-621-1048.


This Statement of Additional  Information  ("SAI") is  incorporated by reference
into the corresponding prospectuses for each class of shares of the Funds.



<PAGE>

                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

INVESTMENT RESTRICTIONS........................................................1


INVESTMENT POLICIES AND TECHNIQUES.............................................5
   Investment Techniques.......................................................5
   Portfolio Holdings.........................................................39

MANAGEMENT OF THE FUNDS.......................................................40
   Investment Advisor.........................................................40
   Compensation of Portfolio Managers.........................................45

FUND SERVICE PROVIDERS........................................................55
   Administrator..............................................................55
   Distributor................................................................58
   Custodian..................................................................59
   Transfer Agent and Shareholder Service Agent...............................59
   Legal Counsel..............................................................60
   Independent Registered Public Accounting Firm..............................60

PORTFOLIO TRANSACTIONS........................................................61

PURCHASE AND REDEMPTION OF SHARES.............................................66

DIVIDENDS.....................................................................84

TAXES.........................................................................85

NET ASSET VALUE...............................................................90

TRUSTEES AND OFFICERS.........................................................91

TRUST ORGANIZATION...........................................................113

PROXY VOTING GUIDELINES......................................................115

FINANCIAL STATEMENTS.........................................................116

ADDITIONAL INFORMATION.......................................................116

APPENDIX.....................................................................118


                                       i

<PAGE>

                             INVESTMENT RESTRICTIONS


Investment Restrictions

Except as otherwise indicated, each Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders.  There can be
no assurance that a Fund's  objective will be met.  Shareholders  of a Fund will
receive  30 days'  prior  written  notice  with  respect  to any  change  in the
investment objective of a Fund.



Any  investment  restrictions  herein  which  involve  a maximum  percentage  of
securities  or assets shall not be  considered  to be violated  unless an excess
over the percentage occurs  immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, a Fund.


Each Fund has  elected to be  classified  as a  diversified  series of  separate
open-end  investment  management  companies.  A  diversified  Fund may not, with
respect  to 75% of total  assets,  invest  more  than 5% of total  assets in the
securities of a single issuer (other than US government securities or securities
of investment  companies) or invest in more than 10% of the  outstanding  voting
securities of such issuer (with certain exceptions).


As a matter of fundamental  policy, each Fund may not (except that no investment
restriction of each Fund shall prevent the Fund from investing all of its assets
in an  open-end  investment  company  with  substantially  the  same  investment
objectives):

(1)      issue senior  securities,  except as  permitted  under the 1940 Act, as
         amended,  and as interpreted or modified by regulatory authority having
         jurisdiction, from time to time.

(2)      borrow money,  except as permitted under the 1940 Act, as amended,  and
         as interpreted or modified by regulatory authority having jurisdiction,
         from time to time.

(3)      engage in the  business of  underwriting  securities  issues by others,
         except to the extent that a Fund may be deemed to be an  underwriter in
         connection with the disposition of portfolio securities.

(4)      purchase or sell real estate, which term does not include securities of
         companies which deal in real estate or mortgages or investments secured
         by real estate or  interests  therein,  except  that the Fund  reserves
         freedom of action to hold and to sell real estate  acquired as a result
         of the Fund's ownership of securities.

(5)      make loans except as permitted  under the 1940 Act, as amended,  and as
         interpreted or modified by regulatory  authority  having  jurisdiction,
         from time to time.

(6)      purchase or sell  commodities,  except as permitted by the 1940 Act, as
         amended,  and as interpreted  or modified by the  regulatory  authority
         having jurisdiction, from time to time.

(7)      concentrate its investments in a particular  industry,  as that term is
         used in the 1940 Act, as  amended,  and as  interpreted  or modified by
         regulatory authority having jurisdiction, from time to time.


A  fundamental  policy may not be changed  without the approval of a majority of
the outstanding  voting  securities of a Fund which,  under the 1940 Act and the
rules thereunder and as used in this SAI, means the lesser of (1) 67% or more of
the voting securities  present at a meeting,  if the holders of more than 50% of
the outstanding voting securities of a Fund are present or represented by proxy,
or (2) more than 50% of the outstanding voting securities of a Fund.


<PAGE>

Non-fundamental  Investment  Restrictions  for DWS Mid Cap  Growth  Fund and DWS
Small Cap Growth Fund.  In order to comply with certain  statutes and  policies,
DWS Small Cap Growth  Fund and DWS Mid Cap Growth  Fund will not, as a matter of
nonfundamental operating policy:


(i)      borrow money  (including  through  reverse  repurchase  or forward roll
         transactions),  except  that the  Fund  may  borrow  for  temporary  or
         emergency purposes up to 1/3 of its net assets;

(ii)     purchase any security or evidence of interest therein on margin, except
         that such  short-term  credit as may be necessary  for the clearance of
         purchases  and sales of  securities  may be  obtained  and except  that
         deposits  of  initial  deposit  and  variation  margin  may be  made in
         connection with the purchase, ownership, holding or sale of futures;

(iii)    sell  securities  it does not own  (short  sales)  such that the dollar
         amount  of such  short  sales  at any one time  exceeds  25% of the net
         equity of the Fund,  and the value of  securities  of any one issuer in
         which the Fund is short  exceeds the lesser of 2.0% of the value of the
         Fund's  net  assets  or 2.0% of the  securities  of any class of any US
         issuer,  and  provided  that  short  sales  may be made  only in  those
         securities which are fully listed on a national  securities exchange or
         a  foreign  exchange  (This  provision  does  not  include  the sale of
         securities that the Fund  contemporaneously  owns or where the Fund has
         the right to obtain  securities  equivalent in kind and amount to those
         sold,  i.e., short sales against the box.) (The Fund currently does not
         engage in short selling.);

(iv)     invest for the purpose of  exercising  control or management of another
         company;

(v)      purchase securities issued by any investment company except by purchase
         in the open market where no commission or profit to a sponsor or dealer
         results  from  such  purchase   other  than  the   customary   broker's
         commission,  or except when such purchase,  though not made in the open
         market,  is  part  of a plan  of  merger  or  consolidation;  provided,
         however,  that  securities  of  any  investment  company  will  not  be
         purchased  for the  Fund if such  purchase  at the time  thereof  would
         cause:  (a) more  than 10% of the  Fund's  total  assets  (taken at the
         greater of cost or market  value) to be invested in the  securities  of
         such issuers; (b) more than 5% of the Fund's total assets (taken at the
         greater of cost or market  value) to be invested in any one  investment
         company;  or (c) more than 3% of the outstanding  voting  securities of
         any such  issuer to be held for the Fund,  unless  permitted  to exceed
         these  limitations by an exemptive order of the Securities and Exchange
         Commission  ("SEC");  provided  further,  that  except in the case of a
         merger or consolidation,  the Fund shall not purchase securities of any
         open-end   investment   company  unless  (1)  the  Advisor  waives  the
         investment  advisory  fee with  respect  to  assets  invested  in other
         open-end  investment  companies and (2) the Fund incurs no sales charge
         in connection with the investment;

(vi)     invest more than 15% of the Fund's net assets  (taken at the greater of
         cost or market  value) in  securities  that are illiquid or not readily
         marketable  (excluding Rule 144A  securities  deemed by the Board to be
         liquid);

(vii)    write  puts  and  calls  on  securities  unless  each of the  following
         conditions  are met:  (a) the  security  underlying  the put or call is
         within the investment  policies of the Fund and the option is issued by
         the  Options  Clearing  Corporation  ("OCC"),  except  for put and call
         options  issued by non-US  entities or listed on non-US  securities  or
         commodities  exchanges;  (b) the  aggregate  value  of the  obligations
         underlying  the puts  determined  as of the date the  options  are sold
         shall not  exceed  5% of the  Fund's  net  assets;  (c) the  securities
         subject to the  exercise of the call  written by the Fund must be owned
         by the Fund at the time the call is sold and must  continue to be owned
         by the Fund until the call has been exercised,  has lapsed, or the Fund
         has  purchased a closing call,  and such  purchase has been  confirmed,
         thereby  extinguishing  the Fund's  obligation  to  deliver  securities
         pursuant to the call it has sold; and (d) at the time a put is written,
         the Fund establishes a segregated account with its custodian consisting
         of cash or liquid securities equal in value to the amount the Fund will
         be  obligated  to pay upon  exercise of the put (this  account  must be
         maintained  until the put is  exercised,  has expired,  or the Fund has
         purchased a closing  put,  which is a put of the same series as the one
         previously written);

                                       2
<PAGE>

(viii)   buy and sell puts and  calls on  securities,  stock  index  futures  or
         options on stock  index  futures,  or  financial  futures or options on
         financial  futures,  unless such  options are written by other  persons
         and: (a) the options or futures are offered through the facilities of a
         national securities  association or are listed on a national securities
         or  commodities  exchange,  except for put and call  options  issued by
         non-US   entities  or  listed  on  non-US   securities  or  commodities
         exchanges;  (b) the  aggregate  premiums paid on all such options which
         are held at any time do not exceed 20% of the Fund's  total net assets;
         and (c) the aggregate  margin deposits  required on all such futures or
         options  thereon  held at any time do not exceed 5% of the Fund's total
         assets; and


(ix)     for DWS Small Cap Growth Fund only,  acquire  securities  of registered
         open-end  investment  companies or registered unit investment trusts in
         reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.



                                       3
<PAGE>



Non-fundamental   Investment   Restrictions   for  DWS  Micro   Cap  Fund.   The
nonfundamental investment restrictions set forth below may be changed or amended
by the Trust's Board of Trustees without shareholder approval.

As a matter of nonfundamental policy, DWS Micro Cap Fund may not:

1.       Participate  on a  joint-and-several  basis in any  securities  trading
         account.  The  "bunching"  of  orders  for  the  sale  or  purchase  of
         marketable   portfolio   securities   with  other  accounts  under  the
         management  of the  Advisor to save  commissions  or to average  prices
         among them is not deemed to result in a securities trading account.

2.       Purchase securities of other investment companies,  except as permitted
         by the the  1940  Act and the  rules,  regulations  and any  applicable
         exemptive order issued thereunder.


3.       Invest for the purpose of exercising  control over or management of any
         company.

4.       Purchase any security,  including any repurchase  agreement maturing in
         more than seven days,  which is  illiquid,  if more than 15% of the net
         assets of the Fund,  taken at market  value,  would be invested in such
         securities.

5.       Acquire  securities  of  registered  open-end  investment  companies or
         registered unit investment  trusts in reliance on Sections  12(d)(1)(F)
         or 12(d)(1)(G) of the 1940 Act.

The staff of the SEC has taken the position that fixed time deposits maturing in
more  than  seven  days  that  cannot  be  traded  on  a  secondary  market  and
participation interests in loans are illiquid.  Until such time (if any) as this
position  changes,  the  Trust,  on  behalf  of  the  Fund,  will  include  such
investments in determining  compliance with the 15% limitation on investments in
illiquid securities.  Restricted  securities  (including commercial paper issued
pursuant to the Securities Act of 1933, as amended ("1933 Act"), which the Board
of  Trustees  has  determined  are readily  marketable  will not be deemed to be
illiquid for purposes of the 15% limitation.

"Value" for the purposes of the foregoing investment restrictions shall mean the
market value used in determining the Fund's net asset value.


There will be no violation of any investment restriction (except with respect to
fundamental  investment  restriction (1) above) if that  restriction is complied
with at the time the relevant action is taken, notwithstanding a later change in
the market  value of an  investment,  in net or total assets or in the change of
securities rating of the investment, or any other later change.




To meet  federal  income  tax  requirements  for  qualification  as a  regulated
investment company, each Fund must, among other things, limit its investments so
that at the close of each  quarter of its  taxable  year (1) no more than 25% of
the  value of its  total  assets  is  invested  in the  securities  (other  than
securities of the US Government or a regulated  investment  company) of a single
issuer or two or more issuers  which the Fund  controls and which are engaged in
the same, similar or related trades or businesses or in the securities of one or
more qualified publicly traded  partnerships,  and (2) at least 50% of the value
of its total assets is represented by cash, cash items (including  receivables),
US Government securities, securities of other regulated investment companies and
other securities of


                                       4
<PAGE>

any issuer that does not represent more than 5% of the value of the Fund's total
assets and not more than 10% of the issuer's outstanding voting securities.

                       INVESTMENT POLICIES AND TECHNIQUES

Investment Techniques


Descriptions  in  this  Statement  of  Additional  Information  of a  particular
investment  practice  or  technique  in which a Fund  may  engage  are  meant to
describe  the  spectrum  of  investments  that  Deutsche  Investment  Management
Americas Inc. (the "Advisor") in its discretion  might,  but is not required to,
use in managing a Fund's portfolio assets.  The Advisor may in its discretion at
any time employ such practice, technique or instrument for one or more Funds but
not for all funds advised by it. Furthermore,  it is possible that certain types
of financial  instruments or investment  techniques  described herein may not be
available,  permissible,  economically  feasible or effective for their intended
purposes in all markets. Certain practices, techniques or instruments may not be
principal activities of a Fund, but, to the extent employed,  could from time to
time have a  material  impact on a Fund's  performance.  Each Fund may engage in
certain additional practices not described herein.

Equity Securities

General.  Each Fund may invest in equity  securities  listed on any  domestic or
non-US securities exchange or traded in the  over-the-counter  (or "OTC") market
as well as certain restricted or unlisted  securities.  As used herein,  "equity
securities" includes common stock, preferred stock, trust or limited partnership
interests, rights and warrants (to subscribe to or purchase such securities) and
convertible  securities  (consisting of debt  securities or preferred stock that
may be converted  into common  stock or that carry the right to purchase  common
stock).


Asset-Backed Securities.  Asset-backed securities may include pools of mortgages
("mortgage-backed  securities"),  loans, receivables or other assets. Payment of
principal and interest may be largely dependent upon the cash flows generated by
the assets backing the securities. For purposes of determining the percentage of
a Fund's total assets  invested in securities of issuers having their  principal
business activities in a particular  industry,  asset-backed  securities will be
classified separately,  based on the nature of the underlying assets,  according
to the  following  categories:  captive auto,  diversified,  retail and consumer
loans, captive equipment and business, business trade receivables,  nuclear fuel
and capital and mortgage lending.  Primarily,  these securities may not have the
benefit of any security interest in the related assets.  Credit card receivables
are  generally  unsecured  and the debtors are entitled to the  protection  of a
number  of state and  federal  consumer  credit  laws,  many of which  give such
debtors the right to set off certain  amounts owed on the credit cards,  thereby
reducing  the  balance  due.  There  is  the  possibility   that  recoveries  on
repossessed  collateral may not, in some cases, be available to support payments
on these  securities.  Asset-backed  securities  are  often  backed by a pool of
assets  representing the obligations of a number of different parties. To lessen
the effect of failures by obligors on underlying  assets to make  payments,  the
securities  may  contain   elements  of  credit  support  which  fall  into  two
categories:  (i)  liquidity  protection,  and  (ii)  protection  against  losses
resulting  from  ultimate  default  by an  obligor  on  the  underlying  assets.
Liquidity  protection  refers to the  provision  of  advances,  generally by the
entity  administering the pool of assets, to ensure that the receipt of payments
on the underlying  pool occurs in a timely  fashion.  Protection  against losses
results from payment of the insurance  obligations  on at least a portion of the
assets in the pool. This protection may be provided through guarantees, policies
or letters of credit  obtained  by the  issuer or  sponsor  from third  parties,
through various means of structuring the transaction or through a combination of
such  approaches.  The funds will not pay any  additional  or separate  fees for
credit  support.  The  degree  of  credit  support  provided  for each  issue is
generally  based on historical  information  respecting the level of credit risk
associated  with the  underlying  assets.  Delinquency or loss in excess of that
anticipated or failure of the credit support could  adversely  affect the return
on an investment in such a security. The availability of asset-backed securities
may be affected by legislative or regulatory  developments.  It is possible that
such developments may require the funds to dispose of any then existing holdings
of such securities.


Common  Stocks.  Common  stocks,  the most familiar  type of equity  securities,
represent an equity (i.e., ownership) interest in a corporation. They may or may
not pay dividends or carry voting rights.  Common stock occupies the most junior
position in a company's  capital  structure.  Although equity  securities have a
history of long-term growth in value, their prices fluctuate based on changes in
a  company's  financial  condition,  as well as changes  in  overall


                                       5
<PAGE>

market and economic conditions.  This affects the value of the shares of a Fund,
and  thus  the  value  of your  investment.  Smaller  companies  are  especially
sensitive to these factors.

Warrants.  Each Fund may invest in warrants.  Warrants are securities  that give
the holder the right but not the obligation to buy a specified  number of shares
of common  stock at a  specified  price,  which is often  higher than the market
price  at the time of  issuance,  for a  specified  period  (or in  perpetuity).
Warrants may be issued in units with other securities or separately,  and may be
freely transferable and traded on exchanges. Investing in warrants can provide a
greater  potential  for  profit or loss  than an  equivalent  investment  in the
underlying  security  and,  thus, is a  speculative  investment.  At the time of
issue,  the  cost of a  warrant  is  substantially  less  than  the  cost of the
underlying  security itself, and price movements in the underlying  security are
generally  magnified  in the price  movements of the  warrant.  This  leveraging
effect enables the investor to gain exposure to the  underlying  security with a
relatively low capital investment. Such leveraging increases an investor's risk,
however,  in the event of a decline in the value of the underlying  security and
can result in a complete loss of the amount invested in the warrant.

While the market value of a warrant  tends to be more  volatile than that of the
securities underlying the warrant,  changes in the market value of a warrant may
not necessarily correlate with that of the underlying security. A warrant ceases
to have value if it is not exercised  prior to the  expiration  date, if any, to
which the warrant is subject.  The  purchase of warrants  involves a risk that a
Fund could lose the  purchase  value of a warrant if the right to  subscribe  to
additional shares is not exercised prior to the warrant's expiration.  Also, the
purchase of warrants  involves  the risk that the  effective  price paid for the
warrant added to the  subscription  price of the related security may exceed the
value  of the  subscribed  security's  market  price,  such as when  there is no
movement  in the level of the  underlying  security.  The value of a warrant may
decline  because  of a decline  in the  value of the  underlying  security,  the
passage of time,  changes in interest rates or in the dividend or other policies
of the company whose equity  underlies the warrant or a change in the perception
as to the future price of the underlying  security,  or any combination thereof.
Also,  warrants  do not entitle the holder to  dividends  or voting  rights with
respect to the  underlying  securities  and do not  represent  any rights in the
assets of the issuing company.

Preferred Stock. Each Fund may invest in preferred stock.  Preferred stock has a
preference  (i.e.,  ranks higher) in liquidation (and generally  dividends) over
common stock but is  subordinated  (i.e.,  ranks lower) in  liquidation to fixed
income securities.  Dividends on preferred stock may be cumulative,  and in such
cases, all cumulative  dividends usually must be paid prior to dividend payments
to common stockholders.  Because of this preference,  preferred stocks generally
entail  less risk than  common  stocks.  As a general  rule the market  value of
preferred  stocks  with fixed  dividend  rates and no  conversion  rights  moves
inversely  with  interest  rates  and  perceived  credit  risk,  with the  price
determined by the dividend rate.  Some  preferred  stocks are  convertible  into
other  securities  (e.g.,  common  stock) at a fixed price and ratio or upon the
occurrence of certain events.  The market price of convertible  preferred stocks
generally reflects an element of conversion value. Because many preferred stocks
lack a fixed maturity date, these securities  generally fluctuate  substantially
in value when interest  rates change;  such  fluctuations  often exceed those of
long-term  bonds of the same issuer.  Some  preferred  stocks pay an  adjustable
dividend  that may be based on an index,  formula,  auction  procedure  or other
dividend  rate  reset  mechanism.   In  the  absence  of  credit  deterioration,
adjustable  rate  preferred  stocks tend to have more stable  market values than
fixed rate preferred stocks.

All  preferred  stocks are also  subject  to the same  types of credit  risks as
corporate  bonds.  In addition,  because  preferred stock is subordinate to debt
securities  and other  obligations  of an  issuer,  deterioration  in the credit
rating of the issuer  will  cause  greater  changes in the value of a  preferred
stock than in a more senior debt security  with similar  yield  characteristics.
Preferred  stocks  may be  rated  by  the  Standard  &  Poor's  Division  of The
McGraw-Hill  Companies,   Inc.  ("S&P")  and  Moody's  Investors  Service,  Inc.
("Moody's"),  although there is no minimum  rating which a preferred  stock must
have to be an eligible investment for a Fund. Generally,  however, the preferred
stocks  in which a Fund  invests  will be  rated  at least  CCC by S&P or Caa by
Moody's or, if unrated,  of  comparable  quality in the opinion of the  Advisor.
Preferred stocks rated CCC by S&P are regarded as predominantly speculative with
respect  to  the  issuer's  capacity  to pay  preferred  stock  obligations  and
represent the highest degree of speculation  among  securities  rated between BB
and CCC;  preferred  stocks  rated Caa by Moody's are likely to be in arrears on
dividend  payments.  Moody's  ratings with  respect to  preferred  stocks do not
purport to indicate the future status of payments of dividends.

                                       6
<PAGE>

Convertible  Securities.  A  convertible  security is a bond or preferred  stock
which may be converted at a stated price within a specific period of time into a
specified  number of shares of common  stock of the same or a different  issuer.
Convertible  securities  are senior to common stock in a  corporation's  capital
structure,  but are generally  subordinate to  non-convertible  debt securities.
While providing a fixed income stream that is generally higher in yield than the
income  derived  from  a  common  stock  but  lower  than  that  afforded  by  a
non-convertible  debt security,  a convertible security also affords an investor
the opportunity,  through its conversion  feature, to participate in the capital
appreciation of common stock into which it is convertible.

The terms of any  convertible  security  determine  its  ranking in a  company's
capital  structure.  In the case of  subordinated  convertible  debentures,  the
holders'  claims on assets and earnings are  subordinated to the claims of other
creditors and are senior to the claims of preferred and common shareholders.  In
the case of  convertible  preferred  stock,  the  holders'  claims on assets and
earnings are  subordinated  to the claims of all creditors and are senior to the
claims of common  shareholders.  In general,  the market value of a  convertible
security is the  greater of its  investment  value (its value as a fixed  income
security) or its conversion value (the value of the underlying  shares of common
stock if the  security is  converted).  As a fixed income  security,  the market
value of a convertible  security generally increases when interest rates decline
and  generally  decreases  when  interest  rates rise;  however,  the price of a
convertible  security generally  increases as the market value of the underlying
stock  increases and generally  decreases as the market value of the  underlying
stock declines. Investments in convertible securities generally entail less risk
than investments in the common stock of the same issuer.

Medium-Capitalization  and Small-Capitalization  Stocks.  Lesser-known companies
with medium- and  small-market  capitalizations  frequently offer greater growth
potential than larger,  better-known and more mature  companies.  Investments in
medium- and  small-capitalization  companies involve considerations that are not
applicable  to investing in  securities of  established,  larger  capitalization
issuers,  including reduced and less reliable information about the issuer, less
stringent financial disclosure  requirements,  higher brokerage  commissions and
fees, and greater market risk in general.

In addition,  investing in the  securities of these  companies also involves the
possibility of greater  portfolio  price  volatility.  Among the reasons for the
greater price volatility of such companies are the less certain growth prospects
of medium and  smaller  firms,  the greater  illiquidity  in the markets for the
stocks of such  companies  and the  greater  sensitivity  of such  companies  to
changing economic conditions in their respective geographic regions.

For example,  securities of these companies  involve higher investment risk than
that normally  associated with larger firms due to the greater business risks of
smaller  size and limited  product  lines,  markets,  distribution  channels and
financial and managerial resources.

In addition, many medium- and small-market capitalization companies are not well
known to the investing public, do not have significant  institutional  ownership
and are followed by relatively few securities analysts.  Also, the securities of
smaller capitalization  companies traded on the over-the-counter  ("OTC") market
may have fewer market  makers,  wider  spreads  between their quoted bid and ask
prices and lower  trading  volumes,  resulting in  comparatively  greater  price
volatility   and  less   liquidity   than  exists  for   securities   of  larger
capitalization companies.


Small and Micro  Capitalization  Companies.  Each Fund  invests a portion of its
assets in  smaller,  lesser-known  companies  which the Advisor  believes  offer
greater  growth  potential  than larger,  more mature,  better-known  companies.
Investing  in  the  securities  of  these  companies,   however,  also  involves
significantly  greater  risk and the  possibility  of  greater  portfolio  price
volatility.  Among the reasons for the greater  price  volatility of these small
companies and unseasoned stocks are the less certain growth prospects of smaller
firms,  the lower  degree of  liquidity  in the  markets for such stocks and the
greater  sensitivity of small companies to changing economic conditions in their
geographic  region.  For example,  securities of these companies  involve higher
investment  risk than that  normally  associated  with  larger  firms due to the
greater  business  risks  of small  size and  limited  product  lines,  markets,
distribution  channels and financial and managerial  resources  and,  therefore,
such  securities may be subject to more abrupt or erratic market  movements than
securities  of larger,  more  established  companies  or the market  averages in
general. Many smaller capitalization  companies in which the Fund may invest are
not well known to the investing  public,  do not have significant  institutional
ownership and are followed by relatively few securities  analysts.  As a result,
it may be difficult to obtain  reliable  information  and financial data on


                                       7
<PAGE>

such  companies and the  securities of these small  companies may not be readily
marketable,  making it  difficult  to  dispose  of  shares  when  desirable.  As
mentioned  above, the securities of smaller  capitalization  companies traded on
the OTC market may have fewer market makers,  wider spreads between their quoted
bid and asked  prices and lower  trading  volumes,  resulting  in  comparatively
greater price volatility and less liquidity than exists for securities of larger
capitalization  companies.  An additional risk of investing in smaller  emerging
companies is that smaller issuers may face increased difficulty in obtaining the
capital necessary to continue operations and thus may go into bankruptcy,  which
could result in a complete loss of an investment.  Furthermore, when the economy
enters into recession there tends to be a "flight to quality," which exacerbates
the increased risk and greater price volatility normally associated with smaller
companies.


Investing in Foreign Securities. Each Fund may invest up to 20% of its assets in
foreign  securities.  Investors  should  realize that investing in securities of
foreign issuers involves  considerations not typically associated with investing
in  securities  of  companies  organized  and  operated  in the  United  States.
Investors should realize that the value of the Fund's foreign investments may be
adversely  affected by changes in  political  or social  conditions,  diplomatic
relations, confiscatory taxation, expropriation,  nationalization, limitation on
the removal of funds or assets, or imposition of (or change in) exchange control
or tax  regulations  in foreign  countries.  In addition,  changes in government
administrations  or economic or monetary policies in the United States or abroad
could result in appreciation  or depreciation of portfolio  securities and could
favorably or unfavorably affect a Fund's operations.  Furthermore, the economies
of individual foreign nations may differ from the US economy,  whether favorably
or  unfavorably,  in areas  such as growth of gross  national  product,  rate of
inflation,  capital  reinvestment,   resource  self-sufficiency  or  balance  of
payments position. In addition, it may be more difficult to obtain and enforce a
judgment  against a foreign  issuer.  In general,  less  information is publicly
available  with respect to foreign  issuers than is available with respect to US
companies.  Most foreign companies are not subject to the uniform accounting and
financial reporting requirements applicable to issuers in the United States. Any
foreign  investments  made by a Fund  must be  made  in  compliance  with US and
foreign currency  restrictions and tax laws restricting the amounts and types of
foreign investments.

A Fund's  foreign  investments  may be less liquid and their  prices may be more
volatile  than  comparable  investments  in  securities  of  US  companies.  The
settlement periods for foreign securities, which are often longer than those for
securities of US issuers, may affect portfolio liquidity. Furthermore, there may
be less government  supervision and regulation of securities exchanges,  brokers
and issuers in foreign countries than in the United States.

Trading in Foreign Securities. Trading in foreign securities may be completed at
times which vary from the closing of the New York Stock  Exchange  ("NYSE").  In
computing  their net asset  values,  the Fund values  foreign  securities at the
latest closing price on the exchange on which they are traded  immediately prior
to the closing of the NYSE.  Foreign securities quoted in foreign currencies are
translated into US dollars at the foreign exchange rates.

Occasionally, events that affect values and exchange rates may occur between the
times at which such values and exchange  rates are determined and the closing of
the NYSE. If such events  materially  affect the value of portfolio  securities,
these  securities  may be valued at their fair value as determined in good faith
using methods approved by the Trustees.

US  Dollar-Denominated  Foreign Debt Securities.  Each Fund may invest in the US
dollar-denominated  debt  securities  of  foreign  companies.  Investing  in the
securities of foreign companies involves more risks than investing in securities
of US companies.  Their value is subject to economic and political  developments
in the countries where the companies  operate and to changes in foreign currency
values.  Values may also be  affected  by foreign  tax laws,  changes in foreign
economic or monetary  policies,  exchange  control  regulations  and regulations
involving prohibitions on the repatriation of foreign currencies.

In addition, the relative performance of various countries' fixed income markets
historically   has   reflected   wide   variations   relating   to  the   unique
characteristics of each country's economy.  Year-to-year fluctuations in certain
markets have been  significant,  and negative  returns have been  experienced in
various markets from time to time.

US Dollar-Denominated  Foreign Government Debt Securities.  Each Fund may invest
in US  dollar-denominated  foreign government debt securities which include debt
obligations issued or guaranteed by national, state or


                                       8
<PAGE>

provincial  governments or similar political subdivisions and quasi-governmental
and  supranational  entities   (collectively,   "sovereign  debt  obligations").
Sovereign  debt  obligations,  especially  those of  developing  countries,  may
involve  a high  degree  of  risk.  The  issuer  of  such an  obligation  or the
governmental  authorities  that control the repayment of the  obligation  may be
unable or unwilling  to repay  principal  and interest  when due and may require
renegotiation  or  rescheduling  of debt  payments.  In addition,  prospects for
repayment of principal  and interest may depend on political as well as economic
factors.

Quasi-governmental    and   supranational    entities   include    international
organizations  designated  or  supported  by  governmental  entities  to promote
economic  reconstruction or development and international  banking  institutions
and related government  agencies.  Examples include (but are not limited to) the
International  Bank for  Reconstruction  and Development (the "World Bank"), the
Japanese  Development  Bank, the Asian  Development Bank and the  Inter-American
Development Bank. Currently, the Portfolio intends to invest only in obligations
issued  or  guaranteed  by  the  Asian  Development  Bank,  the   Inter-American
Development  Bank,  the World Bank, the African  Development  Bank, the European
Coal  and  Steel  Community,  the  European  Economic  Community,  the  European
Investment Bank and the Nordic Investment Bank.  Foreign  government  securities
also include mortgage-related securities issued or guaranteed by national, state
or  provincial  governmental  instrumentalities,   including  quasi-governmental
agencies.

Fixed Income Securities and Money Market Instruments


General.  Each Fund may invest in a broad  range of domestic  and foreign  fixed
income  (debt)  securities  consistent  with its  investment  objective  and 80%
investment  policyfor  each Fund.  Fixed income  securities,  including (but not
limited  to)  bonds,  are used by issuers to borrow  money from  investors.  The
issuer pays the investor a fixed or variable rate of interest and must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon bonds, do
not pay  current  interest,  but are  purchased  at a  discount  from their face
values.


The value of fixed income securities in a Fund's securities  portfolio generally
varies  inversely  with  changes  in  interest  rates.  Prices  of fixed  income
securities with longer effective  maturities are more sensitive to interest rate
changes than those with shorter effective maturities.

In periods of declining  interest rates,  the yield (the income generated over a
stated  period of time) of a Fund that  invests in fixed income  securities  may
tend to be higher  than  prevailing  market  rates  and,  in  periods  of rising
interest rates, the yield of the Fund may tend to be lower.  Also, when interest
rates  are  falling,  the  inflow  of net  new  money  to such a Fund  from  the
continuous  sale of its shares will likely be invested in portfolio  instruments
producing  lower  yields  than the balance of the Fund's  investment  portfolio,
thereby reducing the yield of the Fund. In periods of rising interest rates, the
opposite can be true.  To the extent a Fund invests in fixed income  securities,
the net asset value can  generally  be  expected to change as general  levels of
interest rates fluctuate.

Fixed Income Security Risk. Fixed income  securities  generally expose a Fund to
four types of risk:  (1) interest rate risk (the potential for  fluctuations  in
bond prices due to changing interest rates);  (2) income risk (the potential for
a decline in the Fund's income due to falling market interest rates); (3) credit
risk (the  possibility  that a bond issuer will fail to make timely  payments of
either interest or principal to the Fund);  and (4) prepayment risk or call risk
(the likelihood that, during a period of falling interest rates, securities with
high stated  interest  rates will be prepaid,  or  "called"  prior to  maturity,
requiring the Fund to invest the proceeds at generally lower interest rates).

Short-Term  Instruments.  When a Fund  experiences  large  cash  inflows  -- for
example,  through  the sale of  securities  -- and  attractive  investments  are
unavailable in sufficient  quantities,  the Fund may hold short-term investments
(or shares of money market mutual funds) for a limited time pending availability
of such investments.  Each Fund may invest up to 20% of its total assets in high
quality short-term investments with remaining maturities of 397 days or less, or
in money market mutual funds, to meet  anticipated  redemptions and expenses for
day-to-day operating purposes. In addition,  when in the Advisor's opinion it is
advisable to adopt a temporary defensive position because of unusual and adverse
market or other  conditions,  up to 100% of a Fund's  assets may be  invested in
such short-term instruments.

                                       9
<PAGE>

Short-term   instruments  consist  of  foreign  and  domestic:   (1)  short-term
obligations  of  sovereign  governments,   their  agencies,   instrumentalities,
authorities or political  subdivisions;  (2) other  short-term  debt  securities
rated AA or higher by S&P or Aa or higher by Moody's or, if unrated,  are deemed
to be of comparable quality in the opinion of the Advisor; (3) commercial paper;
(4)  bank  obligations,  including  negotiable  certificates  of  deposit,  time
deposits and bankers' acceptances;  and (5) repurchase agreements. At the time a
Fund invests in commercial paper, bank obligations or repurchase agreements, the
issuer or the issuer's parent must have  outstanding  debt rated AA or higher by
S&P or Aa or higher by Moody's; outstanding commercial paper or bank obligations
rated A-1 by S&P or Prime-1 by Moody's;  or, if no such  ratings are  available,
the instrument must be deemed to be of comparable  quality in the opinion of the
Advisor.  These  instruments  may be  denominated  in US  dollars  or in foreign
currencies.

Other US government securities that the Funds may invest in include (but are not
limited  to)   securities   issued  or   guaranteed   by  the  Federal   Housing
Administration, Farmers Home Loan Administration,  Export-Import Bank of the US,
Small Business Administration, General Services Administration, Central Bank for
Cooperatives,  Federal Farm Credit  Banks,  Federal  Intermediate  Credit Banks,
Federal  Land  Banks,  Maritime  Administration,   Tennessee  Valley  Authority,
District  of  Columbia  Armory  Board and Student  Loan  Marketing  Association.
Because  the US  government  is not  obligated  by law to provide  support to an
instrumentality it sponsors, a Fund will invest in obligations issued by such an
instrumentality only if the Advisor determines that the credit risk with respect
to the instrumentality does not make its securities unsuitable for investment by
a Fund.

Each Fund may also invest in separately traded principal and interest components
of  securities  guaranteed  or  issued  by the US  Government  or its  agencies,
instrumentalities   or   sponsored   enterprises   if  such   components   trade
independently under the Separate Trading of Registered Interest and Principal of
Securities  program  ("STRIPS")  or  any  similar  program  sponsored  by the US
Government.  STRIPS  are  sold  as zero  coupon  securities.  See " Zero  Coupon
Securities and Deferred Interest Bonds."

Certificates  of Deposit and Bankers'  Acceptances.  Certificates of deposit are
receipts  issued by a  depository  institution  in  exchange  for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity.

Bankers'  acceptances   typically  arise  from  short-term  credit  arrangements
designed  to  enable   businesses   to  obtain   funds  to  finance   commercial
transactions.  Generally,  an  acceptance  is a time draft drawn on a bank by an
exporter or an importer to obtain a stated  amount of funds to pay for  specific
merchandise.   The  draft  is  then  "accepted"  by  a  bank  that,  in  effect,
unconditionally  guarantees  to pay the  face  value  of the  instrument  on its
maturity  date.  The  acceptance  may then be held by the  accepting  bank as an
earning  asset or it may be sold in the  secondary  market at the going  rate of
discount for a specific maturity.  Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

Commercial Paper. Each Fund may invest in fixed rate or variable rate commercial
paper, issued by US or foreign entities. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured  promissory notes issued by US or foreign
corporations in order to finance their current operations.  Any commercial paper
issued  by a  foreign  entity  corporation  and  purchased  by a Fund must be US
dollar-denominated  and must not be subject to  foreign  withholding  tax at the
time of purchase.

Commercial  paper  when  purchased  by a Fund  must  be  rated  in  the  highest
short-term rating category by any two nationally recognized  statistical ratings
organizations  ("NRSROs")  (or one NRSRO if that  NRSRO is the only  such  NRSRO
which rates such security) or, if not so rated, must be believed by the Advisor,
acting  under the  supervision  of the Board of Trustees  of the Fund,  to be of
comparable  quality.  Investing in foreign  commercial paper generally  involves
risks similar to those  described above relating to obligations of foreign banks
or foreign branches and subsidiaries of US and foreign banks.

Each Fund may also invest in variable rate master demand notes.  A variable rate
master  demand note (which is a type of  commercial  paper)  represents a direct
borrowing arrangement involving periodically fluctuating rates of interest under
a letter agreement between a commercial paper issuer and an institutional lender
pursuant to which the lender may determine to invest varying amounts.

                                       10
<PAGE>

For a description of commercial paper ratings, see the Appendix to this SAI.

US  Government  Securities.  Each  Fund may  invest  in  obligations  issued  or
guaranteed by the US government, which include: (1) direct obligations of the US
Treasury   and  (2)   obligations   issued  by  US   government   agencies   and
instrumentalities.  Included  among direct  obligations of the United States are
Treasury  Bills,  Treasury  Notes and Treasury  Bonds,  which differ in terms of
their  interest  rates,  maturities  and dates of issuance.  Treasury Bills have
maturities of less than one year,  Treasury  Notes have  maturities of one to 10
years and Treasury Bonds  generally have  maturities of greater than 10 years at
the date of  issuance.  Included  among the  obligations  issued by agencies and
instrumentalities  of the United States are:  instruments  that are supported by
the  full  faith  and  credit  of the US  (such as  certificates  issued  by the
Government National Mortgage Association ("GNMA" or "Ginnie Mae"));  instruments
that are  supported  by the right of the issuer to borrow  from the US  Treasury
(such as  securities  of Federal  Home Loan  Banks);  and  instruments  that are
supported solely by the credit of the instrumentality  (such as Federal National
Mortgage  Association  ("FNMA" or "Fannie  Mae") and Federal Home Loan  Mortgage
Corporation ("FHLMC" or "Freddie Mac")).



Investments in American, European, Global and International Depository Receipts.
Each Fund may invest in non-US  securities  in the form of  American  Depository
Receipts ("ADRs"),  European  Depository  Receipts  ("EDRs"),  Global Depository
Receipts  ("GDRs"),  or International  Depository  Receipts  ("IDRs").  ADRs are
receipts typically issued by a US bank or trust company which evidence ownership
of  underlying  securities  issued by a foreign  corporation.  EDRs and IDRs are
receipts  issued in Europe  typically by non-US banking and trust companies that
evidence ownership of either foreign or US securities.  GDRs are receipts issued
by  either  a US or  non-US  banking  institution  evidencing  ownership  of the
underlying non-US securities.  Generally, ADRs, in registered form, are designed
for use in US securities  markets and EDRs,  GDRs and IDRs, in bearer form,  are
designed for use in European and international  securities markets. An ADR, EDR,
GDR or IDR may be denominated in a currency different from the currency in which
the underlying foreign security is denominated.

Zero Coupon Securities and Deferred Interest Bonds. Each Fund may invest in zero
coupon securities and deferred interest bonds. Zero coupon and deferred interest
bonds are debt obligations which are issued at a significant  discount from face
value. The original discount approximates the total amount of interest the bonds
will


                                       11
<PAGE>

accrue and compound over the period until maturity or the first interest accrual
date at a rate of interest  reflecting  the market  rate of the  security at the
time of  issuance.  Zero coupon  securities  are redeemed at face value at their
maturity date without interim cash payments of interest or principal. The amount
of this  discount  is accrued  over the life of the  security,  and the  accrual
constitutes  the  income  earned on the  security  for both  accounting  and tax
purposes. Because of these features, the market prices of zero coupon securities
are generally  more  volatile  than the market  prices of  securities  that have
similar maturity but that pay interest periodically.

While zero  coupon  bonds do not  require  the  periodic  payment  of  interest,
deferred  interest  bonds  generally  provide  for a period of delay  before the
regular payment of interest  begins.  Although this period of delay is different
for each deferred  interest bond, a typical period is approximately one third of
the bond's term to maturity.  Such investments  benefit the issuer by mitigating
its initial need for cash to meet debt  service,  but some also provide a higher
rate of return to attract  investors  who are  willing to defer  receipt of such
cash.

A Fund will accrue income on such  investments for tax and accounting  purposes,
as required,  which is distributable to shareholders and which,  because no cash
is generally  received at the time of accrual,  may require the  liquidation  of
other portfolio securities to satisfy the Fund's distribution  obligations.  See
"Taxes."

Repurchase Agreements. Each Fund may engage in repurchase agreement transactions
with member banks of the Federal  Reserve System and certain  non-bank  dealers,
including  governmental  securities  dealers  approved  by the  Fund's  Board of
Trustees.  Under the  terms of a  typical  repurchase  agreement,  a Fund  would
acquire any underlying  security for a relatively short period (usually not more
than one week),  subject to an obligation of the seller to  repurchase,  and the
Fund to resell, the obligation at an agreed price and time, thereby  determining
the yield during a Fund's holding period.  This  arrangement  results in a fixed
rate of  return  that is not  subject  to  market  fluctuations  during a Fund's
holding period. The value of the underlying securities will be at least equal at
all times to the total amount of the repurchase obligations, including interest.
A Fund  bears a risk of loss in the event of  default  by or  bankruptcy  of the
other party to a  repurchase  agreement.  A Fund may be delayed in, or prevented
from, exercising its rights to dispose of the collateralized  securities. To the
extent  that,  in the  meantime,  the value of the  securities  repurchased  had
decreased  or  the  value  of the  securities  had  increased,  the  Fund  could
experience a loss. The Advisor reviews the  creditworthiness  of those banks and
dealers with which the Funds enter into repurchase agreements and monitors on an
ongoing basis the value of the  securities  subject to repurchase  agreements to
ensure  that such  value is  maintained  at the  required  level.  A  repurchase
agreement is considered to be a loan under the 1940 Act.

Reverse  Repurchase  Agreements.  Each Fund may borrow  funds for  temporary  or
emergency purposes, such as meeting larger than anticipated redemption requests,
and  not for  leverage,  by  among  other  things,  agreeing  to sell  portfolio
securities to financial institutions such as member banks of the Federal Reserve
System and certain  non-bank dealers and to repurchase them at a mutually agreed
date and price (a  "reverse  repurchase  agreement").  At the time a Fund enters
into a reverse repurchase agreement, it will segregate cash or liquid securities
having a value equal to the repurchase price,  including  accrued interest.  The
segregated assets will be  marked-to-market  daily and additional assets will be
segregated on any day in which the assets fall below the repurchase  price (plus
accrued interest).  A Fund's liquidity and ability to manage its assets might be
affected  when  it sets  aside  cash  or  portfolio  securities  to  cover  such
commitments.  Reverse  repurchase  agreements  involve  the risk that the market
value of the securities sold by a Fund may decline below the repurchase price of
those  securities.  In the  event  the  buyer  of  securities  under  a  reverse
repurchase  agreement files for bankruptcy or becomes  insolvent,  such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's  obligation to repurchase the securities,  and the Fund's use
of  the  proceeds  of  the  reverse  repurchase  agreement  may  effectively  be
restricted pending such decision.  Reverse repurchase  agreements are considered
to be borrowings by the Funds.

Mortgage Dollar Rolls. Each Fund may enter into mortgage "dollar rolls" in which
a Fund sells  securities  for delivery in the current  month and  simultaneously
contracts to repurchase  substantially similar (same type, coupon and maturity),
but not  identical,  securities  on a  specified  future  date.  During the roll
period, a Fund forgoes principal and interest paid on the securities.  A Fund is
compensated  by the  difference  between the  current  sales price and the lower
forward price for the future  purchase  (often referred to as the "drop") or fee
income and by the interest  earned on the cash  proceeds of the initial  sale. A
"covered  roll"  is a  specific  type of  dollar  roll  for  which  there  is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward


                                       12
<PAGE>

settlement  date of the dollar roll  transaction.  The Funds may enter into both
covered  and  uncovered  rolls.  At the time a Fund  enters  into a dollar  roll
transaction, it will segregate cash or liquid securities having a value not less
than the repurchase price  (including  accrued  interest) and will  subsequently
monitor the segregated assets to ensure that its value is maintained.

Illiquid Securities.  Historically, illiquid securities have included securities
subject to  contractual  or legal  restrictions  on resale because they have not
been  registered  under the 1933 Act,  securities that are otherwise not readily
marketable  and  repurchase  agreements  having a maturity  of longer than seven
days.  Securities that have not been registered  under the 1933 Act are referred
to as private  placements or restricted  securities  and are purchased  directly
from the  issuer or in the  secondary  market.  Non-publicly  traded  securities
(including Rule 144A securities,  discussed in greater detail below) may involve
a high  degree of  business  and  financial  risk and may result in  substantial
losses. These securities may be less liquid than publicly traded securities, and
it may take  longer to  liquidate  these  positions  than  would be the case for
publicly traded  securities.  Companies whose securities are not publicly traded
may not be subject to the disclosure and other investor protection  requirements
applicable to companies  whose  securities are publicly  traded.  Limitations on
resale may have an adverse effect on the marketability of portfolio  securities,
and a mutual  fund might be unable to dispose of  restricted  or other  illiquid
securities  promptly  or at  reasonable  prices  and  might  thereby  experience
difficulty  satisfying  redemptions within seven days. An investment in illiquid
securities is subject to the risk that should a Fund desire to sell any of these
securities  when a ready buyer is not  available at a price that is deemed to be
representative of the securities'  value, the value of a Fund's net assets could
be adversely affected.

Mutual funds do not typically hold a significant  amount of these  restricted or
other  illiquid  securities  because of the  potential  for delays on resale and
uncertainty  in  valuation.  A mutual  fund  might  also have to  register  such
restricted  securities  in order to dispose  of them,  resulting  in  additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

A large  institutional  market has developed for certain securities that are not
registered  under  the 1933 Act,  including  repurchase  agreements,  commercial
paper,  non-US securities,  municipal  securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment.  The fact that there are contractual or legal restrictions
on resale of such  investments to the general public or to certain  institutions
may not be indicative of their liquidity.


The SEC has adopted  Rule 144A,  which  allows a broader  institutional  trading
market for  securities  otherwise  subject to restriction on their resale to the
general  public.  Rule 144A  establishes a "safe  harbor" from the  registration
requirements  of the 1933 Act for  resales of certain  securities  to  qualified
institutional buyers ("Rule 144A Securities").  The Advisor anticipates that the
market for certain restricted securities such as institutional  commercial paper
will  expand  further  as a result of this  regulation  and the  development  of
automated  systems for the trading,  clearance and  settlement  of  unregistered
securities of domestic and non-US issuers,  such as the PORTAL System  sponsored
by the Financial Industry Regulatory Authority ("FINRA").


An investment in Rule 144A Securities will be considered  illiquid and therefore
subject to a Fund's  limit on the  purchase  of illiquid  securities  unless the
Board  determines or its delegates  determine that the Rule 144A  Securities are
liquid.  In  reaching  liquidity  decisions,  the  Board and its  delegates  may
consider,  inter alia, the following factors: (i) the unregistered nature of the
security;  (ii) the frequency of trades and quotes for the  security;  (iii) the
number of dealers  wishing to  purchase or sell the  security  and the number of
other  potential  purchasers;  (iv) dealer  undertakings to make a market in the
security;  and (v) the nature of the security and the nature of the  marketplace
trades  (e.g.,  the time  needed  to  dispose  of the  security,  the  method of
soliciting offers and the mechanics of the transfer).

Investing in Rule 144A Securities  could have the effect of increasing the level
of illiquidity in a Fund to the extent that qualified  institutional  buyers are
unavailable or  uninterested  in purchasing  such  securities from the Fund. The
Board has adopted  guidelines and delegated to the Advisor the daily function of
determining and monitoring the liquidity of Rule 144A  Securities,  although the
Board will retain ultimate responsibility for any liquidity determinations.

                                       13
<PAGE>

When-Issued and Delayed Delivery Securities. A Fund may purchase securities on a
when-issued  or  delayed  delivery  basis.  Delivery  of and  payment  for these
securities  can  take  place a month  or more  after  the  date of the  purchase
commitment.  The payment  obligation and the interest rate that will be received
on when-issued and delayed  delivery  securities are fixed at the time the buyer
enters  into the  commitment.  Due to  fluctuations  in the value of  securities
purchased  or sold on a  when-issued  or  delayed  delivery  basis,  the  yields
obtained on such securities may be higher or lower than the yields  available in
the market on the dates  when the  investments  are  actually  delivered  to the
buyers.  When-issued securities may include securities purchased on a "when, as,
and if-issued"  basis,  under which the issuance of the security  depends on the
occurrence  of a  subsequent  event,  such as  approval  of a merger,  corporate
reorganization or debt restructuring. The value of such securities is subject to
market  fluctuation during this period and no interest or income, as applicable,
accrues to a Fund until settlement takes place.

At the time  when a Fund  makes  the  commitment  to  purchase  securities  on a
when-issued or delayed delivery basis, it will record the  transaction,  reflect
the value each day of such securities in determining its net asset value and, if
applicable,  calculate  the maturity for the purposes of average  maturity  from
that date.  At the time of  settlement a  when-issued  security may be valued at
less than the purchase price. To facilitate such acquisition,  a Fund identifies
on its  books  cash or  liquid  assets  in an  amount  at  least  equal  to such
commitments.  It may be expected  that a Fund's net assets will  fluctuate  to a
greater  degree when it sets aside  portfolio  securities to cover such purchase
commitments   than  when  it  sets  aside  cash.  On  delivery  dates  for  such
transactions,  a Fund will meet its obligations  from maturities or sales of the
segregated securities and/or from cash flow. If a Fund chooses to dispose of the
right to acquire a when-issued  security prior to its acquisition,  it could, as
with the disposition of any other portfolio obligation, incur a gain or loss due
to market  fluctuation.  It is the current policy of each Fund not to enter into
when-issued  commitments  exceeding in the aggregate 15% for Mid Cap Growth Fund
and Small Cap Growth Fund and 33 (1)/3% for Micro Cap Fund in each case,  of the
market value of the applicable Fund's total assets,  less liabilities other than
the  obligations  created by  when-issued  commitments.  When a Fund  engages in
when-issued or  delayed-delivery  transactions,  it relies on the other party to
consummate  the  trade.  Failure of the seller to do so may result in the Fund's
incurring a loss or missing an  opportunity  to obtain a price  considered to be
advantageous.


Lending  of  Portfolio  Securities.  DWS Mid Cap  Growth  Fund and DWS Small Cap
Growth  Fund may each  lend up to 30% and DWS  Micro  Cap Fund may lend up to 33
1/3% of the  total  value of their  respective  portfolio  securities  (taken at
market value) to approved institutional  borrowers who need to borrow securities
in order  to  complete  certain  transactions,  such as  covering  short  sales,
avoiding failures to deliver securities or completing arbitrage  operations.  By
lending  its  investment  securities,  a  Fund  attempts  to  increase  its  net
investment  income through the receipt of interest on the loan. Any gain or loss
in the market price of the securities loaned that might occur during the term of
the loan would belong to the Fund. Each Fund may lend its investment  securities
so long as the  terms,  structure  and  aggregate  amount of such  loans are not
inconsistent  with the 1940 Act or the rules and regulations or  interpretations
of the SEC thereunder,  which currently require that (a) the borrower pledge and
maintain  with the Fund  collateral  consisting of liquid,  unencumbered  assets
having a value at all times of not less than 100% of the value of the securities
loaned,  (b) the  borrower  add to such  collateral  whenever  the  price of the
securities  loaned  rises (i.e.,  the borrower  "marks to the market" on a daily
basis), (c) the loan be made subject to termination by the Fund at any time, and
(d) the Fund  receive  reasonable  interest  on the loan  (which may include the
Fund's   investing   any  cash   collateral   in   interest-bearing   short-term
investments),  distributions on the loaned  securities and any increase in their
market value.  There may be risks of delay in recovery of the securities or even
loss of rights in the  collateral  should the  borrower of the  securities  fail
financially.  However, loans will be made only to borrowers selected by a Fund's
delegate  after  a  commercially   reasonable   review  of  relevant  facts  and
circumstances, including the creditworthiness of the borrower.


At the  present  time,  the staff of the SEC does not  object  if an  investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such  fees are set  forth in a  written  contract  and  approved  by the
investment company's Board of Trustees. In addition, voting rights may pass with
the loaned securities, but if a material event occurs affecting an investment on
loan, the loan must be called and the securities voted. Pursuant to an exemptive
order granted by the SEC, cash collateral  received by a Fund may be invested in
a money market fund managed by the Advisor (or one of its affiliates).

                                       14
<PAGE>

Payments  received  by a Fund  in  lieu  of any  dividends  paid  on the  loaned
securities  will not be treated as "qualified  dividend  income" for purposes of
determining what portion of the Fund's dividends  received by individuals may be
taxed at the rates generally applicable to long-term capital gains. See "Taxes."


Impact of Large  Redemptions  and  Purchases of Fund Shares.  From time to time,
shareholders  of a Fund  (which may  include  affiliated  and/or  non-affiliated
registered investment companies that invest in a Fund) may make relatively large
redemptions or purchases of Fund shares.  These transactions may cause a Fund to
have to sell securities or invest  additional cash, as the case may be. While it
is impossible  to predict the overall  impact of these  transactions  over time,
there could be adverse effects on a Fund's performance to the extent that a Fund
may be  required  to sell  securities  or invest cash at times when it would not
otherwise do so. These  transactions  could also  accelerate the  realization of
taxable  income if sales of securities  resulted in capital gains and could also
increase transaction costs.

Investment Company Securities. A Fund may acquire securities of other investment
companies to the extent consistent with its investment  objective and subject to
the limitations of the 1940 Act. A Fund will  indirectly bear its  proportionate
share of any management  fees and other  expenses paid by such other  investment
companies.


For example,  a Fund may invest in a variety of investment  companies which seek
to track the  composition  and  performance  of  specific  indexes or a specific
portion of an index.  These  index-based  investments hold  substantially all of
their assets in securities representing their specific index.  Accordingly,  the
main risk of investing in index-based  investments is the same as investing in a
portfolio  of equity  securities  comprising  the index.  The  market  prices of
index-based  investments  will fluctuate in accordance  with both changes in the
market  value of their  underlying  portfolio  securities  and due to supply and
demand for the  instruments on the exchanges on which they are traded (which may
result in their  trading at a discount  or premium to their  NAVs).  Index-based
investments  may not replicate  exactly the performance of their specified index
because of  transaction  costs and because of the  temporary  unavailability  of
certain component securities of the index.

Examples of index-based investments include:

SPDRs(R):  SPDRs,  an acronym for "Standard & Poor's  Depositary  Receipts," are
based on the S&P 500  Composite  Stock Price Index.  They are issued by the SPDR
Trust,  a unit  investment  trust that  holds  shares of  substantially  all the
companies  in the S&P 500 in  substantially  the  same  weighting  and  seeks to
closely track the price performance and dividend yield of the Index.

MidCap  SPDRs(R):  MidCap SPDRs are based on the S&P MidCap 400 Index.  They are
issued by the MidCap SPDR Trust, a unit investment  trust that holds a portfolio
of securities  consisting of  substantially  all of the common stocks in the S&P
MidCap 400 Index in substantially  the same weighting and seeks to closely track
the price performance and dividend yield of the Index.

Select Sector SPDRs(R):  Select Sector SPDRs are based on a particular sector or
group of  industries  that are  represented  by a specified  Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end  management  investment  company with nine
portfolios  that each seeks to closely track the price  performance and dividend
yield of a particular Select Sector Index.

DIAMONDS(SM):  DIAMONDS are based on the Dow Jones Industrial Average(SM).  They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.


Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq-100 Index. They are
issued by the Nasdaq-100  Trust, a unit investment  trust that holds a portfolio
consisting of substantially  all of the securities,  in  substantially  the same
weighting,  as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.


                                       15
<PAGE>

Derivative Securities -- DWS Small Cap Growth Fund and DWS Mid Cap Growth Fund

General.  Each Fund may invest in various instruments that are commonly known as
"derivatives." Generally, a derivative is a financial arrangement,  the value of
which is based on, or "derived"  from, a traditional  security,  asset or market
index.  Some  derivatives,  such  as  mortgage-related  and  other  asset-backed
securities, are in many respects like any other investment, although they may be
more volatile and/or less liquid than more traditional  debt  securities.  There
are, in fact, many different types of derivatives and many different ways to use
them. There is a range of risks associated with those uses. For example,  a Fund
may use  futures  and  options as a low-cost  method of  gaining  exposure  to a
particular securities market without investing directly in those securities; for
traditional  hedging  purposes to attempt to protect  the Fund from  exposure to
changing  interest rates,  securities prices or currency exchange rates; and for
cash management or other investment purposes.  The use of derivatives may result
in leverage, which tends to magnify the effects of an instrument's price changes
as market  conditions  change.  Leverage  involves  the use of a small amount of
money  to  control  a  large  amount  of  financial  assets  and  can,  in  some
circumstances,  lead to  significant  losses.  Each Fund will limit the leverage
created by its use of  derivatives  for investment  purposes by "covering"  such
positions  as  required  by  the  SEC.  The  Advisor  may  use   derivatives  in
circumstances  where the  Advisor  believes  they offer an  economical  means of
gaining  exposure to a particular  asset class.  Derivatives will not be used to
increase  portfolio  risk  above the level  that  could be  achieved  using only
traditional investment securities or to acquire exposure to changes in the value
of assets or indexes that by  themselves  would not be purchased  for each Fund.
The use of derivatives for non-hedging purposes may be considered speculative.

Each  Fund's  investment  in options,  futures,  forward  contracts  and similar
strategies  depend  on the  Advisor's  judgment  as to the  potential  risks and
rewards of different  types of  strategies.  Options and futures can be volatile
investments,  and may not perform as expected. If the Advisor applies a hedge at
an inappropriate  time or judges price trends  incorrectly,  options and futures
strategies may lower each Fund's return.  Each Fund could also experience losses
if the prices of its options and futures  positions were poorly  correlated with
its other investments,  or if it could not close out its positions because of an
illiquid  secondary  market.  Options  and futures  traded on foreign  exchanges
generally are not regulated by US  authorities  and may offer less liquidity and
less  protection  to each Fund in the event of default by the other party to the
contract.

Options on  Securities.  Each Fund may  purchase  and write  (sell) put and call
options on stocks.  A call option gives the purchaser of the option the right to
buy, and  obligates  the writer to sell,  the  underlying  stock at the exercise
price at any time during the option  period.  Similarly,  a put option gives the
purchaser of the option the right to sell,  and obligates the writer to buy, the
underlying stock at the exercise price at any time during the option period.

Each Fund may write (sell)  covered call and put options to a limited  extent on
its portfolio  securities  ("covered  options") in an attempt to increase income
through the premiums it receives for writing the option(s).  However,  in return
for the premium,  a Fund may forgo the benefits of  appreciation  on  securities
sold or may pay more than the market price on  securities  acquired  pursuant to
call and put options written by each Fund.

A call option written by each Fund is "covered" if each Fund owns the underlying
security  covered by the call or has an absolute and immediate  right to acquire
that security  without  additional  cash  consideration  (or for additional cash
consideration  held in a segregated account by its custodian) upon conversion or
exchange  of other  securities  held in its  portfolio.  A call  option  is also
covered  if a Fund  holds a call  option  on the same  security  and in the same
principal amount as the written call option where the exercise price of the call
option so held (a) is equal to or less than the  exercise  price of the  written
call option or (b) is greater than the exercise price of the written call option
if the difference is segregated by each Fund in cash or liquid securities.

When each Fund  writes a covered  call  option,  it gives the  purchaser  of the
option the right to buy the  underlying  security at the price  specified in the
option (the  "exercise  price") by exercising  the option at any time during the
option period. If the option expires unexercised,  each Fund will realize income
in an amount equal to the premium received for writing the option. If the option
is  exercised,  a decision  over which each Fund has no control,  each Fund must
sell the  underlying  security to the option  holder at the exercise  price.  By
writing a covered call option, a Fund foregoes, in exchange for the premium less
the  commission  ("net  premium"),  the  opportunity to profit during the option
period from an increase in the market value of the underlying security above the
exercise price. In


                                       16
<PAGE>

addition, each Fund may continue to hold a stock which might otherwise have been
sold to protect against depreciation in the market price of the stock.

A put option written by each Fund is "covered" when, among other things, cash or
liquid securities acceptable to the broker are placed in a segregated account to
fulfill the obligations undertaken.  When each Fund writes a covered put option,
it gives the purchaser of the option the right to sell the  underlying  security
to each Fund at the  specified  exercise  price at any time  during  the  option
period. If the option expires unexercised,  each Fund will realize income in the
amount of the net premium received for writing the option.  If the put option is
exercised,  a  decision  over  which  each Fund has no  control,  each Fund must
purchase the underlying  security from the option holder at the exercise  price.
By writing a covered put  option,  each Fund,  in  exchange  for the net premium
received,  accepts the risk of a decline in the market  value of the  underlying
security  below the  exercise  price.  Each Fund  will  only  write put  options
involving securities for which a determination is made at the time the option is
written that the Fund wishes to acquire the securities at the exercise price.

Each Fund may terminate its  obligation as the writer of a call or put option by
purchasing an option with the same  exercise  price and  expiration  date as the
option  previously  written.  This  transaction  is called a  "closing  purchase
transaction."  Each  Fund will  realize  a profit or loss on a closing  purchase
transaction  if the amount paid to  purchase  an option is less or more,  as the
case may be,  than the amount  received  from the sale  thereof.  To close out a
position as a purchaser of an option,  each Fund may enter into a "closing  sale
transaction"  which  involves  liquidating  each Fund's  position by selling the
option  previously  purchased.  When each Fund cannot effect a closing  purchase
transaction,  it may be forced to incur brokerage  commissions or dealer spreads
in  selling  securities  it  receives  or it may be  forced  to hold  underlying
securities until an option is exercised or expires.

When each Fund writes an option,  an amount equal to the net premium received by
each Fund is  included in the  liability  section of each  Fund's  Statement  of
Assets and Liabilities as a deferred  credit.  The amount of the deferred credit
will be subsequently marked to market to reflect the current market value of the
option  written.  The current  market value of a traded  option is the last sale
price or, in the absence of a sale,  the mean  between the closing bid and asked
price.  If an option expires on its stipulated  expiration  date or if each Fund
enters into a closing  purchase  transaction,  each Fund will realize a gain (or
loss  if the  cost of the  closing  purchase  transaction  exceeds  the  premium
received  when the option was sold),  and the  deferred  credit  related to such
option will be eliminated. If a call option is exercised, each Fund will realize
a gain or loss from the sale of the underlying security, and the proceeds of the
sale will be  increased  by the  premium  originally  received.  The  writing of
covered  call  options  may be deemed to involve  the  pledge of the  securities
against which the option is being written. Securities against which call options
are written will be identified on the Fund's books.

Each Fund may also purchase  call and put options on any  securities in which it
may invest.  Each Fund would normally  purchase a call option in anticipation of
an  increase  in the market  value of such  securities.  The  purchase of a call
option would  entitle each Fund, in exchange for the premium paid, to purchase a
security  at a  specified  price  during  the  option  period.  Each Fund  would
ordinarily  have a gain if the  value  of the  securities  increased  above  the
exercise price  sufficiently to cover the premium,  and would have a loss if the
value of the  securities  remained  at or below the  exercise  price  during the
option period.

Each Fund would normally  purchase put options in  anticipation  of a decline in
the  market  value  of  securities  in  its  portfolio  ("protective  puts")  or
securities of the type in which it is permitted to invest. The purchase of a put
option would  entitle each Fund,  in exchange  for the premium  paid,  to sell a
security,  which may or may not be held by the Fund, at a specified price during
the option period.  The purchase of protective puts is designed merely to offset
or hedge  against a decline in the market  value of each Fund.  Put options also
may be purchased by each Fund for the purpose of affirmatively benefiting from a
decline in the price of securities  that each Fund does not own. Each Fund would
ordinarily  recognize a gain if the value of the securities  decreased below the
exercise price  sufficiently  to cover the premium and would recognize a loss if
the value of the securities  remained at or above the exercise price.  Gains and
losses on the  purchase of  protective  put  options  would tend to be offset by
countervailing changes in the value of underlying portfolio securities.

The hours of trading  for  options on  securities  may not  conform to the hours
during which the underlying securities are traded. To the extent that the option
markets  close  before the markets for the  underlying  securities,  significant

                                       17
<PAGE>

price and rate  movements can take place in the  underlying  securities  markets
that cannot be reflected in the option markets.  It is impossible to predict the
volume of trading that may exist in such options,  and there can be no assurance
that viable exchange markets will develop or continue.

Each  Fund may also  engage  in  options  transactions  in the OTC  market  with
broker-dealers  who make markets in these options.  The ability to terminate OTC
option  positions  is more limited than with  exchange-traded  option  positions
because the predominant  market is the issuing broker,  rather than an exchange,
and OTC options may involve the risk that  broker-dealers  participating in such
transactions will not fulfill their obligations.  To reduce this risk, each Fund
will  purchase  such  options  only  from  broker-dealers  who  are  primary  US
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are  expected  to be capable  of)  entering  into  closing
transactions,  although  there can be no guarantee  that any such option will be
liquidated at a favorable  price prior to  expiration.  The Advisor will monitor
the  creditworthiness  of dealers  with whom each Fund enters into such  options
transactions  under the general  supervision  of each Fund's  Board of Trustees.
Unless the Trustees conclude  otherwise,  each Fund intends to treat OTC options
purchased  and the assets  used to "cover"  OTC  options  written as not readily
marketable and therefore subject to each Fund's limit on investments in illiquid
securities.

Options  on  Securities   Indices.   Each  Fund  may  also  purchase  and  write
exchange-listed  and OTC put  and  call  options  on US and  foreign  securities
indices.  A  securities  index  measures  the  movement  of a  certain  group of
securities by assigning relative values to the securities included in the index,
fluctuating  with  changes  in  the  market  values  of  such  securities.  Some
securities  index  options are based on a broad market  index,  such as the NYSE
Composite  Index, or a narrower market index,  such as the S&P 100.  Indices may
also be based on a particular industry or market segment.

Options on securities  indices are similar to options on securities  except that
(1) the expiration  cycles of securities index options are monthly,  while those
of securities options are currently quarterly, and (2) the delivery requirements
are different.  Instead of giving the right to take or make delivery of stock at
a specified price, an option on a securities index gives the holder the right to
receive a cash "exercise  settlement amount" equal to (a) the amount, if any, by
which the fixed  exercise  price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the  underlying  index
on the date of exercise,  multiplied by (b) a fixed "index multiplier."  Receipt
of this cash amount will depend upon the closing level of the  securities  index
upon which the option is based being  greater  than,  in the case of a call,  or
less  than,  in the  case of a put,  the  exercise  price of the  index  and the
exercise  price of the  option  times a  specified  multiple.  The writer of the
option is  obligated,  in return for the premium  received,  to make delivery of
this amount.  Securities  index  options may be offset by entering  into closing
transactions as described above for securities options.

As discussed in "Options on  Securities,"  each Fund would  normally  purchase a
call option in  anticipation  of an increase in the market value of the relevant
index.  The purchase of a call option would  entitle each Fund,  in exchange for
the premium paid,  to purchase the  underlying  securities at a specified  price
during the option period. Each Fund would ordinarily have a gain if the value of
the underlying  securities  increased  above the exercise price  sufficiently to
cover the premium and would have a loss if the value of the securities  remained
at or below the exercise price during the option period.

As discussed in "Options on Securities,"  each Fund would normally  purchase put
options in  anticipation  of a decline in the market value of the relevant index
("protective  puts").  The purchase of a put option would  entitle each Fund, in
exchange for the premium paid, to sell the underlying  securities at a specified
price  during the option  period.  The purchase of  protective  puts is designed
merely to offset or hedge  against a decline in the  market  value of the index.
Each Fund would ordinarily  recognize a gain if the value of the index decreased
below the exercise price sufficiently to cover the premium and would recognize a
loss if the value of the index  remained at or above the exercise  price.  Gains
and losses on the purchase of protective  put options would tend to be offset by
countervailing changes in the value of the index.

Because the value of an index option  depends upon movements in the level of the
index  rather  than the  price of a  particular  stock,  whether  each Fund will
realize a gain or loss from the  purchase  or  writing  of  options  on an index
depends  upon  movements  in the  level  of stock  prices  in the  stock  market
generally or, in the case of certain indices,


                                       18
<PAGE>

in an  industry  or market  segment,  rather  than  movements  in the price of a
particular stock.  Accordingly,  successful use by each Fund of options on stock
indices will be subject to the Advisor's ability to predict correctly  movements
in the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.

Options on securities  indices  entail risks in addition to the risks of options
on  securities.  The absence of a liquid  secondary  market to close out options
positions  on  securities  indices is more likely to occur,  although  each Fund
generally will only purchase or write such an option if the Advisor believes the
option can be closed out. Use of options on securities  indices also entails the
risk that  trading  in such  options  may be  interrupted  if trading in certain
securities  included in the index is  interrupted.  Each Fund will not  purchase
such options unless the Advisor  believes the market is  sufficiently  developed
such that the risk of  trading in such  options  is no greater  than the risk of
trading in options on securities.

Price movements in each Fund's investment  portfolio may not correlate precisely
with  movements in the level of an index and,  therefore,  the use of options on
indices cannot serve as a complete hedge.  Because options on securities indices
require  settlement  in cash,  the Advisor may be forced to liquidate  portfolio
securities  to meet  settlement  obligations.  Each Fund's  activities  in index
options may also be restricted by the  requirements of the Internal Revenue Code
of 1986, as amended (the "Code"),  for  qualification as a regulated  investment
company.

In addition,  the hours of trading for options on the securities indices may not
conform to the hours during which the underlying  securities are traded.  To the
extent that the option  markets  close  before the  markets  for the  underlying
securities,  significant  price  and  rate  movements  can  take  place  in  the
underlying securities markets that cannot be reflected in the option markets. It
is  impossible  to predict the volume of trading that may exist in such options,
and there can be no  assurance  that viable  exchange  markets  will  develop or
continue.


Futures Contracts and Options on Futures Contracts - DWS Mid Cap Growth Fund and
DWS Small Cap Growth Fund


General.  Each Fund may enter into futures  contracts on securities,  securities
indices,  foreign  currencies and interest rates,  and purchase and write (sell)
options  thereon  which are  traded on  exchanges  designated  by the  Commodity
Futures Trading Commission (the "CFTC") or, if consistent with CFTC regulations,
on foreign exchanges. These futures contracts are standardized contracts for the
future  delivery of, among other  things,  a commodity,  a non-US  currency,  an
interest rate sensitive  security or, in the case of index futures  contracts or
certain other futures contracts, a cash settlement with reference to a specified
multiplier  times the change in the index. An option on a futures contract gives
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract.

Each Fund may enter into futures  contracts and options on futures  contracts on
securities,  securities  indices and  currencies  both to manage its exposure to
changing  interest rates,  security prices and currency exchange rates and as an
efficient means of managing allocations between asset classes.

The  successful  use of futures  contracts  and options  thereon  draws upon the
Advisor's skill and experience  with respect to such  instruments and is subject
to special risk  considerations.  A liquid  secondary  market for any futures or
options  contract  may not be  available  when a futures or options  position is
sought to be closed. In addition,  there may be an imperfect correlation between
movements in the market value of the  securities  or currency  held by each Fund
and the prices of the futures and options.  Successful use of futures or options
contracts is further  dependent on the  Advisor's  ability to predict  correctly
movements in the securities or foreign  currency markets and no assurance can be
given that its judgment will be correct.

Futures  Contracts.  Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future.  US futures  contracts  have been designed by exchanges that have
been designated  "contracts markets" by the CFTC, and must be executed through a
futures  commission  merchant,  or  brokerage  firm,  which is a  member  of the
relevant  contract  market.  Futures  contracts  trade on a number  of  exchange
markets,  and,  through their  clearing  corporations,  the exchanges  guarantee
performance  of the  contracts as between the clearing  members of the exchange.
Each Fund may enter into contracts for the purchase or sale for future  delivery
of fixed-income securities,  foreign currencies, or financial indices, including
any  index  of  US


                                       19
<PAGE>

government   securities,   foreign  government   securities  or  corporate  debt
securities.  Each Fund may enter into futures  contracts which are based on debt
securities  that are backed by the full  faith and credit of the US  government,
such as long-term US Treasury Bonds,  Treasury Notes and US Treasury Bills. Each
Fund may also enter into  futures  contracts  which are based on bonds issued by
governments  other  than  the  US  government.   Futures  contracts  on  foreign
currencies  may be used to hedge  against  securities  that are  denominated  in
foreign currencies.

At the same time a futures contract is entered into, the Fund must allocate cash
or liquid securities as a deposit payment ("initial margin").  Daily thereafter,
the  futures  contract is valued and the  payment of  "variation  margin" may be
required,  since each day each Fund would  provide or receive cash that reflects
any decline or increase in the contract's value.

At the time of delivery of securities  pursuant to such a contract,  adjustments
are  made to  recognize  differences  in value  arising  from  the  delivery  of
securities  with a different  interest rate from that specified in the contract.
In some, but not many,  cases,  securities  called for by a futures contract may
not have been issued when the contract was written.

Although futures  contracts (other than those that settle in cash, such as index
futures)  by their  terms call for the actual  delivery  or  acquisition  of the
instrument underlying the contract, in most cases the contractual  obligation is
fulfilled by offset  before the date of the contract  without each Fund's having
to make  or  take  delivery  of the  instrument  underlying  the  contract.  The
offsetting  of a  contractual  obligation  is  accomplished  by entering into an
opposite position in an identical  futures contract on the commodities  exchange
on which the futures  contract was entered into (or a linked  exchange)  calling
for delivery in the same month. Such a transaction,  which is effected through a
member of an exchange,  cancels the  obligation  to make or take delivery of the
instrument underlying the contract. Since all transactions in the futures market
are made,  offset or  fulfilled  through a clearing  house  associated  with the
exchange on which the contracts are traded,  each Fund will incur brokerage fees
when it enters into futures contracts.

The purpose of the  acquisition  or sale of a futures  contract,  in cases where
each Fund holds or intends to acquire fixed-income securities,  is to attempt to
protect  each Fund from  fluctuations  in  interest  or foreign  exchange  rates
without   actually  buying  or  selling   fixed-income   securities  or  foreign
currencies. For example, if interest rates were expected to increase (which thus
would cause the prices of debt  securities  to  decline),  each Fund might enter
into futures  contracts for the sale of debt securities.  Such a sale would have
much the same effect as selling an equivalent value of the debt securities owned
by each Fund. If interest rates did increase,  the value of the debt security in
each Fund would  decline,  but the value of the futures  contracts  to each Fund
would increase at  approximately  the same rate,  thereby  keeping the net asset
value of each Fund from declining as much as it otherwise  would have. Each Fund
could  accomplish  similar  results by selling debt  securities and investing in
bonds with short  maturities  when  interest  rates are  expected  to  increase.
However,  since the futures market is more liquid than the cash market,  the use
of futures  contracts as an investment  technique allows each Fund to maintain a
defensive position without having to sell its portfolio securities.

Similarly,  when it is expected that interest rates may decline (thus increasing
the value of debt securities),  futures contracts may be purchased to attempt to
hedge against anticipated  purchases of debt securities at higher prices.  Since
the fluctuations in the value of futures contracts should be similar to those of
debt  securities,  each Fund could take advantage of the anticipated rise in the
value of debt  securities  without  actually  buying  them  until the market had
stabilized.  At that time,  the futures  contracts  could be liquidated and each
Fund could then buy debt  securities on the cash market.  The segregated  assets
maintained  to cover  each  Fund's  obligations  with  respect  to such  futures
contracts  will consist of cash or liquid  securities  acceptable  to the broker
from each Fund's  portfolio  in an amount  equal to the  difference  between the
fluctuating  market value of such futures  contracts and the aggregate  value of
the initial and variation margin payments made by each Fund with respect to such
futures contracts.

The  ordinary  spreads  between  prices in the cash and futures  market,  due to
differences in the nature of those markets,  are subject to distortions.  First,
all  participants  in the  futures  market are  subject to initial  deposit  and
variation margin  requirements.  Rather than meeting additional variation margin
requirements,   investors  may  close  futures  contracts   through   offsetting
transactions,  which could distort the normal relationship  between the cash and
futures  markets.  Second,  the liquidity of the futures  market depends on most
participants' entering into offsetting


                                       20
<PAGE>

transactions  rather  than  making or taking  delivery.  To the extent that many
participants  decide to make or take  delivery,  liquidity in the futures market
could be reduced,  thus producing  distortion.  Third, from the point of view of
speculators,  the margin  deposit  requirements  in the futures  market are less
onerous than margin requirements in the securities market. Therefore,  increased
participation  by speculators in the futures  market may cause  temporary  price
distortions.  Due to the  possibility  of  distortion,  a  correct  forecast  of
securities price,  general interest rate or currency exchange rate trends by the
Advisor may still not result in a successful transaction.

In addition,  futures contracts entail significant  risks.  Although the Advisor
believes  that use of such  contracts  will benefit each Fund,  if the Advisor's
investment judgment about the general direction of interest rates or an index is
incorrect,  each Fund's overall  performance  would be poorer than if it had not
entered into any such contract. For example, if each Fund has hedged against the
possibility  of an increase  in  interest  rates or a decrease in an index which
would  adversely  affect  the  value of  securities  held in its  portfolio  and
interest rates decrease or securities  prices increase  instead,  each Fund will
lose part or all of the benefit of the increased  value of its securities  which
it has hedged because it will have offsetting  losses in its futures  positions.
In addition, in such situations, if each Fund has insufficient cash, it may have
to  sell  securities   from  its  portfolio  to  meet  daily  variation   margin
requirements.  Such sales of securities may be, but will not  necessarily be, at
increased  prices which  reflect the rising  market.  Each Fund may have to sell
securities at a time when it may be disadvantageous to do so.

Options on Futures Contracts. Each Fund may purchase and write (sell) options on
futures  contracts for hedging  purposes.  For example,  as with the purchase of
futures contracts,  when each Fund is not fully invested, it may purchase a call
option  on an  interest-rate-sensitive  futures  contract  to  hedge  against  a
potential price increase on debt securities due to declining interest rates.

The purchase of a call option on a futures  contract is similar in some respects
to the purchase of a call option on an index or individual  security.  Depending
on the  pricing  of the  option  compared  to either  the  price of the  futures
contract upon which it is based or the price of the underlying debt  securities,
it may or may not be less  risky  than  ownership  of the  futures  contract  or
underlying debt securities.

The  writing of a call option on a futures  contract  may  constitute  a partial
hedge against declining prices of the underlying  portfolio securities which are
the  same  as or  correlate  with  the  security  or  foreign  currency  that is
deliverable  upon  exercise of the  futures  contract.  If the futures  price at
expiration  of the option is below the price  specified in the premium  received
for writing the option ("exercise price"), each Fund will retain the full amount
of the net  premium  (the  premium  received  for  writing  the option  less any
commission),  which  provides a partial  hedge against any decline that may have
occurred in the Fund's holdings.

The  writing of a put  option on an index  futures  contract  may  constitute  a
partial hedge against increasing prices of the underlying  securities or foreign
currency  that are  deliverable  upon exercise of the futures  contract.  If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full  amount of the option net  premium,  which  provides a
partial  hedge  against any increase in the price of  securities  that each Fund
intends to purchase.

If a put or call option each Fund has written is exercised, each Fund will incur
a loss that  will be  reduced  by the  amount of the net  premium  it  receives.
Depending  on the  degree of  correlation  between  changes  in the value of its
portfolio securities and changes in the value of its futures positions, a Fund's
losses  from  existing  options  on  futures  may to some  extent be  reduced or
increased by changes in the value of portfolio securities.

The  purchase of a call or put option on a futures  contract  with respect to an
index is similar in some  respects to the purchase of a call or  protective  put
option on an index. For example, each Fund may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The amount of risk each Fund  assumes  when it  purchases an option on a futures
contract  with  respect  to an index is the  premium  paid for the  option  plus
related transaction costs. In addition to the correlation risks discussed above,
the  purchase of such an option also  entails the risk that changes in the value
of the underlying  futures  contract will not be fully reflected in the value of
the option purchased.

                                       21
<PAGE>

Futures Contracts on Securities  Indices.  Each Fund may also enter into futures
contracts  providing for the making and  acceptance of a cash  settlement  based
upon  changes  in  the  value  of an  index  of US or  non-US  securities.  This
investment  technique may be used as a low-cost method of gaining  exposure to a
particular securities market without investing directly in those securities,  to
hedge against anticipated future changes in general market prices that otherwise
might  either  adversely  affect  the value of  securities  held by each Fund or
adversely  affect the prices of securities which are intended to be purchased at
a later date for each Fund,  or as an  efficient  means of  managing  allocation
between asset classes.  A futures contract may also be entered into to close out
or offset an existing futures position.

When used for hedging  purposes,  each futures  contract on a  securities  index
transaction  involves the establishment of a position which the Advisor believes
will move in a direction  opposite to that of the  investment  being hedged.  If
these hedging transactions are successful,  the futures positions taken for each
Fund will rise in value by an amount which approximately  offsets the decline in
value of the portion of each Fund's  investments  that are being hedged.  Should
general  market  prices  move in an  unexpected  manner,  the  full  anticipated
benefits of futures contracts may not be achieved or a loss may be realized.

Currency  Exchange  Contracts.  Because  each  Fund may buy and sell  securities
denominated  in  currencies  other than the US dollar and may receive  interest,
dividends  and sale proceeds in  currencies  other than the US dollar,  the Fund
from time to time may enter into currency  exchange  transactions  to convert to
and from different foreign  currencies and to convert foreign  currencies to and
from the US dollar.  Each Fund either enters into these  transactions  on a spot
(i.e.,  cash) basis at the spot rate prevailing in the foreign currency exchange
market or uses forward contracts to purchase or sell foreign currencies.

Forward Currency Exchange Contracts.  A forward currency exchange contract is an
obligation  by each Fund to  purchase  or sell a specific  currency  at a future
date,  which  may be any fixed  number  of days  from the date of the  contract.
Forward currency exchange contracts establish an exchange rate at a future date.
These contracts are  transferable  in the interbank  market  conducted  directly
between  currency  traders  (usually large  commercial banks and brokerages) and
their  customers.  A forward currency  exchange  contract may not have a deposit
requirement  and may be  traded  at a net price  without  commission.  Each Fund
maintains with its custodian a segregated  account of cash or liquid  securities
in an amount at least  equal to its  obligations  under  each  forward  currency
exchange  contract.  Neither spot  transactions  nor forward  currency  exchange
contracts  eliminate  fluctuations in the prices of each Fund's securities or in
foreign exchange rates, or prevent loss if the prices of these securities should
decline.

Each Fund may enter into foreign currency hedging  transactions in an attempt to
protect  against  changes  in  currency  exchange  rates  between  the trade and
settlement  dates of  specific  securities  transactions  or changes in currency
exchange  rates  that  would  adversely  affect  a  portfolio   position  or  an
anticipated  investment  position.  Since  consideration  of  the  prospect  for
currency parities will be incorporated into the Advisor's  long-term  investment
decisions, each Fund will not routinely enter into currency hedging transactions
with respect to security transactions;  however, the Advisor believes that it is
important to have the  flexibility to enter into currency  hedging  transactions
when it determines that the transactions  would be in each Fund's best interest.
Although these  transactions  tend to minimize the risk of loss due to a decline
in the  value of the  hedged  currency,  they tend at the same time to limit any
potential  gain that might be realized  should the value of the hedged  currency
increase.  The precise matching of the forward contract amounts and the value of
the securities  involved will not generally be possible because the future value
of such securities in foreign  currencies will change as a consequence of market
movements in the value of such securities  between the date the forward contract
is entered  into and the date it matures.  The  projection  of  currency  market
movements  is extremely  difficult,  and the  successful  execution of a hedging
strategy is highly uncertain.

While these  contracts are not presently  regulated by the CFTC, the CFTC may in
the future assert  authority to regulate forward  contracts.  In such event each
Fund's ability to utilize forward contracts may be restricted. Forward contracts
may reduce the potential gain from a positive change in the relationship between
the US dollar and foreign currencies.  Unanticipated  changes in currency prices
may  result  in  poorer  overall  performance  for each  Fund than if it had not
entered  into such  contracts.  The use of currency  forward  contracts  may not
eliminate  fluctuations  in the  underlying  US dollar  equivalent  value of the
prices  of or  rates of  return  on each  Fund's  foreign  currency  denominated
portfolio  securities,  and the use of such techniques will subject each Fund to
certain risks.

                                       22
<PAGE>

The matching of the  increase in value of a forward  contract and the decline in
the US dollar equivalent value of the foreign currency denominated asset that is
the subject of the hedge generally will not be precise.  In addition,  each Fund
may not always be able to enter into  currency  forward  contracts at attractive
prices and this will limit each Fund's  ability to use such contract to hedge or
cross-hedge its assets.  Also,  with regard to each Fund's use of  cross-hedges,
there can be no assurance that historical  correlations  between the movement of
certain foreign currencies relative to the US dollar will continue. Thus, at any
time poor  correlation may exist between  movements in the exchange rates of the
foreign currencies  underlying each Fund's cross-hedges and the movements in the
exchange  rates of the foreign  currencies  in which each Fund's assets that are
the subject of such cross-hedges are denominated.

Options on Foreign Currencies.  Each Fund may write covered put and call options
and  purchase  put and call  options on foreign  currencies  for the  purpose of
protecting  against  declines in the dollar  value of portfolio  securities  and
against increases in the dollar cost of securities to be acquired. Each Fund may
use options on currencies to cross-hedge,  which involves  writing or purchasing
options  on one  currency  to hedge  against  changes  in  exchange  rates for a
different but related  currency.  As with other types of options,  however,  the
writing of an option on foreign currency will constitute only a partial hedge up
to the  amount of the  premium  received,  and each Fund  could be  required  to
purchase or sell foreign currencies at disadvantageous  exchange rates,  thereby
incurring losses. The purchase of an option on a foreign currency may be used to
hedge against fluctuations in exchange rates, although, in the event of exchange
rate movements adverse to each Fund's position, each Fund may forfeit the entire
amount of the premium plus  related  transaction  costs.  In addition a Fund may
purchase  call  options  on a currency  when the  Advisor  anticipates  that the
currency will appreciate in value.

Each Fund may also write  options on  foreign  currencies  for the same types of
hedging  purposes.  For  example,  when each Fund  anticipates  a decline in the
dollar  value  of  foreign  currency  denominated   securities  due  to  adverse
fluctuations in exchange  rates,  it could,  instead of purchasing a put option,
write a call option on the relevant  currency.  If the expected  decline occurs,
the option will most likely not be  exercised,  and the  diminution  in value of
portfolio securities will be offset by the amount of the premium received.

Similarly,  instead of purchasing a call option to hedge against an  anticipated
increase in the dollar cost of securities to be acquired,  each Fund could write
a put  option  on the  relevant  currency  which,  if rates  move in the  manner
projected,  will expire  unexercised and allow each Fund to hedge such increased
cost up to the amount of the premium.  As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the  premium,  and only if rates move in the  expected
direction.  If this does not occur,  the option may be  exercised  and each Fund
would be required to  purchase or sell the  underlying  currency at a loss which
may not be offset by the amount of the  premium.  Through the writing of options
on foreign currencies,  each Fund also may be required to forgo all or a portion
of the  benefits  which  might  otherwise  have  been  obtained  from  favorable
movements in exchange rates.

Each Fund may write  covered call options on foreign  currencies.  A call option
written on a foreign  currency by each Fund is  "covered"  if each Fund owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for  additional  cash  consideration  identified  on  each  Fund's  books)  upon
conversion or exchange of other foreign  currency held in its portfolio.  A call
option is also covered if the Fund has a call on the same  foreign  currency and
in the same principal amount as the call written where the exercise price of the
call held (a) is equal to or less than the exercise price of the call written or
(b) is greater than the exercise  price of the call written if the difference is
segregated by each Fund in cash or liquid securities.

Each Fund also may write call options on foreign currencies that are not covered
for  cross-hedging  purposes.  A  call  option  on a  foreign  currency  is  for
cross-hedging  purposes if it is not covered, but is instead designed to provide
a hedge  against a decline in the US dollar value of a security  which each Fund
owns or has the  right to  acquire  and  which is  denominated  in the  currency
underlying  the option,  due to an adverse  change in the exchange rate. In such
circumstances, each Fund collateralizes the option by segregating cash or liquid
securities  in an  amount  not less  than the  value of the  underlying  foreign
currency in US dollars marked to market daily.

                                       23
<PAGE>

There  is no  assurance  that a  liquid  secondary  market  will  exist  for any
particular option, or at any particular time. If each Fund is unable to effect a
closing  purchase  transaction  with respect to covered  options it has written,
each Fund will not be able to sell the underlying  currency or dispose of assets
held  in a  segregated  account  until  the  options  expire  or are  exercised.
Similarly,  if each Fund is unable to  effect a closing  sale  transaction  with
respect to options it has  purchased,  it will have to  exercise  the options in
order to realize any profit and will incur  transaction  costs upon the purchase
or sale of underlying currency.  Each Fund pays brokerage commissions or spreads
in connection with its options transactions.

As in the case of forward  contracts,  certain options on foreign currencies are
traded  over-the-counter and involve liquidity and credit risks which may not be
present in the case of exchange-traded  currency options. In some circumstances,
each Fund's  ability to  terminate  OTC options  may be more  limited  than with
exchange-traded  options. It is also possible that broker-dealers  participating
in OTC  options  transactions  will not  fulfill  their  obligations.  Each Fund
intends to treat OTC  options  as not  readily  marketable  and,  therefore,  as
subject to the Fund's limitation with respect to illiquid securities.


                                       24
<PAGE>


Options on Securities,  Securities  Indices and Foreign  Currencies -- DWS Micro
Cap Fund


General.  The Fund may write  covered put and call  options and purchase put and
call options. Such options may relate to particular securities, to various stock
indices,  or to  currencies.  The Fund may write call and put options  which are
issued  by  the  OCC  or  which  are  traded  on US  and  non-US  exchanges  and
over-the-counter. These instruments may be considered derivative instruments.


Written  Options.  The Fund may write  (sell)  covered  put and call  options on
securities  and enter into related  closing  transactions.  The Fund may receive
fees  (referred  to as  "premiums")  for  granting  the rights  evidenced by the
options.  However, in return for the premium for a written call option, the Fund
assumes certain risks.  For example,  in the case of a written call option,  the
Fund forfeits the right to any appreciation in the underlying security while the
option is  outstanding.  A put option gives to its purchaser the right to compel
the Fund to  purchase  an  underlying  security  from the  option  holder at the
specified price at any time during the option period. In contrast, a call option
written by the Fund gives to its  purchaser the right to compel the Fund to sell
an  underlying  security to the option  holder at a specified  price at any time
during the option period. Upon the exercise of a put option written by the Fund,
the Fund may suffer a loss equal to the  difference  between  the price at which
the Fund is required to purchase the underlying security and its market value at
the time of the option  exercise,  less the  premium  received  for  writing the
option.  All  options  written  by the Fund are  covered.  In the case of a call
option,  this means that the Fund will own the securities  subject to the option
or an offsetting  call option as long as the written option is


                                       25
<PAGE>

outstanding,  or will have the absolute  and  immediate  right to acquire  other
securities that are the same as those subject to the written option. In the case
of a put option, this means that the Fund will deposit cash or liquid securities
in a segregated  account with the  custodian  with a value at least equal to the
exercise price of the put option.

Purchased  Options.  The  Fund  may  also  purchase  put  and  call  options  on
securities.  A put option  entitles the Fund to sell, and a call option entitles
the Fund to buy, a specified  security at a specified  price  during the term of
the option. The advantage to the purchaser of a call option is that it may hedge
against an increase in the price of securities it ultimately  wishes to buy. The
advantage  to the  purchaser  of a put  option  is that it may  hedge  against a
decrease in the price of portfolio securities it ultimately wishes to sell.

The Fund may enter into closing  transactions  in order to offset an open option
position  prior to exercise or  expiration by selling an option it has purchased
or by entering into an  offsetting  option.  If the Fund cannot  affect  closing
transactions,  it may  have to  retain  a  security  in its  portfolio  it would
otherwise sell, or deliver a security it would otherwise retain.

The Fund may purchase and sell options traded on US exchanges and, to the extent
permitted by law,  options traded  over-the-counter.  The Fund may also purchase
and sell  options  traded  on  recognized  foreign  exchanges.  There  can be no
assurance that a liquid secondary  market will exist for any particular  option.
OTC  options  also  involve the risk that a  counterparty  will fail to meet its
obligation under the option.

Options  on  Stock  Indices  or  Currencies.  The Fund may  purchase  and  write
exchange-listed  put and call options on stock indices to hedge against risks of
market-wide  price  movements.  A stock index measures the movement of a certain
group of stocks by assigning  relative  values to the common stocks  included in
the index.  Examples of  well-known  stock indices are the S&P 500 Index and the
Wilshire  5000  Index.  Options  on stock  indices  are  similar  to  options on
securities.  However,  because  options  on stock  indices  do not  involve  the
delivery of an underlying security,  the option represents the holder's right to
obtain  from the  writer  in cash a fixed  multiple  of the  amount by which the
exercise  price exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the  underlying  index on the exercise date. The Fund
may also purchase and write put and call options on currencies.

A call  option on a  securities  index  provides  the  holder  with the right to
receive a cash  payment  upon  exercise of the option if the market value of the
underlying index exceeds the option's exercise price.  Conversely,  a put option
on a  securities  index  provides  the  holder  with the right to receive a cash
payment upon exercise of the option if the market value of the underlying  index
is less than the  option's  exercise  price.  The  amount of any  payment to the
option holder will be equal to the  difference  between the closing price of the
index at the time of exercise and the exercise price of the option  expressed in
US dollars or a foreign currency,  times a specified multiple. A put option on a
currency gives its holder the right to sell an amount (specified in units of the
underlying  currency) of the underlying currency at the stated exercise price at
any time  prior to the  option's  expiration.  Conversely,  a call  option  on a
currency gives its holder the right to purchase an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration.

When the Fund  writes an option on a stock  index,  it will  cover the option by
depositing cash or liquid securities or a combination of both in an amount equal
to the market value of the option in a segregated account,  which will be marked
to market daily, with the Fund's custodian,  and will maintain the account while
the option is open. Alternatively, and only in the case of a written call option
on a stock index,  the Fund may cover the written option by owning an offsetting
call  option.  A call option on  currency  written by the Fund is covered if the
Fund owns an equal amount of the underlying currency.

Other   Considerations.   The  Fund  will  engage  in  OTC  options   only  with
broker-dealers  deemed  creditworthy  by the Advisor.  Closing  transactions  in
certain options are usually affected directly with the same  broker-dealer  that
effected  the  original  option  transaction.  The Fund  bears the risk that the
broker-dealer  may fail to meet its obligations.  There is no assurance that the
Fund will be able to close an unlisted option  position.  Furthermore,  unlisted
options are not subject to the protections afforded purchasers of listed options
by the OCC, which  performs the  obligations of its members who fail to do so in
connection with the purchase or sale of options.

                                       26
<PAGE>

When the Fund  purchases a put option,  the premium paid by it is recorded as an
asset of the Fund.  When the Fund writes an option,  an amount  equal to the net
premium (the premium less the commission  paid by the Fund) received by the Fund
is  included  in the  liability  section of the Fund's  statement  of assets and
liabilities as a deferred  credit.  The amount of this asset or deferred  credit
will be marked-to-market on an ongoing basis to reflect the current value of the
option  purchased or written.  The current  value of a traded option is the last
sale price or, in the  absence of a sale,  the  average of the  closing  bid and
asked prices. If an option purchased by the Fund expires  unexercised,  the Fund
realizes a loss equal to the  premium  paid.  If the Fund  enters into a closing
sale  transaction on an option  purchased by it, the Fund will realize a gain if
the premium  received by the Fund on the  closing  transaction  is more than the
premium  paid to  purchase  the  option,  or a loss if it is less.  If an option
written by the Fund  expires on the  stipulated  expiration  date or if the Fund
enters into a closing purchase  transaction,  it will realize a gain (or loss if
the cost of a closing purchase transaction exceeds the net premium received when
the option is sold),  and the  deferred  credit  related to such  option will be
eliminated.  If an option written by the Fund is exercised,  the proceeds to the
Fund from the exercise will be increased by the net premium originally received,
and the Fund will realize a gain or loss.

There are several risks  associated with  transactions in options on securities,
securities   indices  and  currencies.   For  example,   there  are  significant
differences   between  the  securities   markets,   currency   markets  and  the
corresponding  options  markets  that could  result in  imperfect  correlations,
causing a given option transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded OTC or on a US or
non-US  securities  exchange,  may be  absent  for  reasons  which  include  the
following:  there may be  insufficient  trading  interest  in  certain  options;
restrictions  may be imposed by an exchange on opening  transactions  or closing
transactions or both;  trading halts,  suspensions or other  restrictions may be
imposed with respect to  particular  classes or series of options or  underlying
securities;  unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or the OCC may not at all times be
adequate to handle current trading volume;  or one or more exchanges  could, for
economic  or other  reasons,  decide  or be  compelled  at some  future  date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options)  would cease to exist,  although  outstanding  options that had been
issued by the OCC as a result of trades on that  exchange  would  continue to be
exercisable in accordance with their terms.

The hours of trading for options may not conform to the hours  during  which the
underlying  securities and currencies are traded. To the extent that the options
markets close before the markets for the underlying  securities and  currencies,
significant  price and rate movements can take place in the  underlying  markets
that cannot be  reflected in the options  markets.  The purchase of options is a
highly  specialized  activity  that  involves  investment  techniques  and risks
different from those associated with ordinary portfolio securities transactions.

The risks described above also apply to options on futures,  which are discussed
below.


Futures Contracts and Options on Futures Contracts - DWS Micro Cap Fund


General.  When deemed advisable by the Advisor,  the Fund may enter into futures
contracts and purchase and write  options on futures  contracts to hedge against
changes in interest rates,  securities  prices or currency exchange rates or for
certain non-hedging  purposes.  The Fund may purchase and sell financial futures
contracts,  including  stock  index  futures,  and  purchase  and write  related
options.  The Fund may engage in futures and related  options  transactions  for
hedging  and  non-hedging  purposes  as  defined  in  regulations  of the  CFTC.
Transactions  in futures  contracts  and  options on futures  involve  brokerage
costs,  require  margin  deposits  and,  in the case of  contracts  and  options
obligating the Fund to purchase  securities,  require the Fund to segregate cash
or liquid securities with a value equal to the amount of the Fund's obligations.

Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell a  particular  financial  instrument  for an
agreed price during a designated  month (or to deliver the final cash settlement
price,  in the case of a contract  relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).  Futures contracts
obligate  the long or  short  holder  to take or make  delivery  of a  specified
quantity of a commodity or financial instrument,  such as a security or the cash
value of a securities  index,  during a specified  future  period at a specified
price.

                                       27
<PAGE>

When interest  rates are rising or securities  prices are falling,  the Fund can
seek to  offset a  decline  in the  value of its  current  portfolio  securities
through  the sale of  futures  contracts.  When  interest  rates are  falling or
securities  prices  are  rising,  the Fund,  through  the  purchase  of  futures
contracts,  can  attempt to secure  better  rates or prices  than might later be
available in the market when it affects anticipated purchases.

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions, which may result in a profit
or a loss.  While futures  contracts on securities will usually be liquidated in
this manner,  the Fund may instead  make,  or take,  delivery of the  underlying
securities  whenever it appears  economically  advantageous to do so. A clearing
corporation  associated  with the exchange on which  futures on  securities  are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.

Hedging  Strategies.  Hedging,  by use of futures contracts,  seeks to establish
with  more  certainty  the  effective  price  and rate of  return  on  portfolio
securities and securities  that the Fund proposes to acquire.  The Fund may, for
example,  take a "short"  position  in the  futures  market by  selling  futures
contracts in order to hedge against an  anticipated  rise in interest rates or a
decline in market  prices  that would  adversely  affect the value of the Fund's
portfolio  securities.  Such futures  contracts  may include  contracts  for the
future   delivery  of   securities   held  by  the  Fund  or   securities   with
characteristics similar to those of the Fund's portfolio securities.  If, in the
opinion of the Advisor,  there is a  sufficient  degree of  correlation  between
price trends for the Fund's portfolio  securities and futures contracts based on
other financial  instruments,  securities indices or other indices, the Fund may
also enter into such futures contracts as part of its hedging strategy. Although
under some  circumstances  prices of securities  in the Fund's  portfolio may be
more or less  volatile than prices of such futures  contracts,  the Advisor will
attempt to estimate the extent of this volatility difference based on historical
patterns and compensate for any such  differential by having the Fund enter into
a greater or lesser number of futures contracts or by attempting to achieve only
a partial hedge against price changes affecting the Fund's securities portfolio.
When hedging of this character is successful,  any  depreciation in the value of
portfolio  securities will be substantially  offset by appreciation in the value
of the futures position.  On the other hand, any  unanticipated  appreciation in
the value of the Fund's portfolio  securities would be substantially offset by a
decline in the value of the futures position.

On other  occasions,  the Fund may take a "long" position by purchasing  futures
contracts.  This  would be done,  for  example,  when the Fund  anticipates  the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable  market to be less favorable
than prices that are currently available.

Options on Futures Contracts. The acquisition of put and call options on futures
contracts will give the Fund the right (but not the  obligation) for a specified
price to sell or to purchase,  respectively,  the underlying futures contract at
any time during the option  period.  As the  purchaser of an option on a futures
contract, the Fund obtains the benefit of the futures position if prices move in
a favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract  generates a premium that may
partially offset a decline in the value of the Fund's assets.  By writing a call
option,  the Fund becomes  obligated,  in exchange  for the  premium,  to sell a
futures  contract  (if the option is  exercised),  which may have a value higher
than the exercise  price.  Conversely,  the writing of a put option on a futures
contract  generates a premium that may partially offset an increase in the price
of  securities  that the Fund  intends to  purchase.  However,  the Fund becomes
obligated to purchase a futures contract (if the option is exercised), which may
have a value lower than the exercise price.  Thus, the loss incurred by the Fund
in writing options on futures is potentially unlimited and may exceed the amount
of the premium  received.  The Fund will incur  transaction  costs in connection
with the writing of options on futures.

The  holder or writer of an option  on a  futures  contract  may  terminate  its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee  that such  closing  transactions  can be  affected.  The Fund's
ability to establish  and close out positions on such options will be subject to
the development and maintenance of a liquid market.

The Fund may use options on futures  contracts  solely for bona fide  hedging or
other non-hedging purposes as described below.

                                       28
<PAGE>


Other  Considerations.  The Fund has claimed an exclusion from the definition of
the term  "commodity  pool  operator"  under  the  Commodity  Exchange  Act and,
therefore,  is not subject to  registration  or  regulation  under the Commodity
Exchange  Act. The Fund will  determine  whether the price  fluctuations  in the
futures  contracts  and options on futures  used by it for hedging  purposes are
substantially related to price fluctuations in securities or instruments held by
the Fund or securities or  instruments  which it expects to purchase.  Except as
stated  below,  the  Fund's  futures  transactions  will  be  entered  into  for
traditional  hedging purposes -- i.e., futures contracts will be sold to protect
against a decline in the price of securities  (or the currency in which they are
denominated)  that the Fund  owns or  futures  contracts  will be  purchased  to
protect the Fund against an increase in the price of securities (or the currency
in which they are denominated) that the Fund intends to purchase. As evidence of
this hedging  intent,  the Fund expects that, on 75% or more of the occasions on
which it takes a long  futures or option  position  (involving  the  purchase of
futures contracts),  the Fund will have purchased,  or will be in the process of
purchasing,  equivalent  amounts of related securities (or assets denominated in
the related  currency) in the cash market at the time when the futures or option
position is closed out.  However,  in particular  cases, when it is economically
advantageous for the Fund to do so, a long futures position may be terminated or
an option may expire without the  corresponding  purchase of securities or other
assets.

The Fund will engage in  transactions  in futures  contracts and related options
only to the extent such transactions are consistent with the requirements of the
Code, for maintaining its qualification as a regulated  investment company.  See
"Taxes."


The Fund will be required,  in connection with transactions in futures contracts
and the writing of options on futures contracts, to make margin deposits,  which
will be held by its custodian for the benefit of the futures commission merchant
through  whom the Fund engages in such  futures and option  transactions.  These
transactions  involve brokerage costs,  require margin deposits and, in the case
of futures  contracts and options  obligating  the Fund to purchase  securities,
require the Fund to segregate cash or liquid securities in an account maintained
with its custodian to cover such contracts and options.

While  transactions  in futures  contracts  and  options  on futures  may reduce
certain risks,  such transactions  themselves entail certain other risks.  Thus,
unanticipated  changes in interest  rates or  securities  prices may result in a
poorer  overall  performance  for the Fund than if it had not  entered  into any
futures contracts or options  transactions.  The other risks associated with the
use of futures  contracts  and  options  thereon are (i)  imperfect  correlation
between the change in market  value of the  securities  held by the Fund and the
prices of the  futures and  options  and (ii) the  possible  absence of a liquid
secondary market for a futures contract or option and the resulting inability to
close a futures position prior to its maturity date.

In the  event  of an  imperfect  correlation  between  a  futures  position  and
portfolio position which is intended to be protected, the desired protection may
not be  obtained  and the Fund may be  exposed  to risk of  loss.  Investing  in
contracts  whose price  behavior  is  expected  to  resemble  that of the Fund's
underlying securities may minimize the risk of imperfect  correlation.  The Fund
will  attempt to  minimize  the risk that it will be unable to close out futures
positions by entering  into such  transactions  on a national  exchange  with an
active and liquid secondary market.

Limitations and Risks Associated with Transactions in Options, Futures Contracts
and Options on Futures Contracts -- DWS Micro Cap Fund

Options and futures  transactions  involve (1) liquidity  risk that  contractual
positions  cannot  be  easily  closed  out in the  event of  market  changes  or
generally in the absence of a liquid secondary market, (2) correlation risk that
changes in the value of hedging  positions may not match the  securities  market
fluctuations  intended  to be  hedged,  and (3)  market  risk that an  incorrect
prediction  of  securities  prices by the  Advisor may cause the Fund to perform
worse than if such  positions  had not been  taken.  The  ability  to  terminate
over-the-counter  options is more limited than with exchange-traded  options and
may  involve the risk that the  counterparty  to the option will not fulfill its
obligations. In accordance with a position taken by the SEC, the Fund will limit
its investments in illiquid securities to 15% of the Fund's net assets.

Options and futures transactions are highly specialized activities which involve
investment  techniques and risks that are different from those  associated  with
ordinary portfolio transactions.  Gains and losses on investments in options


                                       29
<PAGE>

and futures  depend on the  Advisor's  ability to predict the direction of stock
prices and other economic factors.  The loss that may be incurred by the Fund in
entering  into futures  contracts  and written  options  thereon is  potentially
unlimited. There is no assurance that  higher-than-anticipated  trading activity
or other unforeseen events might not, at times,  render certain facilities of an
options clearing entity or other entity  performing the regulatory and liquidity
functions of an options  clearing entity  inadequate,  and thereby result in the
institution  by an exchange of special  procedures  that may interfere  with the
timely execution of customers'  orders.  Most futures exchanges limit the amount
of fluctuation  permitted in a futures contract's prices during a single trading
day. Once the limit has been reached,  no further trades may be made that day at
a price beyond the limit. The price limit will not limit potential  losses,  and
may in fact  prevent the prompt  liquidation  of futures  positions,  ultimately
resulting in further losses.

There is no limit on the  percentage  of the  assets  of the Fund that may be at
risk with respect to futures  contracts  and related  options.  The Fund may not
invest more than 25% of its total  assets in purchased  protective  put options.
The Fund's  transactions  in options,  futures  contracts and options on futures
contracts may be limited by the requirements for  qualification of the Fund as a
regulated  investment  company for tax  purposes.  See "Taxes"  below.  Options,
futures contracts and options on futures contracts are derivative instruments.


Asset  Coverage - DWS Mid Cap  Growth  Fund,  DWS Small Cap Growth  Fund and DWS
Micro Cap Fund

Asset  Coverage.  Each  Fund  will  comply  with  the  segregation  or  coverage
guidelines  established by the SEC and other applicable  regulatory  bodies with
respect to certain transactions,  including (but not limited to) options written
on securities  and indexes,  currency,  interest rate and security index futures
contracts  and  options  on  those  futures  contracts,   and  forward  currency
contracts.  These guidelines may, in certain instances,  require  segregation by
the Fund of cash or liquid securities to the extent each Fund's obligations with
respect to these strategies are not otherwise  covered through  ownership of the
underlying security or financial instrument,  by other portfolio positions or by
other  means  consistent  with  applicable   regulatory  policies.   Unless  the
transaction is covered,  the segregated assets must at all times equal or exceed
each Fund's  obligations  with respect to these  strategies.  Segregated  assets
cannot be sold or transferred  unless equivalent assets are substituted in their
place or it is no longer  necessary to segregate  them. As a result,  there is a
possibility  that  segregation of a large percentage of each Fund's assets could
impede portfolio  management or each Fund's ability to meet redemption  requests
or other current obligations.

For example,  a call option  written on securities may require each Fund to hold
the  securities  subject  to  the  call  (or  securities  convertible  into  the
securities  without  additional   consideration)  or  to  segregate  assets  (as
described  above)  sufficient to purchase and deliver the securities if the call
is  exercised.  A call option  written on an index may require  each Fund to own
portfolio  securities  that correlate with the index or to segregate  assets (as
described  above) equal to the excess of the index value over the exercise price
on a current  basis.  A put option written by each Fund may require each Fund to
segregate  assets (as described  above) equal to the exercise  price.  Each Fund
could  purchase a put option if the strike  price of that  option is the same or
higher  than the strike  price of a put option  sold by each Fund.  If each Fund
holds a futures  contract,  each Fund  could  purchase  a put option on the same
futures  contract  with a strike  price as high or higher  than the price of the
contract  held.  Each  Fund  may  enter  into  fully  or  partially   offsetting
transactions so that its net position, coupled with any segregated assets (equal
to any remaining obligation),  equals its net obligation.  Asset coverage may be
achieved by other means when consistent with applicable regulatory policies.

The Board of  Trustees of each Fund has adopted  the  requirement  that  futures
contracts  and  options on futures  contracts  be used as a hedge and that stock
index futures may be used on a continual basis to equitize cash so that the Fund
may  maintain  100% equity  exposure.  Each Fund is operated by persons who have
claimed an exclusion from the definition of the term  "commodity  pool operator"
under  the  Commodity  Exchange  Act  and,  therefore,  who are not  subject  to
registration or regulation under the Commodity Exchange Act.

The  use  of  options,  futures  and  foreign  currency  contracts  is a  highly
specialized  activity  which involves  investment  techniques and risks that are
different from those associated with ordinary portfolio transactions.  Gains and
losses on investments in options and futures depend on the Advisor's  ability to
predict the direction of stock prices,  interest rates,  currency  movements and
other economic  factors.  The loss that may be incurred by each Fund in entering
into  futures  contracts  and  written  options  thereon  and  forward  currency
contracts   is   potentially    unlimited.    There   is   no   assurance   that
higher-than-anticipated  trading activity or other unforeseen  events might not,
at times,  render  certain


                                       30
<PAGE>

facilities  of an  options  clearing  entity  or  other  entity  performing  the
regulatory and liquidity functions of an options clearing entity inadequate, and
thereby  result in the  institution by an exchange of special  procedures  which
could  interfere with the timely  execution of customers'  orders.  Most futures
exchanges  limit the amount of  fluctuation  permitted  in a futures  contract's
prices during a single trading day. Once the limit has been reached,  no further
trades may be made that day at a price  beyond the limit.  The price  limit will
not limit potential  losses,  and may in fact prevent the prompt  liquidation of
futures positions,  ultimately resulting in further losses.  Options and futures
traded on foreign exchanges  generally are not regulated by US authorities,  and
may offer less liquidity and less protection to the Fund in the event of default
by the other party to the contract.

There is no limit on the  percentage  of the  assets of each Fund that may be at
risk with respect to futures  contracts and related options or forward  currency
contracts.  Each  Fund may not  invest  more  than 25% of its  total  assets  in
purchased protective put options.  Each Fund's transactions in options,  forward
currency  contracts,  futures  contracts and options on futures contracts may be
limited  by the  requirements  for  qualification  of each  Fund as a  regulated
investment company for tax purposes. See "Taxes." There can be no assurance that
the use of these portfolio strategies will be successful.

Each Fund's active management techniques involve (1) liquidity risk (contractual
positions  cannot  be  easily  closed  out in the  event of  market  changes  or
generally in the absence of a liquid  secondary  market),  (2) correlation  risk
(changes in the value of hedging  positions may not match the securities  market
and foreign currency  fluctuations  intended to be hedged),  and (3) market risk
(an incorrect  prediction of securities  prices or exchange rates by the Advisor
may cause each Fund to perform worse than if such positions had not been taken).
In  addition,  the ability to  terminate  OTC options is more  limited than with
exchange-traded  options and may involve the risk that the  counterparty  to the
option will not fulfill its obligations.


Other Investments and Investment Practices


                                       31
<PAGE>


Borrowing.  The Fund may  borrow  for  temporary  or  emergency  purposes.  This
borrowing may be  unsecured.  Among the forms of borrowing in which the Fund may
engage is entering into reverse repurchase agreements. The 1940 Act requires the
Fund to maintain  continuous  asset  coverage  (that is, total assets  including
borrowings,  less  liabilities  exclusive of  borrowings)  of 300% of the amount
borrowed.  If the asset coverage should decline below 300% as a result of market
fluctuations  or for other  reasons,  the Fund is  required  to sell some of its
portfolio  securities within three days to reduce its borrowings and restore the
300% asset coverage,  even though it may be  disadvantageous  from an investment
standpoint to sell securities at that time.  Borrowing may exaggerate the effect
on net asset  value of any  increase  or  decrease  in the  market  value of the
portfolio. Money borrowed will be subject to interest costs which may or may not
be recovered by appreciation of the securities  purchased.  The Fund also may be
required to maintain  minimum average balances in connection with such borrowing
or to pay a  commitment  or other fee to  maintain a line of  credit;  either of
these requirements would increase the cost of borrowing over the stated interest
rate. See "Investment Restrictions."

US  Dollar-Denominated  Foreign Debt  Securities.  The Fund may invest in the US
dollar-denominated  debt  securities  of  foreign  companies.  Investing  in the
securities of foreign companies involves more risks than investing in securities
of US companies.  Their value is subject to economic and political  developments
in the countries where the companies  operate and to changes in foreign currency
values.  Values may also be  affected  by foreign  tax laws,  changes in foreign
economic or monetary  policies,  exchange  control  regulations  and regulations
involving prohibitions on the repatriation of foreign currencies.

In addition, the relative performance of various countries' fixed income markets
historically   has   reflected   wide   variations   relating   to  the   unique
characteristics of each country's economy.  Year-to-year fluctuations in certain
markets have been  significant,  and negative  returns have been  experienced in
various markets from time to time.

                                       32
<PAGE>

US Dollar-Denominated Foreign Government Debt Securities. The Fund may invest in
US  dollar-denominated  foreign  government debt  securities  which include debt
obligations issued or guaranteed by national, state or provincial governments or
similar political subdivisions and quasi-governmental and supranational entities
(collectively,   "sovereign  debt  obligations").  Sovereign  debt  obligations,
especially those of developing countries, may involve a high degree of risk. The
issuer of such an obligation or the  governmental  authorities  that control the
repayment of the  obligation  may be unable or unwilling to repay  principal and
interest  when  due  and  may  require  renegotiation  or  rescheduling  of debt
payments.  In addition,  prospects  for  repayment of principal and interest may
depend on political as well as economic factors.

Quasi-governmental    and   supranational    entities   include    international
organizations  designated  or  supported  by  governmental  entities  to promote
economic  reconstruction or development and international  banking  institutions
and related government  agencies.  Examples include (but are not limited to) the
International  Bank for  Reconstruction  and Development (the "World Bank"), the
Japanese  Development  Bank, the Asian  Development Bank and the  Inter-American
Development Bank. Currently, the Portfolio intends to invest only in obligations
issued  or  guaranteed  by  the  Asian  Development  Bank,  the   Inter-American
Development  Bank,  the World Bank, the African  Development  Bank, the European
Coal  and  Steel  Community,  the  European  Economic  Community,  the  European
Investment Bank and the Nordic Investment Bank.  Foreign  government  securities
also include mortgage-related securities issued or guaranteed by national, state
or  provincial  governmental  instrumentalities,   including  quasi-governmental
agencies.



Restricted  Securities.  The Fund may invest to a limited  extent in  restricted
securities.  Restricted securities are securities that may not be sold freely to
the public  without  prior  registration  under  federal  securities  laws or an
exemption from registration.  Restricted  securities will be considered illiquid
unless  they  are   restricted   securities   offered  and  sold  to  "qualified
institutional  buyers"  under  Rule  144A  under  the 1933 Act and the  Board of
Trustees  determines that these securities are liquid based upon a review of the
trading markets for the specific securities.

                                       33
<PAGE>


Temporary Defensive Investments. For temporary defensive purposes during periods
when the Advisor determines that conditions  warrant,  the Fund may invest up to
100% of its assets in cash and money market  instruments,  including  securities
issued or guaranteed by the US  Government,  its agencies or  instrumentalities;
certificates of deposit, time deposits, and bankers' acceptances issued by banks
or savings and loans associations  having net assets of at least $500 million as
of the end of their most recent fiscal year;  commercial paper rated at the time
of purchase at least A-1 by S&P or P-1 by Moody's,  or unrated  commercial paper
determined by the Advisor to be of  comparable  quality;  repurchase  agreements
involving any of the foregoing;  and, to the extent permitted by applicable law,
shares  of  other  investment   companies   investing  solely  in  money  market
instruments.

                                       34
<PAGE>


Commercial Paper. The Fund may purchase commercial paper.  Commercial paper is a
short-term,  unsecured negotiable  promissory note of a US or non-US issuer. The
Fund may also invest in variable rate master demand notes,  which  typically are
issued by large  corporate  borrowers and which provide for variable  amounts of
principal  indebtedness  and periodic  adjustments in the interest rate.  Demand
notes are direct lending  arrangements  between the Fund and an issuer,  and are
not normally traded in a secondary market. The Fund, however, may demand payment
of principal and accrued  interest at any time. In addition,  while demand notes
generally  are not rated,  their issuers must satisfy the same criteria as those
that apply to issuers of commercial paper. The Advisor will consider the earning
power,  cash flow and other  liquidity  ratios of  issuers  of demand  notes and
continually will monitor their financial ability to meet payment on demand.


Bank Obligations. The Fund's investments in money market instruments may include
certificates of deposit, time deposits and bankers' acceptances. Certificates of
Deposit ("CDs") are short-term negotiable  obligations of commercial banks. Time
Deposits ("TDs") are non-negotiable  deposits maintained in banking institutions
for specified periods of time at stated interest rates. Bankers' acceptances are
time drafts drawn on commercial  banks by borrowers  usually in connection  with
international transactions.

US commercial  banks  organized under federal law are supervised and examined by
the  Comptroller  of the  Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal  Deposit  Insurance  Corporation
(the "FDIC").  US banks organized under state law are supervised and examined by
state banking  authorities but are members of the Federal Reserve System only if
they elect to join.  Most state  banks are  insured by the FDIC  (although  such
insurance  may not be of  material  benefit  to the  Fund,  depending  upon  the
principal  amount  of CDs of each bank  held by the  Fund)  and are  subject  to
federal examination and to a substantial body of federal law and regulation.  As
a result of  governmental  regulations,  US  branches  of US banks,  among other
things, generally are required to maintain specified levels of reserves, and are
subject to other  supervision  and  regulation  designed  to  promote  financial
soundness.  US savings and loan associations,  the CDs of which may be purchased
by the Fund,  are  supervised and subject to examination by the Office of Thrift
Supervision.  US  savings  and loan  associations  are  insured  by the  Savings
Association  Insurance Fund, which is administered by the FDIC and backed by the
full faith and credit of the US Government.

Investment  of Uninvested  Cash.  The Funds may have cash balances that have not
been invested in portfolio securities  ("Uninvested Cash").  Uninvested Cash may
result from a variety of sources,  including dividends or interest received from
portfolio  securities,  unsettled  securities  transactions,  reserves  held for
investment strategy purposes, scheduled maturity of investments,  liquidation of
investment securities to meet anticipated  redemptions or dividend payments, and
new cash received from investors.  Uninvested  Cash may be invested  directly in
money market  instruments or other short-term debt  obligations.  Pursuant to an
exemptive order issued by the SEC, the Funds may use Uninvested Cash to purchase
shares of affiliated funds, including money market funds and the Cash Management
QP Trust, or entities for which the Advisor may act as investment advisor now or
in the  future  that  operate as cash  management  investment  vehicles  but are
excluded  from the  definition  of an  investment  company  pursuant  to Section
3(c)(1) or 3(c)(7) of the 1940 Act (collectively, the "Central Funds") in excess
of the limitations of Section 12(d)(1) of the 1940 Act.  Investment by the Funds
in shares of the Central Funds will comply with rule 2a-7 under the 1940 Act and
will be in accordance with the Funds' investment policies and restrictions.

Each Fund will invest  Uninvested  Cash in Central Funds only to the extent that
its  aggregate  investment in the Central Funds does not exceed 25% of its total
assets.  Purchases  and sales of shares of  Central  Funds are made at net asset
value.



The  following  is a chart of the various  types of  securities  and  investment
strategies  employed  by the Funds.  Unless  otherwise  indicated,  each Fund is
permitted, but not obligated, to pursue any of the following strategies and does
not represent  that these  techniques  are available now or will be available at
any time in the future.  If a Fund's investment in a particular type of security
is  limited  to  a  certain  percentage  of a  Fund's  assets,  that  percentage
limitation is listed in the chart.  Following the chart,  there is a description
of how each type of security and


                                       35
<PAGE>

investment  strategy  may be used  by a  Fund.  As a  matter  of  nonfundamental
operating policy, each Fund may be subject to additional  restrictions.  See the
section entitled "Investment Restriction."


DWS Mid Cap Growth Fund and DWS Small Cap Growth Fund

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------
                                                                                 DWS Mid Cap Growth DWS Small Cap Growth

INVESTMENT PRACTICE                                                                     Fund                Fund

--------------------------------------------------------------------------------------------------------------------------
KEY TO TABLE:

I        Permitted without stated limit
II       Permitted without stated limit, but not expected to be used to a significant extent
X        Not permitted

20% Italic type (e.g.  20%) represents an investment limitation as a percentage of net Fund assets; does not indicate
actual use

20% Roman type (e.g.  20%) represents an investment limitation as a percentage of total Fund assets; does not indicate
actual use
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                  <C>
EQUITY SECURITIES
--------------------------------------------------------------------------------------------------------------------------
Common Stock                                                                             I                    I
--------------------------------------------------------------------------------------------------------------------------
Warrants                                                                                 I                    I
--------------------------------------------------------------------------------------------------------------------------
Preferred Stock                                                                          I                    I
--------------------------------------------------------------------------------------------------------------------------
Convertible Securities                                                                   I                    I
--------------------------------------------------------------------------------------------------------------------------
Medium Capitalization Stocks                                                        80% (total)              II
--------------------------------------------------------------------------------------------------------------------------
Small Capitalization Stocks                                                              II              80% (total)
--------------------------------------------------------------------------------------------------------------------------
Micro Capitalization Stocks                                                              II                  II
--------------------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
--------------------------------------------------------------------------------------------------------------------------
Short-Term Instruments                                                              20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Obligations of Banks and Other Financial Institutions                               20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Certificates of Deposit and Bankers' Acceptances                                    20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Commercial Paper                                                                    20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Variable Rate Master Demand Notes                                                   20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
US Government Securities                                                            20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Zero Coupon Securities and Deferred Interest Bonds                                  20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (OPTIONS)
--------------------------------------------------------------------------------------------------------------------------
Options on Securities                                                                    I                    I
--------------------------------------------------------------------------------------------------------------------------
Options on Securities Indices                                                            I                    I
--------------------------------------------------------------------------------------------------------------------------
Options on Non-US Securities Indices                                                     I                    I
--------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
--------------------------------------------------------------------------------------------------------------------------
Futures Contracts                                                                        I                    I
--------------------------------------------------------------------------------------------------------------------------
Futures Contracts on Securities Indices                                                  I                    I
--------------------------------------------------------------------------------------------------------------------------
Options on Futures Contracts (including Contracts on Security Indices)                   I                    I
--------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (HEDGING STRATEGIES)
--------------------------------------------------------------------------------------------------------------------------
Hedging Strategies                                                                       I                    I
--------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
--------------------------------------------------------------------------------------------------------------------------
Government Guaranteed Mortgage-Backed Securities                                    20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Ginnie Mae Certificates                                                             20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Fannie Mae Certificates                                                             20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Freddie Mac Certificates                                                            20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Asset-Backed Securities                                                             20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
SECURITIES OF NON-US ISSUERS
--------------------------------------------------------------------------------------------------------------------------
Foreign Securities & Depository Receipts                                            20% (total)          20% (total)

                                       36
<PAGE>
--------------------------------------------------------------------------------------------------------------------------
                                                                                 DWS Mid Cap Growth DWS Small Cap Growth

INVESTMENT PRACTICE                                                                     Fund                Fund

--------------------------------------------------------------------------------------------------------------------------
KEY TO TABLE:

I        Permitted without stated limit
II       Permitted without stated limit, but not expected to be used to a significant extent
X        Not permitted

20% Italic type (e.g.  20%) represents an investment limitation as a percentage of net Fund assets; does not indicate
actual use

20% Roman type (e.g.  20%) represents an investment limitation as a percentage of total Fund assets; does not indicate
actual use
--------------------------------------------------------------------------------------------------------------------------
(ADRs, EDRs, GDRs and IDRs)
--------------------------------------------------------------------------------------------------------------------------
Foreign Corporate Debt Securities                                                   20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Foreign Government Debt Securities                                                  20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
CURRENCY MANAGEMENT
--------------------------------------------------------------------------------------------------------------------------
Currency Exchange Transactions                                                           II                  II
--------------------------------------------------------------------------------------------------------------------------
Currency Hedging Transactions                                                            II                  II
--------------------------------------------------------------------------------------------------------------------------
Cross Hedging                                                                            II                  II
--------------------------------------------------------------------------------------------------------------------------
Forward Currency Exchange Contracts                                                      II                  II
--------------------------------------------------------------------------------------------------------------------------
Options on Foreign Currencies                                                            II                  II
--------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS AND INVESTMENT PRACTICES
--------------------------------------------------------------------------------------------------------------------------
Illiquid Securities                                                                  15% (net)            15% (net)
--------------------------------------------------------------------------------------------------------------------------
When-Issued and Delayed Delivery Securities                                         15% (total)          15% (total)
--------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements                                                               20% (total)          20% (total)
--------------------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements                                                      33 1/3% (net)        33 1/3% (net)
--------------------------------------------------------------------------------------------------------------------------
Mortgage Dollar Rolls                                                              33 1/3% (net)        33 1/3% (net)
--------------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities                                                     30% (total)          30% (total)
--------------------------------------------------------------------------------------------------------------------------
Borrowing                                                                          33 1/3% (net)        33 1/3% (net)
--------------------------------------------------------------------------------------------------------------------------
Short Sales                                                                          25% (net)            25% (net)
--------------------------------------------------------------------------------------------------------------------------
Concentration in Any One Industry                                                   25% (total)          25% (total)
--------------------------------------------------------------------------------------------------------------------------
Other Investment Companies                                                          10% (total)          10% (total)
--------------------------------------------------------------------------------------------------------------------------
Temporary Defensive Investments                                                         100%                100%
--------------------------------------------------------------------------------------------------------------------------



DWS Micro Cap Fund


--------------------------------------------------------------------------------------------------------------------------

INVESTMENT PRACTICE                                                                        DWS Micro Cap Fund

--------------------------------------------------------------------------------------------------------------------------

KEY TO TABLE:

I        Permitted without stated limit
II       Permitted without stated limit, but not expected to be used to a significant extent
X        Not permitted

20% Italic type (e.g.  20%) represents an investment limitation as a percentage of net Fund assets; does not indicate
actual use

20% Roman type (e.g.  20%) represents an investment limitation as a percentage of total Fund assets; does not indicate
actual use

--------------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES
--------------------------------------------------------------------------------------------------------------------------
Common Stock                                                                      I
--------------------------------------------------------------------------------------------------------------------------
Warrants                                                                          I
--------------------------------------------------------------------------------------------------------------------------
Preferred Stock                                                                   5%
--------------------------------------------------------------------------------------------------------------------------
Convertible Securities                                                            I
--------------------------------------------------------------------------------------------------------------------------

                                       37
<PAGE>
INVESTMENT PRACTICE                                                               DWS Micro Cap Fund
--------------------------------------------------------------------------------------------------------------------------

KEY TO TABLE:

I        Permitted without stated limit
II       Permitted without stated limit, but not expected to be used to a significant extent
X        Not permitted

20% Italic type (e.g.  20%) represents an investment limitation as a percentage of net Fund assets; does not indicate
actual use

20% Roman type (e.g.  20%) represents an investment limitation as a percentage of total Fund assets; does not indicate
actual use

--------------------------------------------------------------------------------------------------------------------------

Medium-Capitalization Stocks                                                      II
--------------------------------------------------------------------------------------------------------------------------
Small Capitalization Stocks                                                       I
--------------------------------------------------------------------------------------------------------------------------
Micro Capitalization Stocks                                                       At least 80%
--------------------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
--------------------------------------------------------------------------------------------------------------------------
US Government Securities                                                          20%
--------------------------------------------------------------------------------------------------------------------------
Short-Term Instruments                                                            20%
--------------------------------------------------------------------------------------------------------------------------
Obligations of Banks and Other Financial Institutions                             20%
--------------------------------------------------------------------------------------------------------------------------
Certificates of Deposit and Bankers' Acceptances                                  20%
--------------------------------------------------------------------------------------------------------------------------
Commercial Paper                                                                  20%
--------------------------------------------------------------------------------------------------------------------------
Other Debt Obligations                                                            20%
--------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (OPTIONS)
--------------------------------------------------------------------------------------------------------------------------
Options on Securities                                                             I
--------------------------------------------------------------------------------------------------------------------------
Protective Puts                                                                   20%
--------------------------------------------------------------------------------------------------------------------------
Options on Securities Indices                                                     I
--------------------------------------------------------------------------------------------------------------------------
Options on Non-US Securities Indices                                              I
--------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
--------------------------------------------------------------------------------------------------------------------------
Futures Contracts                                                                 I
--------------------------------------------------------------------------------------------------------------------------
Futures Contracts on Securities Indices                                           I
--------------------------------------------------------------------------------------------------------------------------
Options on Futures Contracts (including Contracts on Securities Indices)          I
--------------------------------------------------------------------------------------------------------------------------
Purchased protective puts                                                         25%
--------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (HEDGING STRATEGIES)
--------------------------------------------------------------------------------------------------------------------------
Hedging Strategies                                                                I
--------------------------------------------------------------------------------------------------------------------------
SECURITIES OF NON-US ISSUERS
--------------------------------------------------------------------------------------------------------------------------
Foreign Securities & Depository Receipts                                          20%
(ADRs, EDRs, GDRs and IDRs)
--------------------------------------------------------------------------------------------------------------------------
Foreign Corporate Debt Securities                                                 20%
--------------------------------------------------------------------------------------------------------------------------
Foreign Government Debt Securities                                                20%
--------------------------------------------------------------------------------------------------------------------------
CURRENCY MANAGEMENT
--------------------------------------------------------------------------------------------------------------------------
Currency Exchange Transactions                                                    II
--------------------------------------------------------------------------------------------------------------------------
Currency Hedging Transactions                                                     II
--------------------------------------------------------------------------------------------------------------------------
Cross Hedging                                                                     II
--------------------------------------------------------------------------------------------------------------------------
Forward Currency Exchange Contracts                                               II
--------------------------------------------------------------------------------------------------------------------------
Options on Foreign Currencies                                                     II
--------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS AND INVESTMENT PRACTICES
--------------------------------------------------------------------------------------------------------------------------
Illiquid Securities                                                               15%
--------------------------------------------------------------------------------------------------------------------------
When-Issued and Delayed Delivery Securities                                       33 1/3%
--------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements                                                             20%
--------------------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements                                                     33%
--------------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities                                                   33 1/3%
--------------------------------------------------------------------------------------------------------------------------
Borrowing                                                                         33 1/3%
--------------------------------------------------------------------------------------------------------------------------
Short Sales                                                                       II
--------------------------------------------------------------------------------------------------------------------------
Other Investment Companies                                                        10%
--------------------------------------------------------------------------------------------------------------------------

                                       38
<PAGE>
INVESTMENT PRACTICE                                                               DWS Micro Cap Fund
--------------------------------------------------------------------------------------------------------------------------

KEY TO TABLE:

I        Permitted without stated limit
II       Permitted without stated limit, but not expected to be used to a significant extent
X        Not permitted

20% Italic type (e.g.  20%) represents an investment limitation as a percentage of net Fund assets; does not indicate
actual use

20% Roman type (e.g.  20%) represents an investment limitation as a percentage of total Fund assets; does not indicate
actual use

--------------------------------------------------------------------------------------------------------------------------
Temporary Defensive Investments                                                   100%
--------------------------------------------------------------------------------------------------------------------------
Non-Diversification                                                               25%
--------------------------------------------------------------------------------------------------------------------------
Concentration in Any One Industry                                                 25%
--------------------------------------------------------------------------------- ----------------------------------------
</TABLE>

Portfolio Holdings


In  addition  to the public  disclosure  of Funds'  portfolio  holdings  through
required  SEC  quarterly  filings,  each  Fund may make its  portfolio  holdings
information  publicly  available on the DWS Funds' Web site as described in each
Fund's prospectus.  Each Fund does not disseminate  non-public information about
portfolio  holdings except in accordance with policies and procedures adopted by
each Fund.

Each Fund's procedures permit non-public  portfolio  holdings  information to be
shared with Deutsche Asset Management and its affiliates  (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys,   officers  and  trustees/directors  and  each  of  their  respective
affiliates and advisers who require access to this  information to fulfill their
duties to each Fund and are subject to the duties of confidentiality,  including
the duty not to trade on non-public information,  imposed by law or contract, or
by each Fund's  procedures.  This non-public  information may also be disclosed,
subject to the  requirements  described  below,  to securities  lending  agents,
financial  printers,  proxy voting  firms,  mutual fund  analysts and rating and
tracking  agencies,  or to shareholders  in connection with in-kind  redemptions
(collectively, "Authorized Third Parties").

Prior to any disclosure of each Fund's non-public portfolio holdings information
to Authorized  Third Parties,  a person  authorized by each Fund's Trustees must
make a good faith determination in light of the facts then known that a Fund has
a legitimate business purpose for providing the information, that the disclosure
is in the  best  interest  of each  Fund,  and  that the  recipient  assents  or
otherwise has a duty to keep the information confidential and to not trade based
on the  information  received  while  the  information  remains  non-public.  No
compensation is received by each Fund or DeAM for disclosing non-public holdings
information.  Periodic  reports  regarding these  procedures will be provided to
each Fund's Trustees.

Portfolio  holdings  information  distributed  by the trading desks of DeAM or a
subadvisor for the purpose of facilitating  efficient trading of such securities
and receipt of relevant  research is not subject to the foregoing  requirements.
Non-public   portfolio   holding   information   does  not   include   portfolio
characteristics (other than holdings or subsets of holdings) about each Fund and
information  derived therefrom,  including,  but not limited to, how each Fund's
investments are divided among various sectors, industries,  countries, value and
growth stocks,  bonds,  currencies and cash,  types of bonds,  bond  maturities,
duration,  bond coupons and bond credit  quality  ratings so long as each Fund's
holdings could not be derived from such information.



                                       39
<PAGE>


Registered  investment  companies  that are subadvised by DeAM may be subject to
different  portfolio  holdings  disclosure  policies,  and  neither  DeAM or its
affiliated  nor a Fund's  Trustees  exercise  control  over  such  policies.  In
addition,  separate  account  clients  of DeAM have  access  to their  portfolio
holdings and are not subject to a Fund's portfolio  holdings  disclosure policy.
The portfolio  holdings of some of the funds  subadvised by DeAM and some of the
separate accounts managed by DeAM may  substantially  overlap with the portfolio
holdings of a Fund.

DeAM also  manages  certain  unregistered  commingled  trusts and creates  model
portfolios,  the portfolio holdings of which may substantially  overlap with the
portfolio  holdings  of the  Funds.  To  the  extent  that  investors  in  these
commingled  trusts or recipients of model  portfolio  holdings  information  may
receive portfolio holdings information of their trust or of a model portfolio on
a different basis from that on which fund portfolio holdings information is made
public,  DeAM has implemented  procedures  reasonably designed to encourage such
investors and recipients to keep such information  confidential,  and to prevent
those investors from trading on the basis of non-public holdings information.

There is no assurance that a Fund's  policies and procedures with respect to the
disclosure  of  portfolio  holdings  information  will  protect  a Fund from the
potential  misuse of portfolio  holdings  information  by those in possession of
that information.

                             MANAGEMENT OF THE FUNDS

Investment Advisor

Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is
part of Deutsche  Asset  Management,  is the  investment  advisor for the Funds.
Under the supervision of the Board of Trustees of each Fund,  with  headquarters
at 345 Park Avenue,  New York, New York 10154,  DIMA makes the Funds' investment
decisions,  buys and sells  securities for the Funds and conducts  research that
leads to these  purchase  and sale  decisions.  The Advisor  manages each Fund's
daily investment and business affairs subject to the policies established by the
Board  of  Trustees.  DIMA  and its  predecessors  have  more  than 80  years of
experience  managing  mutual  funds.  DIMA  provides a full range of  investment
advisory  services to institutional  and retail clients.  The Funds'  investment
advisor  is  also  responsible  for  selecting   brokers  and  dealers  and  for
negotiating  brokerage  commissions  and dealer  charges.  On December 31, 2006,
Deutsche Asset Management, Inc. ("DAMI") merged into DIMA. Prior to


                                       40
<PAGE>

December 31, 2006 DAMI was the investment  advisor to the Funds.  As a result of
the merger, DIMA is now the investment advisor to the Funds.

DeAM is the  marketing  name in the US for the asset  management  activities  of
Deutsche  Bank AG,  DIMA,  Deutsche  Bank Trust  Company  Americas and DWS Trust
Company. DeAM is a global asset management organization that offers a wide range
of investing  expertise and resources,  including hundreds of portfolio managers
and analysts and an office  network  that reaches the world's  major  investment
centers.  This well-resourced  global investment platform brings together a wide
variety of experience and investment insight, across industries,  regions, asset
classes and investing styles.  DIMA is an indirect,  wholly-owned  subsidiary of
Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is
engaged in a wide range of financial services,  including investment management,
mutual fund,  retail,  private and commercial  banking,  investment  banking and
insurance.  The term "DWS Scudder" is the designation  given to the products and
services provided by DIMA and its affiliates to the DWS Mutual Funds.

The Advisor provides  investment  counsel for many individuals and institutions,
including  insurance  companies,  industrial  corporations,  and  financial  and
banking  organizations,  as well as  providing  investment  advice  to open- and
closed-end SEC registered funds.

Each Fund is managed by a team of investment  professionals,  each of whom plays
an important role in a Fund's management process.  Team members work together to
develop investment strategies and select securities for a Fund's portfolio. This
team works for the Advisor or its  affiliates  and is supported by a large staff
of economists,  research analysts, traders and other investment specialists. The
Advisor or its affiliates  believe(s) its team approach  benefits fund investors
by bringing  together many  disciplines and leveraging its extensive  resources.
Team members with primary  responsibility  for  management of a Fund, as well as
team members who have other ongoing management  responsibilities  for each Fund,
are identified in each Fund's prospectus, as of the date of a Fund's prospectus.
Composition  of the  team may  change  over  time,  and  fund  shareholders  and
investors will be notified of changes  affecting  individuals  with primary fund
management responsibility.

Investment Management Agreements


The Board and the  shareholders  of each Fund  approved an amended and  restated
investment management agreement (the "Investment  Management Agreement") between
the Funds and DIMA.  The Investment  Management  Agreement  became  effective on
December 31, 2006 and was last  approved by the Funds'  Board on  September  18,
2007.  Pursuant to the Investment  Management  Agreement,  the Advisor  provides
continuing  investment management of the assets of the Funds. In addition to the
investment  management of the assets of the Funds,  the Advisor  determines  the
investments  to be made for the  Funds,  including  what  portion  of its assets
remain  uninvested  in cash or cash  equivalents,  and with whom the  orders for
investments  are placed,  consistent with the Funds' policies as stated in their
Prospectuses  and SAIs, or as adopted by the Funds' Board. The Advisor will also
monitor, to the extent not monitored by the Fund's administrator or other agent,
the  Funds'  compliance  with  its  investment  and  tax  guidelines  and  other
compliance policies.

DIMA provides assistance to the Fund's Board in valuing the securities and other
instruments  held by the Funds, to the extent  reasonably  required by valuation
policies and procedures that may be adopted by the Funds.

Pursuant to the Investment  Management  Agreement (unless otherwise  provided in
the  agreement  or as  determined  by the Board and to the extent  permitted  by
applicable  law), DIMA pays the  compensation  and expenses of all the Trustees,
officers,  and executive  employees of the Funds,  including the Funds' share of
payroll taxes, who are affiliated persons of DIMA.

The  Investment  Management  Agreement  provides  that the Funds  are  generally
responsible  for expenses that  include:  fees payable to DIMA;  outside  legal,
accounting or auditing  expenses  including with respect to expenses  related to
negotiation,  acquisition or distribution of portfolio investments;  maintenance
of books and records that are


                                       41
<PAGE>

maintained  by the Funds,  the Funds'  custodian,  or other agents of the Funds;
taxes and governmental  fees; fees and expenses of the Funds'  accounting agent,
custodian,  sub-custodians,  depositories, transfer agents, dividend reimbursing
agents and registrars;  payments for portfolio pricing or valuation  services to
pricing agents,  accountants,  bankers and other specialists,  if any; brokerage
commissions  or other costs of acquiring or disposing of any Funds'  security or
other instruments of the Funds; and litigation  expenses and other extraordinary
expenses not incurred in the ordinary course of the Funds' business.

The Investment  Management  Agreement  allows the Advisor to delegate any of its
duties under the  Agreement to a  subadvisor,  subject to a majority vote of the
Board of  Trustees,  including a majority  of the Board of Trustees  who are not
interested  persons of the Trust, and, if required by applicable law, subject to
a majority vote of each Fund's shareholders.

The Investment  Management  Agreement provides that DIMA shall not be liable for
any error of judgment or mistake of law or for any loss suffered by each Fund in
connection with matters to which the Agreement relates,  except a loss resulting
from willful  malfeasance,  bad faith or gross negligence on the part of DIMA in
the  performance  of its  duties  or  from  reckless  disregard  by  DIMA of its
obligations and duties under the agreement. The Investment Management Agreements
may be terminated at any time, without payment of penalty, by either party or by
vote of a majority of the outstanding voting securities of the Funds on 60 days'
written notice.

In addition,  the Board and shareholders  approved a subadvisor  approval policy
for each Fund (the  "Sub-advisor  Approval  Policy").  The Sub-advisor  Approval
Policy  permits the Advisor,  subject to the approval of the Board,  including a
majority of its independent board members,  to appoint and replace  sub-advisors
and to amend  sub-advisory  contracts  without obtaining  shareholder  approval.
Under the  Sub-advisor  Approval  Policy,  the Board,  including its independent
board  members,  will  continue  to evaluate  and  approve all new  sub-advisory
contracts between the Advisor and any subadvisor,  as well as all changes to any
existing  sub-advisory  contract.  Each Fund cannot  implement  the  Sub-advisor
Approval  Policy without the SEC either adopting  revisions to certain  existing
rules (as it proposed to do in October  2003) or  granting  each Fund  exemptive
relief from such existing  rules.  In the event that a Fund  received  exemptive
relief or the SEC  adopted  revisions  to its  current  rules,  the Fund and the
Advisor would be subject to certain  conditions  imposed by the SEC (and certain
conditions that may be imposed in the future within either exemptive relief or a
rule) to  ensure  that the  interests  of each  Fund  and its  shareholders  are
adequately  protected  whenever the Advisor acts under the Sub-advisor  Approval
Policy, including any shareholder notice requirements.


For all services provided under the Investment Management  Agreement,  each Fund
pays the Advisor a fee, computed daily and paid monthly, at the annual rate as a
percentage of net assets shown below:

          Fund                                           Management Fee Rate

          DWS Mid Cap Growth Fund                      0.650% to $500 million
                                                       0.600% next $1 billion
                                                      0.550% next $2.5 billion
                                                      0.540% next $2.5 billion
                                                      0.530% next $2.5 billion
                                                      0.520% next $2.5 billion
                                                      0.510% thereafter

          DWS Small Cap Growth Fund                            0.650%


          DWS Micro Cap Fund                           1.250% to $250 million
                                                      1.100% next $250 million
                                                       0.95% next $500 million
                                                          0.80% thereafter



                                       42
<PAGE>


          Average Daily Net Assets                      DWS Micro Cap Fund
          ------------------------                      ------------------

          to $250 million                                     1.250%
          over $250 million - $500 million                    1.100%
          over $500 million - $1 billion                       0.95%
          over $1 billion                                      0.80%

Prior to July 1,  2006,  DWS Micro Cap Fund  paid the  Advisor a monthly  fee of
1.50% of average daily net assets.



From  December 20, 2004 through  September 18, 2005 DWS Mid Cap Growth Fund paid
the Advisor's predecessor a monthly fee at an annual rate of:

        Average Daily Net Assets                    DWS Mid Cap Growth Fund
        ------------------------                    -----------------------

            to $500 million                                   0.65%
    over $500 million - $1.5 billion                          0.60%
   over $1.5 billion - $11.5 billion                          0.55%
           over $11.5 billion                                 0.51%


From September 19, 2005 through  December 30, 2006, DWS Mid Cap Growth Fund paid
the Advisor's predecessor a monthly fee at an annual rate of:


       Average Daily Net Assets                    DWS Mid Cap Growth Fund
       ------------------------                    -----------------------

     to $500 million                                         0.65%
     over $500 million - $1.5 billion                        0.60%
     over $1.5 billion - $4 billion                          0.55%
     over 4 billion - $6.5 billion                           0.54%
     over $6.5 billion - $9 billion                          0.53%
     over $9 billion - $11.5 billion                         0.52%
     over $11.5 billion                                      0.51%



DWS Mid Cap Growth Fund. For the fiscal year ended  September 30, 2007, the Fund
paid the Advisor a fee in the amount of  $7,925,087.  For the fiscal years ended
September 30, 2006 and 2005*, the Fund paid the Advisor's  predecessor  advisory
fees of $8,308,591 and $5,679,340,  respectively, in compensation for investment
advisory services provided to DWS Mid Cap Growth Fund.

Through January 21, 2009, the Advisor has contractually agreed to waive all or a
portion of its management fee and reimburse or pay operating expenses of DWS Mid
Cap Growth Fund to the extent  necessary to maintain  DWS Mid Cap Growth  Fund's
total operating expenses at 1.05% for Class S shares, excluding certain expenses
such as extraordinary  expenses,  taxes, brokerage and interest. The Advisor had
contractually  agreed through September 30, 2007, to waive a portion of its fees
and reimburse  expenses so that total operating  expenses will not exceed 0.94%,
excluding  certain expenses such as extraordinary  expenses,  taxes,  brokerage,
interest, and organization and offering expenses, and proxy expenses.

Only the Fund's Board of Trustees may change these contractual fee waivers.

                                       43
<PAGE>

DWS Small Cap Growth Fund.  For the fiscal year ended  September  30, 2007,  the
Fund paid the Advisor a fee in the amount of  $2,813,970.  For the fiscal  years
ended  September  30, 2006 and 2005*,  the Fund paid the  Advisor's  predecessor
advisory fees of $3,441,328 and $3,246,753,  respectively,  in compensation  for
investment advisory services provided to DWS Small Cap Growth Fund.

DWS Small Cap Growth Fund. The Advisor and the Administrator  have contractually
agreed to waive their fees and  reimburse  expenses so that total  expenses will
not exceed those set forth below:

Through January 31, 2010, the Advisor has contractually agreed to waive all or a
portion of its  management  fee and reimburse or pay  operating  expenses of DWS
Small Cap Growth Fund to the extent  necessary  to maintain DWS Small Cap Growth
Fund's total operating  expenses at 1.00% for Class S shares,  excluding certain
expenses such as extraordinary expenses, taxes, brokerage and interest.

Only the Fund's Board of Trustees may change these contractual fee waivers.

DWS Micro Cap Fund. For the fiscal year ended  September 30, 2007, the Fund paid
the Advisor a fee in the amount of $890,605 (of which $207,321 was waived).  For
the fiscal years ended September 30, 2006 and 2005*, the Fund paid the Advisor's
predecessor  net advisory fees of $1,464,791  (of which $342,282 was waived) and
$1,512,672 (of which $322,867 was waived), respectively.

*        Prior to June 1,  2006 for DWS Mid Cap  Growth  Fund and DWS  Small Cap
         Growth  Fund and July 1,  2006  for DWS  Micro  Cap  Fund,  these  fees
         included an administrative service fee.




DWS Micro Cap Fund. The Advisor has contractually agreed to waive their fees and
reimburse expenses so that total expenses will not exceed those set forth below:

                                       44
<PAGE>


Effective   February  1,  2008,  through  January  31,  2009,  the  Advisor  has
contractually  agreed to waive all or a portion of its fees and reimburse or pay
certain  operating  expenses  of DWS Micro Cap Fund so that the total  operating
expenses will not exceed 1.52% for Class S shares,  excluding  certain  expenses
such as extraordinary expenses,  taxes, brokerage and interest.  Through January
31, 2008,  the Advisor had  contractually  agreed to waive a portion of its fees
and reimburse  expenses so that total annual operating  expenses will not exceed
1.38% for Class S  shares,  excluding  certain  expenses  such as  extraordinary
expenses,  taxes, brokerage,  interest,  organization and offering expenses, and
proxy expenses.


In reviewing the terms of the Investment Management Agreement and in discussions
with the Advisor  concerning such  Agreement,  the Trustees of the Trust who are
not "interested  persons" of the Advisor are represented by independent  counsel
at the Fund's expense.

The Advisor may enter into  arrangements with affiliates and third party service
providers to perform  various  administrative,  back-office  and other  services
relating to client accounts.  Such service providers may be located in the US or
in non-US jurisdictions.


Pursuant to DeAM  procedures  approved by the Boards on behalf of the DWS funds,
proof of claim forms are  routinely  filed on behalf of the DWS funds by a third
party service provider,  with certain limited exceptions.  The Boards of the DWS
funds receive periodic reports regarding the implementation of these procedures.


Under a separate agreement between Deutsche Bank AG and the Funds, Deutsche Bank
AG has granted a license to the Funds to utilize the trademark "DWS."

Compensation of Portfolio Managers


Each  Fund has been  advised  that the  Advisor  seeks to offer  its  investment
professionals  competitive  short-term  and  long-term  compensation.  Portfolio
managers and research professionals are paid (i) fixed base salaries,  which are
linked to job function,  responsibilities  and financial  services industry peer
comparison  and (ii)  variable  compensation,  which  is  linked  to  investment
performance, individual contributions to the team and DWS Scudder's and Deutsche
Bank's  financial  results.  Variable  compensation  may  include  a cash  bonus
incentive and  participation in a variety of long-term equity programs  (usually
in the form of Deutsche Bank equity).

Bonus  and  long-term   incentives   comprise  a  greater  proportion  of  total
compensation as an investment  professional's  seniority and compensation levels
increase.  Top performing  investment  professionals  earn a total  compensation
package  that is highly  competitive,  including  a bonus that is a multiple  of
their base  salary.  The amount of equity  awarded  under the  long-term  equity
programs is generally based on the individual's total  compensation  package and
may  comprise  from  0%-40%  of  the  total  compensation  award.  As  incentive
compensation increases,  the percentage of compensation awarded in Deutsche Bank
equity also increases. Certain senior investment professionals may be subject to
a mandatory diverting of a portion of their equity compensation into proprietary
mutual funds that they manage.

To  evaluate  its  investment  professionals,  the  Advisor  uses a  Performance
Management  Process.   Objectives  evaluated  by  the  process  are  related  to
investment  performance and generally take into account peer group and benchmark
related data.  The ultimate goal of this process is to link the  performance  of
investment  professionals  with  client  investment  objectives  and to  deliver
investment   performance   that  meets  or  exceeds  clients'  risk  and  return
objectives. When determining total compensation,  the Advisor considers a number
of quantitative and qualitative factors such as:

o        DWS  Scudder   performance   and  the  performance  of  Deutsche  Asset
         Management, quantitative measures which include 1, 3 and 5 year pre-tax
         returns versus benchmark (such as the benchmark used in the prospectus)
         and appropriate  peer group,  taking into  consideration  risk targets.
         Additionally, the portfolio manager's retail/institutional asset mix is
         weighted, as appropriate for evaluation purposes.

                                       45
<PAGE>

o        Qualitative  measures include  adherence to the investment  process and
         individual  contributions  to  the  process,  among  other  things.  In
         addition, the Advisor assesses compliance, risk management and teamwork
         skills.

o        Other factors,  including  contributions made to the investment team as
         well as  adherence  to  compliance,  risk  management,  and "living the
         values" of the Advisor,  are part of a  discretionary  component  which
         gives  management the ability to reward these behaviors on a subjective
         basis through bonus incentives.

In addition,  the Advisor analyzes  competitive  compensation levels through the
use of extensive market data surveys. Portfolio manager compensation is reviewed
and may be modified each year as appropriate  to reflect  changes in the market,
as well as to adjust the  factors  used to  determine  overall  compensation  to
promote good sustained investment performance.

Fund Ownership of Portfolio Managers

The following table shows the dollar range of shares owned  beneficially  and of
record by each member of each Fund's  portfolio  management team in each Fund as
well as in all DWS Funds as a group (i.e., those funds advised by Deutsche Asset
Management or its affiliates),  including  investments by their immediate family
members sharing the same household and amounts invested  through  retirement and
deferred compensation plans. This information is provided as of each Fund's most
recent fiscal year end.

<TABLE>
<CAPTION>

                                 DWS Small Cap Growth   DWS Mid Cap Growth                          Dollar Range of All
Name of Portfolio Manager                Fund                  Fund           DWS Micro Cap Fund   DWS Fund Shares Owned
-------------------------                ----                  ----           ------------------   ---------------------

<S>                                  <C>                   <C>                   <C>                 <C>
Joseph Axtell                        $1 - $10,000          $1 - $10,000               $0             $10,001 - $50,000
Robert S. Janis                   $100,001 - $500,000   $100,001 - $500,000   $100,001 - $500,000     Over $1,000,000
</TABLE>


Conflicts of Interest

In addition to managing the assets of each Fund, each Fund's portfolio  managers
may have responsibility for managing other client accounts of the Advisor or its
affiliates.  The tables below show, for each portfolio  manager,  the number and
asset size of (1) SEC registered  investment companies (or series thereof) other
than the Fund, (2) pooled investment vehicles that are not registered investment
companies and (3) other  accounts  (e.g.,  accounts  managed for  individuals or
organizations)  managed by each portfolio  manager.  Total assets  attributed to
each portfolio  manager in the tables below include total assets of each account
managed  by them,  although  the  manager  may only  manage  a  portion  of such
account's  assets.  The  tables  also show the number of  performance  based fee
accounts, as well as the total assets of the accounts for which the advisory fee
is based on the performance of the account.  This  information is provided as of
each Fund's most recent fiscal year end.

DWS Small Cap Growth Fund

Other SEC Registered Investment Companies Managed:

<TABLE>
<CAPTION>

                                      Number of         Total Assets of    Number of Investment
                                      Registered         Registered        Company Accounts        Total Assets of
                                      Investment          Investment               with           Performance- Based
Name of Portfolio Manager             Companies           Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------           ---------       ---------------------     ------------

<S>                                        <C>          <C>                          <C>                  <C>
Joseph Axtell                              8            $3,557,251,088               0                    $0
Robert S. Janis                            5            $1,746,280,328               0                    $0

                                       46
<PAGE>

DWS Mid Cap Growth Fund

Other SEC Registered Investment Companies Managed:

                                      Number of         Total Assets of    Number of Investment
                                      Registered          Registered          Company Accounts     Total Assets of
                                      Investment          Investment               with           Performance- Based
Name of Portfolio Manager             Companies           Companies        Performance-Based Fee     Fee Accounts
-------------------------             ---------           ---------        ---------------------     ------------
Joseph Axtell                              8             $2,677,481,222              0                    $0
Robert S. Janis                            5               $866,510,462              0                    $0


DWS Micro Cap Fund

Other SEC Registered Investment Companies Managed:

                                       Number of        Total Assets of    Number of Investment
                                      Registered           Registered        Company Accounts       Total Assets of
                                      Investment          Investment               with           Performance- Based
Name of Portfolio Manager             Companies           Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------           ---------       ---------------------     ------------

Joseph Axtell                              8            $3,880,350,813               0                    $0
Robert S. Janis                            5            $2,203,615,843               0                    $0


DWS Small Cap Growth Fund

Other Pooled Investment Vehicles Managed:

                                                                              Number of Pooled
                                     Number of                               Investment Vehicle
                                       Pooled          Total Assets of         Accounts with        Total Assets of
                                     Investment       Pooled Investment      Performance-Based    Performance- Based
Name of Portfolio Manager             Vehicles             Vehicles                 Fee              Fee Accounts
-------------------------             --------             --------                 ---              ------------

Joseph Axtell                             0                   $0                     0                    $0
Robert S. Janis                           0                   $0                     0                    $0


DWS Mid Cap Growth Fund

Other Pooled Investment Vehicles Managed:

                                                                       Number of Pooled
                                                                          Investment
                                    Number of                              Vehicle             Total Assets of
                                     Pooled       Total Assets of        Accounts with            Performance-
                                    Investment   Pooled Investment        Performance-              Based Fee
Name of Portfolio Manager            Vehicles         Vehicles             Based Fee                Accounts
-------------------------            --------         --------             ---------                --------

Joseph Axtell                          0                   $0                 0                       $0
Robert S. Janis                        0                   $0                 0                       $0

                                       47
<PAGE>

DWS Micro Cap Fund

Other Pooled Investment Vehicles Managed:

                                                                       Number of Pooled
                                                                          Investment
                                    Number of                              Vehicle             Total Assets of
                                     Pooled       Total Assets of        Accounts with            Performance-
                                    Investment   Pooled Investment        Performance-              Based Fee
Name of Portfolio Manager            Vehicles         Vehicles             Based Fee                Accounts
-------------------------            --------         --------             ---------                --------
Joseph Axtell                             0               $0                  0                       $0
Robert S. Janis                           0               $0                  0                       $0


DWS Small Cap Growth Fund

Other Accounts Managed:

                                                                                Number of Other       Total Assets of
                                        Number of                              Accounts with            Performance-
                                          Other       Total Assets of          Performance-              Based Fee
Name of Portfolio Manager               Accounts      Other Accounts             Based Fee                Accounts
-------------------------               --------      --------------             ---------                --------

Joseph Axtell                             1              $100,942,734                0                   $0
Robert S. Janis                           1              $100,942,734                0                   $0


DWS Mid Cap Growth Fund

Other Accounts Managed:

                                                                                Number of Other       Total Assets of
                                        Number of                              Accounts with            Performance-
                                          Other       Total Assets of          Performance-              Based Fee
Name of Portfolio Manager               Accounts      Other Accounts             Based Fee                Accounts
-------------------------               --------      --------------             ---------                --------

Joseph Axtell                             1              $100,942,734                0                   $0
Robert S. Janis                           1              $100,942,734                0                   $0

DWS Micro Cap Fund

Other Accounts Managed:

                                                                                Number of Other       Total Assets of
                                        Number of                              Accounts with            Performance-
                                          Other       Total Assets of          Performance-              Based Fee
Name of Portfolio Manager               Accounts      Other Accounts             Based Fee                Accounts
-------------------------               --------      --------------             ---------                --------
Joseph Axtell                             1              $100,942,734                0                   $0
Robert S. Janis                           1              $100,942,734                0                   $0
</TABLE>


In  addition  to the  accounts  above,  an  investment  professional  may manage
accounts in a personal  capacity that may include  holdings that are similar to,
or the same as,  those of the Funds.  The  Advisor has in place a Code of Ethics

                                       48
<PAGE>

that is designed to address  conflicts of interest and that, among other things,
imposes  restrictions  on the ability of portfolio  managers  and other  "access
persons" to invest in securities  that may be recommended or traded in the Funds
and other client accounts.

Real,  potential  or apparent  conflicts  of interest may arise when a portfolio
manager has day-to-day  portfolio  management  responsibilities  with respect to
more than one fund or account,  including the following:

o        Certain investments may be appropriate for each Fund and also for other
         clients advised by the Advisor, including other client accounts managed
         by each Fund's portfolio management team. Investment decisions for each
         Fund  and  other  clients  are  made  with a view  to  achieving  their
         respective  investment  objectives  and  after  consideration  of  such
         factors as their current holdings,  availability of cash for investment
         and the size of their investments  generally. A particular security may
         be bought or sold for only one client or in  different  amounts  and at
         different times for more than one but less than all clients.  Likewise,
         because   clients  of  the  Advisor  may  have   differing   investment
         strategies, a particular security may be bought for one or more clients
         when one or more other clients are selling the security. The investment
         results achieved for each Fund may differ from the results achieved for
         other  clients of the Advisor.  In addition,  purchases or sales of the
         same  security  may be made for two or more clients on the same day. In
         such event,  such transactions will be allocated among the clients in a
         manner  believed by the Advisor to be most  equitable  to each  client,
         generally utilizing a pro rata allocation  methodology.  In some cases,
         the allocation  procedure could  potentially  have an adverse effect or
         positive  effect on the price or amount of the securities  purchased or
         sold by each  Fund.  Purchase  and sale  orders  for  each  Fund may be
         combined  with those of other clients of the Advisor in the interest of
         achieving  the most  favorable  net  results to each Fund and the other
         clients.

o        To the  extent  that  a  portfolio  manager  has  responsibilities  for
         managing  multiple client  accounts,  a portfolio  manager will need to
         divide time and attention among relevant accounts. The Advisor attempts
         to minimize these conflicts by aligning its portfolio  management teams
         by  investment  strategy and by  employing  similar  investment  models
         across multiple client accounts.

o        In some cases, an apparent  conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with  respect to other  accounts it manages.  The Advisor  will not
         determine  allocations based on whether it receives a performance-based
         fee from the client. Additionally, the Advisor has in place supervisory
         oversight processes to periodically monitor performance  deviations for
         accounts with like strategies.

o        The Advisor and its affiliates and the investment team of each Fund may
         manage other mutual funds and separate  accounts on a long-short basis.
         The  simultaneous  management  of long  and  short  portfolios  creates
         potential  conflicts  of  interest  including  the risk that short sale
         activity  could   adversely   affect  the  market  value  of  the  long
         positions(and  vice versa),  the risk arising from sequential orders in
         long and short  positions,  and the  risks  associated  with  receiving
         opposing  orders at the same time.  The Advisor has adopted  procedures
         that it believes are reasonably  designed to mitigate  these  potential
         conflicts  of  interest.  Included  in these  procedures  are  specific
         guidelines  developed to ensure fair and  equitable  treatment  for all
         clients whose accounts are managed by each Fund's portfolio  management
         team. The Advisor and the portfolio  management  team have  established
         monitoring  procedures,  a protocol for supervisory reviews, as well as
         compliance  oversight  to ensure that  potential  conflicts of interest
         relating to this type of activity are properly addressed.

The Advisor is owned by Deutsche Bank AG, a  multi-national  financial  services
company.  Therefore,  the Advisor is affiliated  with a variety of entities that
provide, and/or engage in commercial banking, insurance,  brokerage,  investment
banking,  financial  advisory,  broker-dealer  activities  (including  sales and
trading),  hedge funds, real estate and private equity investing, in addition to
the provision of investment  management services to institutional and individual
investors.  Since  Deutsche  Bank AG, its  affiliates,  directors,  officers and
employees (the "Firm") are engaged in businesses  and have interests  other than
managing  asset  management  accounts,   such  other  activities  involve  real,
potential or apparent  conflicts of interest.  These  interests  and  activities
include potential  advisory,  transactional  and financial  activities and other
interests  in  securities  and  companies  that may be  directly  or  indirectly

                                       49
<PAGE>

purchased  or sold by the Firm for its  clients'  advisory  accounts.  These are
considerations  of which  advisory  clients  should be aware and which may cause
conflicts that could be to the disadvantage of the Advisor's  advisory  clients.
The Advisor has  instituted  business and  compliance  policies,  procedures and
disclosures  that are  designed to identify,  monitor and mitigate  conflicts of
interest and, as appropriate, to report them to the Fund's Board.



                                       50
<PAGE>


                                       51
<PAGE>


                                       52
<PAGE>


Codes of Ethics


The Funds,  the Advisor and the Funds'  principal  underwriter have each adopted
codes of ethics  ("Code of Ethics")  under rule 17j-1 under the 1940 Act.  Board
members,  Officers  of the Trust and  employees  of the  Advisor  and  principal
underwriter are permitted to make personal  securities  transactions,  including
transactions in securities  that may be purchased or held by a Fund,  subject to
requirements and  restrictions  set forth in the applicable Code of Ethics.  The
Advisor's  Code of Ethics  contains  provisions  and  requirements  designed  to
identify and address certain  conflicts of interest between personal  investment
activities  and the interests of each Fund.  Among other  things,  the Advisor's
Code of Ethics  prohibits  certain types of transactions  absent prior approval,
imposes  time  periods  during which  personal  transactions  may not be made in
certain   securities,   and  requires  the   submission   of  duplicate   broker
confirmations  and quarterly  reporting of securities  transactions.  Additional
restrictions apply to portfolio managers,  traders, research analysts and others
involved  in the  investment  advisory  process.  Exceptions  to these and other
provisions  of the  Advisor's  Code  of  Ethics  may be  granted  in  particular
circumstances after review by appropriate personnel.

Regulatory Matters and Legal Proceedings

On December 21, 2006,  DeAM  settled  proceedings  with the SEC and the New York
Attorney General on behalf of Deutsche Asset Management, Inc. ("DAMI") and DIMA,
the investment advisors to many of the DWS Scudder funds,  regarding allegations
of improper  trading of fund shares at DeAM and at the legacy Scudder and Kemper
organizations prior to their acquisition by DeAM in April 2002. These regulators
alleged that although the prospectuses for certain funds in the regulators' view
indicated  that the funds did not permit market  timing,  DAMI and DIMA breached
their  fiduciary  duty to those  funds in that their  efforts  to limit  trading
activity in the funds were not effective at certain times.  The regulators  also
alleged that DAMI and DIMA  breached  their  fiduciary  duty to certain funds by
entering into certain market timing  arrangements with investors.  These trading
arrangements  originated  in  businesses  that  existed  prior to the  currently
constituted  DeAM  organization,  which  came  together  as a result of  various
mergers of the legacy Scudder,  Kemper and Deutsche fund groups,  and all of the
arrangements were terminated prior to the start of the regulatory investigations
that  began in the summer of 2003.  No  current  DeAM  employee  approved  these
trading arrangements.  Under the terms of the settlements, DAMI and DIMA neither
admitted nor denied any wrongdoing.

                                       53
<PAGE>

The terms of the SEC settlement, which identified improper trading in the legacy
Deutsche and Kemper mutual funds only,  provide for payment of  disgorgement  in
the  amount  of $17.2  million.  The terms of the  settlement  with the New York
Attorney  General  provide for payment of  disgorgement  in the amount of $102.3
million, which is inclusive of the amount payable under the SEC settlement, plus
a civil penalty in the amount of $20 million.  The total amount payable by DeAM,
approximately  $122.3  million,  will  be  distributed  to  shareholders  of the
affected  funds in  accordance  with a  distribution  plan to be  developed by a
distribution  consultant.  The funds'  investment  advisors do not believe these
amounts  will have a material  adverse  financial  impact on them or  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.  The  above-described  amounts are not  material to Deutsche
Bank, and have already been reserved.

Among the terms of the settled orders,  DeAM is subject to certain  undertakings
regarding  the conduct of its business in the future,  including  formation of a
Code of Ethics  Oversight  Committee  to oversee all matters  relating to issues
arising  under  the  advisors'  Code of  Ethics;  establishment  of an  Internal
Compliance Controls Committee having overall compliance oversight responsibility
of the advisors; engagement of an Independent Compliance Consultant to conduct a
comprehensive review of the advisors' supervisory  compliance and other policies
and  procedures  designed to prevent  and detect  breaches  of  fiduciary  duty,
breaches  of the Code of Ethics and federal  securities  law  violations  by the
advisors and their employees; and commencing in 2008, the advisors shall undergo
a compliance review by an independent third party.

In addition,  DeAM is subject to certain  further  undertakings  relating to the
governance  of the mutual funds,  including  that at least 75% of the members of
the  Boards  of  Trustees/Directors  overseeing  the DWS  Funds  continue  to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be  independent  of DeAM;  DeAM  maintain  existing  management  fee
reductions  for  certain  funds  for a period  of five  years  and not  increase
management  fees for these certain funds during this period;  the funds retain a
senior  officer (or  independent  consultants,  as applicable)  responsible  for
assisting in the review of fee  arrangements  and  monitoring  compliance by the
funds and the investment advisors with securities laws,  fiduciary duties, codes
of ethics and other compliance policies,  the expense of which shall be borne by
DeAM; and periodic account  statements,  fund prospectuses and the mutual funds'
web site contain  additional  disclosure  and/or tools that assist  investors in
understanding  the fees and costs associated with an investment in the funds and
the impact of fees and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State regarding
market timing matters. The terms of the Illinois settlement provide for investor
education  contributions  totaling approximately $4 million and a payment in the
amount of $2 million to the Securities Audit and Enforcement Fund.

On  September  28,  2006,  the SEC and the National  Association  of  Securities
Dealers  ("NASD")  (now  known as FINRA)  announced  final  agreements  in which
Deutsche   Investment   Management   Americas  Inc.  ("DIMA"),   Deutsche  Asset
Management, Inc. ("DAMI") and Scudder Distributors,  Inc. ("DWS-SDI") (now known
as DWS Scudder Distributors,  Inc.) settled administrative proceedings regarding
disclosure of brokerage  allocation  practices in  connection  with sales of the
Scudder Funds' (now known as the DWS Scudder Funds) shares during 2001-2003. The
agreements  with the SEC and NASD are  reflected in orders  which  state,  among
other  things,  that DIMA and DAMI failed to  disclose  potential  conflicts  of
interest to the funds' Boards and to  shareholders  relating to DWS-SDI's use of
certain  funds'  brokerage  commissions  to  reduce  revenue  sharing  costs  to
broker-dealer  firms  with whom it had  arrangements  to market  and  distribute
Scudder Fund shares.  These directed  brokerage  practices were  discontinued in
October 2003.

Under the terms of the  settlements,  in which DIMA,  DAMI and  DWS-SDI  neither
admitted  nor denied any of the  regulators'  findings,  DIMA,  DAMI and DWS-SDI
agreed to pay  disgorgement,  prejudgment  interest  and civil  penalties in the
total amount of $19.3 million. The portion of the settlements distributed to the
funds was approximately $17.8 million and was paid to the funds as prescribed by
the settlement  orders based upon the amount of brokerage  commissions from each
fund used to satisfy revenue sharing  agreements  with  broker-dealers  who sold
fund shares.

As part of the  settlements,  DIMA,  DAMI and DWS-SDI  also agreed to  implement
certain measures and undertakings relating to revenue sharing payments including
making  additional  disclosures  in the funds'


                                       54
<PAGE>

Prospectuses  or  Statements of  Additional  Information,  adopting or modifying
relevant  policies and  procedures and providing  regular  reporting to the fund
Boards.

Additional  information announced by DeAM regarding the terms of the settlements
is available at www.dws-scudder.com/regulatory_settlements.

The matters alleged in the regulatory  settlements described above also serve as
the general basis of a number of private class action lawsuits involving the DWS
funds. These lawsuits name as defendants various persons,  including certain DWS
funds,  the  funds'  investment  advisors  and  their  affiliates,  and  certain
individuals,  including  in some cases fund  Trustees/Directors,  officers,  and
other parties.  Each DWS fund's  investment  advisor has agreed to indemnify the
applicable  DWS funds in connection  with these  lawsuits,  or other lawsuits or
regulatory actions that may be filed making similar allegations.

Based on currently available information, the funds' investment advisors believe
the likelihood that the pending lawsuits will have a material adverse  financial
impact on a DWS fund is remote and such  actions  are not  likely to  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.



                             FUND SERVICE PROVIDERS

Administrator


DIMA located at 345 Park Avenue, New York, New York 10154, serves as the Trust's
administrator  (the  "Administrator").   The  Funds  recently  entered  into  an
administrattive  services agreement with the Administrator (the  "Administrative
Services  Agreement"),   pursuant  to  which  the  Administrator  provides  most
administrative  services to the Funds,  including,  among others,  providing the
Funds with  personnel,  preparing and making  required  filings on


                                       55
<PAGE>

behalf of the Funds, maintaining books and records for the Funds, and monitoring
the  valuation  of  Funds  securities.  For  all  services  provided  under  the
Administrative  Services  Agreement,  each Fund pays the  Administrator a fee of
0.10% of the Fund's respective average daily net assets.

Under the Administrative  Services Agreement,  DIMA is obligated on a continuous
basis to provide  such  administrative  services as the Board of Trustees of the
Funds  reasonably  deems necessary for the proper  administration  of the Funds.
DIMA provides the Funds with personnel;  arranges for the preparation and filing
of the Funds' tax returns; prepares and submits reports and meeting materials to
the  Board  and the  shareholders;  prepares  and files  updates  to the  Funds'
prospectus  and SAI as well as other  reports  required  to be filed by the SEC;
maintains the Funds'  records;  provides each Fund with office space,  equipment
and  services;  supervises,   negotiates  the  contracts  of  and  monitors  the
performance  of third parties  contractors;  oversees the tabulation of proxies;
monitors the  valuation of portfolio  securities  and monitors  compliance  with
Board-approved valuation procedures;  assists in establishing the accounting and
tax policies of each Fund;  assists in the resolution of accounting  issues that
may arise with  respect to each  Fund;  establishes  and  monitors  each  Fund's
operating expense budgets;  reviews and processes each Fund's bills;  assists in
determining  the amount of dividends and  distributions  available to be paid by
each Fund, prepares and arranges dividend notifications and provides information
to agents to effect payments thereof; provides to the Board periodic and special
reports;  provides  assistance with investor and public relations  matters;  and
monitors the registration of shares under applicable  federal and state law. The
Administrative  Services  Agreement provides that the Advisor will not be liable
under the Administrative Services Agreement except for willful misfeasance,  bad
faith or  negligence  in the  performance  of its  duties  or from the  reckless
disregard by it of its duties and obligations thereunder.


Pursuant to an agreement  between the  Administrator  and SSB, the Administrator
has delegated certain administrative functions to SSB. The costs and expenses of
such delegation are borne by the Administrator, not by a Fund.


Prior to July 1,  2006,  Investment  Company  Capital  Corp.  ("ICCC"),  was the
administrator  for DWS Mid Cap Growth Fund and DWS Small Cap Growth  Fund.  ICCC
received a fee (the "Administrator  Services Fee") of 0.40% of the average daily
net assets for Class AARP and S shares of DWS Small Cap Growth Fund and 0.65% of
the average  daily net assets for Class AARP and 0.45% for Class S shares of DWS
Mid Cap Growth Fund.  Effective June 1, 2006, the Administration  Agreement with
ICCC was  terminated  and the  Funds  entered  into an  Administrative  Services
Agreement with DIMA.

Prior to July 1, 2006, DAMI was the  Administrator  for DWS Micro Cap Fund. DAMI
received  a fee of  0.22% of the  average  daily  net  assets  of the Fund  (the
"Administrator   Service  Fee").  Effective  July  1,  2006  the  Administration
Agreement with DAMI was  terminated and the Fund entered into an  Administrative
Services Agreement with DIMA.

The following administration fees were paid to DIMA by the Funds:

<TABLE>
<CAPTION>

DWS Mid Cap Growth Fund                      Administration Fee                    Unpaid at Fiscal Year End
-----------------------                      ------------------                    -------------------------

<C>                                                 <C>                                      <C>
2007                                                $1,279,181                               $101,228
2006*                                               $416,391                                 $101,784

                                       56
<PAGE>


DWS Small Cap Growth Fund                    Administration Fee                    Unpaid at Fiscal Year End
-------------------------                    ------------------                    -------------------------

2007                                                $432,919                                $31,647
2006*                                               $168,484                                $40,707


DWS Micro Cap Fund                           Administration Fee                    Unpaid at Fiscal Year End
------------------                           ------------------                    -------------------------

2007                                                $71,248                                 $5,394
2006**                                              $23,088                                 $7,332
</TABLE>

* For the period from June 1, 2006 through September 30, 2006.
** For the period
from July 1, 2006 through September 30, 2006

For the period  October 1, 2005 through May 31, 2006 for DWS Mid Cap Growth Fund
and DWS Small Cap Growth Fund and through  June 30, 2006 for DWS Micro Cap Fund,
the Administrator Service fees charged to the Funds were as follows:

<TABLE>
<CAPTION>

DWS Mid Cap Growth Fund                    Administrator Service Fee                        Waived
-----------------------                    -------------------------                        ------

<S>                                                 <C>                                     <C>
Class S                                             $683,715                                $ 66,407


DWS Small Cap Growth Fund                 Administrator Service Fee                         Waived
-------------------------                 -------------------------                         ------

Class S                                             $204,560                                $  3,533


DWS Micro Cap Fund                        Administrator Service Fee                         Waived
------------------                        -------------------------                         ------

Class S                                             $  3,581                                $  1,383


For the fiscal year ended September 30, 2005:

DWS Mid Cap Growth Fund                   Administrator Service Fee                         Waived
-----------------------                   -------------------------                         ------


Class S **                                          $ 35,583                                $  5,202



DWS Small Cap Growth Fund                 Administrator Service Fee                         Waived
-------------------------                 -------------------------                         ------


Class S**                                           $304,074                                $ 91,112



DWS Micro Cap Fund                        Administrator Service Fee                         Waived
------------------                        -------------------------                         ------


Class S**                                           $222,333                                $172,823
</TABLE>

                                       57
<PAGE>

**       Class S  shares  for DWS Mid Cap  Growth  Fund and DWS  Micro  Cap Fund
         commenced  operations on February 1, 2005. Class S shares for DWS Small
         Cap Growth Fund commenced operations on December 20, 2004.

Pursuant to DeAM  procedures  approved by the Boards on behalf of the DWS funds,
proof of claim forms are  routinely  filed on behalf of the DWS funds by a third
party service provider,  with certain limited exceptions.  The Boards of the DWS
funds receive periodic reports regarding the implementation of these procedures.


Distributor

DWS Scudder  Distributors,  Inc.  ("DWS-SDI") is the principal  distributor  for
shares of each Fund.  DWS-SDI is a registered  broker-dealer  and is  affiliated
with DIMA.  The  principal  business  address of DWS-SDI is 222 South  Riverside
Plaza, Chicago, IL 60606.

DWS-SDI  serves  as  the  distributor  of  the  Funds'  shares  pursuant  to the
Distribution  Agreement.  The terms and conditions of the Distribution Agreement
are exactly the same as the Distribution Agreement with ICC Distributors,  Inc.,
the  former  distributor  of the  Funds.  DWS-SDI  enters  into a Selling  Group
Agreement with certain  broker-dealers  (each a  "Participating  Dealer").  If a
Participating  Dealer  previously  had  agreements in place with DWS-SDI and ICC
Distributors,  Inc., the DWS-SDI Agreement controls. If the Participating Dealer
did not have an  agreement  with  DWS-SDI,  then the terms of the  assigned  ICC
Distributors,  Inc.  agreement remain in effect.  These Selling Group Agreements
may be terminated by their terms or by the terms of the Distribution  Agreement,
as  applicable.  DWS-SDI is a wholly owned  subsidiary  of Deutsche Bank AG. The
address for DWS-SDI is 222 South Riverside Plaza, Chicago, IL 60606.

Under the underwriting  agreement,  each Fund is responsible for: the payment of
all fees and expenses in connection with the preparation and filing with the SEC
of its registration  statement and prospectus and any amendments and supplements
thereto;  the registration  and  qualification of shares for sale in the various
states,  including registering the Fund as a broker or dealer in various states,
as  required;  the  fees  and  expenses  of  preparing,   printing  and  mailing
prospectuses  annually to existing shareholders (see below for expenses relating
to prospectuses paid by the Distributor);  notices, proxy statements, reports or
other  communications  to  shareholders  of the Fund;  the cost of printing  and
mailing  confirmations of purchases of shares and any prospectuses  accompanying
such  confirmations;  any issuance  taxes and/or any initial  transfer  taxes; a
portion of shareholder  toll-free  telephone charges and expenses of shareholder
service  representatives;  the cost of  wiring  funds for  share  purchases  and
redemptions (unless paid by the shareholder who initiates the transaction);  the
cost of printing and postage of business reply  envelopes;  and a portion of the
cost of computer terminals used by both the Fund and the Distributor.

The Distributor will pay for printing and  distributing  prospectuses or reports
prepared for its use in  connection  with the offering of each Fund's  shares to
the  public  and  preparing,  printing  and  mailing  any  other  literature  or
advertising in connection with the offering of shares of the fund to the public.
The  Distributor  will  pay  all  fees  and  expenses  in  connection  with  its
qualification  and  registration  as a broker or dealer under  federal and state
laws,  a portion of the cost of  toll-free  telephone  service  and  expenses of
shareholder  service  representatives,   a  portion  of  the  cost  of  computer
terminals, and expenses of any activity which is primarily intended to result in
the sale of shares  issued by the fund,  unless a Rule  12b-1  Plan is in effect
which provides that a Fund shall bear some or all of such expenses.

Although the Funds do not currently have a 12b-1 Plan for these classes, and the
Trustees of each Trust have no current intention of adopting one, each Fund will
also  pay  those  fees  and  expenses  permitted  to be paid or  assumed  by the
applicable  Trust  pursuant  to a 12b-1  Plan,  if any,  adopted  by the  Trust,
notwithstanding  any  other  provision  to  the  contrary  in  the  underwriting
agreement.

The Distributor  currently  offers shares of each Fund on a continuous  basis to
investors  in all  states  in which  shares of the Fund may from time to time be
registered or where  permitted by  applicable  law. The  underwriting  agreement
provides  that the  Distributor  accepts  orders for  shares at net asset  value
because no sales commission or load is charged to the investor.  The Distributor
has made no firm commitment to acquire shares of any of the Funds.

                                       58
<PAGE>

Custodian


Each Fund  employs  SSB, 225 Franklin  Street,  Boston,  Massachusetts  02110 as
custodian.  SSB has entered into agreements with foreign subcustodians  approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank  AG,  an  affiliate  of  the  Investment   Advisor,  as  subcustodian  ("DB
Subcustodian") in certain  countries.  To the extent a Fund holds any securities
in the  countries in which SSB uses DB  Subcustodian  as a  subcustodian,  those
securities  will be held by DB  Subcustodian as part of a larger omnibus account
in the name of SSB (the "Omnibus  Account").  For its services,  DB Subcustodian
receives (1) an annual fee based on a percentage of the average daily net assets
of the Omnibus Account and (2) transaction  charges with respect to transactions
that occur within the Omnibus Account.


Transfer Agent and Shareholder Service Agent

DWS Scudder  Investments  Service  Company  ("DWS-SISC"),  a  subsidiary  of the
Advisor,  serves as transfer  agent for each Fund pursuant to a transfer  agency
agreement.  Under its  transfer  agency  agreement  with the  applicable  Trust,
DWS-SISC  maintains  the  shareholder  account  records  for each Fund,  handles
certain  communications between shareholders and the applicable Trust and causes
to be  distributed  any dividends and  distributions  payable by the  applicable
Trust. DWS-SISC may be reimbursed by the Fund for its out-of-pocket expenses.


The Transfer  Agent  receives an annual  service fee for each account of a Fund,
based on the type of account.  For open retail  accounts,  the fee is a flat fee
ranging from $20.00 to $27.50 per account,  for open  wholesale  money funds the
fee is $32.50 per account, while for certain retirement accounts serviced on the
recordkeeping system of ADP, Inc., the fee is a flat fee up to $3.46 per account
(as of October  2006,  indexed to  inflation)  plus an asset  based fee of up to
0.25% of  average  net  assets.  1/12th of the  annual  service  charge for each
account is  charged  and  payable to the  Transfer  Agent each  month.  A fee is
charged for any account  which at any time during the month had a share  balance
in the  Fund.  Smaller  fees are also  charged  for  closed  accounts  for which
information  must be retained on the Transfer Agent's system for up to 18 months
after closing for tax reporting purposes.

Certain  out-of-pocket  expenses  incurred  by  the  Transfer  Agent,  including
expenses of printing and mailing  routine fund  disclosure  documents,  costs of
record retention and transaction  processing costs are reimbursed by the Fund or
are paid  directly  by the  Fund.  Certain  additional  out-of-pocket  expenses,
including costs of computer  hardware and software,  third party  record-keeping
and processing of proxy statements,  may only be reimbursed by the Fund with the
prior approval of the Fund's Board.

For the fiscal year ended  September 30, 2006, the amounts  charged to the Funds
by DWS-SISC were as follows:

<TABLE>
<CAPTION>

Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------

<S>                                        <C>                    <C>                             <C>
DWS Mid Cap Growth Fund                   Class S                 $142,347                             --
DWS Small Cap Growth Fund                 Class S                  $89,186                       $72,933
DWS Micro Cap Fund                        Class S                     $612                          $529
</TABLE>

                                       59
<PAGE>

For the fiscal year ended  September 30, 2007, the amounts  charged to the Funds
by DWS-SISC were as follows:

<TABLE>
<CAPTION>

Fund                                       Class                    Total                     Amount Waived
----                                       -----                    -----                     -------------

<S>                                        <C>                    <C>                             <C>
DWS Mid Cap Growth Fund                   Class S                 $491,600                      $125,996
DWS Small Cap Growth Fund                 Class S                 $547,476                      $349,346
DWS Micro Cap Fund                        Class S                  $13,100                       $13,100

</TABLE>

Pursuant to a sub-transfer  agency  agreement  between DWS-SISC and DST Systems,
Inc. ("DST"),  333 West 11th Street,  Kansas City, Missouri 64105,  DWS-SISC has
delegated certain transfer agent and dividend paying agent functions to DST.

Each Fund, or the Advisor (including any affiliate of the Advisor), or both, may
pay   unaffiliated   third  parties  for  providing   recordkeeping   and  other
administrative  services with respect to accounts of  participants in retirement
plans or other  beneficial  owners of Fund shares whose  interests are generally
held in an omnibus account.


DWS-SISC acts as a Shareholder Service Agent pursuant to its agreement with each
Trust  and  receives  no  additional   compensation  from  the  Funds  for  such
shareholder  services.  The service fees of any other Service Agents,  including
broker-dealers, will be paid by DWS-SISC from its fees. The services provided by
a Service Agent may include establishing and maintaining  shareholder  accounts,
processing  purchase  and  redemption  transactions,  arranging  for bank wires,
performing shareholder sub-accounting, answering client inquiries regarding each
Trust, assisting clients in changing dividend options,  account designations and
addresses,  providing periodic statements showing the client's account balances,
transmitting proxy statements,  periodic reports, updated prospectuses and other
communications  to shareholders  and, with respect to meetings of  shareholders,
collecting,  tabulating  and  forwarding  to each  Trust  executed  proxies  and
obtaining  such other  information  and  performing  such other  services as the
Transfer Agent or the Service Agent's  clients may reasonably  request and agree
upon with the Service Agent.  Service Agents may separately charge their clients
additional  fees only to cover  provision of  additional  or more  comprehensive
services not already provided under the agreement with DWS-SISC,  or of the type
or scope  not  generally  offered  by a  mutual  fund,  such as cash  management
services or enhanced retirement or trust reporting.  In addition,  investors may
be charged a transaction fee if they effect  transactions in Fund shares through
a Service Agent.  Each Service Agent has agreed to transmit to the  shareholders
who are its  customers  appropriate  disclosures  of any fees that it may charge
them directly.


Legal Counsel

Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019,  serves as
counsel to each Trust and each Fund.

Ropes & Gray LLP, One International  Place,  Boston,  Massachusetts  02110-2624,
serves as counsel to the Independent Trustees to the Trust.

Independent Registered Public Accounting Firm

PricewaterhouseCoopers  LLP,  125 High  Street,  Boston,  MA 02110,  acts as the
Independent Registered Public Accounting Firm for each Fund.

                                       60
<PAGE>

                             PORTFOLIO TRANSACTIONS


The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio  securities,  including  the  allocation  of  brokerage.  With
respect to those  funds for which a  sub-investment  advisor  manages the fund's
investments,  references in this section to the "Advisor" should be read to mean
the Sub-Advisor, except as noted below.

The  policy of the  Advisor  in  placing  orders  for the  purchase  and sale of
securities  for the Funds is to seek best  execution,  taking into  account such
factors,   among  others,   as  price;   commission  (where   applicable);   the
broker-dealer's   ability  to  ensure  that  securities  will  be  delivered  on
settlement date; the willingness of the  broker-dealer to commit its capital and
purchase  a  thinly  traded   security  for  its  own  inventory;   whether  the
broker-dealer   specializes  in  block  orders  or  large  program  trades;  the
broker-dealer's  knowledge of the market and the security;  the  broker-dealer's
ability to  maintain  confidentiality;  the  broker-dealer's  ability to provide
access to new  issues;  the  broker-dealer's  ability  to provide  support  when
placing a difficult trade;  the financial  condition of the  broker-dealer;  and
whether the broker-dealer has the infrastructure and operational capabilities to
execute  and  settle  the trade.  The  Advisor  seeks to  evaluate  the  overall
reasonableness of brokerage  commissions with commissions  charged on comparable
transactions  and compares the brokerage  commissions (if any) paid by the Funds
to reported commissions paid by others. The Advisor routinely reviews commission
rates,  execution  and  settlement  services  performed  and makes  internal and
external comparisons.

Commission  rates  on  transactions  in  equity  securities  on U.S.  securities
exchanges are subject to negotiation. Commission rates on transactions in equity
securities on foreign  securities  exchanges are generally fixed.  Purchases and
sales of  fixed-income  securities and certain  over-the-counter  securities are
effected  on  a  net  basis,  without  the  payment  of  brokerage  commissions.
Transactions  in  fixed  income  and  certain  over-the-counter  securities  are
generally  placed by the  Advisor  with the  principal  market  makers for these
securities  unless the Advisor  reasonably  believes more favorable  results are
available elsewhere.  Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices.  Purchases of  underwritten  issues
will  include  an  underwriting  fee  paid  to  the  underwriter.  Money  market
instruments are normally purchased in principal  transactions  directly from the
issuer or from an underwriter or market maker.

It is  likely  that the  broker-dealers  selected  based  on the  considerations
described in this section will include  firms that also sell shares of the Funds
to their  customers.  However,  the Advisor does not consider sales of shares of
the Funds as a factor in the selection of  broker-dealers  to execute  portfolio
transactions  for the Funds  and,  accordingly,  has  implemented  policies  and
procedures  reasonably designed to prevent its traders from considering sales of
shares of the Funds as a factor in the  selection of  broker-dealers  to execute
portfolio transactions for the Funds.

The Advisor is  permitted  by Section  28(e) of the  Securities  Exchange Act of
1934, as amended ("1934 Act"), when placing  portfolio  transactions for a Fund,
to cause the Fund to pay brokerage  commissions  in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage  services if the Advisor determines that such commissions
are  reasonable in relation to the overall  services  provided.  The Advisor may
from  time to time,  in  reliance  on  Section  28(e) of the 1934  Act,  execute
portfolio  transactions with  broker-dealers that provide research and brokerage
services to the Advisor.  Consistent  with the Advisor's  policy  regarding best
execution,  where more than one broker is  believed  to be capable of  providing
best execution for a particular  trade, the Advisor may take into  consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute  the trade.  Although  certain  research  and  brokerage  services  from
broker-dealers may be useful to a Fund and to the Advisor,  it is the opinion of
the Advisor that such information only supplements its own research effort since
the  information  must still be analyzed,  weighed and reviewed by the Advisor's
staff. To the extent that research and brokerage  services of value are received
by the Advisor,  the Advisor may avoid expenses that it might  otherwise  incur.
Research and brokerage  services  received from a broker-dealer may be useful to
the Advisor and its affiliates in providing  investment  management  services to
all or some of its  clients,  which  includes  a Fund.  Services  received  from
broker-dealers  that executed  securities  transactions for a Portfolio will not
necessarily be used by the Advisor specifically to service such Fund.

Research and brokerage services provided by broker-dealers may include,  but are
not limited to,  information on the economy,  industries,  groups of securities,
individual   companies,   statistical   information,   accounting  and  tax  law

                                       61
<PAGE>

interpretations,  political developments, legal developments affecting portfolio
securities,  technical  market action,  pricing and appraisal  services,  credit
analysis,  risk measurement  analysis,  performance analysis and measurement and
analysis of corporate responsibility issues. Research and brokerage services are
typically  received  in the form of written  or  electronic  reports,  access to
specialized  financial  publications,  telephone  contacts and personal meetings
with  security  analysts,  but may also be  provided  in the form of  access  to
various  computer  software and meetings  arranged  with  corporate and industry
representatives.

The Advisor may also select  broker-dealers  and obtain from them  research  and
brokerage  services that are used in connection  with executing  trades provided
that such services are consistent  with  interpretations  under Section 28(e) of
the 1934 Act.  Typically,  these  services  take the form of  computer  software
and/or  electronic  communication  services  used by the  Advisor to  facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations thereunder.  Currently,
it  is  the  Advisor's  policy  that  Sub-Advisors  may  not  execute  portfolio
transactions on behalf of the Funds to obtain third party research and brokerage
services.  The  Advisor  may, in the future,  change  this  policy.  Regardless,
certain  Sub-Advisors may, as matter of internal policy, limit or preclude third
party research and brokerage services.

The Advisor may use brokerage  commissions to obtain certain brokerage  products
or services that have a mixed use (i.e., it also serves a function that does not
relate to the investment  decision-making process). In those circumstances,  the
Advisor  will make a good faith  judgment to evaluate  the various  benefits and
uses to which it  intends to put the mixed use  product or service  and will pay
for that portion of the mixed use product or service that it reasonably believes
does not constitute research and brokerage services with its own resources.

DIMA will  monitor  regulatory  developments  and market  practice in the use of
client  commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment  decisions for each Fund and for other investment accounts managed by
the  Advisor  are  made  independently  of each  other  in  light  of  differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases,  simultaneous  transactions are inevitable. To the
extent  permitted by law, the Advisor may aggregate the securities to be sold or
purchased  for a Fund with those to be sold or purchased  for other  accounts in
executing  transactions.  Purchases  or sales are then  averaged as to price and
commission  and  allocated  as to amount in a manner  deemed  equitable  to each
account.  While in some cases this practice  could have a detrimental  effect on
the price  paid or  received  by,  or on the size of the  position  obtained  or
disposed of for,  the Fund,  in other  cases it is believed  that the ability to
engage in volume transactions will be beneficial to the Fund.

DIMA and its affiliates and the Funds' management team manage other mutual funds
and separate accounts,  some of which use short sales of securities as a part of
its  investment  strategy.  The  simultaneous   management  of  long  and  short
portfolios creates potential conflicts of interest including the risk that short
sale activity could adversely affect the market value of the long positions (and
vice  versa),  the  risk  arising  from  sequential  orders  in long  and  short
positions,  and the risks associated with receiving  opposing orders at the same
time.

DIMA has adopted procedures that it believes are reasonably designed to mitigate
these  potential  conflicts  of interest.  Incorporated  in the  procedures  are
specific  guidelines  developed to ensure fair and  equitable  treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory  reviews,  as well as compliance  oversight to ensure
that  potential  conflicts  of interest  relating  to this type of activity  are
properly addressed.

Deutsche Bank AG or one of its affiliates (or in the case of a Sub-Advisor,  the
Sub-Advisor  or one of its  affiliates)  may act as a broker  for the  Funds and
receive brokerage commissions or other transaction-related compensation from the
Funds in the purchase and sale of securities, options or futures contracts when,
in the judgment of the Advisor,  and in accordance with  procedures  approved by
the Funds'  Boards,  the  affiliated  broker  will be able to obtain a price and
execution at least as favorable as those obtained from other  qualified  brokers
and if, in the


                                       62
<PAGE>

transaction, the affiliated broker charges the Funds a rate consistent with that
charged to comparable unaffiliated customers in similar transactions.



                                       63
<PAGE>

Pursuant to  procedures  determined  by the  Trustees and subject to the general
policies of each Fund and Section  17(e) of the 1940 Act,  the Advisor may place
securities  transactions  with brokers with whom it is  affiliated  ("Affiliated
Brokers").

For the fiscal year ended  September  30, 2005,  each Fund paid the following in
brokerage commissions:

             DWS Mid Cap Growth Fund                        $1,829,612
             DWS Small Cap Growth Fund                      $1,786,966
             DWS Micro Cap Fund                               $458,539

For the fiscal year ended  September  30, 2006,  each Fund paid the following in
brokerage commissions:

                                       64
<PAGE>

             DWS Mid Cap Growth Fund                        $1,801,405
             DWS Small Cap Growth Fund                      $1,190,469
             DWS Micro Cap Fund                               $389,581


For the fiscal year ended  September  30, 2007,  each Fund paid the following in
brokerage commissions:

             DWS Mid Cap Growth Fund                        $1,506,949
             DWS Small Cap Growth Fund                        $833,006
             DWS Micro Cap Fund                               $287,167


Each Fund did not pay any affiliated  brokerage  commissions for its most recent
fiscal year end.

Securities  of Regular  Broker-Dealers.  Each Fund is required  to identify  any
securities  of its "regular  brokers or dealers" (as such term is defined in the
1940 Act) which the Fund has acquired during its most recent fiscal year.


At September 30, 2007, the following Funds held the following  securities of its
regular brokers or dealers:


DWS Mid Cap Growth Fund

<TABLE>
<CAPTION>


Name of Regular Broker or Dealer or Parent (Issuer)     Value of Securities Owned as of September 30, 2007
---------------------------------------------------     --------------------------------------------------

<S>                                                                     <C>
Eaton Vance Corp.                                                       $12,663,000
Affiliated Managers Group, Inc.                                         $57,188,000
T. Rowe Price Group, Inc.                                               $28,937,000

</TABLE>


DWS Small Cap Growth Fund


<TABLE>
<CAPTION>

Name of Regular Broker or Dealer or Parent (Issuer)     Value of Securities Owned as of September 30,  2007
---------------------------------------------------     ---------------------------------------------------

<S>                                                                               <C>
FCStone Group Inc.                                                                $4,173,000

</TABLE>

DWS Micro Cap Fund


As of September 30, 2007,  DWS Micro Cap Fund did not hold any securities of its
regular broker dealers.


Portfolio Turnover


The  portfolio  turnover  rates for the fiscal years ended 2007 and 2006 were as
follows:

                                         2007                   2006
                                         ----                   ----

DWS Mid Cap Growth Fund                    56%                    53%
DWS Small Cap Growth Fund                  64%                    74%
DWS Micro Cap Fund                         73%                   100%


                                       65
<PAGE>

These  rates  will  vary  from  year  to  year.  High  turnover  rates  increase
transaction  costs and may increase net short-term  capital  gains.  The Advisor
considers these effects when  evaluating the anticipated  benefits of short-term
investing.

                        PURCHASE AND REDEMPTION OF SHARES

General Information

Policies and procedures affecting  transactions in fund shares can be changed at
any  time  without  notice,  subject  to  applicable  law.  Transactions  may be
contingent  upon proper  completion of application  forms and other documents by
shareholders  and their  receipt by the  fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the fund and its  agents  may  occur.  Shareholders  (or  their
financial  service firms) are responsible for all losses and fees resulting from
bad checks,  cancelled orders or the failure to consummate transactions effected
pursuant to instructions reasonably believed to be genuine.

A  distribution  will be  reinvested in shares of the same fund and class if the
distribution check is returned as undeliverable.

Orders  will be  confirmed  at a price  based on the net asset value of the fund
next determined after receipt in good order by DWS-SDI of the order  accompanied
by payment.  Orders received by dealers or other financial  services firms prior
to the  determination  of net asset value and  received in good order by DWS-SDI
prior to the determination of net asset value will be confirmed at a price based
on the net asset value next determined after receipt by DWS-SDI ("trade date").

Certificates. Share certificates will not be issued. Share certificates now in a
shareholder's  possession may be sent to the transfer agent for cancellation and
book-entry  credit to such  shareholder's  account.  Certain telephone and other
procedures   require   book-entry   holdings.   Shareholders   with  outstanding
certificates bear the risk of loss.


Additional  Minimum Balance Policies.  For fiduciary  accounts such as IRAs, and
custodial  accounts such as Uniform Gifts to Minor Act and Uniform  Transfers to
Minor Act accounts, the minimum balance is $1,000 for Class S. A shareholder may
open an account with at least $1,000 ($500 for fiduciary/custodial accounts), if
an automatic  investment  plan (AIP) of $50/month  is  established.  DWS Scudder
group  retirement plans and certain other accounts have similar or lower minimum
share balance requirements.

Shareholders  with a combined  household account balance in any of the DWS Funds
of $100,000 or more, as well as group  retirement  and certain  other  accounts,
will not be subject to an automatic redemption.

Fiduciary  (e.g., IRA or Roth IRA) and custodial  accounts (e.g.,  UGMA or UTMA)
with  balances  below  $1,000 are subject to automatic  redemption  following 60
days' written notice to applicable shareholders.



                                       66
<PAGE>

Use of Financial  Services  Firms.  Investment  dealers and other firms  provide
varying arrangements for their clients to purchase and redeem the Fund's shares,
including higher minimum investments,  and may assess transaction or other fees.
Firms may arrange  with their  clients for other  investment  or  administrative
services.  Such firms may independently  establish and charge additional amounts
to their  clients  for such  services.  Firms  also may hold a Fund's  shares in
nominee or street  name as agent for and on behalf of their  customers.  In such
instances,  the Fund's transfer  agent,  DWS Scudder  Service  Corporation  (the
"Transfer Agent"),  will have no information with respect to or control over the
accounts of specific shareholders.  Such shareholders may obtain access to their
accounts and information  about their accounts only from their firm.  Certain of
these  firms may receive  compensation  from the Funds  through the  Shareholder
Service Agent for  record-keeping  and other expenses  relating to these nominee
accounts.  In  addition,  certain  privileges  with  respect to the purchase and
redemption  of shares or the  reinvestment  of  dividends  may not be  available
through such firms. Some firms may participate in a program allowing them access
to  their  clients'  accounts  for  servicing  including,   without  limitation,
transfers of registration and dividend payee changes;  and may perform functions
such  as  generation  of  confirmation   statements  and  disbursement  of  cash
dividends. Such firms, including affiliates of DWS-SDI, may receive compensation
from the fund through the Shareholder Service Agent for these services.


The Funds have authorized one or more financial service institutions,  including
certain members of FINRA other than the Distributor ("financial  institutions"),
to accept purchase and redemption  orders for the Funds' shares.  Such financial
institutions  may also  designate  other parties,  including plan  administrator
intermediaries,  to accept purchase and redemption  orders on the Funds' behalf.
Orders for purchases or redemptions  will be deemed to have been received by the
Funds when such  financial  institutions  or, if  applicable,  their  authorized
designees  accept the orders.  Subject to the terms of the contract  between the
Funds and the  financial  institution,  ordinarily  orders will be priced at the
Funds'  net  asset  value  next  computed  after  acceptance  by such  financial
institution or its authorized  designees and accepted by the Funds.  Further, if
purchases or  redemptions  of the Funds'  shares are arranged and  settlement is
made  at  an  investor's   election  through  any  other  authorized   financial
institution, that financial institution may, at its discretion, charge a fee for
that  service.  The  Board of  Trustees  and the  Distributor,  also the  Funds'
principal  underwriter,  each has the right to limit the amount of purchases by,
and to refuse to sell to, any  person.  The  Trustees  and the  Distributor  may
suspend or  terminate  the  offering  of shares of the Funds at any time for any
reason.

DWS-SDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents  ("DWS Scudder  Wholesalers").  Generally,  DWS Scudder
Wholesalers  market shares of the DWS funds to financial  advisors,  who in turn
may  recommend  that  investors  purchase  shares of a DWS fund.  The Plan is an
incentive program that combines a monthly  incentive  component with a quarterly
strategic bonus component.  Under the Plan, DWS Scudder Wholesalers will receive
a monetary  monthly  incentive based on the amount of sales generated from their
marketing of the funds,  and that incentive will differ depending on the product
category of the fund. Each fund is assigned to one of four product categories --
"Core," "Strategic," "Satellite" or "Non-CSS" - taking into consideration, among
other things, the following criteria, where applicable:

o        The Fund's 3-year performance;
o        The Fund's Morningstar rating;
o        Market size for the fund category;
o        The Fund's size, including sales and redemptions of the Fund's shares;
o        The length of time the Fund's Portfolio Managers have managed the Fund;
         and
o        The Fund's consistency with DWS Scudder's branding.

This  information  and other factors are  presented to a committee  comprised of
representatives  from  various  groups  within  DWS  Scudder,  who  review  on a
quarterly basis the funds assigned to each product category described above, and
make any  changes to those  assignments  at that time.  No one  factor,  whether
positive or negative,  determines a fund's  placement in a given  category;  all
these factors together are considered, and the designation of funds in the Core,
Strategic and Satellite categories represents management's judgment based on the
above criteria.  In addition,  management may consider a fund's profile over the
course  of  several  review  periods  before  making  a change  to its  category
assignment.  These  category  assignments  will be posted  quarterly  to the DWS
funds' Web site at www.dws-scudder.com, approximately one month after the end of
each quarter.  DWS Scudder Wholesalers will


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receive  the  highest  compensation  for  Core  and  Strategic  funds,  less for
Satellite  funds and the lowest for  Non-CSS  funds.  The level of  compensation
among these categories may differ significantly.

In the normal course of business,  DWS Scudder will from time to time  introduce
new funds into the DWS family of funds. As a general rule, all new funds will be
placed in the  Strategic  compensation  category  for a  minimum  period of four
consecutive quarters, and DWS Scudder Wholesalers will be paid at a rate that is
equivalent to that of the Core Fund  category.  After that four quarter  period,
each new fund in the  Strategic  category  will be reviewed by the committee and
either  assigned to one of the four  categories or continued as a Strategic fund
at that time.

The prospect of receiving,  or the receipt of, additional  compensation by a DWS
Scudder  Wholesaler  under the Plan may provide an incentive to favor  marketing
the Core,  Strategic  or  Satellite  funds  over the  Non-CSS  funds.  The Plan,
however,  will not change  the price that you pay for shares of a Fund.  The DWS
Scudder  Compliance  Department  monitors DWS Scudder Wholesaler sales and other
activity  in an  effort  to  detect  unusual  activity  in  the  context  of the
compensation  structure under the Plan. However,  investors may wish to take the
Plan  and the  product  category  of the  fund  into  account  when  considering
purchasing a fund or evaluating any recommendations relating to fund shares.



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Telephone  and  Electronic  Transaction  Procedures.  Shareholders  have various
telephone, Internet, wire and other electronic privileges available. The fund or
its  agents may be liable  for any  losses,  expenses  or costs  arising  out of
fraudulent or unauthorized  instructions pursuant to these privileges unless the
fund or its  agents  reasonably  believe,  based  upon  reasonable  verification
procedures, that the instructions were genuine.  Verification procedures include
recording instructions,  requiring certain identifying information before acting
upon instructions and sending written  confirmations.  During periods when it is
difficult to contact the  Shareholder  Service Agent, it may be difficult to use
telephone, wire and other privileges.


QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via
the Automated  Clearing House System (minimum $50 and maximum  $250,000) from or
to a shareholder's bank, savings and loan, or credit union account in connection
with the purchase or  redemption  of Fund shares.  Shares  purchased by check or
through  QuickBuy and QuickSell or Direct Deposit may not be redeemed under this
privilege  until  such  Shares  have been owned for at least 10  calendar  days.
QuickBuy and  QuickSell  cannot be used with  passbook  savings  accounts or for
certain tax-deferred plans.


Share  Pricing.  Purchases  will be filled at the net asset value per share next
computed after receipt of the application in good order.  The net asset value of
shares of each Fund is  calculated  at 4:00  p.m.  Eastern  time or the close of
business on each day the Exchange is open for trading. Orders received after the
close of regular  trading on the Exchange  will be executed at the next business
day's net asset value. If the order has been placed by a member of FINRA,  other
than the Distributor, it is the responsibility of the member broker, rather than
the fund, to forward the purchase order to (the "transfer agent") in Kansas City
by the close of regular trading on the Exchange.


Dividend  Payment  Option.   Investors  may  have  dividends  and  distributions
automatically   deposited  to  their  predesignated  bank  account  through  DWS
Scudder's Dividend Payment Option request form. Shareholders whose predesignated
checking  account of record is with a member bank of  Automated  Clearing  House
Network  (ACH) can have  income and  capital  gain  distributions  automatically
deposited to their  personal  bank account  usually  within three  business days
after a Fund pays its  distribution.  A Dividend Payment Option request form can
be obtained by visiting our Web site at:  www.dws-scudder.com  or calling  (800)
728-3337. Confirmation Statements will be mailed to shareholders as notification
that distributions have been deposited.

Tax-Sheltered   Retirement   Plans.  The  Shareholder   Service  Agent  provides
retirement  plan  services  and  documents  and DWS-SDI can  establish  investor
accounts in any of the following types of retirement plans:

o        Traditional,  Roth and Education IRAs. This includes Savings  Incentive
         Match Plan for  Employees  of Small  Employers  ("SIMPLE"),  Simplified
         Employee Pension Plan ("SEP") IRA accounts and prototype documents.

o        403(b)(7)  Custodial  Accounts.  This  type  of plan  is  available  to
         employees of most non-profit organizations.

o        Prototype  money  purchase  pension  and  profit-sharing  plans  may be
         adopted by employers.

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<PAGE>

Brochures  describing these plans as well as model defined benefit plans, target
benefit plans,  457 plans,  401(k) plans,  simple 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
Additional fees and transaction policies and procedures may apply to such plans.
Investors  should  consult with their own tax  advisors  before  establishing  a
retirement plan.

Purchases

Each Fund reserves the right to withdraw all or any part of the offering made by
its prospectus and to reject purchase orders for any reason.  Also, from time to
time, a Fund may temporarily  suspend the offering of any class of its shares to
new  investors.  During the period of such  suspension,  persons who are already
shareholders of such class of such fund may be permitted to continue to purchase
additional shares of such class and to have dividends reinvested.

To help the  government  fight the  funding of  terrorism  and money  laundering
activities,  federal law requires all financial  institutions to obtain,  verify
and record  information  that identifies  each person who opens an account.  For
more information, please see "Policies You Should Know About" in the prospectus.

Each Fund may waive the minimum for purchases by trustees,  directors,  officers
or employees of the fund or the Advisor and its affiliates.


Eligible Class S Investors

A.        The  following  investors  may  purchase  Class S shares  of DWS Funds
          either (i) directly from DWS Scudder  Distributors,  Inc. ("DWS-SDI"),
          the Fund's  principal  underwriter;  or (ii)  through an  intermediary
          relationship  with a financial  services firm established with respect
          to the DWS Funds as of December 31, 2004.

          1.      Existing  shareholders of Class S shares of any DWS Fund as of
                  December 31, 2004, and household  members residing at the same
                  address.

          2.      Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection  with the  consolidation  of Class
                  AARP  and  Class S on July  17,  2006  and  household  members
                  residing at the same address.

          3.      Shareholders who have owned Class S shares  continuously since
                  December 31, 2004 and household  members  residing at the same
                  address  may open new  accounts  for Class S shares of any DWS
                  Fund.

          4.      Any  participant  who has owned Class S shares of any DWS Fund
                  through an  employee  sponsored  retirement,  employee  stock,
                  bonus,  pension  or profit  sharing  plan  continuously  since
                  December 31, 2004 may open a new individual  account for Class
                  S shares of any DWS Fund.

          5.      Any  participant  who  owns  Class S  shares  of any DWS  Fund
                  through a retirement, employee stock, bonus, pension or profit
                  sharing plan may complete a direct  rollover to an IRA account
                  that will hold Class S shares. This applies to individuals who
                  begin their retirement plan investments with a DWS Fund at any
                  time, including after December 31, 2004.

          6.      Officers, Fund Trustees and Directors, and full-time employees
                  and their family members, of the Advisor and its affiliates.

          7.      Class S shares are  available to any  accounts  managed by the
                  Advisor,  any  advisory  products  offered  by the  Advisor or
                  DWS-SDI  and to DWS  Allocation  Series or other fund of funds
                  managed by the Advisor or its affiliates.

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<PAGE>

          8.      Shareholders  of Class S of DWS Emerging  Markets  Equity Fund
                  who became  shareholders  of the fund in  connection  with the
                  fund's acquisition of Scudder New Asia Fund, Inc. on April 17,
                  2006.

          9.      Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders in connection with the  consolidation  of Class M
                  and Class S on August 18, 2006 and household  members residing
                  at the same address.

          10.     Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection with the renaming or conversion of
                  Investment Class to Class S on October 23, 2006.

B. The following additional investors may purchase Class S shares of DWS Funds.

          1.      Broker-dealers,   banks  and  registered  investment  advisors
                  ("RIAs")  may  purchase  Class S shares in  connection  with a
                  comprehensive  or  "wrap"  fee  program  or  other  fee  based
                  program.

          2.      Any  group  retirement,  employee  stock,  bonus,  pension  or
                  profit-sharing plans.

          3.      Persons  who  purchase  shares as part of an  investment  only
                  placement in a 529 College Savings Plan.

          4.      Persons who purchase  shares through a Health Savings  Account
                  or a Voluntary Employees' Benefit Association ("VEBA") Trust.

DWS-SDI may, at its discretion,  require appropriate documentation that shows an
investor is eligible to purchase Class S shares.



                                       71
<PAGE>



Clients  having a regular  investment  counsel  account  with the Advisor or its
affiliates and members of their  immediate  families,  officers and employees of
the Advisor or of any  affiliated  organization  and members of their  immediate
families,  members of FINRA and banks may, if they prefer,  subscribe  initially
for at least $2,500 for Class S and $1,000 for Class AARP through DIMA  Investor
Services, Inc. by letter, fax, or telephone.

Automatic Investment Plan. A shareholder may purchase shares of the fund through
an automatic investment program.  With the Direct Deposit Purchase Plan ("Direct
Deposit"),  investments  are made  automatically  (minimum  $1,000  and  maximum
$250,000  for initial  investments  and a minimum of $50 and maximum of $250,000
for subsequent  investments) from the shareholder's  account at a bank,  savings
and loan or credit union into the shareholder's  fund account.  Termination by a
shareholder  will become  effective  within  thirty  days after the  Shareholder
Service  Agent has  received  the request.  A Fund may  immediately  terminate a
shareholder's  Direct  Deposit  in the  event  that  any item is  unpaid  by the
shareholder's financial institution.

Minimum Subsequent Investment Policies.  For current shareholders there is a $50
minimum investment requirement for subsequent investments in a Fund. There is no
minimum  subsequent   investment   requirement  for  investments  on  behalf  of
participants in certain  fee-based and wrap programs  offered through  financial
intermediaries approved by the Advisor.


Payroll  Investment  Plans. A shareholder  may purchase  shares through  Payroll
Direct Deposit or Government  Direct  Deposit.  Under these  programs,  all or a
portion of a shareholder's  net pay or government check is invested each payment
period.  A shareholder may terminate  participation  in these programs by giving
written  notice  to  the  shareholder's   employer  or  government   agency,  as
appropriate.  (A reasonable  time to act is required.) A Fund is not responsible
for the  efficiency of the employer or  government  agency making the payment or
any financial institutions transmitting payments.


Expedited Purchase Procedures for Existing  Shareholders.  Shareholders of other
DWS funds who have  submitted an account  application  and have  certified a tax
identification  number, clients having a regular investment


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<PAGE>

counsel  account  with  the  Advisor  or its  affiliates  and  members  of their
immediate  families,  officers and employees of the Advisor or of any affiliated
organization and their immediate families,  members of FINRA, and banks may open
an account by wire by calling (800) 728-3337 for instructions. The investor must
send a duly completed and signed application to the applicable Fund promptly.  A
subsequent  purchase  order may be  placed by  telephone,  etc.  by  established
shareholders  (except by DWS Scudder  Individual  Retirement  Account (IRA), DWS
Scudder  Horizon Plan, DWS Scudder  Profit  Sharing and Money  Purchase  Pension
Plans,  DWS Scudder  401(k) and DWS Scudder  403(b)  Plan  holders),  members of
FINRA, and banks.




Revenue Sharing

In light of recent  regulatory  developments,  the Advisor,  the Distributor and
their affiliates have undertaken to furnish certain additional information below
regarding  the  level  of  payments  made  by them to  selected  affiliated  and
unaffiliated  brokers,  dealers,  participating  insurance  companies  or  other
financial  intermediaries  ("financial  advisors") in  connection  with the sale
and/or  distribution  of  Fund  shares  or the  retention  and/or  servicing  of
investors and Fund shares ("revenue sharing").

The  Advisor,  the  Distributor  and/or  their  affiliates  may  pay  additional
compensation,  out of their own  assets and not as an  additional  charge to the
Fund, to financial  advisors in connection with the sale and/or  distribution of
Fund shares or the retention and/or servicing of Fund investors and Fund shares.
Such revenue  sharing  payments are in addition to any  distribution  or service
fees  payable  under any Rule  12b-1 or  service  plan of any fund,  any  record
keeping/sub-transfer  agency/networking  fees  payable  by the  Fund  (generally
through the  Distributor  or an  affiliate)  and/or the  Distributor  to certain
financial   advisors  for  performing  such  services  and  any  sales  charges,
commissions,   non-cash  compensation  arrangements  expressly  permitted  under
applicable  rules of FINRA or other  concessions  described  in the fee table or
elsewhere in the  Prospectuses or the SAI as payable to all financial  advisors.
For example, the Advisor, the Distributor and/or their affiliates may compensate
financial  advisors  for  providing  the Fund with "shelf  space" or access to a
third  party  platform  or fund  offering  list,  or  other  marketing  programs
including, without limitation, inclusion of the Fund on preferred or recommended
sales  lists,  mutual  fund  "supermarket"  platforms  and  other  formal  sales
programs;  granting the  Distributor  access to the  financial  advisor's  sales
force;  granting the Distributor access to the financial  advisor's  conferences
and meetings;  assistance  in training and  educating  the  financial  advisor's
personnel; and, obtaining other forms of marketing support. The level of revenue
sharing payments made to financial advisors may be a fixed fee or based upon one
or more of the following factors:  gross sales,  current assets and/or number of
accounts of the Fund attributable to the financial advisor,  the particular fund
or fund type or other  measures  as agreed to by the  Advisor,  the  Distributor
and/or their affiliates and the financial  advisors or any combination  thereof.
The amount of these payments is determined at the discretion of the Advisor, the
Distributor  and/or their affiliates from time to time, may be substantial,  and
may be different for different  financial  advisors  based on, for example,  the
nature of the services provided by the financial advisor.

The Advisor,  the  Distributor  and/or their  affiliates  currently make revenue
sharing  payments  from  their own  assets in  connection  with the sale  and/or
distribution of DWS Fund shares, or the retention and/or servicing of investors,
to financial  advisors in amounts that  generally  range from .01% up to .50% of
assets of the Fund serviced and  maintained by the  financial  advisor,  .10% to
..25% of sales of the Fund attributable to the financial  advisor,  a flat fee of
$12,500 up to $500,000, or any combination thereof. These amounts are subject to
change  at  the  discretion  of  the  Advisor,   the  Distributor  and/or  their
affiliates.   Receipt  of,  or  the  prospect  of  receiving,   this  additional
compensation,


                                       73
<PAGE>

may influence your  financial  advisor's  recommendation  of this Fund or of any
particular  share class of the Fund. You should review your financial  advisor's
compensation  disclosure  and/or talk to your  financial  advisor to obtain more
information  on  how  this  compensation  may  have  influenced  your  financial
advisor's recommendation of this Fund.

The Advisor,  the Distributor and/or their affiliates may also make such revenue
sharing  payments  to  financial  advisors  under the terms  discussed  above in
connection  with  the  distribution  of both  DWS  funds  and  non-DWS  funds by
financial  advisors to retirement plans that obtain record keeping services from
ADP, Inc. on the DWS Scudder branded  retirement plan platform (the  "Platform")
with the level of revenue  sharing  payments  being based upon sales of both the
DWS funds and the  non-DWS  funds by the  financial  advisor on the  Platform or
current  assets  of both  the DWS  funds  and the  non-DWS  funds  serviced  and
maintained by the financial advisor on the Platform.

As of the  date  hereof,  the  Fund  has been  advised  that  the  Advisor,  the
Distributor  and their  affiliates  expect that the following firms will receive
revenue sharing payments at different points during the coming year as described
above:

Channel: Broker-Dealers and Financial Advisors

A G Edwards & Sons Inc.
AIG Advisors Group
Ameriprise
Cadaret, Grant & Co. Inc.
Capital Analyst, Incorporated
Citigroup Global Markets, Inc. (dba Smith Barney)
Commonwealth  Equity Services,  LLP (dba Commonwealth  Financial  Network)
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Group
LaSalle Financial Services, Inc. (dba ABN Amro)
Linsco/Private Ledger Corp.
Marsh Insurance and Investment Company
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
Pacific Select Distributors Group
Raymond James & Associates
Raymond James Financial Services
RBC Dain Rauscher, Inc
Securities America, Inc.
UBS Financial Services
Wells Fargo Investments, LLC

Channel: Cash Product Platform

ADP Clearing & Outsourcing
Allegheny Investments LTD
Bank of New York (Hare & Co.)
Bear, Stearns Securities Corp.
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange
Citibank NA
D.A. Davidson & Company
Deutsche Bank Securities Inc.

                                       74
<PAGE>

Deutsche Bank Trust Company Americas
Emmett A. Larkin Company
Fiduciary Trust Co. - International
H.C. Denison Co.
Huntleigh Securities
Investors Bank & Trust
JPMorgan Chase
Lincoln Investment Planning
Linsco Private Ledger  Financial  Services
Mellon  Financial  Markets LLC
Penson Financial Services
Pershing Choice Platform ProFunds Distributors, Inc.
Romano Brothers and Company
SAMCO Capital Markets (Fund Services, Inc.)
Smith Moore & Company
State Street Bank & Trust Co.
Sungard Institutional Brokerage Inc.
US Bancorp
UBS Financial Services Inc.
William Blair & Company\

Channel: Third Party Insurance Platforms

Acacia National Life Insurance
Allmerica Financial Life Insurance Company
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
American General Life Insurance Company
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
Genworth Life Insurance Company of New York
Genworth Life and Annuity Insurance Company
Great West Life and Annuity  Insurance  Company
Hartford Life Insurance Company
ICMG Registered Variable Life
Integrity Life Insurance Company
John Hancock Life Insurance companies
Kemper Investors Life Insurance Company
Lincoln Benefit Life Insurance Company
Lincoln Life & Annuity Company of New York
Lincoln National Life Insurance Company
Massachusetts Mutual Life Insurance Group
MetLife Group
Minnesota Life Insurance Company
Mutual of America Life Insurance Company
National Life Insurance Company
National Integrity Life Insurance Company
Nationwide Group

                                       75
<PAGE>

New York Life Insurance and Annuity Corporation
Phoenix Life Insurance Company
Protective Life Insurance
Provident Mutual Life Insurance
Prudential Insurance Company of America
Sun Life GroupSymetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

Any additions,  modifications or deletions to the financial advisors  identified
above that have occurred since the date hereof are not reflected.

The Advisor,  the  Distributor  or their  affiliates  may enter into  additional
revenue sharing arrangements or change or discontinue existing arrangements with
financial advisors at any time without notice.

The  prospect  of  receiving,  or the  receipt  of  additional  compensation  or
promotional  incentives  described above by financial  advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS Funds or a particular  DWS Fund over sales of shares of mutual
funds (or  non-mutual  fund  investments)  with  respect to which the  financial
advisor does not receive additional compensation or promotional  incentives,  or
receives  lower levels of additional  compensation  or  promotional  incentives.
Similarly,  financial advisors may receive different  compensation or incentives
that may influence  their  recommendation  of any particular  share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that the Fund receives
to invest on behalf of an investor and will not increase Fund expenses.  You may
wish to take  such  payment  arrangements  into  account  when  considering  and
evaluating  any  recommendations  relating to Fund shares and you should discuss
this matter with your  financial  advisor  and review your  financial  advisor's
disclosures.



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Redemptions

Redemption fee. Each Fund imposes a redemption fee of 2% of the total redemption
amount  (calculated at net asset value) on all fund shares redeemed or exchanged
within 15 days of buying them (either by purchase or exchange).  The  redemption
fee is paid  directly  to the  fund,  and is  designed  to  encourage  long-term
investment and to offset  transaction and other costs associated with short-term
or excessive  trading.  For purposes of  determining  whether the redemption fee
applies,  shares held the longest time will be treated as being  redeemed  first
and shares held the shortest time will be treated as being  redeemed  last.  The
redemption fee is applicable to fund shares purchased either directly or through
a  financial  intermediary,  such  as  a  broker-dealer.   Transactions  through
financial  intermediaries typically are placed with the fund on an omnibus basis
and include  both  purchase and sale  transactions  placed on behalf of multiple
investors. These purchase and sale transactions are generally netted against one
another and placed on an aggregate  basis;  consequently  the  identities of the
individuals on whose behalf the  transactions are placed generally are not known
to the fund.  For this  reason,  the fund has  undertaken  to  notify  financial
intermediaries  of their  obligation  to assess the  redemption  fee on customer
accounts  and to collect  and remit the  proceeds to the fund.  However,  due to
operational   requirements,   the  intermediaries'   methods  for  tracking  and
calculating the fee may be inadequate or differ in some respects from the Funds.

General.  Policies and procedures  affecting  transactions in Fund shares can be
changed at any time without notice,  subject to applicable law. Transactions may
be contingent upon proper completion of application forms and other documents by
shareholders  and their  receipt by the  Fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the control of a Fund and its agents may occur. Shareholders (or their financial
service  firms)  are  responsible  for all losses  and fees  resulting  from bad
checks,  cancelled  orders or the failure to  consummate  transactions  effected
pursuant to instructions reasonably believed to be genuine.

In addition,  each fund reserves the right to suspend or postpone redemptions as
permitted  pursuant  to Section  22(e) of the  Investment  Company  Act of 1940.
Generally, those circumstances are when 1) the New York Stock Exchange is closed
other than  customary  weekend or holiday  closings;  2) trading on the New York
Stock Exchange is restricted; 3) an emergency exists which makes the disposal of
securities  owned by a fund or the fair  determination


                                       81
<PAGE>

of the value of a fund's net assets not reasonably  practicable;  or 4) the SEC,
by order, permits the suspension of the right of redemption. Redemption payments
by wire may also be delayed in the event of a non-routine closure of the Federal
Reserve wire payment system. A request for repurchase (confirmed redemption) may
be communicated by a shareholder  through a financial  services firm to DWS-SDI,
which firms must promptly submit orders to be effective.

Redemption  requests  must be  unconditional.  Redemption  requests (and a stock
power for certificated  shares) must be duly endorsed by the account holder.  As
specified  in  the  prospectus,  signatures  may  need  to  be  guaranteed  by a
commercial bank, trust company,  savings and loan  association,  federal savings
bank,  member  firm  of  a  national  securities  exchange  or  other  financial
institution  permitted by SEC rule.  Additional  documentation  may be required,
particularly  from   institutional  and  fiduciary  account  holders,   such  as
corporations,  custodians  (e.g.,  under the Uniform  Transfers  to Minors Act),
executors, administrators, trustees or guardians.

If the  proceeds of the  redemption  are  $100,000 or less and the  proceeds are
payable  to the  shareholder  of record at the  address  of  record,  normally a
telephone  request or a written  request  by any one  account  holder  without a
signature guarantee is sufficient for redemptions by individual or joint account
holders, and trust, executor and guardian account holders, provided the trustee,
executor or guardian is named in the account  registration.  Other institutional
account  holders may  exercise  this special  privilege  of redeeming  shares by
telephone request or written request without signature  guarantee subject to the
same conditions as individual account holders,  provided that this privilege has
been  pre-authorized by the institutional  account holder by written instruction
to the Shareholder Service Agent with signatures guaranteed.  This privilege may
not be used to redeem  shares held in  certificated  form and may not be used if
the  shareholder's  account  has had an  address  change  within  15 days of the
redemption request.

Wires.  Delivery of the proceeds of a wire redemption of $250,000 or more may be
delayed  by a Fund for up to seven days if the Fund or the  Shareholder  Service
Agent deems it appropriate under then-current market conditions.  The ability to
send wires is limited by the business hours and holidays of the firms  involved.
Each Fund is not  responsible  for the  efficiency of the federal wire system or
the account  holder's  financial  services firm or bank.  The account  holder is
responsible  for any charges  imposed by the account  holder's  firm or bank. To
change the  designated  account  to receive  wire  redemption  proceeds,  send a
written request to the Fund Shareholder Service Agent with signatures guaranteed
as described above or contact the firm through which fund shares were purchased.

Automatic  Withdrawal  Plan.  An owner of  $5,000 or more of a class of a Fund's
shares at the  offering  price may  provide  for the  payment  from the  owner's
account of any  requested  dollar amount to be paid to the owner or a designated
payee monthly,  quarterly,  semiannually or annually. The $5,000 minimum account
size is not applicable to IRAs. The minimum  periodic payment is $50. Shares are
redeemed so that the payee should receive payment  approximately on the first of
the month. Investors using this Plan must reinvest fund distributions.


Non-retirement plan shareholders may establish an Automatic Withdrawal Plan (the
"Automatic   Withdrawal  Plan")  to  receive  monthly,   quarterly  or  periodic
redemptions  from his or her account for any  designated  amount of $50 or more.
Shareholders  may designate  which day they want the automatic  withdrawal to be
processed.  The check  amounts may be based on the  redemption of a fixed dollar
amount,  fixed share amount,  percent of account value or declining balance. The
Automatic  Withdrawal  Plan  provides  for income  dividends  and capital  gains
distributions,  if any, to be reinvested in additional  shares.  Shares are then
liquidated  as  necessary  to  provide  for  withdrawal   payments.   Since  the
withdrawals are in amounts  selected by the investor and have no relationship to
yield or income,  payments  received  cannot be considered as yield or income on
the investment and the resulting liquidations may deplete or possibly extinguish
the  initial   investment  and  any  reinvested   dividends  and  capital  gains
distributions.  Any such requests must be received by the Fund's  transfer agent
ten days  prior to the date of the  first  automatic  withdrawal.  An  Automatic
Withdrawal Plan may be terminated at any time by the  shareholder,  the Trust or
its agent on written  notice,  and will be terminated  when all shares of a Fund
under the Automatic  Withdrawal Plan have been liquidated or upon receipt by the
Trust of notice of death of the shareholder.


In-kind  Redemptions.  Each Fund  reserves  the right to honor any  request  for
redemption or repurchase  by making  payment in whole or in part in  securities.
These  securities will be chosen by the fund and valued as they are for purposes
of computing a Fund's net asset value. A redeeming shareholder who receives such
securities will be


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<PAGE>

subject to federal income tax in the same manner as if a cash  distribution  had
been received.  A shareholder may incur transaction expenses in converting these
securities to cash.

Exchanges


Shares of money  market  funds that were  acquired  by purchase  (not  including
shares acquired by dividend  reinvestment)  are subject to the applicable  sales
charge on exchange.  Certain series of DWS Target Fund are available on exchange
only during the offering  period for such series as described in the  applicable
prospectus.  Tax Free Money Fund --  Investment  Class,  NY Tax-Free  Money Fund
--Investment Class, Treasury Money Fund --Investment Class, Money Market Fund --
Investment  Class,  Cash  Management  Fund  Institutional,  Cash  Reserves  Fund
Institutional,  Treasury Money Fund -- Institutional  Class,  Cash Reserve Fund,
Inc. Prime Series,  Tax-Exempt  California Money Market Fund, Cash Account Trust
and Investors  Cash Trust are available on exchange but only through a financial
services  firm having a services  agreement  with DWS-SDI.  All exchanges  among
money  funds  must  meet   applicable   investor   eligibility   and  investment
requirements.  Exchanges  may only be made for funds that are available for sale
in the shareholder's state of residence.  Currently, Tax-Exempt California Money
Market Fund is available for sale only in California.




Shareholders must obtain prospectuses of the funds they are exchanging into from
dealers, other firms or DWS-SDI.

Automatic Exchange Plan. The owner of $1,000 or more of any class of shares of a
DWS fund may  authorize  the  automatic  exchange  of a  specified  amount  ($50
minimum) of such  shares for shares of the same class of another  such DWS fund.
Exchanges  will  be  made  automatically  until  the  shareholder  or  the  fund
terminates  the  privilege.  Exchanges  are subject to the terms and  conditions
described above.

Purchases In-Kind

Each Fund may, at its own option,  accept securities in payment for shares.  The
securities  delivered  in payment for shares are valued by the method  described
under "Net Asset Value" as of the day the Fund receives the securities. This may
be a taxable  transaction  to the  shareholder.  (Consult  your tax  advisor for
future tax  guidance.)  Securities may be accepted in payment for shares only if
they are, in the judgment of the Advisor, appropriate investments for a Fund. In
addition,  securities  accepted  in  payment  for  shares  must:  (1)  meet  the
investment objective and policies of the acquiring Fund; (ii) be acquired by the
Fund for investment and not for resale; (iii) be liquid securities which are not
restricted as to transfer either by law or liquidity of the market;  and (iv) if
stock, have a value which is readily  ascertainable as evidenced by a listing on
a stock exchange or OTC market or by readily  available market quotations from a
dealer in such  securities.  Each Fund reserves the right to accept or reject at
its own option any and all securities offered in payment for its shares.

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<PAGE>

                                    DIVIDENDS

Each Fund intends to follow the practice of  distributing  substantially  all of
its investment company taxable income, which includes any excess of net realized
short-term  capital gains over net realized long-term capital losses. A Fund may
follow the practice of distributing the entire excess of net realized  long-term
capital gains over net realized  short-term capital losses.  However,  each Fund
may retain all or part of such gain for  reinvestment  after  paying the related
federal taxes, for which shareholders may then be able to claim a credit against
their federal tax liability. If a Fund does not distribute the amount of capital
gain  and/or  ordinary  income  required  to be  distributed  by an  excise  tax
provision  of the Code,  the Fund may be subject to that  excise tax. In certain
circumstances,  a Fund may determine that it is in the interest of  shareholders
to distribute less than the required amount.

Each Fund  intends  to  distribute  dividends  from its net  investment  income,
excluding short-term capital gains,  annually in December.  Each Fund intends to
distribute  net  realized  capital  gains  after  utilization  of  capital  loss
carryforwards,  if any, in December to prevent  application  of a federal excise
tax. An additional distribution may be made, if necessary.

Any dividends or capital gains  distributions  declared in October,  November or
December  with a record  date in such a month  and  paid  during  the  following
January will be treated by  shareholders  for federal  income tax purposes as if
received on December 31 of the calendar year declared.

Dividends  paid by each Fund with  respect to each  class of its shares  will be
calculated in the same manner, at the same time and on the same day.

Income  dividends  and  capital  gain  distributions,  if any, of a Fund will be
credited to shareholder accounts in full and fractional shares of the same class
of the Fund at net asset  value on the  reinvestment  date,  except  that,  upon
written request to the  Shareholder  Service Agent, a shareholder may select one
of the following options:

To receive  income  including  short-term  capital  gain  dividends  in cash and
long-term capital gain dividends in shares of the same class at net asset value;
or

To receive income dividends and capital gain distributions in cash.

Dividends and distributions  will be reinvested in shares of the same class of a
Fund unless  shareholders  indicate in writing that they wish to receive them in
cash or in  shares of other DWS Funds  with  multiple  classes  of shares or DWS
Funds as  provided  in the  Prospectuses.  To use this  privilege  of  investing
dividends of a Fund in shares of another DWS Fund,  shareholders must maintain a
minimum account value of $1,000 in each Fund  distributing  the dividends.  Each
Fund will reinvest  dividend and distribution  checks (and future  dividends) in
shares of that same Fund and class if  checks  are  returned  as  undeliverable.
Dividends and other distributions of each Fund in the aggregate amount of $10 or
less are automatically  reinvested in shares of such Fund unless the shareholder
requests that such policy not be applied to the shareholder's account.

If an investment is in the form of a retirement  plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.

If  a  shareholder   has  elected  to  reinvest  any   dividends   and/or  other
distributions,  such  distributions  will be made in  shares  of that  Fund  and
confirmations will be mailed to each shareholder. If a shareholder has chosen to
receive  cash, a check will be sent.  Dividends of  investment  company  taxable
income and distributions of net realized capital gains are taxable, whether made
in shares or cash.

Each dividend and distribution is accompanied by a brief explanation of the form
and  character  of the  distribution.  The  characterization  of  dividends  and
distributions on such  correspondence may differ from the  characterization  for
federal  tax  purposes.  In  January  of each  year,  each  Fund  issues to each
shareholder  a statement of the federal  income tax status of all  dividends and
distributions in the prior calendar year.

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<PAGE>

Each Fund may at any time vary its foregoing dividend and distribution practices
and,  therefore,  reserves the right from time to time to either  distribute  or
retain for reinvestment such of its net investment income and its net short-term
and long-term  capital gains as its Board determines  appropriate under the then
current circumstances. In particular, and without limiting the foregoing, a Fund
may make  additional  dividends of net  investment  income or  distributions  of
capital   gain  net  income  in  order  to  satisfy  the  minimum   distribution
requirements contained in the Code.

                                      TAXES

The following is intended to be a general  summary of certain federal income tax
consequences of investing in a Fund. It is not intended as a complete discussion
of all such  consequences,  nor does it purport to deal with all  categories  of
investors.  Investors are  therefore  advised to consult with their tax advisors
before  making an  investment  in a Fund.  The  summary  is based on the laws in
effect  on the  date  of this  SAI  and  existing  judicial  and  administrative
interpretations  thereof,  all of which are  subject  to change,  possibly  with
retroactive effect.

Taxation  of the Funds.  Each Fund has  elected  to be  treated  as a  regulated
investment  company  under  Subchapter  M of the Code and has  qualified as such
since its inception. Each Fund intends to continue to so qualify in each taxable
year as required  under the Code in order to avoid payment of federal income tax
at the Fund level. In order to qualify as a regulated investment company, a Fund
must  meet  certain  requirements  regarding  the  source  of  its  income,  the
diversification of its assets, and the distribution of its income:

(a) Each Fund must  derive at least  90% of its  gross  income  from  dividends,
interest,  payments with respect to certain securities loans, and gains from the
sale of stock,  securities and foreign  currencies,  other income (including but
not limited to gains from options,  futures,  or forward contracts) derived with
respect to its business of investing in such stock,  securities,  or  currencies
and,  net  income   derived  from  interests  in  "qualified   publicly   traded
partnerships" (i.e.,  partnerships that are traded on an established  securities
market or tradable on a secondary  market,  other than  partnerships that derive
90%  of  their  income  from  interest,  dividends,  capital  gains,  and  other
traditional permitted mutual fund income).

(b) Each Fund must diversify its holdings so that, at the end of each quarter of
its taxable  year,  (i) at least 50% of the market value of the Fund's assets is
represented  by cash and cash items,  US  government  securities,  securities of
other regulated investment companies, and other securities limited in respect of
any one issuer of such other  securities  to a value not greater  than 5% of the
value of the Fund's  total  assets  and to not more than 10% of the  outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the  securities  (other than those of the US Government or
other regulated investment  companies) of any one issuer, of two or more issuers
that the Fund  controls  and that are engaged in the same,  similar,  or related
trades or businesses  or in the  securities  of one or more  qualified  publicly
traded partnership.

(c) Each Fund is required to distribute to its  shareholders at least 90% of its
taxable  and  tax-exempt  net  investment  income  (including  the excess of net
short-term  capital gain over net long-term capital losses) and generally is not
subject to federal  income tax to the extent that it  distributes  annually such
net  investment  income and net realized  capital  gains in the manner  required
under the Code.

Fund  investments  in  partnerships,  including  in  qualified  publicly  traded
partnerships,  may result in the Fund's being subject to state, local or foreign
income, franchise or withholding tax liabilities.

If for any taxable year a Fund does not qualify for the special  federal  income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal  income tax at regular  corporate  rates (without any
deduction for distributions to its  shareholders),  and all  distributions  from
earnings and profits,  including any  distributions of net tax-exempt income and
net long-term capital gains, will be taxable to shareholders as ordinary income.
Such  distributions  will be eligible  (i) to be treated as  qualified  dividend
income  in the  case of  shareholders  taxed  as  individuals  and  (ii) for the
dividends received deduction in the case of corporate shareholders. In addition,
a Fund could be required to recognize  unrealized  gains, pay substantial  taxes
and  interest  and  make  substantial  distributions  before  requalifying  as a
regulated  investment company that is accorded special tax treatment.  If a Fund
fails to qualify as a regulated investment company for a period greater than two
taxable  years,


                                       85
<PAGE>

such Fund may be required to recognize  any net  built-in  gains with respect to
certain of its assets (i.e., the excess of the aggregate gains,  including items
of income,  over aggregate  losses that would have been realized with respect to
such  assets  if a Fund had been  liquidated)  if it  qualifies  as a  regulated
investment company in a subsequent year.

Each Fund is subject to a 4% nondeductible excise tax on amounts required to be,
but that are not,  distributed under a prescribed formula.  The formula requires
payment to shareholders during a calendar year of distributions  representing at
least 98% of a Fund's taxable ordinary income for the calendar year and at least
98% of the excess of its capital gains over capital losses  realized  during the
one-year  period  ending  October  31 (in most  cases)  of such  year as well as
amounts  that were  neither  distributed  nor taxed to the Fund during the prior
calendar year.  Although each Fund's  distribution  policies should enable it to
avoid  excise  tax  liability,  a Fund may  retain  (and be subject to income or
excise tax on) a portion of its capital gain or other income if it appears to be
in the interest of the Fund.

Taxation of Fund  Distributions.  Distributions  from a Fund  generally  will be
taxable to shareholders as ordinary income to the extent derived from investment
income and net  short-term  capital  gains.  Distributions  of net capital gains
(that is, the excess of net gains from the sale of capital assets held more than
one year over net losses from the sale of capital  assets held for not more than
one year)  properly  designated  as capital  gain  dividends  will be taxable to
shareholders as long-term capital gain, regardless of how long a shareholder has
held the shares in the Fund.

Long-term  capital gain rates  applicable to individuals  have been  temporarily
reduced -- in general, to 15% with a lower rate applying to taxpayers in the 10%
and 15% rate brackets -- for taxable years  beginning on or before  December 31,
2010.

For taxable years beginning on or before December 31, 2010,  "qualified dividend
income"  received  by an  individual  will be taxed at the rates  applicable  to
long-term capital gain provided holding period and other requirements are met at
both the shareholder and Fund level.  Qualified dividend income does not include
interest  from  fixed-income  securities.  In  order  for  some  portion  of the
dividends  received by a shareholder of a Fund to be qualified  dividend income,
the Fund must meet holding  period and other  requirements  with respect to some
portion of the dividend-paying  stocks in its portfolio and the shareholder must
meet holding period and other  requirements with respect to the Fund's shares. A
dividend will not be treated as qualified dividend income (at either the Fund or
shareholder  level) (1) if the dividend is received with respect to any share of
stock held for fewer than 61 days during the  121-day  period  beginning  on the
date which is 60 days  before the date on which such share  becomes  ex-dividend
with respect to such dividend (or, in the case of certain  preferred  stock, for
fewer than 91 days  during the  181-day  period  beginning  90 days  before such
date),  (2) to the extent that the  recipient  is under an  obligation  (whether
pursuant to a short sale or otherwise) to make related  payments with respect to
positions in substantially  similar or related property, or (3) if the recipient
elects to have the dividend income treated as investment  income for purposes of
the limitation on deductibility of investment interest.  In order for a dividend
paid by a foreign  corporation to constitute  "qualified  dividend  income," the
foreign  corporation  must (1) be eligible for the  benefits of a  comprehensive
income tax treaty with the United  States (or the stock on which the dividend is
paid must be readily tradable on an established  securities market in the United
States), and (2) not be treated as a passive foreign investment company.

In  general,  distributions  of  investment  income  designated  by a  regulated
investment  company as derived from qualified dividend income will be treated as
qualified dividend income by a shareholder taxed as an individual,  provided the
shareholder meets the holding period and other requirements described above with
respect to the Fund's shares.

If the aggregate  qualified dividends received by a Fund during any taxable year
are 95% or more of its gross income  (excluding net long-term  capital gain over
net short-term  capital  loss),  then 100% of the Fund's  dividends  (other than
properly  designated  capital gain  dividends) will be eligible to be treated as
qualified dividend income. For this purpose,  the only gain included in the term
"gross income" is the excess of net  short-term  capital gain over net long-term
capital loss.

Capital  gains  distributions  may  be  reduced  if  a  Fund  has  capital  loss
carryforwards  available.  Any capital loss  carryforwards  and any post-October
loss  deferrals to which a Fund is entitled are  disclosed in the Fund's  annual
and semi-annual reports to shareholders.

                                       86
<PAGE>

All  distributions by a Fund result in a reduction in the net asset value of the
Fund's  shares.  Should  a  distribution  reduce  the net  asset  value  below a
shareholder's  cost basis,  such distribution may nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above,  even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular,  investors  should be careful to consider  the tax  implications  of
buying  shares just prior to a  distribution.  The price of shares  purchased at
that  time  may  include  the  amount  of the  forthcoming  distribution.  Those
purchasing just prior to a distribution will receive a partial return of capital
upon the distribution, which may nevertheless be taxable to them.

Sale or  Redemption of Shares.  The sale,  exchange or redemption of shares of a
Fund may give rise to a gain or loss. In general, any gain or loss realized upon
a taxable  disposition  of shares will be treated as  long-term  capital gain or
loss if the shares have been held for more than one year. Otherwise, the gain or
loss  on the  taxable  disposition  of  shares  of a Fund  will  be  treated  as
short-term  capital  gain or loss.  However,  any loss  realized  upon a taxable
disposition  of shares held for six months or less will be treated as long-term,
rather  than   short-term,   to  the  extent  of  any  long-term   capital  gain
distributions  received (or deemed  received) by the shareholder with respect to
the shares. All or a portion of any loss realized upon a taxable  disposition of
shares of a Fund will be disallowed if other  substantially  identical shares of
the Fund are purchased within 30 days before or after the disposition. In such a
case,  the basis of the newly  purchased  shares will be adjusted to reflect the
disallowed loss.

Dividends Received Deduction.  Dividends from domestic corporations may comprise
a substantial part of each Fund's gross income. If any such dividends constitute
a portion of a Fund's gross income, a portion of the income distributions of the
Fund  may  be  eligible  for  the  70%  deduction  for  dividends   received  by
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the shares of
the Fund with  respect  to which the  dividends  are  received  are  treated  as
debt-financed  under  federal  income tax law and is  eliminated if either those
shares or the shares  owned by the Fund are deemed to have been held by the Fund
or the shareholder, as the case may be, for fewer than 46 days during the 91-day
period beginning 45 days before the shares become ex-dividend.

Foreign  Taxation.  Foreign  withholding  or other foreign taxes with respect to
income  (possibly  including,  in some cases,  capital gains) on certain foreign
securities may occur.  These taxes may be reduced or eliminated  under the terms
of an applicable US income tax treaty.  As it is not expected that more than 50%
of the value of either Fund's total assets will consist of securities  issued by
foreign  corporations,  the  Funds  will  not be  eligible  to pass  through  to
shareholders  their  proportionate  share of any foreign  taxes  paid,  with the
result that shareholders will not be able to include in income,  and will not be
entitled to take any credits or deductions for, such foreign taxes.

Passive Foreign  Investment  Companies.  Equity investments by a Fund in certain
"passive foreign investment  companies"  ("PFICs") could potentially subject the
Fund to a US federal income tax (including  interest  charges) on  distributions
received from the company or on proceeds received from the disposition of shares
in the company,  which tax cannot be eliminated by making  distributions to Fund
shareholders. However, a Fund may elect to avoid the imposition of that tax. For
example, a Fund may elect to treat a PFIC as a "qualified electing fund" (a "QEF
election"),  in which case the Fund will be required to include its share of the
company's  income  and net  capital  gains  annually,  regardless  of whether it
receives any distribution from the company.  A Fund also may make an election to
mark the gains (and to a limited  extent the  losses) in such  holdings  "to the
market" as though it had sold and repurchased its holdings in those PFICs on the
last day of the Fund's  taxable year.  The election must be made  separately for
each PFIC owned by a Fund and, once made,  would be effective for all subsequent
taxable years,  unless revoked with the consent of the Internal  Revenue Service
(the "IRS").  Such gains and losses are treated as ordinary income and loss. The
QEF and  mark-to-market  elections  may  accelerate  the  recognition  of income
(without the receipt of cash) and increase the amount required to be distributed
by a Fund to avoid  taxation.  Making  either of these  elections  therefore may
require  a  Fund  to  liquidate  other  investments  (including  when  it is not
advantageous  to do so) to meet its  distribution  requirement,  which  also may
accelerate the recognition of gain and affect the Fund's total return. Dividends
paid by PFICs will not be eligible to be treated as "qualified dividend income."

Tax Effects of Certain Transactions. A Fund's use of options, futures contracts,
forward  contracts  (to  the  extent  permitted)  and  certain  other  strategic
transactions  will be subject to special  tax rules  (including  mark-to-market,
constructive sale, straddle,  wash sale, short sale and other rules), the effect
of which may be to accelerate  income,


                                       87
<PAGE>

defer losses, cause adjustments in the holding periods of portfolio  securities,
convert capital gains into ordinary income and convert short-term capital losses
into long-term  capital losses.  These rules could therefore  affect the amount,
timing and character of distributions to investors.

The Fund's  investment in so-called  "section 1256 contracts," such as regulated
futures  contracts,  most  foreign  currency  forward  contracts  traded  in the
interbank  market and options on most stock indices,  are subject to special tax
rules.  All section  1256  contracts  held by the Fund at the end of its taxable
year are required to be marked to their market value, and any unrealized gain or
loss on  those  positions  will be  included  in the  Fund's  income  as if each
position had been sold for its fair market value at the end of the taxable year.
The  resulting  gain or loss will be combined  with any gain or loss realized by
the Fund from  positions in section  1256  contracts  closed  during the taxable
year. Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as  short-term  capital gain or loss,  regardless of the
period of time the positions were actually held by the Fund.

As a result  of  entering  into  swap  contracts,  the Fund may make or  receive
periodic net  payments.  The Fund may also make or receive a payment when a swap
is  terminated  prior to  maturity  through an  assignment  of the swap or other
closing  transaction.  Periodic net payments will generally  constitute ordinary
income or  deductions,  while  termination  of a swap will  generally  result in
capital gain or loss (which will be a long-term capital gain or loss if the Fund
has been a party to the swap for more than one year).  The tax treatment of many
types of credit default swaps is uncertain.

In general,  gain or loss on a short sale is recognized when the Fund closes the
sale by delivering  the borrowed  property to the lender,  not when the borrowed
property  is sold.  Gain or loss from a short sale is  generally  considered  as
capital  gain or loss to the extent  that the  property  used to close the short
sale  constitutes a capital  asset in the Fund's  hands.  Except with respect to
certain situations where the property used by the Fund to close a short sale has
a long-term  holding  period on the date of the short sale,  special rules would
generally  treat the gains on short sales as  short-term  capital  gains.  These
rules may also  terminate  the running of the holding  period of  "substantially
identical property" held by the Fund.  Moreover,  a loss on a short sale will be
treated  as a  long-term  capital  loss  if,  on the  date  of the  short  sale,
"substantially  identical  property" has been held by the Fund for more than one
year.  In general,  the Fund will not be  permitted to deduct  payments  made to
reimburse the lender of securities  for dividends  paid on borrowed stock if the
short  sale is closed on or before  the 45th day after the short sale is entered
into.

Transactions in foreign currencies, foreign investment currency-denominated debt
securities and certain foreign  currency  options,  futures  contracts,  forward
contracts and similar  instruments  (to the extent  permitted)  may give rise to
ordinary  income  or  loss to the  extent  such  income  or  loss  results  from
fluctuations in the value of the foreign currency concerned.

A Fund's  investment  in zero  coupon  bonds and other debt  obligations  having
original issue discount may cause the Fund to recognize taxable income in excess
of any cash received from the investment.

A Fund's  investment in so-called  "section 1256  contracts,"  such as regulated
futures  contracts,  most  foreign  currency  forward  contracts  traded  in the
interbank  market and options on most stock indices,  are subject to special tax
rules.  All section 1256 contracts held by a Fund at the end of its taxable year
are required to be marked to their market value, and any unrealized gain or loss
on those  positions  will be included in a Fund's income as if each position had
been  sold  for its  fair  market  value  at the end of the  taxable  year.  The
resulting gain or loss will be combined with any gain or loss realized by a Fund
from  positions  in section  1256  contracts  closed  during the  taxable  year.
Provided  such  positions  were held as  capital  assets  and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as  short-term  capital gain or loss,  regardless of the
period of time the positions were actually held by a Fund.

In general,  gain or loss on a short sale is  recognized  when a Fund closes the
sale by delivering  the borrowed  property to the lender,  not when the borrowed
property  is sold.  Gain or loss from a short sale is  generally


                                       88
<PAGE>

considered as capital gain or loss to the extent that the property used to close
the short  sale  constitutes  a capital  asset in a Fund's  hands.  Except  with
respect to certain situations where the property used by a Fund to close a short
sale has a long-term holding period on the date of the short sale, special rules
would  generally  treat the gains on short sales as  short-term  capital  gains.
These  rules  may  also   terminate  the  running  of  the  holding   period  of
"substantially  identical property" held by a Fund.  Moreover, a loss on a short
sale will be treated as a  long-term  capital  loss if, on the date of the short
sale,  "substantially  identical property" has been held by a Fund for more than
one year.  In general,  a Fund will not be permitted to deduct  payments made to
reimburse the lender of securities  for dividends  paid on borrowed stock if the
short  sale is closed on or before  the 45th day after the short sale is entered
into.

Under  current law, a Fund serves to block  unrelated  business  taxable  income
("UBTI") from being realized by its tax-exempt shareholders. Notwithstanding the
foregoing,  a  tax-exempt  shareholder  could  realize  UBTI  by  virtue  of its
investment in a Fund if either:  (1) the Fund invests in real estate  investment
trusts ("REITs") that hold residual interests in real estate mortgage investment
conduits ("REMICs"); or (2) shares in the Fund constitute debt-financed property
in the hands of the  tax-exempt  shareholder  within the meaning of Code Section
514(b).  If a  charitable  remainder  trust (as  defined  in Code  Section  664)
realizes any UBTI for a taxable year, it will lose its tax-exempt status for the
year. The Funds may invest in REITs that hold residential investments in REMICs.

Other Tax Considerations.  Under the backup withholding  provisions of the Code,
redemption  proceeds as well as  distributions  may be subject to federal income
tax withholding for certain shareholders,  including those who fail to furnish a
Fund with their taxpayer  identification  numbers and certifications as to their
tax status.

Shareholders of a Fund may be subject to state and local taxes on  distributions
received from the Fund and on redemptions of the Fund's shares.

Special tax rules apply to investments  through defined  contribution  plans and
other  tax-qualified  plans.  Shareholders  should consult their tax advisors to
determine  the  suitability  of shares of a Fund as an  investment  through such
plans and the precise effect of an investment on their particular tax situation.

If a shareholder recognizes a loss with respect to a Fund's shares of $2 million
or more for an  individual  shareholder  or $10  million or more for a corporate
shareholder,  the  shareholder  must file with the  Internal  Revenue  Service a
disclosure  statement on Form 8886. Direct shareholders of portfolio  securities
are in many cases  excepted from this reporting  requirement,  but under current
guidance,  shareholders of a regulated investment company are not excepted.  The
fact that a loss is reportable under these regulations does not affect the legal
determination  of  whether  the  taxpayer's  treatment  of the  loss is  proper.
Shareholders should consult their tax advisors to determine the applicability of
these regulations in light of their individual circumstances.

Taxation of Non-US Shareholders. Dividends paid by a Fund to non-US shareholders
are  generally  subject  to  withholding  tax at a 30%  rate or a  reduced  rate
specified  by an  applicable  income  tax  treaty  to the  extent  derived  from
investment  income and short-term  capital  gains.  In order to obtain a reduced
rate of  withholding,  a non-US  shareholder  will be required to provide an IRS
Form  W-8BEN  certifying  its  entitlement  to  benefits  under  a  treaty.  The
withholding tax does not apply to regular dividends paid to a non-US shareholder
who  provides a Form  W-8ECI,  certifying  that the  dividends  are  effectively
connected with the non-US  shareholder's  conduct of a trade or business  within
the United States.  Instead, the effectively connected dividends will be subject
to regular US income tax as if the non-US  shareholder were a US shareholder.  A
non-US corporation receiving effectively connected dividends may also be subject
to  additional  "branch  profits  tax" imposed at a rate of 30% (or lower treaty
rate).  A non-US  shareholder  who fails to provide an IRS Form  W-8BEN or other
applicable form may be subject to backup withholding at the appropriate rate.

In general,  United States federal withholding tax will not apply to any gain or
income realized by a non-US  shareholder in respect of any  distributions of net
long-term  capital gains over net  short-term  capital  losses,  exempt-interest
dividends, or upon the sale or other disposition of shares of a Fund.

For  taxable  years  beginning  before  January  1,  2008,   properly-designated
dividends are generally exempt from United States federal  withholding tax where
they (i) are paid in respect  of the  Fund's  "qualified  net  interest  income"
(generally,  the Fund's US source interest income, other than certain contingent
interest and interest from  obligations


                                       89
<PAGE>

of a corporation or partnership in which the Fund is at least a 10% shareholder,
reduced  by  expenses  that are  allocable  to such  income) or (ii) are paid in
respect of the Fund's  "qualified  short-term  capital  gains"  (generally,  the
excess of the  Fund's net  short-term  capital  gain over the  Fund's  long-term
capital loss for such taxable year).  However,  depending on its  circumstances,
the Fund may designate all, some or none of its potentially  eligible  dividends
as such qualified net interest income or as qualified  short-term capital gains,
and/or  treat  such  dividends,  in  whole or in part,  as  ineligible  for this
exemption  from  withholding.  In  order to  qualify  for  this  exemption  from
withholding,   a  non-US   shareholder  will  need  to  comply  with  applicable
certification requirements relating to its non-US status (including, in general,
furnishing  an IRS Form W-8BEN or substitute  Form).  In the case of shares held
through  an  intermediary,  the  intermediary  may  withhold  even  if the  Fund
designates the payment as qualified net interest income or qualified  short-term
capital gain.  Non-US  shareholders  should  contact their  intermediaries  with
respect to the application of these rules to their accounts.

Foreign  shareholders  of a Fund must treat a distribution  attributable  to the
Fund's sale of a real estate  investment trust or other US real property holding
company as real  property  gain if 50% or more of the value of the Fund's assets
are invested in real estate investment trusts and other US real property holding
corporations and if the foreign  shareholder has held more than 5% of a class of
stock  at any  time  during  the  one-year  period  ending  on the  date  of the
distribution.  After  December 31, 2007,  a  distribution  from the Fund will be
treated as attributable to a US real property interest only if such distribution
is  attributable  to a  distribution  received  by the Fund  from a real  estate
investment fund.  Restrictions apply regarding wash sales and substitute payment
transactions.

The  foregoing  is only a summary of  certain  material  US  federal  income tax
consequences  affecting the Funds and its shareholders.  Current and prospective
shareholders  are advised to consult  their own tax advisors with respect to the
particular tax consequences to them of an investment in a Fund.

                                 NET ASSET VALUE

The net  asset  value of  shares  of each  Fund is  computed  as of the close of
regular  trading on the  Exchange  on each day the  Exchange is open for trading
(the "Value  Time").  The Exchange is  scheduled  to be closed on the  following
holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday,  Memorial Day,  Independence Day, Labor Day, Thanksgiving and Christmas,
and on the  preceding  Friday or  subsequent  Monday when one of these  holidays
falls on a  Saturday  or  Sunday,  respectively.  Net  asset  value per share is
determined  separately  for each  class of shares by  dividing  the value of the
total  assets of the fund  attributable  to the shares of that  class,  less all
liabilities  attributable  to that class,  by the total number of shares of that
class  outstanding.  The per  share net  asset  value  may be lower for  certain
classes of the fund because of higher expenses borne by these classes.

An equity  security is valued at its most  recent  sale price on the  security's
primary  exchange  or OTC market as of the Value Time.  Lacking  any sales,  the
security is valued at the calculated  mean between the most recent bid quotation
and the most recent asked quotation (the "Calculated  Mean") on such exchange or
OTC  market  as of the  Value  Time.  If it is not  possible  to  determine  the
Calculated Mean, the security is valued at the most recent bid quotation on such
exchange  or OTC market as of the Value  Time.  In the case of  certain  foreign
exchanges  or OTC  markets,  the closing  price  reported by the exchange or OTC
market  (which may  sometimes  be  referred  to as the  "official  close" or the
"official  closing  price" or other similar  term) will be  considered  the most
recent sale price.

Debt securities are valued as follows.  Money market instruments  purchased with
an  original or  remaining  maturity  of 60 days or less,  maturing at par,  are
valued at amortized  cost.  Other money market  instruments  are valued based on
information  obtained from an approved  pricing agent or, if such information is
not readily  available,  by using  matrix  pricing  techniques  (formula  driven
calculations based primarily on current market yields). Bank loans are valued at
prices supplied by an approved  pricing agent (which are intended to reflect the
mean between the bid and asked prices), if available,  and otherwise at the mean
of the most recent bid and asked quotations or evaluated  prices, as applicable,
based  on   quotations   or  evaluated   prices   obtained   from  one  or  more
broker-dealers.  Privately  placed  debt  securities,  other than Rule 144A debt
securities,  initially are valued at cost and  thereafter  based on all relevant
factors  including  type  of  security,  size of  holding  and  restrictions  on
disposition.  Municipal  debt  securities  are valued at prices  supplied  by an
approved  pricing  agent (which are intended to reflect the mean between the bid
and asked  prices),  if available,  and otherwise at the mean of the most recent
bid and asked quotations or evaluated price obtained from a broker-dealer. Other
debt securities are valued at prices  supplied by an approved  pricing


                                       90
<PAGE>

agent, if available, and otherwise at the most recent bid quotation or evaluated
price,  as applicable,  obtained from one or more  broker-dealers.  If it is not
possible to value a particular debt security pursuant to the above methods,  the
security  is valued on the  basis of  factors  including  (but not  limited  to)
maturity, coupon,  creditworthiness,  currency denomination, and the movement of
the market in which the security is normally traded.

An exchange-traded option contract on securities, currencies and other financial
instruments  is valued at its most recent sale price on the  relevant  exchange.
Lacking any sales,  the option contract is valued at the Calculated  Mean. If it
is not possible to determine the Calculated  Mean, the option contract is valued
at the most recent bid quotation in the case of a purchased  option  contract or
the most recent asked  quotation in the case of a written  option  contract,  in
each case as of the Value Time. An option contract on securities, currencies and
other financial instruments traded in the OTC market is valued on the Value Date
at the evaluated price provided by the  broker-dealer  with which it was traded.
Futures contracts (and options thereon) are valued at the most recent settlement
price, if available,  on the exchange on which they are traded most extensively.
With the exception of stock index futures  contracts  which trade on the Chicago
Mercantile Exchange,  closing settlement times are prior to the close of trading
on the Exchange.  For stock index futures  contracts  which trade on the Chicago
Mercantile  Exchange,  closing  settlement  prices  are  normally  available  at
approximately  4:20 p.m. Eastern time. If no settlement price is available,  the
last traded price on such exchange will be used.

If market  quotations  for a portfolio  asset are not readily  available  or the
value of a portfolio  asset as  determined  in  accordance  with Board  approved
procedures does not represent the fair market value of the portfolio  asset, the
value of the portfolio  asset is taken to be an amount which,  in the opinion of
each  Fund's  Pricing  Committee  (or,  in some  cases,  the  Board's  Valuation
Committee),  represents fair market value. The value of other portfolio holdings
owned by a Fund is  determined  in a manner which is intended to fairly  reflect
the fair market  value of the asset on the  valuation  date,  based on valuation
procedures  adopted by each Fund's Board and  overseen  primarily by each Fund's
Pricing Committee.

                              TRUSTEES AND OFFICERS


The following table presents certain information  regarding the Board Members of
the Trust.  Each Board Member's year of birth is set forth in parentheses  after
his or her name.  Unless  otherwise  noted, (i) each Board Member has engaged in
the principal occupation(s) noted in the table for at least the most recent five
years,  although not  necessarily in the same capacity,  and (ii) the address of
each Board  Member  that is not an  "interested  person" (as defined in the 1940
Act) of the Trust or the Advisor (each, an "Independent  Board Member"),  is c/o
Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for
each Board  Member is until the election and  qualification  of a successor,  or
until  such Board  Member  sooner  dies,  resigns,  is  removed or as  otherwise
provided in the governing documents of the Trust. Because the Fund does not hold
an annual  meeting of  shareholders,  each Board  Member will hold office for an
indeterminate  period.  The Board  Members may also serve in similar  capacities
with other funds in the DWS fund complex.  The Length of Time Served  represents
the year in which the Board Member joined the board of one or more DWS funds now
overseen by the Board.

                                       91
<PAGE>

<TABLE>
<CAPTION>

Independent Board Members
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                            Number of Funds
 and Length of Time        Business Experience and                                                  in DWS Fund
 Served                    Directorships During the Past 5 Years                                    Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                        <C>                                                                             <C>
Dawn-Marie Driscoll (1946) President, Driscoll Associates (consulting firm); Executive Fellow,              76
Chairperson since 2006     Center for Business Ethics, Bentley College; formerly, Partner, Palmer
Board Member since         & Dodge (1988-1990); Vice President of Corporate Affairs and General
1987                       Counsel, Filene's (1978-1988). Directorships: Trustee of 8 open-end
                           mutual funds managed by Sun Capital Advisers, Inc. (since 2007);
                           Director of ICI Mutual Insurance Company (since 2007); Advisory Board,
                           Center for Business Ethics, Bentley College; Trustee, Southwest Florida
                           Community Foundation (charitable organization); Former Directorships:
                           Investment Company Institute (audit, executive, nominating committees)
                           and Independent Directors Council (governance, executive committees)
--------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr.      Vice Chair, WGBH Educational Foundation. Directorships: Association of           76
 (1943)                    Public Television Stations; Becton Dickinson and Company(1) (medical
 Board Member since        technology company); Belo Corporation(1) (media company); Boston Museum
 1990                      of Science; Public Radio International. Former Directorships: American
                           Public Television; Concord Academy; New England Aquarium; Mass.
                           Corporation for Educational Telecommunications; Committee for Economic
                           Development; Public Broadcasting Service
--------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)        Managing General Partner, Exeter Capital Partners (a series of private           76
Board Member since         equity funds). Directorships: Progressive Holding Corporation (kitchen
1996                       goods importer and distributor); Natural History, Inc. (magazine
                           publisher); Box Top Media Inc. (advertising); The Kennel Shop (retailer)
--------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss        Clinical Professor of Finance, NYU Stern School of Business                      76
(1945)                     (1997-present); Member, Finance Committee, Association for Asian
Board Member since         Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US)
2001                       (2004-present); prior thereto, Managing Director, J.P. Morgan
                           (investment banking firm) (until 1996)
--------------------------------------------------------------------------------------------------------------------
Martin J. Gruber           Nomura Professor of Finance, Leonard N. Stern School of Business, New            76
(1937)                     York University (since September 1965); Director, Japan Equity Fund,
Board Member since         Inc. (since January 1992), Thai Capital Fund, Inc. (since January
1999                       2000), Singapore Fund, Inc. (since January 2000), National Bureau of
                           Economic Research (since January 2006). Formerly, Trustee, TIAA
                           (pension funds) (January 1996-January 2000); Trustee, CREF and CREF
                           Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF Mutual
                           Funds (February 2004-March 2005); and Director, S.G. Cowen Mutual Funds
                           (January 1985-January 2001)
--------------------------------------------------------------------------------------------------------------------
Richard J. Herring         Jacob Safra Professor of International Banking and Professor, Finance            76
(1946)                     Department, The Wharton School, University of Pennsylvania (since July
Board Member since         1972); Co-Director, Wharton Financial Institutions Center (since July
1999                       2000); Director, Japan Equity Fund, Inc. (since September 2007), Thai
                           Capital Fund, Inc. (since September 2007), Singapore Fund, Inc. (since
                           September 2007). Formerly, Vice Dean and Director, Wharton
                           Undergraduate Division (July 1995-June 2000); Director, Lauder
                           Institute of International Management Studies (July 2000-June 2006)
--------------------------------------------------------------------------------------------------------------------

                                       92
<PAGE>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                            Number of Funds
 and Length of Time        Business Experience and                                                  in DWS Fund
 Served                    Directorships During the Past 5 Years                                    Complex Overseen
--------------------------------------------------------------------------------------------------------------------
Graham E. Jones            Senior Vice President, BGK Realty, Inc. (commercial real estate) (since          76
(1933)                     1995). Formerly, Trustee of various investment companies managed by Sun
Board Member since         Capital Advisors, Inc. (1998-2005), Morgan Stanley Asset Management
2002                       (1985-2001) and Weiss, Peck and Greer (1985-2005)
--------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel           President and Chief Executive Officer, The Pew Charitable Trusts                 76
(1951)                     (charitable organization) (1994 to present); Trustee, Thomas Jefferson
Board Member since         Foundation (charitable organization) (1994 to present); Trustee,
2002                       Executive Committee, Philadelphia Chamber of Commerce (2001 to
                           present). Formerly, Executive Vice President, The Glenmede Trust
                           Company (investment trust and wealth management) (1983 to 2004); Board
                           Member, Investor Education (charitable organization) (2004-2005);
                           Director, Viasys Health Care(1) (January 2007-June 2007)
--------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.     Private investor since October 2003; Trustee of 8 open-end mutual funds          76
(1946)                     managed by Sun Capital Advisers, Inc. (since October 1998). Formerly,
Board Member since         Pension & Savings Trust Officer, Sprint Corporation(1)
2002                       (telecommunications) (November 1989-September 2003)
--------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg     Retired. Formerly, Consultant (1997-2001); Director, US Government               76
(1943)                     Accountability Office (1996-1997); Partner, Fulbright & Jaworski,
Board Member since         L.L.P. (law firm) (1978-1996). Directorships: The William and Flora
1997                       Hewlett Foundation; Service Source, Inc. Former Directorships: Mutual
                           Fund Directors Forum (2002-2004), American Bar Retirement Association
                           (funding vehicle for retirement plans) (1987-1990 and 1994-1996)
--------------------------------------------------------------------------------------------------------------------
Carl W. Vogt               Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm);                 74
(1936)                     formerly, President (interim) of Williams College (1999-2000);
Board Member since         formerly, President of certain funds in the Deutsche Asset Management
2006                       family of funds (formerly, Flag Investors family of funds) (registered
                           investment companies) (1999-2000). Directorships: Yellow Corporation
                           (trucking); American Science & Engineering (x-ray detection equipment).
                           Former Directorships: ISI Family of Funds (registered investment
                           companies, 4 funds overseen); National Railroad Passenger Corporation
                           (Amtrak) Waste Management, Inc. (solid waste disposal); formerly,
                           Chairman and Member, National Transportation Safety Board
--------------------------------------------------------------------------------------------------------------------

Interested Board Member
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                            Number of Funds
 and Length of Time        Business Experience and                                                  in DWS Fund
 Served                    Directorships During the Past 5 Years                                    Complex Overseen
--------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(2)         Managing Director(4), Deutsche Asset Management; Head of Deutsche Asset          82
 (1958)                    Management Americas; CEO of DWS Scudder; formerly board member of DWS
 Board Member since        Investments, Germany (1999-2005); formerly, Head of Sales and Product
 2006                      Management for the Retail and Private Banking Division of Deutsche Bank
                           in Germany (1997-1999); formerly, various strategic and operational
                           positions for Deutsche Bank Germany Retail and Private Banking Division
                           in the field of investment funds, tax driven instruments and asset
                           management for corporates (1989-1996)
--------------------------------------------------------------------------------------------------------------------

                                       93
<PAGE>

Officers(3)
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(5)        Managing Director(4), Deutsche Asset Management (2006-present); President of DWS family
 (1965)                     of funds; Director, ICI Mutual Insurance Company (since October 2007); formerly,
 President, 2006-present    Director of Fund Board Relations (2004-2006) and Director of Product Development
                            (2000-2004), Merrill Lynch Investment Managers; Senior Vice President Operations,
                            Merrill Lynch Asset Management (1999-2000)
--------------------------------------------------------------------------------------------------------------------
 John Millette(6) (1962)    Director(4), Deutsche Asset Management
 Vice President and
 Secretary, 1999-present
--------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(5)        Managing Director(4), Deutsche Asset Management (since July 2004); formerly, Executive
 (1963)                     Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds
 Chief Financial Officer,   (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset
 2004-present               Management (1994-1998)
 Treasurer, 2005-present
--------------------------------------------------------------------------------------------------------------------
 Patricia DeFilippis(5)     Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New York
 (1963)                     Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co. LLC
 Assistant Secretary,       (1998-2003)
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Elisa D. Metzger(5)        Director(4), Deutsche Asset Management (since September 2005); formerly, Counsel,
 (1962)                     Morrison and Foerster LLP (1999-2005)
 Assistant Secretary,
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(6)        Managing Director(4), Deutsche Asset Management
 (1962)
 Assistant Secretary,
 2002-present
--------------------------------------------------------------------------------------------------------------------
 Paul Antosca(6)            Director(4), Deutsche Asset Management (since 2006); formerly, Vice President, The
 (1957)                     Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jack Clark (6)             Director(4), Deutsche Asset Management (since 2007); formerly, Vice President, State
 (1967)                     Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Kathleen Sullivan          Director(4), Deutsche Asset Management
 D'Eramo(6)
 (1957)
 Assistant Treasurer,
 2003-present
--------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(6)         Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(5) (1972)    Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations Manager
 Anti-Money Laundering      for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations Manager
 Compliance Officer,        for AXA Financial (1999-2004)
 2007-present
--------------------------------------------------------------------------------------------------------------------

                                       94
<PAGE>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(5) (1962)     Managing Director(4), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance           Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The
 Officer, 2006-present      Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company (1984-1988)
--------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(5)  Director(4), Deutsche Asset Management (2006-present); formerly, Director, Senior Vice
 (1951)                     President, General Counsel, and Assistant Secretary, Hansberger Global Investors, Inc.
 Chief Legal Officer,       (1996-2006); Director, National Society of Compliance Professionals
 2006-present               (2002-2005)(2006-2009)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      A publicly held company with securities  registered pursuant to Section
         12 of the Securities Exchange Act of 1934.

(2)      The  mailing  address  of Axel  Schwarzer  is c/o  Deutsche  Investment
         Management  Americas Inc.,  345 Park Avenue,  New York, New York 10154.
         Mr.  Schwarzer is an interested Board Member by virtue of his positions
         with Deutsche Asset Management.  As an interested person, Mr. Schwarzer
         receives no compensation from the Funds.

(3)      As a result of their respective positions held with the Advisor,  these
         individuals are considered  "interested  persons" of the Advisor within
         the meaning of the 1940 Act. Interested persons receive no compensation
         from the Funds.

(4)      Executive title, not a board directorship.

(5)      Address:  345 Park Avenue, New York, New York 10154.

(6)      Address: Two International Place, Boston, Massachusetts 02110.

Each Officer also holds  similar  positions for other  investment  companies for
which DIMA or an affiliate serves as the advisor.

Officer's Role with Principal Underwriter:  DWS Scudder Distributors, Inc.

 Paul H. Schubert:                         Vice President
 Caroline Pearson:                         Secretary
Information Concerning Committees and Meetings of Board Members

The  Board of the  Trust met ten (10)  times  during  the  calendar  year  ended
December 31, 2007 and each Board Member attended at least 80% of the meetings of
the Board and meetings of the committees of the Board on which such Board Member
served.

Board  Committees.  Ms.  Driscoll  has served as Chair of the Board of the Funds
since May 2006.

The Board has established the following  standing  committees:  Audit Committee,
Nominating/Corporate Governance Committee, Valuation Committee, Equity Oversight
Committee, Fixed Income Oversight Committee,  Marketing/Distribution/Shareholder
Service Committee,  Legal/Regulatory/Compliance Committee and Expense/Operations
Committee.

The Audit  Committee  assists the Board in  fulfilling  its  responsibility  for
oversight of the quality and integrity of the accounting, auditing and financial
reporting  practices  of the  applicable  Fund.  It also  makes  recommendations
regarding the selection of an independent  registered public accounting firm for
a Fund,  reviews the  independence of


                                       95
<PAGE>

such firm,  reviews  the scope of audit and  internal  controls,  considers  and
reports to the Board on matters  relating to a Fund's  accounting  and financial
reporting  practices,  and  performs  such other  tasks as the full Board  deems
necessary or appropriate.  The Audit Committee  receives annual  representations
from the independent  registered  public accounting firm as to its independence.
The members of the Audit  Committee are Keith R. Fox (Chair and Audit  Committee
Financial Expert),  Kenneth C. Froewiss,  Richard J. Herring, William N. Searcy,
Jr. and Jean  Gleason  Stromberg.  The Audit  Committee  held nine (9)  meetings
during the calendar year 2007.

The  Nominating/Corporate  Governance  Committee  (i)  recommends  to the  Board
candidates  to serve as Board  Members and (ii)  oversees  and, as  appropriate,
makes  recommendations  to the Board  regarding  other  fund  governance-related
matters,  including but not limited to Board compensation practices,  retirement
policies,  self-evaluations  of effectiveness,  review of possible  conflicts of
interest  and  independence  issues  involving  Board  Members,  allocations  of
assignments  and  functions  of  committees  of the Board,  and share  ownership
policies. The members of the Nominating/Corporate Governance Committee are Henry
P.  Becton,  Jr.  (Chair),  Graham E. Jones,  Rebecca W. Rimel and Jean  Gleason
Stromberg.  The  Nominating/Corporate  Governance Committee (previously known as
the  Committee on  Independent  Directors)  held three (3)  meetings  during the
calendar year 2007.

The Valuation  Committee  oversees Fund  valuation  matters,  reviews  valuation
procedures  adopted  by the  Board,  determines  the fair  value  of the  Fund's
securities as needed in accordance  with the valuation  procedures  and performs
such other tasks as the full Board deems necessary or  appropriate.  The members
of the Valuation Committee are Keith R. Fox, Kenneth C. Froewiss (Chair), Martin
J. Gruber and Richard J. Herring.  The Valuation Committee held six (6) meetings
during the calendar year 2007.

The Board has established two Investment Oversight  Committees,  one focusing on
Funds  primarily   investing  in  equity   securities  (the  "Equity   Oversight
Committee")  and one  focusing  on Funds  primarily  investing  in fixed  income
securities  (the "Fixed Income  Oversight  Committee").  These  Committees  meet
regularly with Fund portfolio managers and other investment  personnel to review
the relevant  Funds'  investment  strategies  and  investment  performance.  The
members of the Equity  Oversight  Committee are Henry P. Becton,  Jr., Martin J.
Gruber  (Chair),  Richard J.  Herring,  Rebecca  W. Rimel and Carl W. Vogt.  The
members of the Fixed Income Oversight Committee are Dawn-Marie  Driscoll,  Keith
R. Fox, Kenneth C. Froewiss, Graham E. Jones, William N. Searcy, Jr. (Chair) and
Jean  Gleason  Stromberg.  Each  Investment  Oversight  Committee  held  six (6)
meetings during the calendar year 2007.

The  Marketing/Distribution/Shareholder   Service  Committee  oversees  (i)  the
quality, costs and types of shareholder services provided to the Funds and their
shareholders,  and (ii) the distribution-related  services provided to the Funds
and their  shareholders.  The members of the  Marketing/Distribution/Shareholder
Service Committee are Martin J. Gruber,  Richard J. Herring (Chair),  Rebecca W.
Rimel,     Jean     Gleason     Stromberg     and    Carl    W.    Vogt.     The
Marketing/Distribution/Shareholder  Service  Committee  held seven (7)  meetings
during the calendar year 2007.

The  Legal/Regulatory/Compliance  Committee  oversees (i) the significant  legal
affairs of the Funds, including the handling of pending or threatened litigation
or  regulatory  action  involving  the Funds,  (ii) general  compliance  matters
relating   to  the  Funds  and  (iii)   proxy   voting.   The   members  of  the
Legal/Regulatory/Compliance  Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie
Driscoll,  Rebecca W. Rimel,  William N. Searcy, Jr., Jean Gleason Stromberg and
Carl W. Vogt (Chair).  The  Legal/Regulatory/Compliance  Committee  held six (6)
meetings during the calendar year 2007.

The Expense/Operations Committee (i) monitors the Fund's total operating expense
levels,  (ii)  oversees the  provision of  administrative  services to the Fund,
including the Fund's custody,  fund accounting and insurance  arrangements,  and
(iii) reviews the Fund's investment advisers' brokerage practices, including the
implementation  of  related  policies.  The  members  of the  Expense/Operations
Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie  Driscoll,  Keith R. Fox and
William  N.  Searcy,  Jr.  This  committee  held seven (7)  meetings  during the
calendar year 2007.

Ad Hoc Committees.  In addition to the standing committees described above, from
time to time the Board also forms ad hoc committees to consider specific issues.

                                       96
<PAGE>

Remuneration.  Each Independent Board Member receives compensation from the Fund
for his or her services, which includes an annual retainer and an attendance fee
for each meeting attended. No additional compensation is paid to any Independent
Board Member for travel time to meetings,  attendance at directors'  educational
seminars  or  conferences,   service  on  industry  or  association  committees,
participation  as speakers at directors'  conferences or service on special fund
industry director task forces or subcommittees. Independent Board Members do not
receive any employee  benefits such as pension or retirement  benefits or health
insurance from the Fund or any fund in the DWS fund complex.

Members of the Board who are officers,  directors,  employees or stockholders of
Deutsche Asset Management or its affiliates receive no direct  compensation from
a Fund, although they are compensated as employees of Deutsche Asset Management,
or its affiliates,  and as a result may be deemed to participate in fees paid by
the Funds.  The following tables show  compensation  from the Fund and aggregate
compensation  from all of the  funds in the DWS fund  complex  received  by each
Board Member during the calendar year 2007. Mr. Schwarzer became a member of the
Board on May 5,  2006,  is an  interested  person of the Funds and  received  no
compensation  from the  Funds or any fund in the DWS  fund  complex  during  the
relevant periods.

<TABLE>
<CAPTION>

                                                     Aggregate
                                   Aggregate        Compensation        Aggregate
                                 Compensation       from DWS Mid       Compensation         Total Compensation
                                from DWS Micro      Cap Growth        from DWS Small           from Fund and
                                                        -------
  Name of Board Member             Cap Fund            Fund          Cap Growth Fund        DWS Fund Complex(1)
  --------------------                 -----           -----             ------------       -------------------

<S>                   <C>               <C>             <C>                  <C>               <C>
  Henry P. Becton, Jr.(3)(4)            $160            $3,056               $1,043            $200,000
  Dawn-Marie Driscoll(2)(3)(4)          $200            $3,836               $1,308            $253,000
  Keith R. Fox(3)(4)                    $161            $3,079               $1,050            $203,000
  Kenneth C. Froewiss(3)(4)             $159            $3,034               $1,034            $200,000
  Martin J. Gruber(3)(4)                $154            $2,943               $1,007            $198,000
  Richard J. Herring(3)(4)              $155            $2,958               $1,011            $195,000
  Graham E. Jones(3)                    $165            $3,153               $1,075            $207,000
  Rebecca W. Rimel(3)(4)                $151            $2,882                 $985            $194,000
  William N. Searcy, Jr.(3)(4)          $159            $3,034               $1,034            $200,000
  Jean Gleason Stromberg(3)(4)          $150            $2,867                 $981            $189,000
  Carl W. Vogt(3)(4)                    $157            $2,987               $1,022            $194,000
</TABLE>

(1)      The DWS Fund Complex is composed of 138 funds as of December 31, 2007.

(2)      Includes  $50,000 in annual  retainer  fees in Ms.  Driscoll's  role as
         Chairperson of the Board.

(3)      For each Board Member, except Mr. Vogt, total compensation for calendar
         year 2007 includes  compensation,  as of December 31, 2007, for service
         on   the   boards   of   30   trusts/corporations   comprised   of   76
         funds/portfolios.  For Mr. Vogt total  compensation  for calendar  year
         2007   includes   compensation   for   service  on  the  boards  of  28
         trusts/corporations comprised of 74 funds/portfolios.

(4)      Aggregate  compensation  includes amounts paid to the Board Members for
         special  meetings of ad hoc committees of the board in connection  with
         the  possible  consolidation  of the various DWS Fund boards and funds,
         meetings for considering fund expense simplification  initiatives,  and
         consideration  of issues  specific  to the Funds'  direct  shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $1,000 for Mr. Becton, $1,000 for
         Ms. Driscoll,  $1,000 for Mr. Fox, $1,000 for Mr. Froewiss,  $5,000 for
         Mr. Gruber,  $1,000 for Dr. Herring,  $5,000 for Ms. Rimel,  $1,000 for
         Mr.  Searcy,  $1,000 for Ms.  Stromberg and $1,000 for Mr. Vogt.  These
         meeting fees were borne by the Advisor.

                                       97
<PAGE>

Board Member Ownership in the Fund(1)

The  following  table shows the dollar range of equity  securities  beneficially
owned by each Board  Member in the Funds and DWS Fund Complex as of
December 31, 2007.

<TABLE>
<CAPTION>

                                     Dollar Range of   Dollar Range of     Dollar Range of     Aggregate Dollar Range
                                        Beneficial        Beneficial          Beneficial         of Ownership in all
                                       Ownership in      Ownership in      Ownership in DWS       Funds Overseen by
                                      DWS Micro Cap      DWS Mid Cap      Small Cap Growth       Board Member in the
Board Member                               Fund          Growth Fund             Fund           DWS Fund Complex(1)
------------                               ----          -----------             ----               -----------------

Independent Board Member:
-------------------------

<S>                                                       <C>                 <C>                        <C>
Henry P. Becton, Jr.                       None           $1-$10,000          $1-$10,000            Over $100,000
Dawn-Marie Driscoll                        None              None          $10,001-$50,000          Over $100,000
Keith R. Fox                               None              None                None               Over $100,000
Kenneth C. Froewiss                        None              None                None               Over $100,000
Martin J. Gruber                     $10,001-$50,000         None                None               Over $100,000
Richard J. Herring                         None        $10,001-$50,000           None               Over $100,000
Graham E. Jones                            None              None                None               Over $100,000
Rebecca W. Rimel                           None              None                None               Over $100,000
William N. Searcy, Jr.                     None              None                None               Over $100,000
Jean Gleason Stromberg                     None              None                None               Over $100,000
Carl W. Vogt                               None              None                None               Over $100,000

Interested Board Member:
------------------------

Axel Schwarzer                             None              None                None               Over $100,000
</TABLE>

(1)      Securities  beneficially  owned as defined  under the 1934 Act  include
         direct and/or indirect ownership of securities where the Board Member's
         economic interest is tied to the securities,  employment  ownership and
         securities  when the Board  Member can exert  voting power and when the
         Board Member has  authority to sell the  securities.  The dollar ranges
         are:  None,   $1-$10,000,   $10,001-$50,000,   $50,001-$100,000,   over
         $100,000.

Ownership in Securities of the Advisor and Related Companies

As  reported to the Funds,  the  information  in the  following  table  reflects
ownership by the Independent Board Members and their immediate family members of
certain  securities as of December 31, 2007. An immediate family member can be a
spouse,  children  residing in the same  household  including  step and adoptive
children and any dependents.  The securities  represent ownership in the Advisor
or principal  underwriter  of the Fund and any persons  (other than a registered
investment company) directly or indirectly controlling,  controlled by, or under
common control with the Advisor or principal underwriter of the Funds (including
Deutsche Bank AG).

                                       98
<PAGE>

<TABLE>
<CAPTION>

                                                                              Value of        Percent of
                              Owner and                                     Securities on     Class on an
Independent                Relationship to                     Title of     an Aggregate       Aggregate
Board Member                 Board Member         Company        Class          Basis            Basis
------------                 ------------         -------        -----          -----            -----

<S>                               <C>                   <C>           <C>           <C>               <C>
Henry P. Becton, Jr.                                None
Dawn-Marie Driscoll                                 None
Keith R. Fox                                        None
Kenneth C. Froewiss                                 None
Martin J. Gruber                                    None
Richard J. Herring                                  None
Graham E. Jones                                     None
Rebecca W. Rimel                                    None
William N. Searcy, Jr.                              None
Jean Gleason Stromberg                              None
Carl W. Vogt                                        None

</TABLE>


                                       99
<PAGE>


                                      100
<PAGE>


                                      101
<PAGE>


                                      102
<PAGE>


                                      103
<PAGE>


                                      104
<PAGE>


                                      105
<PAGE>


                                      106
<PAGE>


Securities Beneficially Owned


As of January 8, 2008,  the Board Members and officers of the Trust owned,  as a
group, less than 1% of the outstanding shares of each Fund.

To the best of the Funds'  knowledge,  as of January 8, 2008, no person owned of
record or beneficially 5% or more of any class of the Funds' outstanding shares,
except as noted below.

DWS Mid Cap Growth Fund

<TABLE>
<CAPTION>

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

<S>                                                          <C>                            <C>
JOHN HANCOCK LIFE INSURANCE COMPANY (USA) RPS SEG            10,430,913.54                  31.95% of Class A
FUNDS& ACCOUNTING ET-7
BOSTON MA  022101

DWS TRUST COMPANY TTEE                                       10,041,641.57            98.39% of Institutional Class
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET REC
SALEM NH  03079-1143

DWS Small Cap Growth Fund

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                  403,628.14                    17.52% of Class A
ATTN FUND ADM (97HB3)
JACKSONVILLE FL  32246-6484

MORGAN STANLEY & CO.                                          222,315.10                       Of Class A
HARBORSIDE FINANCIAL CENTER
JERSEY CITY NJ 07311

                                      107
<PAGE>
Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

HARTFORD LIFE INSURANCE COMPANY                               188,105.70                    8.17% of Class A
ATTN UIT OPERATIONS
HARTFORD CT  06104-2999

DWS TRUST COMPANY TRUSTEE                                      22,230.86                    6.00% of Class C
OXFORD INDUSTRIES INC
FBO OXFORD INDUSTRIES POOLED ACCOUNT
ATLANTA GA  30308-3306

DEUTSCHE BANK SECURITIES INC                                  276,954.07              6.56% of Institutional Shares
ATTN MUTUAL FUND DEPT 26TH FL
NEW YORK NY  10020-1104

DWS TRUST COMPANY TTEE                                       3,764,960.39            89.16% of Institutional Shares
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET REC
SALEM NH  03079-1143

CHARLES SCHWAB & CO INC                                      2,422,718.05                   32.23% of Class S
REINVEST ACCOUNT
SAN FRANCISCO CA  94104-4151

DWS TRUST COMPANY                                             971,302.53                    12.92% of Class S
FBO FARMERS GROUP INC EMPLOYEES PROFIT SHARING
SAVINGS PLAN
ATTN ASSET REC
SALEM NH  03079-1143

MERRILL LYNCH PIERCE FENNER & SMITH FOR THE SOLE              471,975.72                    6.28% of Class S
BENEFIT OFITS CUSTOMERS
ATTN SERVICE TEAM
JACKSONVILLE FL  32246-6484


DWS Micro Cap Fund

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

STATE STREET BANK & TRUST CO CUST                             168,235.12                    12.09% of Class A
FBO ADP/MORGAN STANLEY DW
WESTWOOD MA  02090-2318

NATIONAL FINANCIAL SERVICES CORP                              399,514.05              44.99% of Institutional Class
FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS
NEW YORK NY  10281-1003

CHARLES SCHWAB & CO INC                                       252,175.67              28.40% of Institutional Class
SPECIAL CUSTODY ACCOUNT
MUTUAL FUNDS DEPARTMENT
SAN FRANCISCO CA  94104-4151

                                      108
<PAGE>
Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

DWS TRUST COMPANY CUST                                         68,664.79              7.73% of Institutional Class
FBO THE THRIFT PLAN OF LONZA
ATTN ASSET REC
SALEM NH  03079-1143

MORGAN STANLEY & CO.                                           51,254.32                    10.19% of Class C
HARBORSIDE FINANCIAL CENTER PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   50,163.93                    9.97% of Class C
ATTN FUND ADMINISTRATION SEC #97JS4
JACKSONVILLE FL  32246

SAC & CO                                                       25,435.70                    5.05% of Class C
NEW YORK NY  10017-8298

CHARLES SCHWAB & CO INC                                       153,726.66                    24.44% of Class S
REINVEST ACCOUNT
SAN FRANCISCO CA  94104-4151

AST TRUST CO                                                   32,879.71                    5.23% of Class S
CUST FBO CORPORATE OFFICE PROPERTIES TRUST
EXECUTIVE DEFFERED COMP PLAN
PHOENIX AZ  85072-2129
</TABLE>



                                      109
<PAGE>


                                      110
<PAGE>


                                      111
<PAGE>



Agreement to Indemnify Independent Trustees for Certain Expenses

In connection with litigation or regulatory  action related to possible improper
market timing or other improper trading activity or possible improper  marketing
and sales  activity  in the Funds,  each Fund's  investment  advisor has agreed,
subject to  applicable  law and  regulation,  to indemnify and hold harmless the
applicable  Funds  against  any and all loss,  damage,  liability  and  expense,
arising  from  market  timing or  marketing  and sales  matters  alleged  in any
enforcement actions brought by governmental authorities involving or potentially
affecting the Funds or the investment  advisor  ("Enforcement  Actions") or that
are the basis for private  actions  brought by shareholders of the Funds against
the Funds,  their directors and officers,  the Funds' investment  advisor and/or
certain other parties ("Private Litigation"), or any proceedings or actions that
may  be  threatened  or  commenced  in  the  future  by  any  person  (including
governmental authorities), arising from or similar to the matters alleged in the
Enforcement Actions or Private Litigation.  In recognition of its undertaking to
indemnify  the  applicable  Funds  and in  light of the  rebuttable  presumption
generally  afforded to independent  directors/trustees  of investment  companies
that they have not engaged in disabling conduct,  each Fund's investment advisor
has also agreed,  subject to  applicable  law and  regulation,  to indemnify the
applicable  Funds'   Independent   Trustees  against  certain   liabilities  the
Independent  Trustees  may incur from the  matters  alleged  in any  Enforcement
Actions or Private  Litigation or arising from or similar to the matters alleged
in the Enforcement Actions or Private Litigation,  and advance expenses that may
be  incurred by the  Independent  Trustees in  connection  with any  Enforcement
Actions  or  Private  Litigation.  The  applicable  investment  advisor  is not,
however,  required to provide  indemnification and advancement of expenses:  (1)
with respect to any  proceeding  or action with respect to which the  applicable
Fund's Board  determines that the Independent  Trustee  ultimately  would not be
entitled to indemnification or (2) for any liability of the Independent  Trustee
to the  Funds or their  shareholders  to which  the  Independent  Trustee  would
otherwise  be  subject  by reason  of  willful  misfeasance,  bad  faith,  gross
negligence  or  reckless  disregard  of the  Independent  Trustee's  duties as a
director or trustee of the Funds as determined in a final  adjudication  in such
action or proceeding.  The estimated amount of any expenses that may be advanced
to the Independent Trustees or indemnity that may be payable under the indemnity
agreements is currently  unknown.  These  agreements  by each Fund's  investment
advisor will survive the  termination  of the investment  management  agreements
between the applicable investment advisor and the Funds.



                                      112
<PAGE>

                               TRUST ORGANIZATION


Each Fund is a series of DWS Advisor Funds (the "Trust"), an open-end management
investment company. The Trust is a Massachusetts  business trust organized under
the laws of Massachusetts and is governed by an Amended and Restated Declaration
of Trust dated June 27, 2006,  as may be further  amended from time to time (the
"Declaration of Trust"). Prior to July 10, 2006, DWS Micro Cap Fund was a series
of DWS Investments Trust, an open-end management investment company organized as
a  Delaware  statutory  trust.  On or about  July 10,  2006,  DWS Micro Cap Fund
acquired all the assets and assumed all the liabilities of DWS Micro Cap Fund, a
series  of  DWS  Investment  Trust  (the  "Micro  Cap  Predecessor  Fund")  in a
reorganization.

The Trust was organized on July 21, 1986 under the laws of The  Commonwealth  of
Massachusetts under the name BT Tax-Free Investment Trust and assumed its former
name of BT  Investment  Funds on May 16,  1988.  The Trust's name was changed to
Scudder  Advisor Funds effective May 16, 2003 and to DWS Advisor Funds effective
February  6, 2006.  The Board of Trustees  of the Trust is  responsible  for the
overall  management and supervision of the affairs of the Trust. The Declaration
of Trust authorizes the Board of Trustees to create separate  investment  series
or portfolios of shares.  Mid Cap Growth Fund  currently  offers five classes of
shares,  Institutional  Class and Class A, B, C and S shares.  Small Cap  Growth
Fund currently offers five classes of shares,  Institutional  Class and Class A,
B, C, and S shares.  Micro Cap Fund  currently  offers  five  classes of shares,
Institutional Class and Class A, B, C and S shares. On July 14, 2006, Class AARP
shares of Mid Cap Growth Fund and Small Cap Growth Fund were merged into Class S
Shares of each Fund and are no longer  available for investment.  On October 23,
2006,  Investment Class shares of Mid Cap Growth Fund, Small Cap Growth Fund and
Micro  Cap Fund  merged  into  Class S shares  and are no longer  available  for
investment.  Effective  November 17, 2006, Class R shares of Mid Cap Growth Fund
and  Small Cap  Growth  Fund  converted  into  Class A shares  and are no longer
available for investment. Each of the Funds is a separate series of the Trust.



                                      113
<PAGE>


Prior to March 28, 2002,  Mid Cap Growth Fund and Small Cap Growth Fund invested
all of their investable  assets in diversified  open-end  management  investment
companies  having the same investment  objectives as each Fund. These investment
companies  were  Capital   Appreciation   Portfolio  and  Small  Cap  Portfolio,
respectively  (each, a "Portfolio" and collectively,  the  "Portfolios").  Since
March 28, 2002,  each Fund is now  operating as a  stand-alone  mutual fund that
directly  acquires and manages its own portfolio of  securities.  Mid Cap Growth
Fund  and  Small  Cap  Growth  Fund  may in the  future  seek to  achieve  their
investment  objectives  by  investing  all of their  net  assets  in  investment
companies  having  the  same  investment  policies  and  restrictions  as  those
applicable to each Fund.



Each Fund generally is not required to hold meetings of its shareholders.  Under
the  Declaration  of  Trust,  however,  shareholder  meetings  will  be  held in
connection  with the  following  matters to the extent  and as  provided  in the
Declaration  of Trust and as required by  applicable  law:  (a) the  election or
removal of trustees if a meeting is called for such purpose; (b) the termination
of the Trust or a Fund; (c) an amendment of the Declaration of Trust; (d) to the
same extent as stockholders of Massachusetts  business corporation as to whether
or not a court  action,  proceeding or claims should or should not be brought or
maintained  derivatively  or as a class  action  on  behalf  of the Trust or any
series or class thereof or the Shareholders;  and (e) such additional matters as
may be required by law, the Declaration of Trust,  the By-laws of a Fund, or any
registration  of a Fund  with  the  SEC or any  state,  or as the  Trustees  may
determine to be necessary or desirable.  Shareholders  also vote upon changes in
fundamental policies or restrictions.


On any  matter  submitted  to a vote of  shareholders,  all  shares of the Trust
entitled to vote shall,  except as otherwise provided in the Trust's By-Laws, be
voted in the aggregate as a single class without  regard to series or classes of
shares,  except (a) when required by applicable  law or when the Trustees  shall
have  determined that the matter affects one or more series or classes of shares
materially differently, shares shall be voted by individual series or class; and
(b) when the Trustees have determined that the matter affects only the interests
of one or more series or classes,  only  shareholders  of such series or classes
shall be entitled to vote thereon.

The  Declaration  of Trust  provides  that the  Board of  Trustees  may,  in its
discretion,  establish  minimum  investment  amounts for  shareholder  accounts,
impose  fees on  accounts  that do not  exceed a minimum  investment  amount and
involuntarily  redeem  shares in any such  account in payment of such fees.  The
Board of Trustees,  in its sole  discretion,  also may cause the Trust to redeem
all of the  shares of the Trust or one or more  series  or  classes  held by any
shareholder for any reason, to the extent permissible by the 1940 Act, including
(a) if the  shareholder  owns shares having an aggregate net asset value of less
than a specified minimum amount, (b) if a particular  shareholder's ownership of
shares would disqualify a series from being a regulated  investment company, (c)
upon a shareholder's failure to provide sufficient  identification to permit the
Trust to verify the shareholder's  identity, (d) upon a shareholder's failure to
pay for  shares  or meet or  maintain  the  qualifications  for  ownership  of a
particular  class or


                                      114
<PAGE>

series of  shares,  (e) if the Board of  Trustees  determines  (or  pursuant  to
policies  established by the Board it is determined)  that share  ownership by a
particular  shareholder is not in the best interests of remaining  shareholders,
(f) when a Fund is requested or compelled to do so by governmental  authority or
applicable law and (g) upon a shareholder's failure to comply with a request for
information  with  respect to the direct or indirect  ownership of shares of the
Trust.  The  Declaration  of Trust  also  authorizes  the Board of  Trustees  to
terminate a Fund or any class without  shareholder  approval,  and the Trust may
suspend the right of  shareholders  to require the Trust to redeem shares to the
extent permissible under the 1940 Act.

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Fund. The Declaration of Trust,  however,  disclaims  shareholder  liability for
acts or obligations  of the Fund and requires that notice of such  disclaimer be
given in each agreement,  obligation,  or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification  out of  Fund  property  for  all  losses  and  expenses  of any
shareholder held personally  liable for the obligations of the Fund and the Fund
may be  covered by  insurance  which the  Trustees  consider  adequate  to cover
foreseeable  tort claims.  Thus, the risk of a shareholder  incurring  financial
loss on account of shareholder liability is considered by the Advisor remote and
not  material,  since it is limited to  circumstances  in which a disclaimer  is
inoperative and the Fund itself is unable to meet its obligations.

                             PROXY VOTING GUIDELINES

Each Fund has delegated proxy voting responsibilities to its investment advisor,
subject to the Board's general oversight. The Fund has delegated proxy voting to
the Advisor with the direction that proxies should be voted  consistent with the
Fund's best  economic  interests.  The Advisor has adopted its own Proxy  Voting
Policies and Procedures ("Policies") and Proxy Voting Guidelines  ("Guidelines")
for this  purpose.  The  Policies  address,  among other  things,  conflicts  of
interest  that may arise  between the interests of the Fund and the interests of
the Advisor and its affiliates,  including the Fund's principal underwriter. The
Guidelines set forth the Advisor's general position on various  proposals,  such
as:

Shareholder  Rights  -- The  Advisor  generally  votes  against  proposals  that
restrict shareholder rights.

Corporate  Governance  -- The  Advisor  generally  votes  for  confidential  and
cumulative voting and against  supermajority voting requirements for charter and
bylaw amendments.  The Advisor generally votes for proposals to restrict a chief
executive  officer from serving on more than three outside  boards of directors.
The Advisor  generally votes against proposals that require a company to appoint
a Chairman who is an independent director.

Anti-Takeover  Matters -- The Advisor generally votes for proposals that require
shareholder ratification of poison pills or that request boards to redeem poison
pills,  and votes against the adoption of poison pills if they are submitted for
shareholder ratification. The Advisor generally votes for fair price proposals.

Compensation   Matters  --  The  Advisor  generally  votes  for  executive  cash
compensation  proposals,  unless they are  unreasonably  excessive.  The Advisor
generally  votes  against  stock  option  plans  that do not meet the  Advisor's
criteria.

Routine Matters -- The Advisor generally votes for the ratification of auditors,
procedural  matters  related to the annual  meeting and changes in company name,
and against bundled proposals and adjournment.

The general provisions described above do not apply to investment companies. The
Advisor generally votes proxies solicited by investment  companies in accordance
with the  recommendations  of an  independent  third  party,  except for proxies
solicited by or with respect to investment companies for which the Advisor or an
affiliate  serves as investment  advisor or principal  underwriter  ("affiliated
investment companies").  The Advisor votes affiliated investment company proxies
in  the  same  proportion  as  the  vote  of  the  investment   company's  other
shareholders  (sometimes called "mirror" or "echo" voting).  Master fund proxies
solicited from feeder funds are voted in accordance with applicable requirements
of the 1940 Act.

                                      115
<PAGE>

Although the  Guidelines  set forth the Advisor's  general  voting  positions on
various proposals,  the Advisor may,  consistent with the Fund's best interests,
determine under some circumstances to vote contrary to those positions.

The  Guidelines  on a  particular  issue  may or may  not  reflect  the  view of
individual members of the Board or of a majority of the Board. In addition,  the
Guidelines may reflect a voting position that differs from the actual  practices
of  the  public  companies  within  the  Deutsche  Bank  organization  or of the
investment  companies for which the Advisor or an affiliate serves as investment
advisor or sponsor.

The  Advisor  may  consider  the views of a portfolio  company's  management  in
deciding how to vote a proxy or in establishing general voting positions for the
Guidelines, but management's views are not determinative.

As mentioned above, the Policies  describe the way in which the Advisor resolves
conflicts  of  interest.  To  resolve  conflicts,   the  Advisor,  under  normal
circumstances,  votes proxies in accordance with its Guidelines.  If the Advisor
departs  from  the  Guidelines  with  respect  to a  particular  proxy or if the
Guidelines do not specifically  address a certain proxy proposal, a proxy voting
committee established by the Advisor will vote the proxy. Before voting any such
proxy,  however,  the  Advisor's  conflicts  review  committee  will  conduct an
investigation to determine whether any potential  conflicts of interest exist in
connection with the particular proxy proposal. If the conflicts review committee
determines  that the Advisor has a material  conflict  of  interest,  or certain
individuals on the proxy voting committee  should be recused from  participating
in a  particular  proxy vote,  it will  inform the proxy  voting  committee.  If
notified  that the Advisor has a material  conflict,  or fewer than three voting
members are eligible to  participate  in the proxy vote,  typically  the Advisor
will  engage an  independent  third  party to vote the proxy or follow the proxy
voting recommendations of an independent third party.

Under certain circumstances,  the Advisor may not be able to vote proxies or the
Advisor  may find that the  expected  economic  costs from voting  outweigh  the
benefits  associated with voting. For example,  the Advisor may not vote proxies
on certain foreign securities due to local restrictions or customs.  The Advisor
generally  does  not vote  proxies  on  securities  subject  to  share  blocking
restrictions.

You may  obtain  information  about  how a fund  voted  proxies  related  to its
portfolio  securities  during the 12-month  period ended June 30 by visiting the
Securities and Exchange  Commission's Web site at www.sec.gov or by visiting our
Web site at:  www.dws-scudder.com  (click on "proxy voting" at the bottom of the
page).

                              FINANCIAL STATEMENTS


The financial statements, including the portfolio of investments, of DWS Mid Cap
Growth Fund, DWS Small Cap Growth Fund and DWS Micro Cap Fund, together with the
Report of Independent  Registered Public Accounting Firm,  Financial  Highlights
and notes to financial  statements in the Annual Report to the  Shareholders  of
each Fund dated September 30, 2007, are incorporated herein by reference and are
hereby deemed to be a part of this SAI


                             ADDITIONAL INFORMATION

The CUSIP number of DWS Small Cap Growth Fund Class S is 23336Y 771.

The CUSIP number of DWS Mid Cap Growth Fund Class S is 23336Y 862.

The CUSIP number of DWS Micro Cap Fund Class S is 23339E 574.

Each Fund has a fiscal year end of September 30.


Many of the investment  changes in a Fund will be made at prices  different from
those  prevailing  at the time  they may be  reflected  in a  regular  report to
shareholders of a Fund. These  transactions  will reflect  investment  decisions
made by the Advisor in light of a Fund's investment objective and policies,  its
other portfolio holdings and tax considerations,  and should not be construed as
recommendations for similar action by other investors.


                                      116
<PAGE>

The Funds' Prospectuses and this SAI omit certain  information  contained in the
Registration  Statement  which  each  Fund  has  filed  with the SEC  under  the
Securities  Act and Reference is hereby made to the  Registration  Statement for
further  information  with respect to a Fund and the securities  offered hereby.
This  Registration  Statement and its amendments are available for inspection by
the public at the SEC in Washington, D.C.



                                      117
<PAGE>


                                    APPENDIX

Description of Moody's Corporate Bond Ratings:

Aaa - Bonds  rated Aaa are  judged  to be of the best  quality.  They  carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally  stable margin
and  principal is secure.  While the various  protective  elements are likely to
change,  such  changes  as can be  visualized  are most  unlikely  to impair the
fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards.  Together
with the Aaa group they comprise what are generally  known as high-grade  bonds.
They are rated lower than the best bonds because  margins of protection  may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater  amplitude  or  there  may be  other  elements  present  which  make the
long-term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many  favorable  investment  attributes  and are to be
considered  as  upper-medium-grade  obligations.   Factors  giving  security  to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium-grade obligations,  i.e. they are
neither highly  protected nor poorly  secured.  Interest  payments and principal
security appear adequate for the present but certain protective  elements may be
lacking or may be  characteristically  unreliable over any great length of time.
Such  bonds  lack  outstanding  investment  characteristics  and  in  fact  have
speculative characteristics as well.

Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well  assured.  Often the  protection of interest and principal
payments may be very moderate and thereby not well safeguarded  during both good
and bad times over the future.  Uncertainty of position  characterizes  bonds in
this class.

B - Bonds  rated B generally  lack  characteristics  of a desirable  investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds  rated Caa are of poor  standing.  Such  issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds  rated Ca  represent  obligations  which  are  speculative  in a high
degree. Such issues are often in default or have other marked shortcomings.

C - Bonds  rated C are the  lowest-rated  class of bonds and can be  regarded as
having extremely poor prospects of ever attaining any real investment standing.

Moody's  applies  numerical  modifiers,  1, 2,  and 3, in  each  generic  rating
classification  from Aa through B in its corporate  bond system.  The modifier 1
indicates  that the  security  ranks in the  higher  end of its  generic  rating
category;  the  modifier 2  indicates a mid-range  ranking;  and the  modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Description of S&P Corporate Bond Ratings:

AAA - Debt rated AAA has the highest  rating  assigned by Standard & Poor's to a
debt  obligation.  Capacity to pay  interest  and repay  principal  is extremely
strong.

AA - Debt  rated  AA has a very  strong  capacity  to  pay  interest  and  repay
principal and differs from the higher-rated issues only in small degree.

                                      118
<PAGE>

A - Debt rated A has a strong  capacity  to pay  interest  and repay  principal,
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions.

BBB - Debt rated BBB is regarded as having an adequate  capacity to pay interest
and  repay  principal.   Whereas  it  normally  exhibits   adequate   protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB - Debt  rated BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate capacity to timely meet interest and principal payments.

B - Debt rated B has a greater  vulnerability  to default but  currently has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay  principal.  The B rating  category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable  vulnerability to default, and
is dependent upon favorable business,  financial and economic conditions to meet
timely  payment of interest and repayment of principal.  In the event of adverse
business,  financial,  or  economic  conditions,  it is not  likely  to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is  typically  applied to debt  subordinated  to senior  debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically  applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation  where a  bankruptcy  petition has been filed but debt service
payments are continued.

CI - The rating CI is  reserved  for income  bonds on which no interest is being
paid.

D - Debt  rated D is in  payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless S&P believes that such payments
will be made during such grace  period.  The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Description of S&P Commercial Paper Ratings:

Commercial  paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+.

Description of Moody's Commercial Paper Ratings:

The rating Prime-1 is the highest  commercial  paper rating assigned by Moody's.
Issuers rated Prime-1 (or related  supporting  institutions)  are  considered to
have a superior capacity for repayment of short-term promissory obligations.

S&P's Commercial Paper Ratings:

A is the highest  commercial  paper rating category  utilized by S&P, which uses
the  numbers  1,  1,  2  and  3  to  denote  relative   strength  within  its  A
classification.  Commercial  paper  issues  rated A by S&P  have  the  following
characteristics:  Liquidity ratios are better than industry  average.  Long-term
debt ratings are A or better.  The issuer


                                      119
<PAGE>

has access to at least two additional channels of borrowing.  Basic earnings and
cash flow are in an upward tread. Typically, the issuer is a strong company in a
well-established industry and has superior management.

Moody's Commercial Paper Ratings:

Issuers  rated  Prime-1 (or  related  supporting  institutions)  have a superior
capacity for repayment of short-term promissory  obligations.  Prime-1 repayment
capacity will normally be evidenced by the  following  characteristics:  leading
market positions in well-established  industries;  high rates of return on funds
employed;  conservative capitalization structures with moderate reliance on debt
and  ample  asset  protection;  broad  margins  in  earnings  coverage  of fixed
financial charges and high internal cash generation;  well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers  rated  Prime-2  (or  related  supporting  institutions)  have a  strong
capacity for repayment of short-term promissory obligations.  This will normally
be evidenced by many of the characteristics  cited above but to a lesser degree.
Earnings  trends and  coverage  ratios,  while  sound,  will be more  subject to
variation. Capitalization characteristics,  while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related  supporting  institutions)  have an acceptable
capacity  for  repayment of  short-term  promissory  obligations.  The effect of
industry   characteristics  and  market  composition  may  be  more  pronounced.
Variability in earnings and  profitability may result in changes in the level of
debt protection  measurements  and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.




                                      120
<PAGE>

                                             STATEMENT OF ADDITIONAL INFORMATION

INVESTMENT ADVISOR AND ADMINISTRATOR
Deutsche Investment Management Americas, Inc.
345 Park Avenue
New York, NY 10154

CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

DISTRIBUTOR
DWS Scudder Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606

TRANSFER AGENT
DWS Scudder Investments Service Company
222 South Riverside Plaza
Chicago, IL 60606

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110

LEGAL COUNSEL
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019

No  person  has  been  authorized  to  give  any  information  or  to  make  any
representations other than those contained in each Fund's Prospectuses,  its SAI
or its official sales  literature in connection  with the offering of the Funds'
shares and, if given or made, such other information or representations must not
be relied on as having been  authorized by the Trust.  Neither the  Prospectuses
nor this SAI  constitutes  an offer in any state in which,  or to any  person to
whom, such offer may not lawfully be made.




<PAGE>



                                DWS ADVISOR FUNDS


                          DWS Short Duration Plus Fund
                          Class A, Class B and Class C








                       STATEMENT OF ADDITIONAL INFORMATION


                                February 1, 2008

This Statement of Additional  Information is not a prospectus and should be read
in conjunction  with the  prospectuses  dated February 1, 2008 (Class A, Class B
and Class C Shares),  as amended from time to time,  for DWS Short Duration Plus
Fund (the "Fund"), a series of DWS Advisor Funds (the "Trust"),  copies of which
may be obtained without charge by contacting DWS Scudder Distributors, Inc., 222
South Riverside Plaza, Chicago, Illinois 60606, (800) 621-1148, or from the firm
from which  this  Statement  of  Additional  Information  was  obtained  and are
available along with other materials on the Securities and Exchange Commission's
Internet Web site (http://www.sec.gov).

The Annual Report to  Shareholders,  dated  September 30, 2007, is  incorporated
herein by reference  and is deemed to be part of this  Statement  of  Additional
Information.  A copy of the Fund's Annual Report may be obtained  without charge
by calling the Fund at the toll-free number (800) 621-1048.


This Statement of Additional  Information  ("SAI") is  incorporated by reference
into the corresponding prospectuses for each class of shares of the Fund.








<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----


INVESTMENT RESTRICTIONS........................................................3

INVESTMENT POLICIES AND TECHNIQUES.............................................5
   Investment Techniques.......................................................5
   Portfolio Holdings.........................................................38

MANAGEMENT OF THE FUND........................................................39
   Investment Advisor.........................................................39

FUND SERVICE PROVIDERS........................................................52
   Administrator..............................................................52
   Distributor................................................................54
   Custodian..................................................................58
   Transfer Agent.............................................................59
   Service Agent..............................................................59
   Legal Counsel..............................................................59
   Independent Registered Public Accounting Firm..............................60

PORTFOLIO TRANSACTIONS........................................................60

PURCHASE AND REDEMPTION OF SHARES.............................................65

DIVIDENDS.....................................................................90

TAXES.........................................................................91

NET ASSET VALUE...............................................................96

TRUSTEES AND OFFICERS.........................................................97

TRUST ORGANIZATION...........................................................115

PROXY VOTING GUIDELINES......................................................116

FINANCIAL STATEMENTS.........................................................117

ADDITIONAL INFORMATION.......................................................118

APPENDIX.....................................................................119


                                       i
<PAGE>



                                       ii


<PAGE>



                             INVESTMENT RESTRICTIONS

Except as otherwise indicated,  the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders.  There can be
no assurance that the Fund's objective will be met.

Any  investment  restrictions  herein  which  involve  a maximum  percentage  of
securities  or assets shall not be  considered  to be violated  unless an excess
over the percentage occurs  immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.


The Fund has  elected  to be  classified  as a  diversified  series of  separate
open-end  investment  management  companies.  A  diversified  Fund may not, with
respect  to 75% of total  assets,  invest  more  than 5% of total  assets in the
securities of a single issuer (other than US government securities or securities
of investment  companies) or invest in more than 10% of the  outstanding  voting
securities of such issuer (with certain exceptions).


Fundamental Restrictions

The Fund has elected to be treated as a diversified  investment company, as that
term is used in the Investment Company Act of 1940, as amended (the "1940 Act"),
and as interpreted or modified by regulatory authority having jurisdiction, from
time to time.

As a matter of fundamental policy, the Fund may not:

(1)      borrow money, except as permitted under the 1940 Act, and as
         interpreted or modified by regulatory authority having jurisdiction,
         from time to time;

(2)      issue senior securities, except as permitted under the 1940 Act, and as
         interpreted or modified by regulatory  authority  having  jurisdiction,
         from time to time;

(3)      concentrate its investments in a particular  industry,  as that term is
         used in the 1940 Act,  and as  interpreted  or modified  by  regulatory
         authority having jurisdiction, from time to time;

(4)      engage in the  business of  underwriting  securities  issued by others,
         except to the extent  that the Fund may be deemed to be an  underwriter
         in connection with the disposition of portfolio securities;

(5)      purchase or sell real estate, which term does not include securities of
         companies which deal in real estate or mortgages or investments secured
         by real estate or  interests  therein,  except  that the Fund  reserves
         freedom of action to hold and to sell real estate  acquired as a result
         of the Fund's ownership of securities;

(6)      purchase or sell commodities,  except as permitted by the 1940 Act, and
         as  interpreted  or  modified  by  the  regulatory   authority   having
         jurisdiction, from time to time; and

(7)      make loans except as permitted  under the 1940 Act, and as  interpreted
         or modified by regulatory authority having  jurisdiction,  from time to
         time.


A  fundamental  policy may not be changed  without the approval of a majority of
the outstanding  voting securities of the Fund which, under the 1940 Act and the
rules thereunder and as used in this Statement of Additional Information,  means
the lesser of (1) 67% or more of the voting securities present at a meeting,  if
the holders of more than 50% of the  outstanding  voting  securities of the Fund
are present or  represented  by proxy,  or (2) more than 50% of the  outstanding
voting securities of the Fund.

                                       3
<PAGE>

Non-Fundamental Restrictions

In order to comply with certain statutes and policies and for other reasons, the
Fund will not,  as a matter  of  operating  policy  (these  restrictions  may be
changed by a vote of the Trustees of the Trust without shareholder approval):

i.       purchase any security or evidence of interest therein on margin, except
         that  short-term  credits  necessary for the clearance of purchases and
         sales of  securities  may be  obtained  and  deposits  of  initial  and
         variation   margin  may  be  made  in  connection  with  the  purchase,
         ownership, holding or sale of futures contracts;

ii.      sell securities it does not own (short sales).  (This  restriction does
         not  preclude  short  sales  "against  the  box"  (that  is,  sales  of
         securities  (a) the Fund  contemporaneously  owns or (b) where the Fund
         has the right to obtain  securities  equivalent  in kind and  amount to
         those  sold).  (The Fund has no  current  intention  to engage in short
         selling);

iii.     purchase  securities  issued by any  investment  company  except to the
         extent   permitted  by  the  1940  Act  (including  any  exemptions  or
         exclusions  therefrom),  except that this  limitation does not apply to
         securities  received  or  acquired  as  dividends,  through  offers  of
         exchange, or as a result of reorganization, consolidation or merger;

iv.      lend  portfolio  securities  in an amount  greater  than 33 1/3% of its
         total assets;

v.       invest more than 15% of the Fund's net assets  (taken at the greater of
         cost or market  value) in  securities  that are illiquid or not readily
         marketable  (excluding  Rule 144A  securities  deemed by the Fund Trust
         Board to be liquid); and

vi.      acquire  securities  of  registered  open-end  investment  companies or
         registered unit investment  trusts in reliance on Sections  12(d)(1)(F)
         or 12(d)(1)(G) of the 1940 Act.


An investment restriction will not be considered violated if that restriction is
complied with at the time the relevant action is taken,  notwithstanding a later
change in the market  value of an  investment,  in net or total assets or in the
change of securities rating of the investment or any other later change.


The Fund invests in varying maturities and normally seeks to maintain an average
portfolio  duration  of no more than 3 years.  The Fund  invests,  under  normal
market conditions,  at least 65% of its total assesrs in fixed income securities
rated, at the time of purchase,  within the top four long-term rating categories
by a  nationally  recognized  statistical  rating  organization  "NSRO"  (or, if
unrated, determined by the Fund's investment advisor to be of similar quality).


To meet  federal  income  tax  requirements  for  qualification  as a  regulated
investment company,  the Fund must, among other things, limit its investments so
that at the close of each  quarter of its  taxable  year (1) no more than 25% of
the  value of its  total  assets  is  invested  in the  securities  (other  than
securities of the US Government or a regulated  investment  company) of a single
issuer or two or more issuers  which the Fund  controls and which are engaged in
the same, similar or related trades or businesses or in the securities of one or
more qualified publicly traded  partnerships,  and (2) at least 50% of the value
of its total assets is represented by cash, cash items (including  receivables),
US Government securities, securities of other regulated investment companies and
other securities of any issuer that does not represent more than 5% of the value
of the Fund's  total  assets and not more than 10% of the  issuer's  outstanding
voting securities.

Master/feeder Fund Structure. The Board of Trustees has the discretion to retain
the current distribution arrangement for a Fund while investing in a master fund
in a master/feeder fund structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing  directly in a portfolio of securities,  invests most or all of its
investment  assets in a separate  registered  investment  company  (the  "master
fund") with  substantially  the same  investment  objective  and policies as the
feeder  fund.  Such a  structure  permits  the


                                       4
<PAGE>

pooling of assets of two or more feeder funds, preserving separate identities or
distribution  channels  at the feeder  fund  level.  Based on the  premise  that
certain of the expenses of  operating an  investment  portfolio  are  relatively
fixed, a larger  investment  portfolio may  eventually  achieve a lower ratio of
operating expenses to average net assets. An existing investment company is able
to convert to a feeder fund by selling all of its  investments,  which  involves
brokerage and other transaction costs and realization of a taxable gain or loss,
or by contributing its assets to the master fund and avoiding  transaction costs
and, if proper procedures are followed, the realization of taxable gain or loss.

                       INVESTMENT POLICIES AND TECHNIQUES

Investment Techniques


Descriptions  in  this  Statement  of  Additional  Information  of a  particular
investment  practice  or  technique  in which the Fund may  engage  are meant to
describe  the  spectrum  of  investments  that  Deutsche  Investment  Management
Americas Inc. (the "Advisor") in its discretion  might,  but is not required to,
use in managing the Fund's portfolio  assets.  The Advisor may in its discretion
at any time employ such practice,  technique or instrument for one or more Funds
but not for all funds  advised by it.  Furthermore,  it is possible that certain
types of financial instruments or investment techniques described herein may not
be available, permissible, economically feasible or effective for their intended
purposes in all markets. Certain practices, techniques or instruments may not be
principal  activities of the Fund, but, to the extent employed,  could from time
to time have a material impact on the Fund's performance. The Fund may engage in
certain additional practices not described herein.


Short-Term Instruments

When the Fund experiences large cash inflows -- for example, through the sale of
securities  --  and  attractive   investments   are  unavailable  in  sufficient
quantities,  the Fund may hold short-term investments (or shares of money market
mutual funds) for a limited time pending  availability of such  investments.  In
addition,  when in the  Advisor's  opinion it is  advisable to adopt a temporary
defensive position because of unusual and adverse market or other conditions, up
to 100% of the Fund's assets may be invested in such short-term instruments.

Short-term   instruments  consist  of  foreign  and  domestic:   (1)  short-term
obligations  of sovereign  governments  and their  agencies,  instrumentalities,
authorities or political  subdivisions;  (2) other  short-term  debt  securities
rated AA or higher by S&P or Aa or higher by Moody's or, if  unrated,  deemed to
be of comparable  quality in the opinion of the Advisor;  (3) commercial  paper;
(4)  bank  obligations,  including  negotiable  certificates  of  deposit,  time
deposits and bankers' acceptances;  and (5) repurchase  agreements.  At the time
the Fund invests in commercial paper, bank obligations or repurchase agreements,
the issuer or the issuer's parent must have  outstanding debt rated AA or higher
by the Standard & Poor's Division of The McGraw-Hill Companies,  Inc. ("S&P") or
Aa or  higher  by  Moody's  Investors  Service,  Inc.  ("Moody's");  outstanding
commercial paper or bank obligations rated A-1 by S&P or Prime-1 by Moody's; or,
if no such  ratings  are  available,  the  instrument  must be  deemed  to be of
comparable  quality in the  opinion of the  Advisor.  These  instruments  may be
denominated in US dollars or in foreign currencies.

Other US  government  securities  the Fund may  invest in  include  (but are not
limited  to)   securities   issued  or   guaranteed   by  the  Federal   Housing
Administration, Farmers Home Loan Administration,  Export-Import Bank of the US,
Small Business Administration, General Services Administration, Central Bank for
Cooperatives,  Federal Farm Credit  Banks,  Federal  Intermediate  Credit Banks,
Federal  Land  Banks,  Maritime  Administration,   Tennessee  Valley  Authority,
District  of  Columbia  Armory  Board and Student  Loan  Marketing  Association.
Because  the US  government  is not  obligated  by law to provide  support to an
instrumentality it sponsors,  the Fund will invest in obligations issued by such
an  instrumentality  only if the  Advisor  determines  that the credit risk with
respect  to the  instrumentality  does not make its  securities  unsuitable  for
investment by the Fund.

The Fund may also invest in separately traded principal and interest  components
of  securities  guaranteed  or  issued  by the US  government  or its  agencies,
instrumentalities   or   sponsored   enterprises   if  such   components   trade
independently under the Separate Trading of Registered Interest and Principal of
Securities  program  ("STRIPS")  or  any  similar  program  sponsored  by the US
Government.  STRIPS  may be sold as zero  coupon  securities.  See "Zero  Coupon
Securities and Deferred Interest Bonds."

                                       5
<PAGE>

US  Government  Securities.  The  Fund  may  invest  in  obligations  issued  or
guaranteed  by the US government  including:  (1) direct  obligations  of the US
Treasury   and  (2)   obligations   issued  by  US   government   agencies   and
instrumentalities.  Included  among  direct  obligations  of the US are Treasury
Bills,  Treasury  Notes  and  Treasury  Bonds,  which  differ  in terms of their
interest rates, maturities and dates of issuance. Treasury Bills have maturities
of less than one year,  Treasury  Notes have  maturities  of one to 10 years and
Treasury Bonds generally have maturities of greater than 10 years at the date of
issuance.    Included   among   the   obligations   issued   by   agencies   and
instrumentalities  of the United States are:  instruments  that are supported by
the full faith and credit of the United States (such as  certificates  issued by
the  Government  National  Mortgage   Association  ("GNMA"  or  "Ginnie  Mae"));
instruments  that are supported by the right of the issuer to borrow from the US
Treasury (such as securities of Federal Home Loan Banks);  and instruments  that
are  supported  solely by the credit of the agency or  instrumentality  (such as
Federal National Mortgage  Association ("FNMA" or "Fannie Mae") and Federal Home
Loan Mortgage Corporation ("FHLMC" or "Freddie Mac")).

Certificates  of  Deposit  and  Bankers'  Acceptances.  The Fund may  invest  in
certificates  of deposit and bankers'  acceptances.  Certificates of deposit are
receipts  issued by a  depository  institution  in  exchange  for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary  market prior to maturity.  Bankers'  acceptances
typically  arise  from  short-term  credit   arrangements   designed  to  enable
businesses to obtain funds to finance  commercial  transactions.  Generally,  an
acceptance  is a time draft  drawn on a bank by an  exporter  or an  importer to
obtain a stated  amount of funds to pay for specific  merchandise.  The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the  instrument on its maturity  date.  The acceptance may then be
held  by the  accepting  bank  as an  earning  asset  or it may be  sold  in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for  acceptances can be as long as 270 days,  most  acceptances  have
maturities of six months or less.

Commercial  Paper. The Fund may invest in commercial  paper. The Fund may invest
in fixed  rate or  variable  rate  commercial  paper,  issued  by US or  foreign
entities.  Commercial paper consists of short-term  (usually from 1 to 270 days)
unsecured  promissory  notes  issued by US or foreign  corporations  in order to
finance  their  current  operations.  Any  commercial  paper issued by a foreign
entity corporation and purchased by the Fund must be US  dollar-denominated  and
must not be subject to foreign withholding tax at the time of purchase.

Commercial  paper,  when  purchased  by the Fund,  must be rated in the  highest
short-term  rating category by any two NRSROs (or one NRSRO if that NRSRO is the
only such NRSRO which rates such security) or, if not so rated, must be believed
by the  Advisor,  acting under the  supervision  of the Board of Trustees of the
Fund,  to be of  comparable  quality.  Investing  in  foreign  commercial  paper
generally   involves  risks  similar  to  those   described  below  relating  to
obligations  of foreign  banks or foreign  branches and  subsidiaries  of US and
foreign banks.

The Fund may also invest in variable rate master  demand notes.  A variable rate
master  demand note (which is a type of  commercial  paper)  represents a direct
borrowing arrangement involving periodically fluctuating rates of interest under
a letter agreement between a commercial paper issuer and an institutional lender
pursuant to which the lender may determine to invest varying amounts.

For a description of commercial paper ratings, see the Appendix to this SAI.

US  Dollar-Denominated  Foreign Fixed Income Securities.  The Fund may invest in
the  dollar-denominated  debt securities of foreign companies.  Investing in the
securities of foreign companies involves more risks than investing in securities
of US companies.  Their value is subject to economic and political  developments
in the countries where the companies  operate and to changes in foreign currency
values.  Values may also be  affected  by foreign  tax laws,  changes in foreign
economic or monetary  policies,  exchange  control  regulations  and regulations
involving prohibitions on the repatriation of foreign currencies.

In addition, the relative performance of various countries' fixed income markets
historically   has   reflected   wide   variations   relating   to  the   unique
characteristics of each country's economy.  Year-to-year fluctuations in certain
markets have been  significant,  and negative  returns have been  experienced in
various markets from time to time.

                                       6
<PAGE>

US Dollar-Denominated  Sovereign and Supranational Fixed Income Securities.  The
Fund may invest in US  dollar-denominated  foreign  government debt  securities,
which  include debt  obligations  issued or  guaranteed  by  national,  state or
provincial  governments or similar political subdivisions and quasi-governmental
and  supranational  entities   (collectively,   "sovereign  debt  obligations").
Sovereign debt obligations may involve a high degree of risk. The issuer of such
an obligation or the governmental  authorities that control the repayment of the
obligation  may be unable or unwilling to repay  principal and interest when due
and may require  renegotiations  or rescheduling of debt payments.  In addition,
prospects  for  repayment of  principal  and interest may depend on political as
well as economic factors.  Quasi-governmental and supranational entities include
international  organizations designated or supported by governmental entities to
promote  economic   reconstruction  or  development  and  international  banking
institutions  and related  government  agencies.  Examples  include (but are not
limited to) the  International  Bank for  Reconstruction  and  Development  (the
"World Bank"), the Japanese Development Bank, the Asian Development Bank and the
Inter-American  Development  Bank.  Foreign  government  securities also include
mortgage-related   securities  issued  or  guaranteed  by  national,   state  or
provincial   governmental   instrumentalities,    including   quasi-governmental
agencies.

Put Bonds.  A put bond (also referred to as a tender option or third party bond)
is a bond created by coupling an  intermediate or long-term fixed rate bond with
an agreement  giving the holder the option of tendering  the bond to receive its
par value. As consideration for providing this tender option, the sponsor of the
bond (usually a bank,  broker-dealer or other financial  intermediary)  receives
periodic fees that equal the difference between the bond's fixed coupon rate and
the rate  (determined  by a remarketing  or similar  agent) that would cause the
bond,  coupled  with the tender  option,  to trade at par.  By paying the tender
offer fees, the Fund in effect holds a demand  obligation that bears interest at
the prevailing short-term rate.

In   selecting   put  bonds,   the   Advisor   takes  into   consideration   the
creditworthiness of the issuers of the underlying bonds and the creditworthiness
of the  providers  of the tender  option  features.  A sponsor may  withdraw the
tender option feature if the issuer of the underlying  bond defaults on interest
or principal payments or the bond's rating is downgraded.

Bank Loans.  The Fund may also invest in bank loans,  which are typically senior
debt  obligations  of borrowers  (issuers) and as such, are considered to hold a
senior  position in the capital  structure  of the  borrower.  These may include
loans which hold the most senior position, that hold an equal ranking with other
senior debt, or loans that are, in the judgment of the Advisor,  in the category
of senior debt of the borrower.  This capital structure position generally gives
the  holders of these  loans a priority  claim on some or all of the  borrower's
assets  in the  event of a  default.  In most  cases,  these  loans  are  either
partially or fully  collateralized by the assets of a corporation,  partnership,
limited  liability  company or other business  entity,  or by cash flow that the
Advisor  believes has a market value at the time of  acquisition  that equals or
exceeds  the  principal  amount of the  loan.  These  loans are often  issued in
connection  with   recapitalizations,   acquisitions,   leveraged  buy-outs  and
refinancings.  It is  important to note that Moody's and S&P may rate bank loans
higher  than high yield  bonds of the same  issuer to reflect  their more senior
position.  The Fund may  invest  in both  fixed-  and  floating-rate  loans.  In
addition,  bank loans can trade either as an  "assignment"  or  "participation."
When the Fund buys an assignment, it is essentially becoming a party to the bank
agreement.  The vast majority of all trades are  assignments and would therefore
generally represent the preponderance of bank loans held by the Fund. In certain
cases, the Fund may buy bank loans on a participation basis; if for example, the
Fund did not want to become party to the bank agreement.  However, in all cases,
the Fund will not purchase  bank loans where  Deutsche  Bank,  or an  affiliate,
serves as an agent bank.

Participations  and  assignments   involve  credit  risk,  interest  rate  risk,
liquidity  risk,  and the  risk of  being a  lender.  If the  Fund  purchases  a
participation, it may only be able to enforce its rights through the lender, and
may assume the credit risk of both the lender and the borrower.

Investments  in loans through  direct  assignment  of a financial  institution's
interests with respect to a loan may involve additional risks. For example, if a
loan is foreclosed, the purchaser could become part owner of any collateral, and
would bear the costs and liabilities associated with owning and disposing of the
collateral.  In addition,  it is at least  conceivable that under emerging legal
theories of lender liability, a purchaser could be held liable as a co-lender.

                                       7
<PAGE>

In the case of loans administered by a bank or other financial  institution that
acts as agent for all holders,  if assets held by the agent for the benefit of a
purchaser  are  determined  to be subject to the claims of the  agent's  general
creditors,  the  purchaser  might incur  certain  costs and delays in  realizing
payment on the loan or loan  participation  and could suffer a loss of principal
or interest.

In the case of loan  participations  where a bank or other  lending  institution
serves as  financial  intermediary  between  the Fund and the  borrower,  if the
participation does not shift to the Fund the direct debtor-creditor relationship
with the borrower,  interpretations  of the Securities  and Exchange  Commission
("SEC") require the Fund, in some circumstances,  to treat both the lending bank
or other  lending  institution  and the  borrower as issuers for purposes of the
Fund's investment  policies.  Treating a financial  intermediary as an issuer of
indebtedness  may restrict the Fund's ability to invest in indebtedness  related
to a single financial intermediary,  or a group of intermediaries engaged in the
same  industry,  even  if the  underlying  borrowers  represent  many  different
companies and industries.

Variable  and  Floating  Rate  Instruments.  The Fund may invest in  variable or
floating  rate  instruments  and  variable  rate demand  instruments,  including
variable amount master demand notes.  These  instruments  will normally  involve
industrial  development  or revenue bonds that provide that the rate of interest
is set as a specific  percentage  of a  designated  base rate (such as the prime
rate) at a major  commercial  bank.  In  addition,  the  interest  rate on these
securities may be reset daily, weekly or on some other reset period and may have
a floor or ceiling on interest rate changes.  The Fund can demand payment of the
obligation at all times or at stipulated dates on short notice (not to exceed 30
days) at par plus accrued  interest.  Generally,  changes in interest rates will
have a  smaller  effect on the  market  value of these  instruments  than on the
market  value  of  fixed  income  securities  and,  thus,  may  allow  for  less
opportunity for capital appreciation or depreciation.

Debt  instruments  purchased by the Fund may be  structured  to have variable or
floating  interest rates.  These  instruments may include variable amount master
demand notes that permit the  indebtedness  to vary in addition to providing for
periodic  adjustments  in the  interest  rates.  The Advisor  will  consider the
earning  power,  cash  flows  and other  liquidity  ratios  of the  issuers  and
guarantors  of such  instruments  and, if the  instrument is subject to a demand
feature,  will  continuously  monitor their financial ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
equivalent  to the  quality  standards  applicable  to the Fund's  fixed  income
investments, the issuer's obligation to pay the principal of the instrument will
be backed  by an  unconditional  bank  letter or line of  credit,  guarantee  or
commitment  to lend.  Any bank  providing  such a bank  letter,  line of credit,
guarantee or loan commitment will meet the Fund's  investment  quality standards
relating to investments in bank obligations.  The Advisor will also continuously
monitor the creditworthiness of issuers of such instruments to determine whether
the Fund should continue to hold the investments.

Other  variable and  floating  rate  instruments  include but are not limited to
corporates, ABS, CMBS, MBS, CMOs, government and agency securities.

The absence of an active secondary market for certain variable and floating rate
notes could make it difficult to dispose of the instruments,  and the Fund could
suffer a loss if the issuer  defaults or during periods in which the Fund is not
entitled to exercise its demand rights.

Variable and floating rate  instruments  held by the Fund will be subject to the
Fund's limitation on investments in illiquid  securities when a reliable trading
market for the instruments does not exist and the Fund may not demand payment of
the principal amount of such instruments within seven days.

Warrants. The Fund may invest in warrants. Warrants generally entitle the holder
to buy a specified number of shares of common stock at a specified price,  which
is often higher than the market  price at the time of issuance,  for a period of
years or in perpetuity. Warrants may be issued in units with other securities or
separately,  and may be freely  transferable and traded on exchanges.  While the
market value of a warrant tends to be more volatile than that of the  securities
underlying the warrant, the market value of a warrant may not necessarily change
with that of the  underlying  security.  A warrant ceases to have value if it is
not exercised prior to any expiration date to which the warrant is subject.  The
purchase of warrants involves a risk that the Fund could lose the purchase value
of a warrant if the right to subscribe  to  additional  shares is not  exercised
prior to the warrant's  expiration.  Also, the purchase of


                                       8
<PAGE>

warrants  involves the risk that the effective  price paid for the warrant added
to the  subscription  price of the related  security may exceed the value of the
subscribed  security's  market  price,  such as when there is no movement in the
level of the underlying security.

Municipal  Securities.  The Fund may  invest  to a limited  extent in  municipal
securities.  Municipal  securities consist of bonds, notes and other instruments
issued  by or on  behalf  of  states,  territories  and  possessions  of  the US
(including the District of Columbia) and their political subdivisions,  agencies
or  instrumentalities,  the  interest  on which is exempt from  regular  federal
income tax (i.e., excluded from gross income for federal income tax purposes but
not necessarily  exempt from the federal  alternative  minimum tax or from state
and local  taxes).  Municipal  securities  may also be issued on a taxable basis
(i.e., the interest on such securities is not exempt from regular federal income
tax).

Municipal  securities  are  often  issued to obtain  funds  for  various  public
purposes,  including the construction of a wide range of public  facilities such
as bridges, highways, housing, hospitals, mass transportation,  schools, streets
and water and sewer works. Other public purposes for which municipal  securities
may be issued include  refunding  outstanding  obligations,  obtaining funds for
general  operating  expenses,  and  obtaining  funds  to  lend to  other  public
institutions  and  facilities.   Municipal   securities  also  include  "private
activity" or industrial  development  bonds, which are issued by or on behalf of
public  authorities  to provide  financing  aid to acquire sites or construct or
equip  facilities   within  a  municipality  for  privately  or  publicly  owned
corporations.

The  two  principal   classifications  of  municipal   securities  are  "general
obligations" and "revenue  obligations".  General obligations are secured by the
issuer's  pledge of its full faith and credit for the payment of  principal  and
interest although the characteristics and enforcement of general obligations may
vary  according  to  the  law  applicable  to  the  particular  issuer.  Revenue
obligations,  which  include,  but are not limited to, private  activity  bonds,
resource  recovery bonds,  certificates of participation  and certain  municipal
notes,  are not backed by the credit and taxing  authority of the issuer and are
payable solely from the revenues derived from a particular  facility or class of
facilities  or, in some cases,  from the  proceeds of a special  excise or other
specific revenue source. Nevertheless, the obligations of the issuer may also be
backed by a letter of credit,  guarantee or insurance.  General  obligations and
revenue  obligations may be issued in a variety of forms,  including  commercial
paper,  fixed,  variable and floating  rate  securities,  tender  option  bonds,
auction rate bonds and capital appreciation bonds.

In addition to general obligations and revenue obligations,  there are a variety
of hybrid and special  types of municipal  securities.  There are also  numerous
differences  in the  credit  backing of  municipal  securities  both  within and
between these two principal classifications.

For  the  purpose  of  applying   the  Fund's   investment   restrictions,   the
identification  of the  issuer of a  municipal  security  which is not a general
obligation is made by the Advisor based on the  characteristics of the municipal
security,  the most important of which is the source of funds for the payment of
principal and interest on such securities.

One or a small number of  institutional  investors such as the Fund may purchase
an entire issue of municipal  securities.  Thus, the issue may not be said to be
publicly  offered.  Unlike some  securities  that are not  publicly  offered,  a
secondary  market exists for many  municipal  securities  that were not publicly
offered initially and such securities can be readily marketable.

The obligations of an issuer to pay the principal of and interest on a municipal
security are subject to the provisions of bankruptcy,  insolvency and other laws
affecting the rights and remedies of creditors,  such as the Federal  Bankruptcy
Act,  and laws,  if any,  that may be enacted by Congress or state  legislatures
extending  the time for payment of  principal  or  interest  or  imposing  other
constraints  upon  the  enforcement  of such  obligations.  There  is  also  the
possibility  that,  because  of  litigation  or other  conditions,  the power or
ability of the issuer to pay when due  principal  of or  interest on a municipal
security may be materially affected.

Municipal  Leases,   Certificates  of  Participation  and  other   Participation
Interests.  A  municipal  lease  is an  obligation  in the  form of a  lease  or
installment  purchase  contract that is issued by a state or local government to

                                       9
<PAGE>

acquire  equipment and  facilities.  Income from such  obligations  is generally
exempt from state and local  taxes in the state of issuance  (as well as regular
federal  income tax).  Municipal  leases  frequently  involve  special risks not
normally  associated  with  general  obligation  or  revenue  bonds.  Leases and
installment  purchase or conditional  sale contracts (which normally provide for
title to the leased asset to pass  eventually to the  governmental  issuer) have
evolved as a means for  governmental  issuers to acquire  property and equipment
without meeting the constitutional  and statutory  requirements for the issuance
of debt. The debt issuance  limitations are deemed to be inapplicable because of
the  inclusion in many leases or contracts of  `non-appropriation'  clauses that
relieve the governmental  issuer of any obligation to make future payments under
the lease or  contract  unless  money is  appropriated  for such  purpose by the
appropriate  legislative  body on a yearly or other  periodic  basis.  Thus, the
Fund's  investment in municipal  leases will be subject to the special risk that
the governmental issuer may not appropriate funds for lease payments.

In addition,  such leases or contracts may be subject to the temporary abatement
of payments in the event the issuer is prevented from  maintaining  occupancy of
the leased premises or utilizing the leased equipment.  Although the obligations
may be secured by the leased  equipment or  facilities,  the  disposition of the
property in the event of  nonappropriation or foreclosure might prove difficult,
time consuming and costly, and result in an unsatisfactory or delayed recoupment
of the Fund's original investment.

Certificates of participation represent undivided interests in municipal leases,
installment  purchase  contracts  or other  instruments.  The  certificates  are
typically  issued by a trust or other entity that has received an  assignment of
the payments to be made by the state or political  subdivision under such leases
or installment purchase contracts.

Certain  municipal lease  obligations and certificates of  participation  may be
deemed  illiquid for the purpose of the Fund's  limitations  on  investments  in
illiquid  securities.  Other  municipal lease  obligations  and  certificates of
participation acquired by the Fund may be determined by the Advisor, pursuant to
guidelines adopted by the Trustees of the Trust, to be liquid securities for the
purpose of the Fund's  limitation  on  investments  in illiquid  securities.  In
determining  the liquidity of municipal lease  obligations  and  certificates of
participation, the Advisor will consider a variety of factors including: (1) the
willingness  of  dealers  to bid for the  security;  (2) the  number of  dealers
willing to purchase  or sell the  obligation  and the number of other  potential
buyers;  (3) the frequency of trades or quotes for the  obligation;  and (4) the
nature of the marketplace trades. In addition, the Advisor will consider factors
unique  to  particular  lease  obligations  and  certificates  of  participation
affecting the marketability thereof. These include the general  creditworthiness
of the issuer, the importance to the issuer of the property covered by the lease
and the likelihood that the  marketability  of the obligation will be maintained
throughout  the time the obligation is held by the Fund. The Fund may not invest
more than 5% of its net assets in municipal leases.

The  Fund  may  purchase  participations  in  municipal  securities  held  by  a
commercial bank or other financial institution.  Such participations provide the
Fund with the right to a pro rata undivided interest in the underlying municipal
securities. In addition, such participations generally provide the Fund with the
right to demand payment,  on not more than seven days notice, of all or any part
of the Fund's participation interest in the underlying municipal security,  plus
accrued interest.

Municipal Notes. Municipal securities in the form of notes generally are used to
provide for short-term  capital needs, in anticipation of an issuer's receipt of
other revenues or financing, and typically have maturities of up to three years.
Such instruments may include Tax Anticipation Notes, Revenue Anticipation Notes,
Bond  Anticipation  Notes, Tax and Revenue  Anticipation  Notes and Construction
Loan Notes.  Tax  Anticipation  Notes are issued to finance the working  capital
needs of governments.  Generally, they are issued in anticipation of various tax
revenues,  such as income,  sales,  property,  use and business  taxes,  and are
payable from these specific future taxes.  Revenue Anticipation Notes are issued
in  expectation of receipt of other kinds of revenue,  such as federal  revenues
available under federal revenue sharing programs.  Bond  Anticipation  Notes are
issued to provide  interim  financing  until  long-term  bond  financing  can be
arranged.  In most cases,  the long-term bonds then provide the funds needed for
repayment of the notes. Tax and Revenue  Anticipation  Notes combine the funding
sources  of  both  Tax  Anticipation  Notes  and  Revenue   Anticipation  Notes.
Construction Loan Notes are sold to provide construction financing.  These notes
are secured by mortgage notes insured by the Federal Housing Authority; however,
the proceeds from the insurance may be less than the economic  equivalent of the
payment of  principal  and  interest  on the  mortgage  note if


                                       10
<PAGE>

there has been a default.  The  obligations of an issuer of municipal  notes are
generally  secured  by the  anticipated  revenues  from  taxes,  grants  or bond
financing. An investment in such instruments,  however, presents a risk that the
anticipated  revenues  will  not be  received  or  that  such  revenues  will be
insufficient to satisfy the issuer's payment obligations under the notes or that
refinancing will be otherwise unavailable.

Tax-Exempt  Commercial  Paper.  Issues of tax-exempt  commercial paper typically
represent short-term,  unsecured, negotiable promissory notes. These obligations
are issued by state and local  governments and their agencies to finance working
capital needs of municipalities or to provide interim construction financing and
are  paid  from  general  revenues  of  municipalities  or are  refinanced  with
long-term debt. In most cases,  tax-exempt commercial paper is backed by letters
of credit,  lending  agreements,  note  repurchase  agreements  or other  credit
facility agreements offered by banks or other institutions.

Pre-Refunded  Municipal  Securities.  The principal of and interest on municipal
securities  that have been  pre-refunded  are no longer  paid from the  original
revenue source for the securities.  Instead,  after  pre-refunding the source of
such payments of the principal of and interest on these securities are typically
paid from an escrow fund  consisting of obligations  issued or guaranteed by the
US  Government.  The assets in the escrow fund are derived  from the proceeds of
refunding  bonds  issued  by  the  same  issuer  as the  pre-refunded  municipal
securities. Issuers of municipal securities use this advance refunding technique
to obtain  more  favorable  terms with  respect to  securities  that are not yet
subject to call or  redemption  by the issuer.  For example,  advance  refunding
enables an issuer to refinance debt at lower market interest rates,  restructure
debt to improve cash flow or eliminate restrictive covenants in the indenture or
other governing instrument for the pre-refunded  municipal securities.  However,
except for a change in the revenue  source  from which  principal  and  interest
payments are made, the pre-refunded  municipal  securities remain outstanding on
their  original  terms  until  they  mature  or  are  redeemed  by  the  issuer.
Pre-refunded  municipal  securities  are  usually  purchased  at a  price  which
represents a premium over their face value.

Tender Option Bonds.  A tender  option bond is a municipal  security  (generally
held pursuant to a custodial  arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing short-term
tax-exempt rates. The bond is typically issued in conjunction with the agreement
of a third party, such as a bank,  broker-dealer or other financial institution,
pursuant to which such institution  grants the security  holders the option,  at
periodic  intervals,  to tender their  securities to the institution and receive
the face value thereof.

As consideration for providing the option,  the financial  institution  receives
periodic fees equal to the  difference  between the bond's fixed coupon rate and
the  rate,  as  determined  by a  remarketing  or  similar  agent at or near the
commencement of such period,  that would cause the securities,  coupled with the
tender option,  to trade at par on the date of such  determination.  Thus, after
payment of this fee, the security holder  effectively  holds a demand obligation
that bears interest at the prevailing short-term tax-exempt rate.

However,  an institution  will not be obligated to accept  tendered bonds in the
event of certain  defaults  or a  significant  downgrade  in the  credit  rating
assigned to the issuer of the bond.  The  liquidity of a tender option bond is a
function  of the  credit  quality  of both the  bond  issuer  and the  financial
institution  providing  liquidity.  Tender  option bonds are deemed to be liquid
unless, in the opinion of the Advisor, the credit quality of the bond issuer and
the  financial  institution  is deemed,  in light of the Fund's  credit  quality
requirements, to be inadequate. The Fund intends to invest only in tender option
bonds the interest on which will,  in the opinion of bond  counsel,  counsel for
the issuer of interests  therein or counsel  selected by the Advisor,  be exempt
from regular federal income tax. However, because there can be no assurance that
the Internal Revenue Service (the "IRS") will agree with such counsel's  opinion
in any particular case, there is a risk that the Fund will not be considered the
owner of such  tender  option  bonds and thus will not be entitled to treat such
interest as exempt from such tax. Additionally, the federal income tax treatment
of  certain  other  aspects  of these  investments,  including  the  proper  tax
treatment of tender option bonds and the associated fees, in relation to various
regulated  investment  company tax  provisions  is unclear.  The Fund intends to
manage its  portfolio in a manner  designed to eliminate or minimize any adverse
impact from the tax rules applicable to these investments.

                                       11
<PAGE>

Auction Rate  Securities.  Auction rate  securities in which the Fund may invest
consist  of  auction  rate  municipal  securities  and  auction  rate  preferred
securities  issued by closed-end  investment  companies that invest primarily in
municipal securities. Provided that the auction mechanism is successful, auction
rate  securities  usually permit the holder to sell the securities in an auction
at par value at specified intervals. The dividend is reset by "Dutch" auction in
which  bids are made by  broker-dealers  and  other  institutions  for a certain
amount of securities at a specified  minimum yield. The dividend rate set by the
auction is the lowest  interest  or  dividend  rate that  covers all  securities
offered  for sale.  While  this  process  is  designed  to permit  auction  rate
securities  to be traded at par value,  there is the risk that an  auction  will
fail due to insufficient demand for the securities.

Dividends on auction rate preferred  securities  issued by a closed-end fund may
be  designated  as  exempt  from  federal  income  tax to the  extent  they  are
attributable to tax-exempt  interest income earned by the Fund on the securities
in its  portfolio  and  distributed  to  holders  of the  preferred  securities,
provided  that the preferred  securities  are treated as equity  securities  for
federal  income tax  purposes  and the  closed-end  fund  complies  with certain
requirements under the Internal Revenue Code of 1986, as amended (the "Code").

The Fund's investments in auction rate preferred  securities of closed-end funds
are subject to  limitations  on  investments  in other US registered  investment
companies,  which  limitations  are prescribed by the Investment  Company Act of
1940,  as amended  (the "1940  Act").  These  limitations  include  prohibitions
against  acquiring  more than 3% of the  voting  securities  of any  other  such
investment  company,  and  investing  more  than  5% of  the  Fund's  assets  in
securities of any one such investment  company or more than 10% of its assets in
securities of all such investment companies.

Private  Activity  Bonds.  Certain  types  of  municipal  securities,  generally
referred to as industrial  development  bonds (and referred to under current tax
law as private activity bonds), are issued by or on behalf of public authorities
to obtain funds for privately operated housing facilities, airport, mass transit
or port  facilities,  sewage  disposal,  solid waste disposal or hazardous waste
treatment or disposal  facilities and certain local facilities for water supply,
gas or electricity. Other types of industrial development bonds, the proceeds of
which  are  used for the  construction,  equipment,  repair  or  improvement  of
privately operated industrial or commercial facilities, may constitute municipal
securities,  although the current federal tax laws place substantial limitations
on the size of such issues.  The payment of the  principal  and interest on such
bonds is generally  dependent  solely on the ability of the  facility's  user to
meet its  financial  obligations  and the pledge,  if any, of real and  personal
property so financed as security for such  payment.  The  interest  from certain
private  activity bonds owned by the Fund  (including  the Fund's  distributions
attributable  to such  interest)  may be a  preference  item for purposes of the
alternative minimum tax.

Fixed Income Security Risk. Fixed income securities generally expose the Fund to
four types of risk:  (1) interest rate risk (the potential for  fluctuations  in
bond prices due to changing interest rates);  (2) income risk (the potential for
a decline in the Fund's income due to falling market interest rates); (3) credit
risk (the  possibility  that a bond issuer will fail to make timely  payments of
either interest or principal to the Fund);  and (4) prepayment risk or call risk
(the likelihood that, during a period of falling interest rates, securities with
high stated  interest  rates will be prepaid,  or  "called"  prior to  maturity,
requiring the Fund to invest the proceeds at generally lower interest rates).

Foreign  Securities  Risk.  The Fund may  invest a portion  of its  assets in US
dollar-denominated  and non-US  dollar-denominated  debt  securities  of foreign
companies.  Investing in the securities of foreign companies involves more risks
than investing in securities of US companies. Their value is subject to economic
and political  developments in the countries where the companies  operate and to
changes in foreign currency  values.  Values may also be affected by foreign tax
laws,  changes  in foreign  economic  or  monetary  policies,  exchange  control
regulations  and  regulations  involving  prohibitions  on the  repatriation  of
foreign currencies.

In general, less information may be available about foreign companies than about
US  companies,  and  foreign  companies  are  generally  not subject to the same
accounting,  auditing and  financial  reporting  standards as are US  companies.
Foreign  securities  markets may be less  liquid and subject to less  regulation
than the US securities markets. The costs of investing outside the United States
frequently  are higher  than those in the United  States.  These  costs  include
relatively higher brokerage commissions and foreign custody expenses.

                                       12
<PAGE>

Mortgage-Backed and Asset-Backed Securities

Mortgage-Backed Securities. The Fund may invest in mortgage-backed securities. A
mortgage-backed  security  consists of a pool of  mortgage  loans  evidenced  by
promissory  notes  secured by first  mortgages  or first deeds of trust or other
similar  security  instruments  creating  a  first  lien on  owner-occupied  and
non-owner-occupied  one-unit to four-unit  residential  properties,  multifamily
(i.e.,  five or more  units)  properties,  agricultural  properties,  commercial
properties and mixed use properties.

The  investment  characteristics  of adjustable  and fixed rate  mortgage-backed
securities differ from those of traditional fixed-income  securities.  The major
differences  include the payment of interest and  principal  on  mortgage-backed
securities on a more frequent  (usually monthly)  schedule,  and the possibility
that  principal may be prepaid at any time due to  prepayments on the underlying
mortgage loans or other assets.  These  differences can result in  significantly
greater  price  and  yield   volatility  than  is  the  case  with   traditional
fixed-income  securities.  As a result,  if the Fund  purchases  mortgage-backed
securities at a premium,  a  faster-than-expected  prepayment rate will decrease
both  the  market  value  and the  yield  to  maturity  from  those  which  were
anticipated.  A  prepayment  rate that is  slower  than  expected  will have the
opposite effect of increasing yield to maturity and market value. Conversely, if
the    Fund    purchases    mortgage-backed    securities    at   a    discount,
faster-than-expected   prepayments  will  increase,  while  slower-than-expected
prepayments  will decrease,  yield to maturity and market values.  To the extent
that the Fund  invests in  mortgage-backed  securities,  the Advisor may seek to
manage  these  potential  risks by  investing  in a variety  of  mortgage-backed
securities and by using certain hedging techniques.

Asset-Backed Securities. The Fund may invest in securities generally referred to
as asset-backed  securities.  Asset-backed securities are secured by and payable
from, or directly or indirectly  represent  undivided  fractional  interests in,
pools  of  corporate,   consumer  and/or  commercial  loans  held  in  a  trust.
Asset-backed  securities may provide periodic  payments that consist of interest
and/or principal payments.  Consequently,  the life of an asset-backed  security
can vary with the  prepayment  and loss  experience  of the  underlying  assets.
Payments of  principal  and  interest  are  typically  supported by some form of
credit enhancement,  such as a letter of credit,  surety bond, limited guarantee
or senior/subordination.  The degree of credit enhancement varies, but generally
amounts  to only a  fraction  of the  asset-backed  security's  par value  until
exhausted.  If the credit  enhancement  is  exhausted,  certificate  holders may
experience losses or delays in payment if the required payments of principal and
interest are not made to the trust with  respect to the  underlying  loans.  The
value of the  securities  also may fluctuate  because of changes in the market's
perception of  creditworthiness  of the servicing  agent for the loan pool,  the
originator  of the  loans or the  financial  institution  providing  the  credit
enhancement.  Asset-backed  securities are ultimately  dependent upon payment of
business,  government,  corporate  and consumer  loans,  leases,  etc.,  and the
certificate  holder generally has no recourse against the entity that originated
the loans.

Asset-backed    securities   have   structural    characteristics   similar   to
mortgage-backed securities.  Asset-backed securities include assets such as (but
not limited to) motor vehicle installment sale contracts, other installment sale
contracts,  home  equity  loans,  leases of various  types of real and  personal
property,  and receivables from revolving credit (credit card) agreements.  Such
assets  are   securitized   through  the  use  of  trusts  or  special   purpose
corporations.   Payments  or   distributions   of  principal   and  interest  on
asset-backed  securities  may be  guaranteed  up to  certain  amounts  and for a
certain time period by a letter of credit or a pool insurance policy issued by a
financial institution unaffiliated with the issuer, or other credit enhancements
may be present.

Asset-backed  securities present certain additional risks that are not presented
by  mortgage-backed  securities.  Primarily,  these  securities  do not have the
benefit of the same type of security interest in the related collateral.  Credit
card  receivables are generally  unsecured,  and the debtors are entitled to the
protection of a number of state and federal  consumer credit laws, many of which
give such  debtors  the right to avoid  payment of certain  amounts  owed on the
credit  cards,  thereby  reducing  the balance due.  Most issuers of  automobile
receivables   permit  the  servicer  to  retain  possession  of  the  underlying
obligations.  If the servicer were to sell these  obligations  to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related automobile receivables.  In addition,  because of the
large  number  of  vehicles   involved  in  a  typical  issuance  and  technical
requirements  under  state laws,  the trustee for the holders of the  automobile
receivables  may not have a


                                       13
<PAGE>

proper  security  interest in all of the obligations  backing such  receivables.
Therefore,  there is the possibility  that recoveries on repossessed  collateral
may not, in some cases, be available to support payments on these securities.

The market for  privately  issued  asset-backed  securities  is smaller and less
liquid  than  the  market  for US  government  mortgage-backed  securities.  The
asset-backed  securities in which the Fund may invest are limited to those which
usually are readily  marketable,  dollar-denominated  and rated BBB  category or
higher by S&P or Baa category or higher by Moody's.

The yield characteristics of the mortgage- and asset-backed  securities in which
the Fund may invest differ from those of traditional debt securities.  Among the
major  differences  are that  interest  and  principal  payments  are made  more
frequently on the mortgage- and asset-backed  securities  (usually  monthly) and
that  principal  may be  prepaid  at any  time  because  the  underlying  assets
generally may be prepaid at any time. As a result,  if the Fund purchases  these
securities  at a premium,  a prepayment  rate that is faster than  expected will
reduce their yield,  while a prepayment  rate that is slower than  expected will
have the opposite effect of increasing yield. Conversely,  if the Fund purchases
these securities at a discount,  faster-than-expected prepayments will increase,
while   slower-than-expected   prepayments  will  reduce,  the  yield  on  these
securities.  Amounts  available  for  reinvestment  by the Fund are likely to be
greater during a period of declining interest rates and, as a result, are likely
to be reinvested at lower interest rates than during a period of rising interest
rates.

Mortgage-Backed  Securities  and  Asset-Backed  Securities  -- Types  of  Credit
Support. Mortgage-backed securities and asset-backed securities are often backed
by a pool of  assets  representing  the  obligations  of a number  of  different
parties.  To lessen the effect of failure by  obligors on  underlying  assets to
make payments,  such  securities may contain  elements of credit  support.  Such
credit  support  falls into two  categories:  (1) liquidity  protection  and (2)
protection  against losses  resulting from ultimate default by an obligor on the
underlying  assets.  Liquidity  protection  refers to the provision of advances,
generally  by the entity  administering  the pool of assets,  to ensure that the
pass-through  of payments due on the underlying pool occurs in a timely fashion.
Protection   against  losses   resulting  from  ultimate  default  enhances  the
likelihood of ultimate  payment of the  obligations on at least a portion of the
assets  in the  pool.  Such  protection  may  be  provided  through  guarantees,
insurance  policies or letters of credit  obtained by the issuer or sponsor from
third parties; through various means of structuring the transaction;  or through
a combination of such approaches.  The Fund may pay any additional fees for such
credit support,  although the existence of credit support may increase the price
of a security.

The ratings of mortgage-backed  securities and asset-backed securities for which
third-party  credit  enhancement  provides  liquidity  protection  or protection
against  losses  from  default  are  generally   dependent  upon  the  continued
creditworthiness of the provider of the credit enhancement.  The ratings of such
securities  could be subject to reduction in the event of  deterioration  in the
creditworthiness  of the credit  enhancement  provider  even in cases  where the
delinquency  and loss experience on the underlying pool of assets is better than
expected.

Examples of credit  support  arising  out of the  structure  of the  transaction
include "senior-subordinated  securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne  first by the  holders of the  subordinated  class),  creation of "reserve
funds"  (where  cash or  investments,  sometimes  funded  from a portion  of the
payments on the underlying  assets,  are held in reserve  against future losses)
and "over-collateralization"  (where the scheduled payments on, or the principal
amount of, the  underlying  assets exceed those  required to make payment of the
securities  and pay any servicing or other fees).  The degree of credit  support
provided  for each  issue is  generally  based on  historical  information  with
respect  to the level of credit  risk  associated  with the  underlying  assets.
Delinquency  or loss in  excess of that  which is  anticipated  could  adversely
affect the return on an investment in such a security.

Government  Guaranteed  Mortgage-Backed  Securities.  The Fund's  investments in
mortgage-backed securities may include securities issued or guaranteed by the US
government or one of its agencies,  authorities,  instrumentalities or sponsored
enterprises,  such as Ginnie Mae,  Fannie Mae and Freddie Mac. There are several
types of guaranteed  mortgage-backed  securities currently available,  including
guaranteed  mortgage  pass-through  certificates and multiple class  securities,
which include guaranteed Real Estate Mortgage  Investment  Conduit


                                       14
<PAGE>

Certificates  ("REMIC  Certificates"),  collateralized  mortgage obligations and
stripped  mortgage-backed  securities.  The Fund is permitted to invest in other
types of  mortgage-backed  securities that may be available in the future to the
extent consistent with its investment policies and objective.

Ginnie Mae Certificates.  Ginnie Mae is a wholly owned corporate instrumentality
of the United States within the Department of Housing and Urban Development. The
National Housing Act of 1934, as amended (the "Housing Act"),  authorizes Ginnie
Mae to  guarantee  the  timely  payment  of the  principal  of and  interest  on
certificates that are based on and backed by a pool of mortgage loans insured by
the Federal  Housing  Administration  under the  Housing  Act, or Title V of the
Housing Act of 1949 ("FHA  Loans"),  or guaranteed by the Department of Veterans
Affairs  under  the  Servicemen's  Readjustment  Act of 1944,  as  amended  ("VA
Loans"),  or by pools of other eligible mortgage loans. The Housing Act provides
that the full faith and credit of the US government is pledged to the payment of
all amounts  that may be required to be paid under any Ginnie Mae  guaranty.  In
order to meet its obligations  under such guaranty,  Ginnie Mae is authorized to
borrow from the US Treasury with no limitations as to amount.

The Ginnie Mae  Certificates in which the Fund invests will represent a pro rata
interest  in one or more pools of the  following  types of mortgage  loans:  (1)
fixed-rate  level payment  mortgage  loans;  (2)  fixed-rate  graduated  payment
mortgage loans;  (3) fixed-rate  growing equity  mortgage loans;  (4) fixed-rate
mortgage loans secured by  manufactured  (mobile)  homes;  (5) mortgage loans on
multifamily  residential  properties under  construction;  (6) mortgage loans on
completed  multifamily  projects;  (7)  fixed-rate  mortgage  loans  as to which
escrowed funds are used to reduce the  borrower's  monthly  payments  during the
early years of the  mortgage  loans ("buy down"  mortgage  loans);  (8) mortgage
loans that  provide for  adjustments  in payments  based on periodic  changes in
interest  rates  or in  other  payment  terms  of the  mortgage  loans;  and (9)
mortgage-backed serial notes.

Fannie Mae Certificates. Fannie Mae is a federally chartered and privately owned
corporation   organized  and  existing  under  the  Federal  National   Mortgage
Association  Charter Act of 1938. The  obligations of Fannie Mae are obligations
solely of Fannie  Mae and are not  backed by the full faith and credit of the US
government.

Each Fannie Mae  Certificate  will  represent a pro rata interest in one or more
pools of FHA Loans,  VA Loans or  conventional  mortgage  loans (i.e.,  mortgage
loans that are not  insured or  guaranteed  by any  governmental  agency) of the
following  types:  (1) fixed-rate  level payment  mortgage loans; (2) fixed-rate
growing equity mortgage loans; (3) fixed-rate  graduated payment mortgage loans;
(4) variable rate mortgage loans;  (5) other adjustable rate mortgage loans; and
(6) fixed-rate and adjustable mortgage loans secured by multifamily projects.

Freddie Mac  Certificates.  Freddie Mac is a federally  chartered  and privately
owned  corporation of the United States  created  pursuant to the Emergency Home
Finance Act of 1970, as amended (the "FHLMC Act").  The  obligations  of Freddie
Mac are  obligations  solely of Freddie Mac and are not backed by the full faith
and credit of the US government.

Freddie Mac  Certificates  represent a pro rata  interest in a group of mortgage
loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The mortgage
loans  underlying  the Freddie Mac  Certificates  will consist of  fixed-rate or
adjustable  rate mortgage  loans with original  terms to maturity of between ten
and thirty years,  substantially all of which are secured by first liens on one-
to four-family  residential  properties or multifamily  projects.  Each mortgage
loan must meet the  applicable  standards  set forth in the FHLMC Act. A Freddie
Mac Certificate group may include whole loans,  participating interests in whole
loans and  undivided  interests  in whole  loans and  participations  comprising
another Freddie Mac Certificate group.

Multiple Class Mortgage-Backed Securities. The Fund may invest in multiple class
mortgage-backed   securities  including   collateralized   mortgage  obligations
("CMOs") and REMIC Certificates. These securities may be issued by US government
agencies  and  instrumentalities  such as Fannie Mae or Freddie Mac or by trusts
formed by private  originators of, or investors in,  mortgage  loans,  including
savings and loan  associations,  mortgage bankers,  commercial banks,  insurance
companies,  investment banks and special purpose  subsidiaries of the foregoing.
In general,  CMOs are debt obligations of a legal entity that are collateralized
by a pool of mortgage loans or mortgage-backed  securities the payments on which
are  used  to  make  payments  on the  CMOs or  multiple  class  mortgage-


                                       15
<PAGE>

backed securities.  REMIC Certificates  represent beneficial ownership interests
in a REMIC trust,  generally consisting of mortgage loans or Fannie Mae, Freddie
Mac or Ginnie Mae guaranteed mortgage-backed securities (the "Mortgage Assets").
The obligations of Fannie Mae or Freddie Mac under their respective  guaranty of
the REMIC  Certificates  are  obligations  solely of Fannie Mae or Freddie  Mac,
respectively.  Although investors may purchase  beneficial  interests in REMICs,
which are known as "regular"  interests or "residual"  interests,  the Fund does
not intend to purchase such residual interests in REMICs.

Fannie  Mae  REMIC   Certificates   are  issued  and  guaranteed  as  to  timely
distribution  of principal and interest by Fannie Mae.  These  certificates  are
obligations solely of Fannie Mae and are not backed by the full faith and credit
of the US  government.  In addition,  Fannie Mae will be obligated to distribute
the principal  balance of each class of REMIC  Certificates in full,  whether or
not sufficient funds are otherwise available.

Freddie  Mac  guarantees  the timely  payment of  interest  on Freddie Mac REMIC
Certificates  and also  guarantees  the payment of  principal  as  payments  are
required  to be  made  on the  underlying  mortgage  participation  certificates
("PCs").  These  certificates are obligations  solely of Freddie Mac and are not
backed  by the  full  faith  and  credit  of the US  government.  PCs  represent
undivided  interests  in  specified  level  payment  residential   mortgages  or
participations  therein  purchased by Freddie Mac and placed in a PC pool.  With
respect to principal payments on PCs, Freddie Mac generally  guarantees ultimate
collection of all  principal of the related  mortgage  loans  without  offset or
deduction.  Freddie Mac also  guarantees  timely payment of principal of certain
PCs.

CMOs and REMIC  Certificates are issued in multiple classes.  Each class of CMOs
or REMIC Certificates, often referred to as a "tranche," is issued at a specific
adjustable  or fixed  interest  rate and must be fully retired no later than its
final distribution date. Principal  prepayments on the underlying mortgage loans
or the Mortgage Assets underlying the CMOs or REMIC  Certificates may cause some
or all of the classes of CMOs or REMIC Certificates to be retired  substantially
earlier  than their final  distribution  dates.  Generally,  interest is paid or
accrues on all classes of CMOs or REMIC Certificates on a monthly basis.

The principal of and interest on the Mortgage  Assets may be allocated among the
several  tranches in various ways. In certain  structures  (known as "sequential
pay" CMOs or REMIC Certificates), payments of principal, including any principal
prepayments, on the Mortgage Assets generally are applied to the classes of CMOs
or REMIC Certificates in the order of their respective final distribution dates.
Thus, no payment of principal  will be made on any class of sequential  pay CMOs
or  REMIC   Certificates  until  all  other  classes  having  an  earlier  final
distribution  date  have been paid in full.  Additional  structures  of CMOs and
REMIC  Certificates  include,  among  others,  "parallel  pay"  CMOs  and  REMIC
Certificates.  Parallel  pay CMOs or REMIC  Certificates  are  those  which  are
structured to apply principal payments and prepayments of the Mortgage Assets to
two or more classes  concurrently on a proportionate or disproportionate  basis.
These  simultaneous  payments  are taken into account in  calculating  the final
distribution date of each class.

A wide variety of REMIC Certificates may be issued in parallel pay or sequential
pay structures.  These securities  include accrual  certificates  (also known as
"Z-Bonds"),  which only  accrue  interest  at a  specified  rate until all other
certificates having an earlier final distribution date have been retired and are
converted  thereafter to an interest-paying  security,  and planned amortization
class  ("PAC")  certificates,  which are  parallel pay REMIC  Certificates  that
generally require that specified amounts of principal be applied on each payment
date to one or more classes or REMIC Certificates (the "PAC Certificates"), even
though all other  principal  payments and prepayments of the Mortgage Assets are
then  required  to  be  applied  to  one  or  more  other  classes  of  the  PAC
Certificates.   The  scheduled  principal  payments  for  the  PAC  Certificates
generally have the highest  priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently.  Shortfalls, if
any,  are  added  to the  amount  payable  on the  next  payment  date.  The PAC
Certificate  payment  schedule is taken into  account in  calculating  the final
distribution date of each class of PAC. In order to create PAC tranches,  one or
more tranches  generally  must be created that absorb most of the  volatility in
the underlying  Mortgage  Assets.  These tranches tend to have market prices and
yields that are much more volatile than other PAC classes.

Stripped   Mortgage-Backed   Securities.   The   Fund  may   purchase   stripped
mortgage-backed  securities ("SMBS"),  which are derivative  multiclass mortgage
securities.  Although the market for such  securities  is  increasingly  liquid,

                                       16
<PAGE>

certain SMBS may not be readily  marketable and will be considered  illiquid for
purposes of the Fund's  limitation on  investments in illiquid  securities.  The
market value of the class consisting entirely of principal payments generally is
highly volatile in response to changes in interest rates.  The yields on a class
of SMBS that receives all or most of the interest  from the Mortgage  Assets are
generally  higher  than  prevailing  market  yields  on  other   mortgage-backed
securities  because  their cash flow  patterns are more  volatile and there is a
greater risk that the initial investment will not be fully recouped.

Adjustable Rate  Mortgages-Interest  Rate Indices.  Adjustable rate mortgages in
which the Fund  invests may be adjusted on the basis of one of several  indices.
The One Year Treasury Index is the figure derived from the average weekly quoted
yield on US Treasury Securities adjusted to a constant maturity of one year. The
Cost of Funds Index  reflects  the  monthly  weighted  average  cost of funds of
savings and loan  associations  and savings banks whose home offices are located
in Arizona, California and Nevada (the "FHLB Eleventh District") that are member
institutions  of the Federal Home Loan Bank of San  Francisco  (the "FHLB of San
Francisco"),  as computed from statistics tabulated and published by the FHLB of
San Francisco.  The FHLB of San Francisco  normally  announces the Cost of Funds
Index on the last working day of the month following the month in which the cost
of funds was incurred.

A number of factors  affect the  performance  of the Cost of Funds Index and may
cause the Cost of Funds Index to move in a manner  different  from indices based
upon specific  interest rates,  such as the One Year Treasury Index.  Because of
the various  origination  dates and maturities of the  liabilities of members of
the FHLB Eleventh  District  upon which the Cost of Funds Index is based,  among
other  things,  the Cost of Funds  Index may not  reflect  at any given time the
average   prevailing  market  interest  rates  on  new  liabilities  of  similar
maturities.  There  can be no  assurance  that  the  Cost of  Funds  Index  will
necessarily  move in the  same  direction  or at the  same  rate  as  prevailing
interest  rates  since as longer  term  deposits  or  borrowings  mature and are
renewed  at market  interest  rates,  the Cost of Funds  Index will rise or fall
depending  upon the  differential  between  the  prior and the new rates on such
deposits and  borrowings.  In addition,  dislocations  in the thrift industry in
recent  years have caused and may  continue to cause the cost of funds of thrift
institutions to change for reasons unrelated to changes in general interest rate
levels.  Furthermore,  any  movement  in the Cost of Funds  Index as compared to
other  indices  based upon  specific  interest  rates may be affected by changes
instituted by the FHLB of San Francisco in the method used to calculate the Cost
of Funds Index. To the extent that the Cost of Funds Index may reflect  interest
changes  on a more  delayed  basis  than  other  indices,  in a period of rising
interest  rates,  any  increase  may produce a higher  yield later than would be
produced by such other indices, and in a period of declining interest rates, the
Cost of Funds Index may remain higher than other market  interest  rates,  which
may result in a higher level of principal  prepayments  on mortgage  loans which
adjust in  accordance  with the Cost of Funds  Index than  mortgage  loans which
adjust in accordance with other indices.

LIBOR,  the London  interbank  offered  rate, is the interest rate that the most
creditworthy  international banks dealing in US dollar-denominated  deposits and
loans  charge  each  other for  large  dollar-denominated  loans.  LIBOR is also
usually the base rate for large  dollar-denominated  loans in the  international
market.  LIBOR is  generally  quoted for loans having rate  adjustments  at one,
three, six or twelve month intervals.

Zero Coupon  Securities and Deferred Interest Bonds. The Fund may invest in zero
coupon  securities  that are  "stripped"  US  Treasury  notes  and  bonds and in
deferred  interest  bonds.  Zero coupon  securities  are the separate  income or
principal  components of a debt  instrument.  Zero coupon and deferred  interest
bonds are debt obligations which are issued at a significant  discount from face
value. The original discount approximates the total amount of interest the bonds
will accrue and compound  over the period until  maturity or the first  interest
accrual date at a rate of interest reflecting the market rate of the security at
the time of issuance. Zero coupon securities are redeemed at face value at their
maturity date without interim cash payments of interest or principal. The amount
of this  discount  is accrued  over the life of the  security,  and the  accrual
constitutes  the  income  earned on the  security  for both  accounting  and tax
purposes. Because of these features, the market prices of zero coupon securities
are generally  more  volatile  than the market  prices of  securities  that have
similar maturity but that pay interest periodically.

While zero  coupon  bonds do not  require  the  periodic  payment  of  interest,
deferred  interest  bonds  generally  provide  for a period of delay  before the
regular payment of interest  begins.  Although this period of delay is different
for


                                       17
<PAGE>

each deferred interest bond, a typical period is approximately  one-third of the
bond's term to maturity.  Such investments  benefit the issuer by mitigating its
initial need for cash to meet debt service,  but some also provide a higher rate
of return to attract investors who are willing to defer receipt of such cash.

The Fund will accrue income on such investments for tax and accounting purposes,
as required,  which is distributable to shareholders and which,  because no cash
is generally  received at the time of accrual,  may require the  liquidation  of
other portfolio securities to satisfy the Fund's distribution  obligations.  See
"Federal Income Taxes."

Illiquid Securities.  Historically, illiquid securities have included securities
subject to  contractual  or legal  restrictions  on resale because they have not
been  registered  under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase  agreements
having a maturity  of longer  than seven  days.  Securities  which have not been
registered  under  the  1933  Act  are  referred  to as  private  placements  or
restricted  securities  and are  purchased  directly  from the  issuer or in the
secondary  market.   Non-publicly   traded   securities   (including  Rule  144A
Securities)  may involve a high degree of business  and  financial  risk and may
result in substantial losses.  These securities may be less liquid than publicly
traded  securities,  and it may take longer to liquidate  these  positions  than
would be the case for publicly traded securities. Companies whose securities are
not  publicly  traded may not be subject to the  disclosure  and other  investor
protection  requirements  applicable to companies whose  securities are publicly
traded. Limitations on resale may have an adverse effect on the marketability of
portfolio  securities and a mutual fund might be unable to dispose of restricted
or other illiquid  securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. An investment in
illiquid  securities  is subject to the risk that should the Fund desire to sell
any of these  securities  when a ready buyer is not available at a price that is
deemed to be  representative  of their value, the value of the Fund's net assets
could be adversely affected.

Mutual funds do not typically hold a significant  amount of these  restricted or
other  illiquid  securities  because of the  potential  for delays on resale and
uncertainty  in  valuation.  A mutual  fund  might  also have to  register  such
restricted  securities  in order to dispose  of them,  resulting  in  additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

A large  institutional  market has developed for certain securities that are not
registered  under  the  1933  Act,  including  but  not  limited  to  repurchase
agreements,  commercial  paper,  non-US  securities,  municipal  securities  and
corporate  bonds and  notes.  Institutional  investors  depend  on an  efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment.  The fact that there are
contractual or legal  restrictions on resale of such  investments to the general
public or to certain institutions may not be indicative of their liquidity.


The SEC has adopted  Rule 144A,  which  allows a broader  institutional  trading
market for  securities  otherwise  subject to restriction on their resale to the
general  public.  Rule 144A  establishes a "safe  harbor" from the  registration
requirements  of the 1933 Act for  resales of certain  securities  to  qualified
institutional  buyers.  The  Advisor  anticipates  that the market  for  certain
restricted securities such as institutional commercial paper will expand further
as a result of this regulation and the development of automated  systems for the
trading,  clearance and  settlement of  unregistered  securities of domestic and
non-US  issuers,  such as the PORTAL  System  sponsored  by  Financial  Industry
Regulatory Authority ("FINRA").


An investment in Rule 144A Securities will be considered  illiquid and therefore
subject to the Fund's  limit on the purchase of illiquid  securities  unless the
Board or its delegates  determines that the Rule 144A Securities are liquid.  In
reaching liquidity  decisions,  the Board and its delegates may consider,  inter
alia, the following factors:  (i) the unregistered nature of the security;  (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to  purchase  or sell the  security  and the  number of other  potential
purchasers;  (iv) dealer undertakings to make a market in the security;  and (v)
the nature of the security and the nature of the marketplace  trades (e.g.,  the
time needed to dispose of the security,  the method of soliciting offers and the
mechanics of the transfer).

Investing in Rule 144A Securities  could have the effect of increasing the level
of illiquidity in the Fund to the extent that qualified institutional buyers are
unavailable or  uninterested  in purchasing  such  securities from the Fund. The

                                       18
<PAGE>

Board has adopted  guidelines and delegated to the Advisor the daily function of
determining and monitoring the liquidity of Rule 144A  Securities,  although the
Board will retain ultimate responsibility for any liquidity determinations.

TBA  Purchase  Commitments.  The Fund may enter into "To Be  Announced"  ("TBA")
purchase  commitments to purchase securities for a fixed price at a future date,
typically not exceeding  75-90 days. TBA purchase  commitments may be considered
securities  in  themselves,  and  involve  a risk of loss  if the  value  of the
security to be purchased  declines  prior to settlement  date,  which risk is in
addition  to the risk of  decline  in the  value  of the  Fund's  other  assets.
Unsettled TBA purchase commitments are valued at the current market value of the
underlying securities.  To facilitate such acquisitions,  the Fund identifies on
its book cash or liquid assets in an amount at least equal to such  commitments.
It may be expected that the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio  securities to cover such purchase commitments than
when it sets aside cash. On delivery dates for such transactions,  the Fund will
meet its  obligations  from  maturities  or sales of the  segregated  securities
and/or from cash flow. If the Fund chooses to dispose of the TBA security  prior
to its  settlement,  it could,  as with the  disposition of any other  portfolio
obligation, incur a gain or loss due to market fluctuation.

When-Issued and Delayed Delivery Securities. The Fund may purchase securities on
a  when-issued  or delayed  delivery  basis.  Delivery  of and payment for these
securities  can  take  place a month  or more  after  the  date of the  purchase
commitment.  The payment  obligation and the interest rate that will be received
on when-issued and delayed  delivery  securities are fixed at the time the buyer
enters  into the  commitment.  Due to  fluctuations  in the value of  securities
purchased  or sold on a  when-issued  or  delayed  delivery  basis,  the  yields
obtained on such securities may be higher or lower than the yields  available in
the market on the dates  when the  investments  are  actually  delivered  to the
buyers.  When-issued  securities may include securities purchased on a "when, as
and if issued"  basis,  under which the issuance of the security  depends on the
occurrence  of a  subsequent  event,  such as  approval  of a merger,  corporate
reorganization or debt restructuring. The value of such securities is subject to
market  fluctuation during this period and no interest or income, as applicable,
accrues to the Fund until settlement takes place.

At  the  time  the  Fund  makes  the  commitment  to  purchase  securities  on a
when-issued or delayed delivery basis, it will record the  transaction,  reflect
the value each day of such securities in determining its net asset value and, if
applicable,  calculate  the maturity for the purposes of average  maturity  from
that date.  At the time of  settlement a  when-issued  security may be valued at
less  than  the  purchase  price.  To  facilitate  such  acquisitions,  the Fund
identifies  on its books  cash or liquid  assets in an amount at least  equal to
such  commitments.  It may be expected that the Fund's net assets will fluctuate
to a greater  degree  when it sets  aside  portfolio  securities  to cover  such
purchase  commitments  than when it sets aside cash. On delivery  dates for such
transactions, the Fund will meet its obligations from maturities or sales of the
segregated  securities  and/or from cash flow. If the Fund chooses to dispose of
the right to acquire a when-issued security prior to its acquisition,  it could,
as with the disposition of any other portfolio obligation,  incur a gain or loss
due to market  fluctuation.  It is the  current  policy of the Fund not to enter
into when-issued  commitments exceeding in the aggregate 15% of the market value
of the Fund's total assets,  less liabilities other than the obligations created
by   when-issued   commitments.   When  the  Fund  engages  in   when-issued  or
delayed-delivery  transactions,  it relies on the other party to consummate  the
trade.  Failure of the seller to do so may result in the Fund's incurring a loss
or missing an opportunity to obtain a price considered advantageous.

Additional US Government Obligations.  The Fund may invest in obligations issued
or  guaranteed  by US government  agencies or  instrumentalities.  US government
securities  are  high-quality  debt  securities  issued or  guaranteed by the US
Treasury  or by an  agency  or  instrumentality  of  the  US  government.  These
obligations  may or may not be  backed by the "full  faith  and  credit"  of the
United States. In the case of securities not backed by the full faith and credit
of the United  States,  the Fund must look  principally to the federal agency or
instrumentality  issuing or guaranteeing  the obligation for ultimate  repayment
and may not be able to assert a claim  against the United  States  itself in the
event the agency or instrumentality does not meet its commitments. Securities in
which the Fund may  invest  that are not  backed by the full faith and credit of
the United States include  obligations of the Tennessee Valley Authority and the
US Postal Service, each of which has the right to borrow from the US Treasury to
meet its obligations,  and obligations of the Federal Farm Credit System and the
Federal Home Loan Banks,  both of whose obligations may be satisfied only by the
individual credit of the issuing agency.  Securities that are backed by the


                                       19
<PAGE>

full faith and credit of the United  States  include  obligations  of GNMA,  the
Farmers Home Administration and the Export-Import Bank.

Lower-Rated  Debt  Securities  ("Junk  Bonds").  The  Fund  may  invest  in debt
securities  rated in the fifth and sixth  long-term  rating  categories  by S&P,
Moody's and Fitch Inc.  ("Fitch"),  or comparably  rated by another NRSRO, or if
not rated by a NRSRO, of comparable  quality as determined by the Advisor in its
sole discretion.

These  securities,  often  referred  to as  "junk  bonds"  or "high  yield  debt
securities," are considered  speculative  and, while generally  offering greater
income than  investments in higher quality  securities,  involve greater risk of
loss of principal and income, including the possibility of default or bankruptcy
of the issuers of such securities, and have greater price volatility, especially
during periods of economic uncertainty or change. These lower quality bonds tend
to be  affected  by  economic  changes and  short-term  corporate  and  industry
developments, as well as public perception of those changes and developments, to
a greater  extent than higher  quality  securities,  which  react  primarily  to
fluctuations in the general level of interest rates.

In addition,  the market for lower-rated debt securities may be thinner and less
active than that for higher-rated  debt  securities,  which can adversely affect
the prices at which the former are sold. If market quotations are not available,
lower-rated  debt  securities  will be  valued  in  accordance  with  procedures
established  by the Board of Trustees of the Fund,  including the use of outside
pricing services.  Judgment plays a greater role in valuing high yield corporate
debt securities than is the case for securities for which more external  sources
for quotations and last sale  information  is available.  Adverse  publicity and
changing investor perception may also affect the availability of outside pricing
services to value  lower-rated debt securities and the Fund's ability to dispose
of these  securities.  In addition,  such securities  generally present a higher
degree of credit risk.  Issuers of lower-rated  debt securities are often highly
leveraged and may not have more  traditional  methods of financing  available to
them so that their  ability  to service  their  obligations  during an  economic
downturn or during  sustained  periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
below  investment  grade  securities  generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness.

Since the risk of  default  is  higher  for  lower-rated  debt  securities,  the
Advisor's  research and credit  analysis  are an  especially  important  part of
managing  securities of this type held by the Fund. In  considering  investments
for the Fund,  the Advisor will attempt to identify  those issuers of high yield
debt  securities  whose  financial   conditions  are  adequate  to  meet  future
obligations,  have  improved  or are  expected  to  improve in the  future.  The
Advisor's  analysis focuses on relative values based on such factors as interest
on dividend coverage, asset coverage,  earnings prospects and the experience and
managerial strength of the issuer.

While the market for high yield  corporate debt securities has been in existence
for many years and has weathered  previous economic  downturns,  past experience
may not provide an accurate  indication of future  performance of the high yield
bond market, especially during periods of economic recession.

The Fund may choose,  at its expense or in  conjunction  with others,  to pursue
litigation  or  otherwise  exercise  its rights as a security  holder to seek to
protect  the  interest of security  holders if it  determines  this to be in the
interest of the Fund.

The Fund may invest in an affiliated mutual fund to gain exposure to lower rated
debt  securities.  The  affiliated  fund is permitted to invest in securities of
lower credit ratings than the Fund could invest in if it makes direct  purchases
of high yield debt securities.

Inverse Floaters. The Fund may invest in inverse floaters.  Inverse floaters are
debt  instruments  with a  floating  rate of  interest  that  bears  an  inverse
relationship to changes in short-term market interest rates. Investments in this
type of  security  involve  special  risks as compared  to  investments  in, for
example, a fixed rate municipal security.  The Fund could lose money and its NAV
could  decline if  movements  in  interest  rates are  incorrectly  anticipated.
Moreover,  the markets for securities of this type may be less developed and may
have less liquidity than the markets for more traditional municipal securities.

                                       20
<PAGE>

Securities of Foreign Issuers

Investment in Emerging Markets. The Fund may invest to varying degrees in one or
more countries with emerging securities  markets.  These countries are generally
located in Latin America,  Europe,  the Middle East, Africa and Asia.  Political
and economic structures in many of these countries may be undergoing significant
evolution  and rapid  development,  and  these  countries  may lack the  social,
political and economic  stability  characteristic  of more developed  countries.
Certain of these  countries  may have in the past  failed to  recognize  private
property rights and, at times, may have nationalized, or expropriated the assets
of  private  companies.  As  a  result,  these  risks,  including  the  risk  of
nationalization  or  expropriation  of assets,  may be heightened.  In addition,
unanticipated  political  or social  developments  may  affect  the value of the
Fund's investments in these countries, as well as the availability of additional
investments  in  these  countries.  The  small  size  and  inexperience  of  the
securities  markets in  certain of these  countries  and the  limited  volume of
trading in securities  in these  countries  may make the Fund's  investments  in
these  countries  illiquid and more  volatile than  investments  in most Western
European countries,  and the Fund may be required to establish special custodial
or  other  arrangements  before  making  certain  investments  in some of  these
countries.  There may be little  financial or accounting  information  available
with  respect to issuers  located  in  certain  of these  countries,  and may be
difficult as a result to assess the value or prospects of an investment in those
countries.  The laws of some foreign  countries may limit the Fund's  ability to
invest in securities of certain issuers located in those countries.

Derivatives

General.  The Fund may invest in various  instruments that are commonly known as
"derivatives." Generally, a derivative is a financial arrangement,  the value of
which is based on, or "derived"  from, a traditional  security,  asset or market
index.  Some  derivatives,  such  as  mortgage-related  and  other  asset-backed
securities, are in many respects like any other investment, although they may be
more volatile and/or less liquid than more traditional  debt  securities.  There
are, in fact, many different types of derivatives and many different ways to use
them.  There are a range of risks  associated with those uses. For example,  the
Fund may use futures and options as a low-cost  method of gaining  exposure to a
particular  securities market without investing directly in those securities and
for traditional hedging purposes to attempt to protect the Fund from exposure to
changing  interest rates,  securities  prices or currency exchange rates and for
cash management or other investment  purposes.  The Fund may use derivatives for
non-hedging  purpose,  such as to enhance  return.  The use of  derivatives  may
result in leverage,  which tends to magnify the effects of an instrument's price
changes as market conditions change. Leverage involves the use of a small amount
of  money  to  control  a large  amount  of  financial  assets,  and can in some
circumstances  lead to  significant  losses.  The Fund will  limit the  leverage
created by its use of  derivatives  for investment  purposes by "covering"  such
positions  as  required  by  the  SEC.  The  Advisor  may  use   derivatives  in
circumstances  where the  Advisor  believes  they offer an  economical  means of
gaining  exposure  to a  particular  asset  class.  The use of  derivatives  for
non-hedging purposes may be considered speculative.

The Fund's  investments  in  options,  futures,  forward  contracts  and similar
strategies  depend  on the  Advisor's  judgment  as to the  potential  risks and
rewards of different  types of  strategies.  Options and futures can be volatile
investments,  and may not perform as expected. If the Advisor applies a hedge at
an inappropriate  time or judges price trends  incorrectly,  options and futures
strategies may lower the Fund's return. The Fund could also experience losses if
the prices of its options and futures  positions were poorly correlated with its
other  investments,  or if it could not close out its  positions  because  of an
illiquid  secondary  market.  Options  and futures  traded on foreign  exchanges
generally are not regulated by US authorities,  and may offer less liquidity and
less  protection  to the Fund in the event of default by the other  party to the
contract.

The  Fund is  operated  by  persons  who  have  claimed  an  exclusion  from the
definition of the term "commodity  pool operator"  under the Commodity  Exchange
Act and, therefore,  who are not subject to registration or regulation under the
Commodity Exchange Act.

Options  on  Securities.  The Fund may  purchase  and write  (sell) put and call
options on securities. A call option gives the purchaser of the option the right
to buy,  and  obligates  the  writer to sell,  the  underlying  security  at the
exercise  price at any time during the option  period.  Similarly,  a put option
gives the purchaser of the option the


                                       21
<PAGE>

right to sell, and obligates the writer to buy, the  underlying  security at the
exercise price at any time during the option period.

The Fund may write (sell)  covered  call and put options to a limited  extent on
its portfolio  securities  ("covered  options") in an attempt to increase income
through the premiums it receives for writing the option(s).  However,  in return
for the premium,  the Fund may forgo the benefits of  appreciation on securities
sold or may pay more than the market price on  securities  acquired  pursuant to
call and put options written by the Fund.

A call option  written by the Fund is "covered" if the Fund owns the  underlying
security  covered by the call or has an absolute and immediate  right to acquire
that security  without  additional  cash  consideration  (or for additional cash
consideration  held in a segregated account by its custodian) upon conversion or
exchange  of other  securities  held in its  portfolio.  A call  option  is also
covered if the Fund  holds a call  option on the same  security  and in the same
principal amount as the written call option where the exercise price of the call
option so held (a) is equal to or less than the  exercise  price of the  written
call option or (b) is greater than the exercise price of the written call option
if the difference is segregated by the Fund in cash or liquid securities.

When the Fund writes a covered call option, it gives the purchaser of the option
the right to buy the  underlying  security at the price  specified in the option
(the  "exercise  price") by exercising  the option at any time during the option
period.  If the option expires  unexercised,  the Fund will realize income in an
amount equal to the premium  received  for writing the option.  If the option is
exercised,  a decision over which a Fund has no control,  the Fund must sell the
underlying  security to the option  holder at the exercise  price.  By writing a
covered  call  option,  the Fund  forgoes,  in exchange for the premium less the
commission ("net  premium"),  the opportunity to profit during the option period
from an  increase  in the  market  value of the  underlying  security  above the
exercise  price.  In addition,  the Fund may  continue to hold a security  which
might  otherwise have been sold to protect  against  depreciation  in the market
price of the security.

A put option written by the Fund is "covered" when, among other things,  cash or
liquid securities acceptable to the broker are placed in a segregated account to
fulfill the obligations  undertaken.  When the Fund writes a covered put option,
it gives the purchaser of the option the right to sell the  underlying  security
to the  Fund at the  specified  exercise  price at any time  during  the  option
period. If the option expires  unexercised,  the Fund will realize income in the
amount of the net premium received for writing the option.  If the put option is
exercised, a decision over which the Fund has no control, the Fund must purchase
the underlying security from the option holder at the exercise price. By writing
a covered  put option,  the Fund,  in  exchange  for the net  premium  received,
accepts  the risk of a decline in the market  value of the  underlying  security
below  the  exercise  price.  The Fund will only  write  put  options  involving
securities for which a  determination  is made at the time the option is written
that the Fund wishes to acquire the securities at the exercise price.

The Fund may terminate  its  obligation as the writer of a call or put option by
purchasing an option with the same  exercise  price and  expiration  date as the
option  previously  written.  This  transaction  is called a  "closing  purchase
transaction."  The Fund will  realize  a profit  or loss on a  closing  purchase
transaction  if the amount paid to  purchase  an option is less or more,  as the
case may be,  than the amount  received  from the sale  thereof.  To close out a
position as a purchaser  of an option,  the Fund may enter into a "closing  sale
transaction,"  which  involves  liquidating  the Fund's  position by selling the
option  previously  purchased.  When the Fund cannot  effect a closing  purchase
transaction,  it may be forced to incur brokerage  commissions or dealer spreads
in  selling  securities  it  receives  or it may be  forced  to hold  underlying
securities until an option is exercised or expires.

When the Fund writes an option,  an amount equal to the net premium  received by
the Fund is included in the liability  section of the Fund's Statement of Assets
and Liabilities as a deferred credit.  The amount of the deferred credit will be
subsequently  marked to market to reflect the current market value of the option
written.  The current market value of a traded option is the last sale price or,
in the absence of a sale,  the mean between the closing bid and asked price.  If
an option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction,  the Fund will realize a gain (or loss if the cost
of a closing purchase  transaction  exceeds the premium received when the option
was sold), and the deferred credit related to such option will be eliminated. If
a call option is  exercised,  the Fund will realize a gain or loss from the sale
of the  underlying  security,  and the proceeds of the sale


                                       22
<PAGE>

will be increased  by the premium  originally  received.  The writing of covered
call options may be deemed to involve the pledge of the securities against which
the option is being written.  Securities  against which call options are written
will be identified on the Fund's books.

The Fund may also  purchase  call and put options on any  securities in which it
may invest. The Fund would normally purchase a call option in anticipation of an
increase in the market value of such  securities.  The purchase of a call option
would entitle the Fund, in exchange for the premium paid, to purchase a security
at a specified price during the option period.  The Fund would ordinarily have a
gain  if  the  value  of the  securities  increased  above  the  exercise  price
sufficiently  to cover the  premium  and  would  have a loss if the value of the
securities remained at or below the exercise price during the option period.

The Fund would normally purchase put options in anticipation of a decline in the
market value of securities in its portfolio ("protective puts") or securities of
the type in which it is permitted to invest.  The purchase of a put option would
entitle the Fund, in exchange for the premium  paid,  to sell a security,  which
may or may not be held  by the  Fund at a  specified  price  during  the  option
period.  The purchase of protective  puts is designed  merely to offset or hedge
against a decline  in the  market  value of the Fund.  Put  options  also may be
purchased by the Fund for the purpose of affirmatively benefiting from a decline
in the price of securities that the Fund does not own. The Fund would ordinarily
recognize a gain if the value of the  securities  decreased  below the  exercise
price  sufficiently to cover the premium and would recognize a loss if the value
of the securities  remained at or above the exercise price.  Gains and losses on
the purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.

The hours of trading for options on securities  and  securities  indices may not
conform to the hours during which the underlying  securities are traded.  To the
extent that the option  markets  close  before the  markets  for the  underlying
securities,  significant  price  and  rate  movements  can  take  place  in  the
underlying securities markets that cannot be reflected in the option markets. It
is  impossible  to predict the volume of trading that may exist in such options,
and there can be no  assurance  that viable  exchange  markets  will  develop or
continue.

The Fund may also engage in options transactions in the over-the-counter ("OTC")
market with  broker-dealers  who make markets in these  options.  The ability to
terminate OTC option positions is more limited than with exchange-traded  option
positions  because the  predominant  market is the issuing broker rather than an
exchange,  and may involve the risk that  broker-dealers  participating  in such
transactions will not fulfill their  obligations.  To reduce this risk, the Fund
will  purchase  such  options  only  from  broker-dealers  who  are  primary  US
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are  expected  to be capable  of)  entering  into  closing
transactions,  although  there can be no guarantee  that any such option will be
liquidated at a favorable  price prior to  expiration.  The Advisor will monitor
the  creditworthiness  of dealers  with whom the Fund enters  into such  options
transactions  under the general  supervision  of the Fund's  Board of  Trustees.
Unless the Trustees  conclude  otherwise,  the Fund intends to treat OTC options
purchased  and the assets  used to "cover"  OTC  options  written as not readily
marketable  and,  therefore,  subject  to the  Fund's  limit on  investments  in
illiquid securities.

Options  on   Securities   Indices.   The  Fund  may  also  purchase  and  write
exchange-listed and OTC put and call options on securities indices. A securities
index  measures  the  movement of a certain  group of  securities  by  assigning
relative  values to the securities  included in the index,  which will fluctuate
with changes in the market values of the securities  included in the index. Some
securities  index  options are based on a broad market  index,  such as the NYSE
Composite  Index, or a narrower market index,  such as the S&P 100.  Indices may
also be based on a particular industry or market segment.

Options on securities  indices are similar to options on securities  except that
(1) the expiration  cycles of securities index options are monthly,  while those
of securities options are currently quarterly, and (2) the delivery requirements
are different.  Instead of giving the right to take or make delivery of stock at
a specified price, an option on a securities index gives the holder the right to
receive a cash "exercise  settlement amount" equal to (a) the amount, if any, by
which the fixed  exercise  price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the  underlying  index
on the date of exercise,  multiplied by (b) a fixed "index


                                       23
<PAGE>

multiplier."  Receipt of this cash amount will depend upon the closing  level of
the  securities  index upon which the option is based being greater than, in the
case of a call,  or less than,  in the case of a put, the exercise  price of the
index and the  exercise  price of the option  times a  specified  multiple.  The
writer of the option is obligated,  in return for the premium received,  to make
delivery of this amount. Securities index options may be offset by entering into
closing transactions as described above for securities options.

As discussed in "Options on Securities," the Fund would normally purchase a call
option in anticipation of an increase in the market value of the relevant index.
The  purchase  of a call option  would  entitle  the Fund,  in exchange  for the
premium paid, to purchase the underlying  securities at a specified price during
the option  period.  The Fund would  ordinarily  have a gain if the value of the
underlying  securities  increased above the exercise price sufficiently to cover
the premium and would have a loss if the value of the securities  remained at or
below the exercise price during the option period.

As discussed in "Options on  Securities,"  the Fund would normally  purchase put
options in  anticipation  of a decline in the market value of the relevant index
("protective  puts").  The purchase of a put option would  entitle the Fund,  in
exchange for the premium paid, to sell the underlying  securities at a specified
price  during the option  period.  The purchase of  protective  puts is designed
merely to offset or hedge  against a decline in the  market  value of the index.
The Fund would  ordinarily  recognize a gain if the value of the index decreased
below the exercise price sufficiently to cover the premium and would recognize a
loss if the value of the index  remained at or above the exercise  price.  Gains
and  losses  on the  purchase  of  protective  puts  would  tend to be offset by
countervailing changes in the value of the index.

Because the value of an index option  depends upon movements in the level of the
index rather than the price of a particular stock, whether the Fund will realize
a gain or loss from the purchase or writing of options on an index  depends upon
movements in the level of stock prices in the stock market  generally or, in the
case of certain indices, in an industry or market segment, rather than movements
in the price of a particular stock.  Accordingly,  successful use by the Fund of
options on stock  indices  will be subject to the  Advisor's  ability to predict
correctly  movements  in the  direction  of the stock  market  generally or of a
particular  industry.   This  requires  different  skills  and  techniques  than
predicting changes in the price of individual stocks.

Options on securities  indices  entail risks in addition to the risks of options
on  securities.  The absence of a liquid  secondary  market to close out options
positions  on  securities  indices is more  likely to occur,  although  the Fund
generally will only purchase or write such an option if the Advisor believes the
option can be closed out. Use of options on securities  indices also entails the
risk that  trading  in such  options  may be  interrupted  if trading in certain
securities included in the index is interrupted. The Fund will not purchase such
options unless the Advisor  believes the market is  sufficiently  developed such
that the risk of trading in such  options is no greater than the risk of trading
in options on securities.

Price movements in the Fund's investment  portfolio may not correlate  precisely
with  movements in the level of an index and,  therefore,  the use of options on
indices cannot serve as a complete hedge.  Because options on securities indices
require  settlement  in cash,  the Advisor may be forced to liquidate  portfolio
securities  to meet  settlement  obligations.  The  Fund's  activities  in index
options  may  also  be  restricted  by  the   requirements   of  the  Code,  for
qualification as a regulated investment company.

Hedging  Strategies.  The Fund may use certain strategies designed to adjust the
overall risk of its investment  portfolio.  These "hedging"  strategies  involve
derivative contracts,  including (but not limited to) US Treasury and Eurodollar
futures  contracts  and  exchange-traded  put and call  options on such  futures
contracts.  New financial products and risk management techniques continue to be
developed and may be used if consistent with the Fund's investment objective and
policies.  Among  other  purposes,  these  hedging  strategies  may be  used  to
effectively  maintain  desired  portfolio  duration or to protect against market
risk should the Fund reallocate its  investments  among different types of Fixed
Income Securities

The Fund might not use any  hedging  strategies,  and there can be no  assurance
that any strategy used will succeed. If the Advisor is incorrect in its judgment
on market values,  interest  rates or other economic  factors in using a hedging

                                       24
<PAGE>

strategy,  the Fund may have lower net income and a net loss on the  investment.
Each of these strategies  involves certain risks, which include:

o        the  fact  that  the  skills  needed  to use  hedging  instruments  are
         different from those needed to select securities for the Fund;

o        the  possibility  of  imperfect  correlation,  or even no  correlation,
         between the price movements of hedging  instruments and price movements
         of the securities or currencies being hedged;

o        possible  constraints  placed on the Fund's ability to purchase or sell
         portfolio  investments  at  advantageous  times due to the need for the
         Fund to maintain "cover" or to segregate securities; and

o        the possibility  that the Fund will be unable to close out or liquidate
         its hedged position.

A hedge is designed to offset a loss in a portfolio  position with a gain in the
hedged position.  At the same time,  however,  a properly  correlated hedge will
result in a gain in the portfolio  position being offset by a loss in the hedged
position.  As a  result,  the use of  options,  futures  and  currency  exchange
transactions  for  hedging  purposes  could  limit  any  potential  gain from an
increase in the value of the position hedged. With respect to futures contracts,
since the value of portfolio securities will far exceed the value of the futures
contracts  sold by the Fund,  an increase in the value of the futures  contracts
could only  mitigate,  but not totally  offset,  the decline in the value of the
Fund's assets.

To the extent that the Fund engages in the strategies  described above, the Fund
may experience losses greater than if these strategies had not been utilized. In
addition to the risks described above,  these instruments may be illiquid and/or
subject  to trading  limits,  and the Fund may be unable to close out a position
without incurring substantial losses, if at all. The Fund is also subject to the
risk of default by a counterparty to an off-exchange transaction.  See "Illiquid
Securities."

Currency  Management  Techniques.  The instruments  involved in currency-related
transactions may be considered derivative  instruments.  The Fund may enter into
currency-related  transactions to attempt to protect against an anticipated rise
in the US dollar price of securities  that it intends to purchase.  In addition,
the Fund may enter  into  currency-related  transactions  to  attempt to protect
against  the  decline in value of its  foreign  currency  denominated  or quoted
portfolio  securities,  or a decline in the value of  anticipated  dividends  or
interest  from such  securities,  due to a decline  in the value of the  foreign
currency against the US dollar.  The forecasting of currency market movements is
extremely  difficult  and  there  can  be no  assurance  that  currency  hedging
strategies  will be  successful.  If the Advisor is incorrect  in its  forecast,
currency hedging  strategies may result in investment  performance worse than if
the  strategies  were  not  attempted.   In  addition,   forward  contracts  and
over-the-counter  currency  options may be illiquid  and are subject to the risk
that the counterparty will default on its obligations.

Forward Foreign Currency Exchange Contracts. The Fund may exchange currencies in
the normal  course of managing its  investments  in foreign  securities  and may
incur costs in doing so because a foreign  exchange  dealer may charge a fee for
conversion.  The Fund may conduct foreign  currency  exchange  transactions on a
"spot" basis (i.e.,  for prompt  delivery and settlement) at the prevailing spot
rate for purchasing or selling currency in the foreign currency exchange market.
The Fund  also may  enter  into  forward  foreign  currency  exchange  contracts
("forward  currency   contracts")  or  other  contracts  to  purchase  and  sell
currencies for settlement at a future date. A foreign exchange  dealer,  in that
situation,  will expect to realize a profit based on the difference  between the
price at which a foreign currency is sold to the Fund and the price at which the
dealer will cover the purchase in the foreign currency market.  Foreign exchange
transactions  are entered into at prices quoted by dealers,  which may include a
mark-up over the price that the dealer must pay for the currency.

A forward  currency  contract  involves  an  obligation  to  purchase  or sell a
specific  currency at a future date,  which may be any fixed number of days from
the date of the contract agreed upon by the parties,  at a price set at the time
of the contract.  These contracts are traded in the interbank  market  conducted
directly between  currency  traders  (usually large commercial  banks) and their
customers.  A forward  contract  generally  has no deposit  requirement,  and


                                       25
<PAGE>

no  commissions  are  generally  charged at any stage for trades,  but  currency
dealers seek to obtain a "spread" or profit on each transaction.

At the  maturity  of a  forward  contract,  the Fund may  either  accept or make
delivery of the currency  specified in the contract or, at or prior to maturity,
enter into a closing purchase  transaction  involving the purchase or sale of an
offsetting contract.

The Fund may use forward  currency  transactions  in an attempt to hedge against
losses,  or where possible,  to add to investment  returns.  For the purposes of
hedging,  when the Fund  enters  into a contract  for the  purchase or sale of a
security  denominated in a foreign  currency,  or when the Fund  anticipates the
receipt  in a foreign  currency  of  dividend  or  interest  payments  on such a
security which it holds, the Fund may desire to "lock in" the US dollar price of
the security or the US dollar  equivalent of such dividend or interest  payment,
as the case may be. By  entering  into a forward  contract  for the  purchase or
sale,  for a fixed  amount of US  dollars,  of the  amount of  foreign  currency
involved in the underlying transactions, the Fund will attempt to protect itself
against  an adverse  change in the  relationship  between  the US dollar and the
subject  foreign  currency  during  the  period  between  the date on which  the
security is purchased or sold,  or on which the dividend or interest  payment is
declared, and the date on which such payments are made or received.

Additionally,  when  management  of the Fund  believes  that the  currency  of a
particular  foreign  country  may suffer a  substantial  decline  against the US
dollar,  it may cause the Fund to enter into a forward  contract to sell,  for a
fixed amount of US dollars,  the amount of foreign  currency  approximating  the
value of some or all of the  Fund's  portfolio  securities  denominated  in such
foreign  currency.  The precise matching of the forward contract amounts and the
value of the  securities  involved  will not  generally be possible  because the
future  value  of  such  securities  in  foreign  currencies  will  change  as a
consequence  of market  movements in the value of those  securities  between the
date on which the contract is entered into and the date it matures.

Using  forward  currency  contracts  in an attempt  to protect  the value of the
Fund's  portfolio  securities  against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities. It simply
establishes  a rate of exchange  which the Fund can achieve at some future point
in time. The precise  projection of short-term  currency market movements is not
possible,  and short-term hedging provides a means of fixing the dollar value of
only a portion of the Fund's foreign assets.

The Fund will cover the amount of its commitments to purchase foreign currencies
under forward currency  contracts with liquid  securities.  If the value of such
securities  declines  below the value of the Fund's  commitments  under  forward
currency  contracts,  additional liquid securities will be used as cover so that
the value of such  securities  will equal the amount of the Fund's  commitments.
The securities will be marked-to-market on a daily basis.

The Fund generally will not enter into a forward  currency  contract with a term
of  greater  than one  year.  The  forecasting  of  short-term  currency  market
movements is extremely  difficult and there can be no assurance that  short-term
hedging strategies will be successful.

While the Fund will enter into forward  currency  contracts  to reduce  currency
exchange rate risks, transactions in such contracts involve certain other risks.
Thus,  while the Fund may  benefit  from  currency  transactions,  unanticipated
changes in currency  prices may result in a poorer overall  performance  for the
Fund than if it had not engaged in any such transactions. Moreover, there may be
an imperfect  correlation between the Fund's holdings of securities  denominated
in a particular  currency and forward  contracts  entered into by the Fund. Such
imperfect  correlation  may cause the Fund to sustain  losses which will prevent
the Fund from  achieving a complete  hedge or expose the Fund to risk of foreign
currency exchange loss. Forward currency contracts may be considered  derivative
instruments.

Futures Contracts and Related Options

General.  The Fund may enter into futures  contracts on  securities,  securities
indices,  foreign  currencies and interest rates,  and purchase and write (sell)
options  thereon  which are  traded on  exchanges  designated  by the  Commodity
Futures Trading Commission (the "CFTC") or, if consistent with CFTC regulations,
on foreign exchanges. These


                                       26
<PAGE>

futures  contracts are standardized  contracts for the future delivery of, among
other  things,  a  commodity,  a non-US  currency,  an interest  rate  sensitive
security or, in the case of index  futures  contracts or certain  other  futures
contracts,  a cash settlement with reference to a specified multiplier times the
change in the index.  An option on a futures  contract  gives the  purchaser the
right,  in  return  for the  premium  paid,  to assume a  position  in a futures
contract.

The Fund may enter into futures  contracts  and options on futures  contracts on
securities, securities indices and currencies to manage its exposure to changing
interest  rates,  security  prices and currency  exchange rates, as an efficient
means of managing allocations between asset classes and to enhance return.

The  successful  use of futures  contracts  and options  thereon  draws upon the
Advisor's skill and experience with respect to such  instruments and are subject
to special risk  considerations.  A liquid  secondary  market for any futures or
options  contract  may not be  available  when a futures or options  position is
sought to be closed. In addition,  there may be an imperfect correlation between
movements in the  securities or currency in the Fund.  Successful use of futures
or options  contracts is further  dependent on the Advisor's  ability to predict
correctly  movements  in the  securities  or  foreign  currency  markets  and no
assurance can be given that its judgment will be correct.

Futures  Contracts.  Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future.  US futures  contracts have been designed by exchanges which have
been designated  "contracts markets" by the CFTC, and must be executed through a
futures  commission  merchant,  or  brokerage  firm,  which is a  member  of the
relevant  contract  market.  Futures  contracts  trade on a number  of  exchange
markets,  and,  through their  clearing  corporations,  the exchanges  guarantee
performance  of the  contracts as between the clearing  members of the exchange.
The Fund may enter into  contracts for the purchase or sale for future  delivery
of fixed-income securities,  foreign currencies, or financial indices, including
any  index  of  US  government  securities,  foreign  government  securities  or
corporate debt securities.  The Fund may enter into futures  contracts which are
based on debt  securities that are backed by the full faith and credit of the US
government,  such as long-term US Treasury Bonds, Treasury Notes and US Treasury
Bills.  The Fund may also enter into futures  contracts which are based on bonds
issued by governments other than the US government. Futures contracts on foreign
currencies  may be used to hedge  against  securities  that are  denominated  in
foreign currencies.

At the same time a futures contract is entered into, the Fund must allocate cash
or liquid securities as a deposit payment ("initial margin").  Daily thereafter,
the  futures  contract is valued and the  payment of  "variation  margin" may be
required,  since each day the Fund would  provide or receive cash that  reflects
any decline or increase in the contract's value.

At the time of delivery of securities  pursuant to such a contract,  adjustments
are  made to  recognize  differences  in value  arising  from  the  delivery  of
securities  with a different  interest rate from that specified in the contract.
In some, but not many,  cases,  securities  called for by a futures contract may
not have been issued when the contract was written.

Although futures  contracts (other than those that settle in cash, such as index
futures)  by their  terms call for the actual  delivery  or  acquisition  of the
instrument underlying the contract, in most cases the contractual  obligation is
fulfilled by offset before the date of the contract without the Fund's having to
make or take delivery of the instrument underlying the contract.  The offsetting
of a  contractual  obligation  is  accomplished  by  entering  into an  opposite
position in an identical  futures contract on the commodities  exchange on which
the  futures  contract  was  entered  into (or a linked  exchange)  calling  for
delivery  in the same month.  Such a  transaction,  which is effected  through a
member of an exchange,  cancels the  obligation  to make or take delivery of the
instrument underlying the contract. Since all transactions in the futures market
are  made,  offset or  fulfilled  through a  clearinghouse  associated  with the
exchange on which the contracts are traded,  the Fund will incur  brokerage fees
when it enters into futures contracts.

The purpose of the acquisition or sale of a futures contract, in cases where the
Fund  holds or  intends to  acquire  fixed-income  securities,  is to attempt to
protect the Fund from fluctuations in interest or foreign exchange rates without
actually buying or selling  fixed-income  securities or foreign currencies.  For
example, if interest rates were expected to increase (which thus would cause the
prices of debt  securities  to  decline),  the Fund  might  enter  into


                                       27
<PAGE>

futures  contracts for the sale of debt securities.  Such a sale would have much
the same effect as selling an equivalent  value of the debt securities  owned by
the Fund. If interest rates did increase,  the value of the debt security in the
Fund would  decline,  but the value of the futures  contracts  to the Fund would
increase at approximately the same rate,  thereby keeping the net asset value of
the Fund from declining as much as it otherwise would have.

Similarly,  when it is expected that interest rates may decline (thus increasing
the value of debt securities),  futures contracts may be purchased to attempt to
hedge against anticipated  purchases of debt securities at higher prices.  Since
the fluctuations in the value of futures contracts should be similar to those of
debt  securities,  the Fund could take advantage of the anticipated  rise in the
value of debt  securities  without  actually  buying  them  until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could  then buy  debt  securities  on the cash  market.  The  segregated  assets
maintained  to  cover  the  Fund's  obligations  with  respect  to such  futures
contracts  will consist of cash or liquid  securities  acceptable  to the broker
from its portfolio in an amount equal to the difference  between the fluctuating
market value of such futures  contracts and the  aggregate  value of the initial
and  variation  margin  payments  made by the Fund with  respect to such futures
contracts.

The  ordinary  spreads  between  prices in the cash and futures  market,  due to
differences in the nature of those markets,  are subject to distortions.  First,
all  participants  in the  futures  market are  subject to initial  deposit  and
variation margin  requirements.  Rather than meeting additional variation margin
requirements,   investors  may  close  futures  contracts   through   offsetting
transactions,  which could distort the normal relationship  between the cash and
futures  markets.  Second,  the liquidity of the futures  market depends on most
participants entering into offsetting  transactions rather than making or taking
delivery.  To the extent that many participants decide to make or take delivery,
liquidity in the futures  market could be reduced,  thus  producing  distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin  requirements  in the securities
market. Therefore,  increased participation by speculators in the futures market
may cause temporary price distortions.  Due to the possibility of distortion,  a
correct forecast of securities price, general interest rate or currency exchange
rate trends by the Advisor may still not result in a successful transaction.

In addition,  futures contracts entail significant  risks.  Although the Advisor
believes  that use of such  contracts  will benefit the Fund,  if the  Advisor's
investment judgment about the general direction of interest rates or an index is
incorrect,  the Fund's  overall  performance  would be poorer than if it had not
entered into any such contract.  For example, if the Fund has hedged against the
possibility  of an increase  in  interest  rates or a decrease in an index which
would  adversely  affect  the  value of  securities  held in its  portfolio  and
interest rates decrease or securities  prices  increase  instead,  the Fund will
lose part or all of the benefit of the increased  value of its securities  which
it has hedged because it will have offsetting  losses in its futures  positions.
In addition, in such situations,  if the Fund has insufficient cash, it may have
to  sell  securities   from  its  portfolio  to  meet  daily  variation   margin
requirements.  Such sales of  securities  may, but will not  necessarily,  be at
increased  prices  which  reflect the rising  market.  The Fund may have to sell
securities at a time when it may be disadvantageous to do so.

Futures  Contracts on Securities  Indices.  The Fund may also enter into futures
contracts  providing for the making and  acceptance of a cash  settlement  based
upon  changes  in  the  value  of an  index  of US or  non-US  securities.  This
investment  technique may be used as a low-cost method of gaining  exposure to a
particular  securities market without investing  directly in those securities or
to hedge  against  anticipated  future  changes in general  market  prices  that
otherwise might either adversely affect the value of securities held by the Fund
or adversely  affect the prices of securities which are intended to be purchased
at a later date for the Fund or as an  efficient  means of  managing  allocation
between asset classes.  A futures contract may also be entered into to close out
or offset an existing futures position.

When used for hedging  purposes,  each futures  contract on a  securities  index
transaction  involves the establishment of a position which the Advisor believes
will move in a direction  opposite to that of the  investment  being hedged.  If
these hedging  transactions are successful,  the futures positions taken for the
Fund will rise in value by an amount which approximately  offsets the decline in
value of the portion of the Fund's  investments  that are being  hedged.  Should
general  market  prices  move in an  unexpected  manner,  the  full  anticipated
benefits of futures contracts may not be achieved or a loss may be realized.

                                       28
<PAGE>

Options  on  Futures  Contracts   (including  Futures  Contracts  on  Securities
Indices).  The Fund may purchase and write (sell)  options on futures  contracts
for hedging purposes.  For example,  as with the purchase of futures  contracts,
when the Fund is not fully invested it may purchase a call option on an interest
rate sensitive  futures  contract to hedge against a potential price increase on
debt securities due to declining interest rates.

The purchase of a call option on a futures  contract is similar in some respects
to the purchase of a call option on an index or individual  security.  Depending
on the  pricing  of the  option  compared  to either  the  price of the  futures
contract upon which it is based or the price of the underlying debt  securities,
it may or may not be less  risky  than  ownership  of the  futures  contract  or
underlying debt securities.

The  writing of a call option on a futures  contract  may  constitute  a partial
hedge against declining prices of the underlying  portfolio securities which are
the  same  as or  correlate  with  the  security  or  foreign  currency  that is
deliverable  upon  exercise of the  futures  contract.  If the futures  price at
expiration  of the option is below the price  specified in the premium  received
for writing the option ("exercise price"),  the Fund will retain the full amount
of the net  premium  (the  premium  received  for  writing  the option  less any
commission),  which  provides a partial  hedge against any decline that may have
occurred in the Fund's holdings.

The  writing of a put  option on an index  futures  contract  may  constitute  a
partial hedge against increasing prices of the underlying  securities or foreign
currency  that are  deliverable  upon exercise of the futures  contract.  If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full  amount of the option net  premium,  which  provides a
partial  hedge  against  any  increase  in the price of  securities  that a Fund
intends to purchase.

If a put or call option the Fund has written is exercised, the Fund will incur a
loss  that  will be  reduced  by the  amount  of the net  premium  it  receives.
Depending  on the  degree of  correlation  between  changes  in the value of its
portfolio  securities  and  changes in the value of its futures  positions,  the
Fund's losses from existing  options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.

The  purchase of a call or put option on a futures  contract  with respect to an
index is similar in some  respects to the purchase of a call or  protective  put
option on an index. For example,  the Fund may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The amount of risk the Fund  assumes  when it  purchases  an option on a futures
contract  with  respect  to an index is the  premium  paid for the  option  plus
related transaction costs. In addition to the correlation risks discussed above,
the  purchase of such an option also  entails the risk that changes in the value
of the underlying  futures  contract will not be fully reflected in the value of
the option purchased.

Swaps.  The Fund may  enter  into  currency  and  other  types of swaps  and the
purchase or sale of related caps, floors and collars.  The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment  or  portion  of  its   portfolio,   to  protect   against   currency
fluctuations,  as a duration  management  technique  or to protect  against  any
increase in the price of securities the Fund  anticipates  purchasing at a later
date.  The Fund will not sell interest rate caps or floors where it does not own
securities  or other  instruments  providing  the income  stream the Fund may be
obligated  to pay.  Interest  rate swaps  involve the  exchange by the Fund with
another party of their respective commitments to pay or receive interest,  e.g.,
an exchange of floating  rate payments for fixed rate payments with respect to a
notional  amount of principal.  A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential  among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference  indices.  The
purchase  of a cap  entitles  the  purchaser  to receive  payments on a notional
principal  amount from the party selling such cap to the extent that a specified
index exceeds a predetermined  interest rate or amount.  The purchase of a floor
entitles the purchaser to receive  payments on a notional  principal amount from
the party selling such floor to the extent that a specified  index falls below a
predetermined  interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a  predetermined  range of interest
rates or values.

                                       29
<PAGE>

Swaps  have  special  risks  associated   including   possible  default  by  the
counterparty  to the  transaction,  illiquidity  and,  where  swaps are used for
hedges,  the risk that the use of a swap could result in losses  greater than if
the swap had not  been  employed.  Whether  the use of swap  agreements  will be
successful in furthering its  investment  objective will depend on the Advisor's
ability to correctly  predict whether certain types of investments are likely to
produce greater returns than other  investments.  Certain swap agreements may be
considered to be illiquid  because they are two party contracts and because they
may have terms of greater than seven days. Moreover,  the Fund bears the risk of
loss of the amount  expected to be received  under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty.

Credit  Default  Swaps.  The Fund may  invest up to 15% of its  total  assets in
credit default swaps. A credit default swap is a contract  between a buyer and a
seller of protection against a pre-defined credit event. The buyer of protection
pays the  seller a fixed  regular  fee  provided  that no event of default on an
underlying reference obligation has occurred. If an event of default occurs, the
seller  must pay the buyer  the full  notional  value,  or "par  value."  of the
reference  obligation in exchange for the reference  obligation.  Credit default
swaps are used as a means of "buying"  credit  protection,  i.e.,  attempting to
mitigate the risk of default or credit quality  deterioration in some portion of
the Fund's holdings,  or "selling" credit protection,  i.e.,  attempting to gain
exposure  to an  underlying  issuer's  credit  quality  characteristics  without
directly  investing in that issuer.  No more than 5% of the Fund's assets may be
invested in credit  default swaps for purposes of buying credit  protection  for
non-hedging  purposes.  Where  the Fund is a seller  of  credit  protection,  it
effectively adds leverage to its portfolio because, in addition to its total net
assets, the Fund would be subject to investment  exposure on the notional amount
of the  swap.  The Fund  will  only  sell  credit  protection  with  respect  to
securities  in which  it  would  be  authorized  to  invest  directly.  The Fund
currently  considers  credit  default swaps to be illiquid and treats the market
value of the contract as illiquid for purposes of  determining  compliance  with
the Fund's restrictions on investing in illiquid securities.

If the Fund is a buyer of a credit default swap and no event of default  occurs,
the Fund will lose its investment and recover nothing. However, if the Fund is a
buyer and an event of default  occurs,  the Fund will receive the full  notional
value of the reference obligation that may have little or no value. As a seller,
the Fund  receives  a fixed  rate of  income  through  the term of the  contract
(typically  between  six  months  and three  years),  provided  that there is no
default event. If an event of default occurs,  the seller must pay the buyer the
full notional  value of the reference  obligation.  Credit default swaps involve
greater  risks  than  if the  Fund  had  invested  in the  reference  obligation
directly.

The Fund may use credit default swaps to gain exposure to particular  issuers or
particular  markets  through  investments in portfolios of credit default swaps,
such  as  Dow  Jones  CDX.NA.HY  certificates.   By  investing  in  certificates
representing  interests in a basket of credit default swaps,  the Fund is taking
credit risk with respect to an entity or group of entities and providing  credit
protection  to the swap  counterparties.  For example,  the CDX EM is a tradable
basket of 19 credit  default  swaps on country  credits which seeks to replicate
the returns on the indices of a broad group of emerging markets  countries.  The
credits  are a subset of the  countries  represented  by the  JPMorgan  Emerging
Markets Bond Index Global  Diversified.  By purchasing  interests in CDX EM, the
Fund is gaining emerging markets  exposure through a single  investment.  Unlike
other types of credit  default  swaps which are generally  considered  illiquid,
credit default swap certificates generally can be sold within seven days and are
not subject to the Fund's restrictions on investing in illiquid securities.

Other Considerations. The Fund will determine that the price fluctuations in the
futures  contracts  and options on futures  used by it for hedging  purposes are
substantially related to price fluctuations in securities or instruments held by
the Fund or securities or instruments which it expects to purchase.

The Fund will be required,  in connection with transactions in futures contracts
and the writing of options on futures contracts, to make margin deposits,  which
will be held by its custodian for the benefit of the futures commission merchant
through  whom the Fund engages in such  futures and option  transactions.  These
transactions  involve brokerage costs,  require margin deposits and, in the case
of futures  contracts and options  obligating  the Fund to purchase  securities,
require the Fund to segregate cash or liquid securities in an account maintained
with its custodian to cover such contracts and options.

                                       30
<PAGE>

While  transactions  in futures  contracts  and  options  on futures  may reduce
certain risks,  such transactions  themselves entail certain other risks.  Thus,
unanticipated  changes in interest  rates or  securities  prices may result in a
poorer  overall  performance  for the Fund than if it had not  entered  into any
futures contracts or options  transactions.  The other risks associated with the
use of futures  contracts  and  options  thereon are (i)  imperfect  correlation
between the change in market  value of the  securities  held by the Fund and the
prices of the  futures and  options  and (ii) the  possible  absence of a liquid
secondary market for a futures contract or option and the resulting inability to
close a futures position prior to its maturity date.

In the  event  of an  imperfect  correlation  between  a  futures  position  and
portfolio position which is intended to be protected, the desired protection may
not be  obtained  and the  Fund  may be  exposed  to risk of  loss.  The risk of
imperfect  correlation  may be minimized  by investing in contracts  whose price
behavior is expected to resemble that of the Fund's underlying  securities.  The
Fund  will  attempt  to  minimize  the risk  that it will be unable to close out
futures positions by entering into such transactions on a national exchange with
an active and liquid secondary market.

Limitations and Risks Associated with Transactions in Options, Futures
Contracts and Options on Futures Contracts

Options and futures  transactions  involve (1) liquidity  risk that  contractual
positions  cannot  be  easily  closed  out in the  event of  market  changes  or
generally in the absence of a liquid secondary market, (2) correlation risk that
changes in the value of hedging  positions may not match the  securities  market
fluctuations  intended  to be  hedged,  and (3)  market  risk that an  incorrect
prediction  of  securities  prices by the  Advisor may cause the Fund to perform
worse than if such  positions  had not been  taken.  The  ability  to  terminate
over-the-counter  options is more limited than with exchange  traded options and
may  involve the risk that the  counterparty  to the option will not fulfill its
obligations. In accordance with a position taken by the SEC, the Fund will limit
its investments in illiquid securities to 15% of the Fund's net assets.

Options and futures transactions are highly specialized activities which involve
investment  techniques and risks that are different from those  associated  with
ordinary portfolio transactions.  Gains and losses on investments in options and
futures  depend on the  Advisor's  ability to predict the  direction of interest
rates, security prices, currencies and other economic factors. The loss that may
be incurred by the Fund in entering into futures  contracts and written  options
thereon  is  potentially  unlimited.  There is no  assurance  that  higher  than
anticipated  trading  activity or other  unforeseen  events might not, at times,
render  certain  facilities  of an  options  clearing  entity  or  other  entity
performing the regulatory and liquidity  functions of an options clearing entity
inadequate,  and  thereby  result in the  institution  by an exchange of special
procedures which may interfere with the timely  execution of customers'  orders.
Most futures  exchanges  limit the amount of fluctuation  permitted in a futures
contract's  prices during a single  trading day. Once the limit has been reached
no further  trades may be made that day at a price  beyond the limit.  The price
limit  will not limit  potential  losses,  and may in fact  prevent  the  prompt
liquidation of futures positions, ultimately resulting in further losses.

Global Asset Allocation  Strategy ("GAA  Strategy").  In connection with the GAA
Strategy and in addition to the securities  described above, the Fund may invest
in indexed  securities,  futures  contracts on  securities  indices,  securities
representing  securities of foreign issuers (e.g., ADRs, GDRs and EDRs), options
on stocks, options on futures contracts,  foreign currency exchange transactions
and options on foreign currencies.  These are discussed below, to the extent not
already described above.

Indexed Securities.  The indexed securities in which the Fund may invest include
debt  securities  whose value at  maturity is  determined  by  reference  to the
relative  prices of various  currencies  or to the price of a stock  index.  The
value of such securities depends on the price of foreign currencies,  securities
indices  or other  financial  values  or  statistics.  These  securities  may be
positively or negatively indexed;  that is, their value may increase or decrease
if the underlying instrument appreciates.

Securities Representing Securities of Foreign Issuers. The Fund's investments in
the  securities  of  foreign  issuers  may be made  directly  or in the  form of
American Depositary Receipts ("ADRs"),  Global Depositary Receipts ("GDRs," also
referred to as International Depositary Receipts or "IDRs"), European Depositary
Receipts ("EDRs")


                                       31
<PAGE>

or other similar securities  representing  securities of foreign issuers.  These
securities  may not  necessarily  be  denominated  in the same  currency  as the
securities  they  represent,  and while designed for use as  alternatives to the
purchase of the underlying  securities in their national markets and currencies,
are subject to the same risks as the foreign securities to which they relate.

ADRs  are  receipts,  typically  issued  by a US bank or  trust  company,  which
evidence  ownership of underlying  securities  issued by a foreign  corporation.
EDRs,  which  are  sometimes  referred  to as  Continental  Depository  Receipts
("CDRs"), are receipts issued in Europe, and GDRs or IDRs are issued outside the
United States.  EDRs (CDRs) and GDRs (IDRs) are typically issued by non-US banks
and trust  companies  and  evidence  ownership  of either  foreign  or  domestic
securities.  Generally,  ADRs in  registered  form  are  designed  for use in US
securities markets,  and EDRs (CDRs) and GDRs (IDRs) in bearer form are designed
for use in European and non-US securities markets, respectively. For purposes of
the Fund's investment policies, depository receipts generally are deemed to have
the same  classification  as the underlying  securities they represent.  Thus, a
depository  receipt  representing  ownership  of common stock will be treated as
common stock.

ADRs are publicly traded on exchanges or  over-the-counter  in the United States
and are issued through "sponsored" or "unsponsored" arrangements. In a sponsored
ADR arrangement, the foreign issuer assumes the obligation to pay some or all of
the depository's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligations and the depository's  transaction fees are
paid directly by the ADR holders. In addition,  less information is available in
the United States about an unsponsored ADR than about a sponsored ADR.

Investments  in foreign  securities  incur higher costs than  investments  in US
securities,  including higher costs in making securities transactions as well as
foreign  government taxes which may reduce the investment return of the Fund. In
addition,  foreign  investments  may  include  risks  associated  with  currency
exchange rates,  less complete  information  about  additional  companies,  less
market liquidity and political instability.

Repurchase Agreements.  The Fund may engage in repurchase agreement transactions
with member banks of the Federal  Reserve System and certain  non-bank  dealers,
including  governmental  securities  dealers  approved by the Fund Trust  Board.
Under the terms of a typical  repurchase  agreement,  the Fund would acquire any
underlying  security  for a relatively  short period  (usually not more than one
week),  subject to an  obligation of the seller to  repurchase,  and the Fund to
resell,  the  obligation at an agreed price and time,  thereby  determining  the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market  fluctuations  during the Fund's holding
period.  The value of the  underlying  securities  will be at least equal at all
times to the total amount of the repurchase obligations, including interest. The
Fund bears a risk of loss in the event of default by or  bankruptcy of the other
party to a repurchase agreement.  The Fund may be delayed in, or prevented from,
exercising its rights to dispose of the collateralized securities. To the extent
that, in the meantime,  the value of the securities repurchased had decreased or
the value of the securities had increased, the Fund could experience a loss. The
Advisor reviews the  creditworthiness  of those banks and dealers with which the
Fund enters into  repurchase  agreements  and  monitors on an ongoing  basis the
value of the  securities  subject to repurchase  agreements to ensure that it is
maintained at the required  level. A repurchase  agreement is considered to be a
loan under the 1940 Act.

Reverse  Repurchase  Agreements.  The Fund may  borrow  funds for  temporary  or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for  leverage,  by,  among  other  things,  agreeing  to sell  portfolio
securities to financial institutions such as member banks of the Federal Reserve
System and certain  non-bank dealers and to repurchase them at a mutually agreed
date and price (a "reverse repurchase  agreement").  At the time the Fund enters
into a reverse repurchase  agreement it will segregate cash or liquid securities
having a value equal to the repurchase price,  including  accrued interest.  The
segregated assets will be  marked-to-market  daily and additional assets will be
segregated on any day in which the assets fall below the repurchase  price (plus
accrued  interest).  The Fund's liquidity and ability to manage its assets might
be  affected  when it sets  aside  cash or  portfolio  securities  to cover such
commitments.  Reverse  repurchase  agreements  involve  the risk that the market
value of the securities sold by the Fund may decline below the repurchase  price
of those  securities.  In the  event  the  buyer of  securities  under a reverse
repurchase  agreement files for bankruptcy or becomes  insolvent,  such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's  obligation to repurchase the


                                       32
<PAGE>

securities,  and  the  Fund's  use of the  proceeds  of the  reverse  repurchase
agreement  may  effectively  be  restricted   pending  such  decision.   Reverse
repurchase agreements are considered to be borrowings by the Fund.

Mortgage Dollar Rolls.  The Fund may enter into mortgage "dollar rolls" in which
the Fund sells  securities for delivery in the current month and  simultaneously
contracts to repurchase  substantially  similar (same dealer,  type,  coupon and
maturity), but not identical,  securities on a specified future date. During the
roll period, the Fund forgoes principal and interest paid on the securities. The
Fund is compensated  by the  difference  between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") or
fee income and by the interest  earned on the cash proceeds of the initial sale.
A  "covered  roll" is a  specific  type of  dollar  roll for  which  there is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward  settlement date of the dollar roll transaction.  The Fund
may enter into both  covered and  uncovered  rolls.  At the time the Fund enters
into a dollar roll transaction,  it will segregate,  with an approved custodian,
cash or liquid  securities  having a value not less  than the  repurchase  price
(including accrued interest) and will subsequently monitor the segregated assets
to ensure that its value is maintained.

Borrowing.  The Fund may not borrow  money,  except as permitted  under the 1940
Act, and as interpreted or modified by regulatory authority having jurisdiction,
from  time to  time.  Under  the 1940  Act,  the Fund is  required  to  maintain
continuous  asset  coverage of 300% with respect to such  borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market  fluctuations or otherwise,  even
if such  liquidation  of the  Fund's  holdings  may be  disadvantageous  from an
investment standpoint.

Leveraging  by means of borrowing may  exaggerate  the effect of any increase or
decrease in the value of the Fund's securities and the Fund's NAV per share, and
money  borrowed by the Fund will be subject to interest  and other costs  (which
may include  commitment  fees  and/or the cost of  maintaining  minimum  average
balances) that may exceed the income received from the securities purchased with
the borrowed funds.


Lending of Portfolio Securities.  The Fund may lend its investment securities to
approved  institutional  borrowers  who need to  borrow  securities  in order to
complete certain  transactions,  such as covering short sales, avoiding failures
to deliver  securities  or  completing  arbitrage  operations.  By  lending  its
investment  securities,  the Fund attempts to increase its net investment income
through  the  receipt of  interest  on the loan.  Any gain or loss in the market
price of the  securities  loaned  that might  occur  during the term of the loan
would belong to the Fund. The Fund may lend its investment securities so long as
the terms, structure and the aggregate amount of such loans are not inconsistent
with the 1940 Act or the rules and  regulations  or  interpretations  of the SEC
thereunder,  which  currently  require that (a) the borrower pledge and maintain
with the Fund  collateral  consisting  of liquid,  unencumbered  assets having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral  whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis),  (c) the loan
be made  subject  to  termination  by the  Fund at any  time,  and (d) the  Fund
receives  reasonable  interest on the loan (which may include the Fund investing
any  cash  collateral  in  interest   bearing   short-term   investments),   and
distributions  on the loaned  securities and any increase in their market value.
There may be risks of delay in recovery of the securities or even loss of rights
in the  collateral  should the  borrower  of the  securities  fail  financially.
However,  loans will be made only to borrowers  selected by the Fund's  delegate
after a  commercially  reasonable  review of relevant  facts and  circumstances,
including the creditworthiness of the borrower.

At the  present  time,  the staff of the SEC does not  object  if an  investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such  fees are set  forth in a  written  contract  and  approved  by the
investment company's Board of Trustees. In addition, voting rights may pass with
the loaned securities, but if a material event occurs affecting an investment on
loan, the loan must be called and the securities voted. Pursuant to an exemptive
order granted by the SEC, cash  collateral  received by the Fund may be invested
in a money market fund managed by the Advisor (or one of its affiliates).


Other  Investment  Companies.  Securities of other  investment  companies may be
acquired by the Fund to the extent  permitted  under the 1940 Act,  that is, the
Fund may  invest a maximum  of up to 10% of its total  assets in  securities  of
other investment  companies so long as not more than 3% of the total outstanding
voting stock of any


                                       33
<PAGE>

one investment company is held by the Fund. In addition, not more than 5% of the
Fund's  total  assets may be invested in the  securities  of any one  investment
company.  The Fund may be permitted to exceed these  limitations by an exemptive
order of the SEC.  Pursuant to exemptive orders granted by the SEC, the Fund may
invest up to 25% of its total assets in affiliated money market funds. It should
be noted that investment  companies  incur certain  expenses such as management,
custodian, and transfer agency fees, and therefore any investment by the Fund in
shares  of  other  investment  companies  would  be  subject  to such  duplicate
expenses.  The  Fund  will  indirectly  bear  its  proportionate  share  of  any
management  or other fees paid by investment  companies in which it invests,  in
addition  to its own fees.  No  advisory  fee is charged on assets  invested  in
affiliated money market funds.

Investment of  Uninvested  Cash  Balances.  The Fund may have cash balances that
have not been invested in portfolio securities  ("Uninvested Cash").  Uninvested
Cash may result  from a variety of  sources,  including  dividends  or  interest
received from portfolio securities, unsettled securities transactions,  reserves
held for  investment  strategy  purposes,  scheduled  maturity  of  investments,
liquidation  of  investment  securities  to  meet  anticipated  redemptions  and
dividend payments, and new cash received from investors.  Uninvested Cash may be
invested  directly  in  money  market   instruments  or  other  short-term  debt
obligations.  Pursuant to an Exemptive Order issued by the SEC, the Fund may use
Uninvested Cash to purchase shares of affiliated  funds,  including money market
funds and Cash Management QP Trust, or entities for which the Advisor may act as
investment  advisor  now  or in the  future  that  operate  as  cash  management
investment vehicles but are excluded from the definition of "investment company"
pursuant  to  Section  3(c)(1) or  3(c)(7)  of the 1940 Act  (collectively,  the
"Central  Funds") in excess of the  limitations of Section  12(d)(1) of the 1940
Act. Investment by the Fund in shares of the Central Funds will comply with Rule
2a-7 under the 1940 Act and will be in  accordance  with the  Fund's  investment
policies and restrictions.

The Fund will invest  Uninvested  Cash in Central  Funds only to the extent that
the Fund's aggregate  investment in the Central Funds does not exceed 25% of its
total  assets.  Purchases  and sales of shares of Central  Funds are made at net
asset value.

Asset Coverage. The Fund will comply with the segregation or coverage guidelines
established by the SEC and other  applicable  regulatory  bodies with respect to
certain  transactions,  including  (but  not  limited  to)  options  written  on
securities  and indexes;  currency,  interest  rate and security  index  futures
contracts  and  options  on  these  futures  contracts;   and  forward  currency
contracts. These guidelines may, in certain instances, require the Fund to cover
the Fund's  obligations  with  respect to these  strategies  with cash or liquid
securities to the extent they are not otherwise covered through ownership of the
underlying security or financial instrument,  by other portfolio positions or by
other means consistent with applicable  regulatory policies.  The assets used as
cover must at all times equal or exceed the Fund's  obligations  with respect to
these  strategies.  Assets used as cover  cannot be sold or  transferred  unless
equivalent  assets  are  substituted  in  their  place  or  cover  is no  longer
necessary.  As a result, there is a possibility that using a large percentage of
the Fund's  assets as cover could  impede the  Advisor or the Fund's  ability to
meet redemption requests or other current obligations.

For example,  a call option  written on securities  may require the Fund to hold
the  securities  subject  to the  call  (or  securities  convertible  into  such
securities  without  additional  consideration)  or to use  assets  as cover (as
described  above)  sufficient to purchase and deliver the securities if the call
is  exercised.  A call  option  written on an index may  require the Fund to own
portfolio securities that correlate with the index or to use assets as cover (as
described  above) equal to the excess of the index value over the exercise price
on a current basis. A put option written by the Fund may require the Fund to use
assets as cover (as described above) equal to the exercise price. The Fund could
purchase a put option if the strike  price of that  option is the same or higher
than the  strike  price of a put  option  sold by the Fund.  If the Fund holds a
futures  contract,  the Fund could  purchase  a put  option on the same  futures
contract  with a strike  price as high or higher than the price of the  contract
held. The Fund may enter into fully or partially offsetting transactions so that
its net position,  coupled with any assets used as cover (equal to any remaining
obligation),  equals its net obligation. Asset coverage may be achieved by other
means when consistent with applicable regulatory policies.

There is no limit on the  percentage  of the  assets  of the Fund that may be at
risk with respect to futures  contracts and related options or forward  currency
contracts.  The  Fund  may not  invest  more  than 15% of its  total  assets  in
purchased  protective put options.  The Fund's transactions in options,  forward
currency  contracts,  futures  contracts


                                       34
<PAGE>

and  options  on  futures  contracts  may be  limited  by the  requirements  for
qualification  of the Fund as a regulated  investment  company for tax purposes.
See  "Taxes."  There  can  be no  assurance  that  the  use of  these  portfolio
strategies will be successful.


Impact of Large  Redemptions  and  Purchases of Fund shares.  From time to time,
shareholders  of the Fund (which may include  affiliated  and/or  non-affiliated
registered  investment  companies  that invest in the Fund) may make  relatively
large redemptions or purchases of Fund shares.  These transactions may cause the
Fund to have to sell securities or invest  additional  cash, as the case may be.
While it is impossible to predict the overall impact of these  transactions over
time,  there could be adverse  effects on the Fund's  performance  to the extent
that the Fund may be required to sell securities or invest cash at times when it
would  not  otherwise  do so.  These  transactions  could  also  accelerate  the
realization of taxable  income if sales of securities  resulted in capital gains
and could also increase transaction costs.


Investment  Objective.  The Fund's  investment  objective  is not a  fundamental
policy and may be changed  upon  notice to, but  without  the  approval  of, the
Fund's  shareholders.  If there is a change in the Fund's investment  objective,
the Fund's  shareholders should consider whether the Fund remains an appropriate
investment in light of their then-current  needs.  Shareholders of the Fund will
receive  30 days'  prior  written  notice  with  respect  to any  change  in the
investment objective of the Fund.

Rating Services

The ratings of rating services represent their opinions as to the quality of the
securities that they undertake to rate. It should be emphasized,  however,  that
ratings are relative and subjective  and are not absolute  standards of quality.
Although  these  ratings are an initial  criterion  for  selection  of portfolio
investments,  the Advisor  also makes its own  evaluation  of these  securities,
subject to review by the Board of Trustees of the Trust.  After  purchase by the
Fund, an obligation may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund.  Neither event would require the Fund
to eliminate the obligation  from its  portfolio,  but the Advisor will consider
such an event in its  determination  of whether the Fund should continue to hold
the  obligation.  A  description  of the  ratings  referred to herein and in the
Prospectuses is set forth in the Appendix of this SAI.

The  following  is a chart of the various  types of  securities  and  investment
strategies  employed by the Fund.  Unless otherwise  indicated,  the Fund is not
obligated to pursue any of the following  strategies and does not represent that
these  techniques  are  available  now or will be  available  at any time in the
future.  If the Fund's investment in a particular type of security is limited to
a certain percentage of the Fund's assets, that percentage  limitation is listed
in the chart.  Following the chart,  there is a description  of how each type of
security  and  investment  strategy  may be used by the  Fund.  As a  matter  of
nonfundamental   operating  policy,  the  Fund  may  be  subject  to  additional
restrictions. See the section entitled "Investment Restrictions."

<TABLE>
<CAPTION>

 -------------------------------------------------------- ----------------------------------------------------------
 INVESTMENT PRACTICE                                       DWS Short Duration Plus Fund
 ======================================================== ==========================================================
 KEY TO TABLE:
 +   Permitted without stated limit
 o   Permitted  without stated limit, but not expected to be used to a significant extent
 X   Not permitted

 20% Italic type (e.g. 20%) represents an investment limitation as a percentage of net fund assets; does not
 indicate actual use

 20% Roman type (e.g. 20%) represents an investment limitation as a percentage of total fund assets; does not
 indicate actual use
 -------------------------------------------------------------------------------------------------------------------
 EQUITY SECURITIES
 -------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                           <C>
 Common Stock                                                                         X
 -------------------------------------------------------------------------------------------------------------------
 Warrants                                                                            20%
 -------------------------------------------------------------------------------------------------------------------
 Preferred Stock                                                                      X
 -------------------------------------------------------------------------------------------------------------------
 Convertible Securities                                                               X
 -------------------------------------------------------------------------------------------------------------------

                                       35
<PAGE>
 -------------------------------------------------------- ----------------------------------------------------------
 INVESTMENT PRACTICE                                       DWS Short Duration Plus Fund
 ======================================================== ==========================================================
 KEY TO TABLE:
 +   Permitted without stated limit
 o   Permitted  without stated limit, but not expected to be used to a significant extent
 X   Not permitted

 20% Italic type (e.g. 20%) represents an investment limitation as a percentage of net fund assets; does not
 indicate actual use

 20% Roman type (e.g. 20%) represents an investment limitation as a percentage of total fund assets; does not
 indicate actual use
 -------------------------------------------------------------------------------------------------------------------
 FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
 -------------------------------------------------------------------------------------------------------------------
 Short-Term Instruments                                                               +
 -------------------------------------------------------------------------------------------------------------------
 Obligations of Banks and Other Financial Institutions                                +
 -------------------------------------------------------------------------------------------------------------------
 Certificates of Deposit and Banker's Acceptances                                     +
 -------------------------------------------------------------------------------------------------------------------
 Commercial Paper                                                                     +
 -------------------------------------------------------------------------------------------------------------------
 Variable Rate Master Demand Notes                                                    +
 -------------------------------------------------------------------------------------------------------------------
 US Government Securities                                                             +
 -------------------------------------------------------------------------------------------------------------------
 Corporate Debt Securities                                                            +
 -------------------------------------------------------------------------------------------------------------------
 Custodial Receipts                                                                   o
 -------------------------------------------------------------------------------------------------------------------
 Zero Coupon Securities and Deferred Interest Bonds                                   +
 -------------------------------------------------------------------------------------------------------------------
 Variable Rate Securities                                                             +
 -------------------------------------------------------------------------------------------------------------------
 Warrants                                                                             +
 -------------------------------------------------------------------------------------------------------------------
 Inverse Floating Rate Securities                                                     o
 -------------------------------------------------------------------------------------------------------------------
 Lower-Rated Debt Securities                                                         10%
 -------------------------------------------------------------------------------------------------------------------
 Registered Loans                                                                     X
 -------------------------------------------------------------------------------------------------------------------
 Put Bonds                                                                            +
 -------------------------------------------------------------------------------------------------------------------
 Bank Loans                                                                           +
 -------------------------------------------------------------------------------------------------------------------
 Other Debt Obligations                                                               +
 -------------------------------------------------------------------------------------------------------------------
 MUNICIPAL SECURITIES
 -------------------------------------------------------------------------------------------------------------------
 Municipal Notes                                                                      o
 -------------------------------------------------------------------------------------------------------------------
 Tax Anticipation Notes                                                               o
 -------------------------------------------------------------------------------------------------------------------
 Revenue Anticipation Notes                                                           o
 -------------------------------------------------------------------------------------------------------------------
 Bond Anticipation Notes                                                              o
 -------------------------------------------------------------------------------------------------------------------
 Tax and Revenue Anticipation Notes                                                   o
 -------------------------------------------------------------------------------------------------------------------
 Construction Loan Notes                                                              o
 -------------------------------------------------------------------------------------------------------------------
 Miscellaneous, Temporary and Anticipatory Instruments                                o
 -------------------------------------------------------------------------------------------------------------------
 Tax-Exempt Commercial Paper                                                          o
 -------------------------------------------------------------------------------------------------------------------
 Municipal Securities                                                                 o
 -------------------------------------------------------------------------------------------------------------------
 General Obligation Bonds                                                             o
 -------------------------------------------------------------------------------------------------------------------
 Revenue Bonds                                                                        o
 -------------------------------------------------------------------------------------------------------------------
 Private Activity Bonds                                                               o
 -------------------------------------------------------------------------------------------------------------------
 Tender Option Bonds                                                                  o
 -------------------------------------------------------------------------------------------------------------------
 Municipal Leases, Certificates of Participation and
 Other Participation Interests                                                       5%
 -------------------------------------------------------------------------------------------------------------------
 Pre-Refunded Securities                                                              o
 -------------------------------------------------------------------------------------------------------------------
 Auction Rate Securities                                                              o
 -------------------------------------------------------------------------------------------------------------------
 Pay-in-Kind Securities                                                               o
 -------------------------------------------------------------------------------------------------------------------
 DERIVATIVE SECURITIES (OPTIONS)
 -------------------------------------------------------------------------------------------------------------------
 Options on Securities                                                                +
 -------------------------------------------------------------------------------------------------------------------
 Options on Securities Indices                                                        +
 -------------------------------------------------------------------------------------------------------------------
 Options on Non-US Securities Indices                                                 +
 -------------------------------------------------------------------------------------------------------------------
 DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
 -------------------------------------------------------------------------------------------------------------------
 Futures Contracts                                                                    +
 -------------------------------------------------------------------------------------------------------------------
 Futures Contracts on Securities Indices, Foreign
 Currency and Interest Rates                                                          +
 -------------------------------------------------------------------------------------------------------------------
 Options on Futures Contracts (including Contracts on
 Securities Indices)                                                                  +
 -------------------------------------------------------------------------------------------------------------------
 DERIVATIVE SECURITIES (HEDGING STRATEGIES)
 -------------------------------------------------------------------------------------------------------------------
 Hedging Strategies                                                                   +
 -------------------------------------------------------------------------------------------------------------------
 Swap Agreements                                                                      +
 -------------------------------------------------------------------------------------------------------------------

                                       36
<PAGE>
 -------------------------------------------------------- ----------------------------------------------------------
 INVESTMENT PRACTICE                                       DWS Short Duration Plus Fund
 ======================================================== ==========================================================
 KEY TO TABLE:
 +   Permitted without stated limit
 o   Permitted  without stated limit, but not expected to be used to a significant extent
 X   Not permitted

 20% Italic type (e.g. 20%) represents an investment limitation as a percentage of net fund assets; does not
 indicate actual use

 20% Roman type (e.g. 20%) represents an investment limitation as a percentage of total fund assets; does not
 indicate actual use
 -------------------------------------------------------------------------------------------------------------------
 Credit Default Swaps                                                                15%
 -------------------------------------------------------------------------------------------------------------------
 MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
 -------------------------------------------------------------------------------------------------------------------
 Government Guaranteed Mortgage-Backed Securities                                     +
 -------------------------------------------------------------------------------------------------------------------
 Ginnie Mae Certificates                                                              +
 -------------------------------------------------------------------------------------------------------------------
 Fannie Mae Certificates                                                              +
 -------------------------------------------------------------------------------------------------------------------
 Freddie Mac Certificates                                                             +
 -------------------------------------------------------------------------------------------------------------------
 Multi-Class Mortgage-Backed Securities (CMOs and
 REMICs)                                                                              +
 -------------------------------------------------------------------------------------------------------------------
 Privately Issued Commercial Mortgage-Backed Securities                               +
 -------------------------------------------------------------------------------------------------------------------
 Agency Commercial Mortgage-Backed Securities                                         +
 -------------------------------------------------------------------------------------------------------------------
 Mortgage Pass-Through Securities                                                     +
 -------------------------------------------------------------------------------------------------------------------
 Stripped Mortgage-Backed Securities                                                  +
 -------------------------------------------------------------------------------------------------------------------
 Adjustable Rate Mortgages                                                            +
 -------------------------------------------------------------------------------------------------------------------
 Asset-Backed Securities                                                              +
 -------------------------------------------------------------------------------------------------------------------
 SECURITIES OF NON-US ISSUERS
 -------------------------------------------------------------------------------------------------------------------
 Foreign Securities and Depository Receipts (ADRs,                                  +(1)
 EDRs, GDRs and IDRs)
 -------------------------------------------------------------------------------------------------------------------
 Foreign Corporate Debt Securities                                                  +(1)
 -------------------------------------------------------------------------------------------------------------------
 Foreign Government Debt Securities                                                 +(1)
 -------------------------------------------------------------------------------------------------------------------
 Investments in Emerging Markets                                                      +
 -------------------------------------------------------------------------------------------------------------------
 CURRENCY MANAGEMENT
 -------------------------------------------------------------------------------------------------------------------
 Currency Exchange Transactions                                                       +
 -------------------------------------------------------------------------------------------------------------------
 Currency Hedging Transactions                                                        +
 -------------------------------------------------------------------------------------------------------------------
 Cross Hedging                                                                        X
 -------------------------------------------------------------------------------------------------------------------
 Forward Currency Exchange Contracts                                                  +
 -------------------------------------------------------------------------------------------------------------------
 Options on Foreign Currencies                                                        +
 -------------------------------------------------------------------------------------------------------------------
 OTHER INVESTMENTS AND INVESTMENT PRACTICES
 -------------------------------------------------------------------------------------------------------------------
 Illiquid Securities                                                                 15%
 -------------------------------------------------------------------------------------------------------------------
 TBA Commitments                                                                      +
 -------------------------------------------------------------------------------------------------------------------
 When-Issued and Delayed Delivery Securities                                         15%
 -------------------------------------------------------------------------------------------------------------------
 Repurchase Agreements                                                                +
 -------------------------------------------------------------------------------------------------------------------
 Reverse Repurchase Agreements                                                       5%
 -------------------------------------------------------------------------------------------------------------------
 Mortgage Dollar Rolls                                                               5%
 -------------------------------------------------------------------------------------------------------------------

 Lending of Portfolio Securities                                                   33 1/3%

 -------------------------------------------------------------------------------------------------------------------
 Borrowing                                                                         33 1/3%
 -------------------------------------------------------------------------------------------------------------------
 Short Sales                                                                          +
 -------------------------------------------------------------------------------------------------------------------
 Other Investment Companies                                                      limits vary
 -------------------------------------------------------------------------------------------------------------------
 Temporary Defensive Investments                                                      +
 -------------------------------------------------------------------------------------------------------------------
 Dow Jones CDX.NA.HY.3 and similar products                                           +
 -------------------------------------------------------------------------------------------------------------------
 Concentration of Investment in Any One Industry                                     25%
 -------------------------------------------------------- ----------------------------------------------------------
</TABLE>

(1) May be denominated in any currency.

Portfolio Holdings


In addition to the public disclosure of Fund portfolio holdings through required
Securities and Exchange Commission ("SEC") quarterly filings,  the Fund may make
its portfolio holdings information publicly available on the DWS Funds' Web site
as described in the Fund's prospectus.  The Fund does not disseminate non-public
information  about  portfolio  holdings  except in accordance  with policies and
procedures adopted by the Fund.

                                       37
<PAGE>

The Fund's  procedures permit non-public  portfolio  holdings  information to be
shared with Deutsche Asset Management and its affiliates  (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys,   officers  and  trustees/directors  and  each  of  their  respective
affiliates and advisers who require access to this  information to fulfill their
duties to the Fund and are subject to the duties of  confidentiality,  including
the duty not to trade on non-public information,  imposed by law or contract, or
by the Fund's  procedures.  This  non-public  information may also be disclosed,
subject to the  requirements  described  below,  to securities  lending  agents,
financial  printers,  proxy voting  firms,  mutual fund  analysts and rating and
tracking  agencies,  or to shareholders  in connection with in-kind  redemptions
(collectively, "Authorized Third Parties").

Prior to any disclosure of the Fund's non-public  portfolio holdings information
to Authorized  Third Parties,  a person  authorized by the Fund's  Trustees must
make a good faith  determination  in light of the facts then known that the Fund
has a  legitimate  business  purpose for  providing  the  information,  that the
disclosure is in the best interest of the Fund,  and that the recipient  assents
or otherwise has a duty to keep the  information  confidential  and to not trade
based on the information  received while the information remains non-public.  No
compensation is received by the Fund or DeAM for disclosing  non-public holdings
information. Periodic reports regarding these procedures will be provided to the
Fund's Trustees.

Portfolio  holdings  information  distributed  by the trading desks of DeAM or a
subadvisor for the purpose of facilitating  efficient trading of such securities
and receipt of relevant  research is not subject to the foregoing  requirements.
Non-public   portfolio   holding   information   does  not   include   portfolio
characteristics  (other than holdings or subsets of holdings) about the Fund and
information  derived  therefrom,  including,  but not limited to, how the Fund's
investments are divided among various sectors, industries,  countries, value and
growth stocks,  bonds,  currencies and cash,  types of bonds,  bond  maturities,
duration,  bond  coupons and bond credit  quality  ratings so long as the Fund's
holdings could not be derived from such information.



                                       38
<PAGE>

Registered  investment  companies  that are subadvised by DeAM may be subject to
different  portfolio  holdings  disclosure  policies,  and neither  DeAM nor the
Fund's  Trustees  exercise  control over such  policies.  In addition,  separate
account  clients of DeAM have  access to their  portfolio  holdings  and are not
subject  to the Fund's  portfolio  holdings  disclosure  policy.  The  portfolio
holdings  of some of the  funds  subadvised  by DeAM  and  some of the  separate
accounts managed by DeAM may substantially  overlap with the portfolio  holdings
of the Fund.

DeAM also  manages  certain  unregistered  commingled  trusts and creates  model
portfolios,  the portfolio holdings of which may substantially  overlap with the
portfolio holdings of the Fund. To the extent that investors in these commingled
trusts  or  recipients  of model  portfolio  holdings  information  may  receive
portfolio  holdings  information  of their  trust or of a model  portfolio  on a
different basis from that on which Fund portfolio  holdings  information is made
public,  DeAM has implemented  procedures  reasonably designed to encourage such
investors and recipients to keep such information  confidential,  and to prevent
those investors from trading on the basis of non-public holdings information.

There is no assurance that the Fund's  policies and  procedures  with respect to
the disclosure of portfolio holdings  information will protect the Fund from the
potential  misuse of portfolio  holdings  information  by those in possession of
that information.

                             MANAGEMENT OF THE FUND

Investment Advisor

Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is
part of Deutsche Asset Management, is the investment advisor for the Fund. Under
the supervision of the Board of Trustees of the Fund,  with  headquarters at 345
Park  Avenue,  New  York,  New York  10154,  DIMA  makes the  Fund's  investment
decisions,  buys and sells  securities  for the Fund and conducts  research that
leads to these purchase and sale decisions. The Advisor manages the Fund's daily
investment  and business  affairs  subject to the policies  established  by each
Corporation's  Board of Directors.  DIMA and its predecessors  have more than 80
years of  experience  managing  mutual  funds.  DIMA  provides  a full  range of
investment  advisory  services to institutional  and retail clients.  The Fund's
investment advisor is also responsible for selecting brokers and dealers and for
negotiating  brokerage  commissions  and dealer  charges.  On December 31, 2006,
Deutsche Asset Management, Inc. ("DAMI") merged into DIMA. Prior to December 31,
2006 DAMI was the  investment  advisor to the Fund.  As a result of the  merger,
DIMA is now the investment advisor to the Fund.

DeAM is the  marketing  name in the US for the asset  management  activities  of
Deutsche  Bank AG,  DIMA,  Deutsche  Bank Trust  Company  Americas and DWS Trust
Company. DeAM is a global asset management organization that offers a wide range
of investing  expertise and resources,  including hundreds of portfolio managers
and analysts and an office  network  that reaches the world's  major  investment
centers.  This well-resourced  global investment platform brings together a wide
variety of experience and investment insight, across industries,  regions, asset
classes and investing styles.  DIMA is an indirect,  wholly-owned  subsidiary of
Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is
engaged in a wide range of financial services,  including investment management,
mutual fund,  retail,  private and commercial  banking,  investment  banking and
insurance.  The term "DWS Scudder" is the designation  given to the products and
services provided by DIMA and its affiliates to the DWS Mutual Funds.

The Advisor provides  investment  counsel for many individuals and institutions,
including  insurance  companies,  industrial  corporations,  and  financial  and
banking  organizations,  as well as  providing  investment  advice  to open- and
closed-end SEC registered funds.

The Fund is managed by a team of investment professionals, each of whom plays an
important role in the Fund's management  process.  Team members work together to
develop  investment  strategies and select  securities for the Fund's portfolio.
This team works for the Advisor or its  affiliates  and is  supported by a large
staff  of  economists,   research   analysts,   traders  and  other   investment
specialists. The Advisor or its affiliates believe(s) its team approach benefits
fund  investors  by  bringing  together  many  disciplines  and  leveraging  its
extensive resources.  Team members


                                       39
<PAGE>

with primary  responsibility for management of the Fund, as well as team members
who have other ongoing management  responsibilities for the Fund, are identified
in the Fund's prospectus,  as of the date of the Fund's prospectus.  Composition
of the team may change over time,  and fund  shareholders  and investors will be
notified  of  changes   affecting   individuals  with  primary  fund  management
responsibility.

Investment Management Agreement


The  Board  and  the  shareholders  of the  Fund  have  approved  an  investment
management  agreement (the "Investment  Management  Agreement") between the Fund
and DIMA. Pursuant to the Investment Management Agreement,  the Advisor provides
continuing  investment  management of the assets of the Fund. In addition to the
investment  management  of the assets of the Fund,  the Advisor  determines  the
investments to be made for the Fund, including what portion of its assets remain
uninvested in cash or cash equivalents, and with whom the orders for investments
are placed,  consistent with the Fund's  policies as stated in its  Prospectuses
and this SAI, or as adopted by the Fund's Board.  The Advisor also monitors,  to
the extent not monitored by the Fund's  administrator or other agent, the Fund's
compliance with its investment and tax guidelines and other compliance policies.



The Advisor  provides  assistance to the Fund's Board in valuing the  securities
and other  instruments  held by the Fund, to the extent  reasonably  required by
valuation policies and procedures that may be adopted by the Fund.


Pursuant to the Investment Management  Agreement,  (unless otherwise provided in
the agreement or as  determined by the Fund's Board and to the extent  permitted
by applicable  law), the Advisor pays the  compensation  and expenses of all the
Board  members,  officers,  and executive  employees of the Fund,  including the
Fund's share of payroll taxes, who are affiliated persons of the Advisor.

The  Investment  Management  Agreement  provides  that  the  Fund  is  generally
responsible  for expenses  that  include:  fees payable to the Advisor;  outside
legal,  accounting  or auditing  expenses,  including  with  respect to expenses
related to negotiation,  acquisition or  distribution of portfolio  investments;
maintenance  of books and records that are  maintained  by the Fund,  the Fund's
custodian,  or other agents of the Fund; taxes and  governmental  fees; fees and
expenses   of  the   Fund's   accounting   agent,   custodian,   sub-custodians,
depositories,  transfer  agents,  dividend  reimbursing  agents and  registrars;
payment  for  portfolio  pricing  or  valuation   services  to  pricing  agents,
accountants,  bankers and other specialists,  if any;  brokerage  commissions or
other costs of  acquiring  or disposing  of any  portfolio  securities  or other
instruments  of the  Fund;  and  litigation  expenses  and  other  extraordinary
expenses not incurred in the ordinary course of the Fund's business.

The Investment  Management  Agreement  allows the Advisor to delegate any of its
duties under the  Agreement to a  subadvisor,  subject to a majority vote of the
Board of the Fund,  including  a  majority  of the Board who are not  interested
persons of the Fund, and, if required by applicable  law,  subject to a majority
vote of the Fund's shareholders.

The  Investment  Management  Agreement  provides  that the Advisor  shall not be
liable for any error of judgment  or mistake of law or for any loss  suffered by
the Fund in  connection  with matters to which the agreement


                                       40
<PAGE>

relates,  except a loss resulting from willful  malfeasance,  bad faith or gross
negligence on the part of the Advisor in the  performance  of its duties or from
reckless  disregard  by the  Advisor of its  obligations  and  duties  under the
agreement.  The Investment  Management  Agreement may be terminated at any time,
without  payment of  penalty,  by either  party or by vote of a majority  of the
outstanding voting securities of the Fund on 60 days' written notice.

In addition,  the Board and  shareholders  have  approved a subadvisor  approval
policy for the Fund (the "Subadvisor Approval Policy").  The Subadvisor Approval
Policy  permits the Advisor,  subject to the approval of the Board,  including a
majority of its independent  board members,  to appoint and replace  subadvisors
and to amend  sub-advisory  contracts  without obtaining  shareholder  approval.
Under the Subadvisor Approval Policy, the Board, including its independent board
members,  will continue to evaluate and approve any new  sub-advisory  contracts
between the Advisor and any  subadvisor,  as well as all changes to any existing
sub-advisory  contract. The Fund cannot implement the Subadvisor Approval Policy
without  the SEC either  adopting  revisions  to certain  existing  rules (as it
proposed to do in October 2003) or granting the Fund exemptive  relief from such
existing rules. In the event that the Fund received  exemptive relief or the SEC
adopted  revisions  to its  current  rules,  the Fund and the  Advisor  would be
subject to certain  conditions  imposed by the SEC (and certain  conditions that
may be imposed in the future within either exemptive relief or a rule) to ensure
that the interests of the Fund and its  shareholders  are  adequately  protected
whenever the Advisor acts under the Subadvisor  Approval  Policy,  including any
shareholder notice requirements.

Effective  April 23,  2007,  for all  services  provided  under  the  Investment
Management Agreement, the Fund pays the Advisor a fee, calculated daily and paid
monthly, at the annual rates shown below:

Average Daily Net Assets                         Fee Rate
------------------------                         --------

$0 - $1.5 billion                                0.365%
$1.5 billion - $2 billion                        0.340%
$2 billion - $3 billion                          0.315%
$3 billion - $4 billion                          0.300%
$4 billion - $5 billion                          0.285%
$5 billion - $6 billion                          0.270%
Over $6 billion                                  0.255%





Prior to April 23,  2007,  the Fund paid the Advisor a fee,  computed  daily and
paid monthly, at the annual rate as a percentage of net assets shown below:


Average Daily Net Assets                         Fee Rate
------------------------                         --------

$0 - $500 million                                0.500%
$500 million - $1 billion                        0.485%
$1 billion - $2 billion                          0.470%
Over $2 billion                                  0.455%


[Prior to the implementation of the above fee schedule,  the fund's advisory fee
was equal to an annual  rate of 0.70% of the Fund's  average  daily net  assets,
computed and accrued daily and paid monthly.]



                                       41
<PAGE>


The advisory fees paid to the Advisor's  predecessor  by the Fund for the period
January 14, 2006 through September 30, 2006* was equal to $2,452,759.

*     Prior to July 1, 2006, these fees included an administrative service fee.




The investment advisor has contractually  agreed through April 22, 2010 to waive
a portion of its fees and  reimburse  expenses  so that total  annual  operating
expenses will not exceed 0.94% for Class A, excluding  certain  expenses such as
extraordinary expenses, taxes, brokerage and interest.

The investment  advisor has  contractually  agreed  through  January 31, 2009 to
waive a  portion  of its  fees  and  reimburse  expenses  so that  total  annual
operating expenses will not exceed 1.67% for Class B, excluding certain expenses
such as extraordinary expenses, taxes, brokerage and interest.

The investment advisor has voluntarily agreed to waive a portion of its fees and
reimburse expenses so that total annual operating expenses will not exceed 0.86%
and  1.61%,  for  Class A and Class C shares,  respectively,  excluding  certain
expenses such as  extraordinary  expenses,  taxes,  brokerage and interest.  The
investment  advisor,   at  its  discretion,   may  revise  or  discontinue  this
arrangement at any time.

The investment  advisor has  contractually  agreed through September 30, 2008 to
waive a  portion  of its  fees  and  reimburse  expenses  so that  total  annual
operating  expenses  will not  exceed  0.92%  and  1.67% for Class A and Class C
shares, respectively, excluding certain expenses such as extraordinary expenses,
taxes,  brokerage and interest.


The advisory  fees paid to the  PreservationPlus  Income  Portfolio,  the master
portfolio in which the Fund previously  invested all of its assets, for its last
three fiscal years ended September 30 are shown in the table below.


            2006*, **           2005**                  2004**
            ---------           ------                  ------

          $1,517,873          $9,183,185             $16,152,288

                                       42
<PAGE>

*        For the period October 1, 2005 through January 13, 2006.

**       Prior to July 1, 2006,  these fees included an  administrative  service
         fee.


For the last three fiscal years ended  September 30, the Advisor  reimbursed the
following amounts to the Portfolio to cover expenses:

         2007                    2006*                   2005
         ----                    -----                   ----

          $0                   $625,126               $3,508,421


* For the period October 1, 2005 through January 13, 2006.

In reviewing the terms of the Investment Management Agreement and in discussions
with the Advisor  concerning such  Agreement,  the Trustees of the Trust who are
not "interested  persons" of the Advisor are represented by independent  counsel
at the Fund's expense.

Under a separate agreement between Deutsche Bank AG and the Fund,  Deutsche Bank
AG has granted a license to the Fund to utilize the trademark "DWS."

The Advisor may enter into  arrangements with affiliates and third party service
providers to perform  various  administrative,  back-office  and other  services
relating to client accounts.  Such service providers may be located in the US or
in non-US jurisdictions.



Compensation of Portfolio Managers

The  Fund has  been  advised  that the  Advisor  seeks to offer  its  investment
professionals  competitive  short-term  and  long-term  compensation.  Portfolio
managers and research professionals are paid (i) fixed base salaries,  which are
linked to job function,  responsibilities  and financial  services industry peer
comparison  and (ii)  variable  compensation,  which  is  linked  to  investment
performance, individual contributions to the team and DWS Scudder's and Deutsche
Bank's  financial  results.  Variable  compensation  may  include  a cash  bonus
incentive and  participation in a variety of long-term equity programs  (usually
in the form of Deutsche Bank equity).

Bonus  and  long-term   incentives   comprise  a  greater  proportion  of  total
compensation as an investment  professional's  seniority and compensation levels
increase.  Top performing  investment  professionals  earn a total  compensation
package  that is highly  competitive,  including  a bonus that is a multiple  of
their base  salary.  The amount of equity  awarded  under the  long-term  equity
programs is generally based on the individual's total  compensation  package and
may  comprise  from  0%-40%  of  the  total  compensation  award.  As  incentive
compensation increases,  the percentage of compensation awarded in Deutsche Bank
equity also increases. Certain senior investment professionals may be subject to
a mandatory diverting of a portion of their equity compensation into proprietary
mutual funds that they manage.

To  evaluate  its  investment  professionals,  the  Advisor  uses a  Performance
Management  Process.   Objectives  evaluated  by  the  process  are  related  to
investment  performance and generally take into account peer group and benchmark
related data.  The ultimate goal of this process is to link the  performance  of
investment  professionals  with  client  investment  objectives  and to  deliver
investment   performance   that  meets  or  exceeds  clients'  risk  and  return
objectives. When determining total compensation,  the Advisor considers a number
of quantitative and qualitative factors such as:

o        DWS  Scudder   performance   and  the  performance  of  Deutsche  Asset
         Management, quantitative measures which include 1, 3 and 5 year pre-tax
         returns versus benchmark (such as the benchmark used in the


                                       43
<PAGE>

         prospectus) and appropriate peer group,  taking into consideration risk
         targets.  Additionally,  the portfolio  manager's  retail/institutional
         asset mix is weighted, as appropriate for evaluation purposes.

o        Qualitative  measures include  adherence to the investment  process and
         individual  contributions  to  the  process,  among  other  things.  In
         addition, the Advisor assesses compliance, risk management and teamwork
         skills.

o        Other factors,  including  contributions made to the investment team as
         well as  adherence  to  compliance,  risk  management,  and "living the
         values" of the Advisor,  are part of a  discretionary  component  which
         gives  management the ability to reward these behaviors on a subjective
         basis through bonus incentives.

In addition,  the Advisor analyzes  competitive  compensation levels through the
use of extensive market data surveys. Portfolio manager compensation is reviewed
and may be modified each year as appropriate  to reflect  changes in the market,
as well as to adjust the  factors  used to  determine  overall  compensation  to
promote good sustained investment performance.

Fund Ownership of Portfolio Managers

The following table shows the dollar range of shares owned  beneficially  and of
record by each  member of the Fund's  portfolio  management  team in the Fund as
well as in all DWS Funds as a group (i.e.  those funds advised by Deutsche Asset
Management or its affiliates),  including  investments by their immediate family
members sharing the same household and amounts invested  through  retirement and
deferred  compensation plans. This information is provided as of the Fund's most
recent fiscal year end.

<TABLE>
<CAPTION>

                                                                                   Dollar Range of All
Name of Portfolio Manager              DWS Short Duration Plus Fund               DWS Fund Shares Owned
-------------------------              ----------------------------               ---------------------

<S>                                          <C>                                    <C>
William Chepolis                             $10,001 - $50,000                     $100,001 - $500,000
Matthew F. MacDonald                                $0                              $10,001 - $50,000
Gary Sullivan                                       $0                              $10,001 - $50,000
Robert Wang                                    $1 - $10,000                        $100,001 - $500,000
Thomas Picciochi                             $10,001 - $50,000                     $100,001 - $500,000
</TABLE>

Conflicts of Interest

In addition to managing the assets of the Fund,  the Fund's  portfolio  managers
may have responsibility for managing other client accounts of the Advisor or its
affiliates.  The tables below show, for each portfolio  manager,  the number and
asset size of (1) SEC registered  investment companies (or series thereof) other
than the Fund, (2) pooled investment vehicles that are not registered investment
companies and (3) other  accounts  (e.g.,  accounts  managed for  individuals or
organizations)  managed by each portfolio  manager.  Total assets  attributed to
each portfolio  manager in the tables below include total assets of each account
managed  by them,  although  the  manager  may only  manage  a  portion  of such
account's  assets.  The  tables  also show the number of  performance  based fee
accounts, as well as the total assets of the accounts for which the advisory fee
is based on the performance of the account.  This  information is provided as of
the Fund's most recent fiscal year end.

Other SEC Registered Investment Companies Managed:

<TABLE>
<CAPTION>

                                      Number of         Total Assets of    Number of Investment
                                      Registered          Registered         Company Accounts       Total Assets of
                                      Investment          Investment               with            Performance-Based
Name of Portfolio Manager             Companies            Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------            ---------       ---------------------         --------

<S>                                        <C>          <C>                          <C>                  <C>
William Chepolis                           15           $8,026,523,474               0                    $0
Matthew F. MacDonald                       15           $8,026,523,474               0                    $0

                                       44
<PAGE>
                                      Number of         Total Assets of    Number of Investment
                                      Registered          Registered         Company Accounts       Total Assets of
                                      Investment          Investment               with            Performance-Based
Name of Portfolio Manager             Companies            Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------            ---------       ---------------------         --------

Gary Sullivan                              11           $6,177,175,664               0                    $0
Robert Wang                                40          $14,038,962,945               0                    $0
Thomas Picciochi                           11           $4,712,462,072               0                    $0

Other Pooled Investment Vehicles Managed:

                                                                              Number of Pooled
                                      Number of                              Investment Vehicle
                                       Pooled          Total Assets of         Accounts with        Total Assets of
                                     Investment       Pooled Investment      Performance-Based     Performance-Based
Name of Portfolio Manager             Vehicles             Vehicles                 Fee              Fee Accounts
-------------------------             --------             --------                 ---                  --------

William Chepolis                            0                        $0              0                         $0
Matthew F. MacDonald                        0                        $0              0                         $0
Gary Sullivan                               0                        $0              0                         $0
Robert Wang                                22              $699,278,407              2               $291,834,605
Thomas Picciochi                            5              $341,411,072              2               $291,834,605

Other Accounts Managed:

                                                                              Number of Other
                                                                               Accounts with      Total Assets of
                                      Number of     Total Assets of Other   Performance-Based   Performance-Based
Name of Portfolio Manager          Other Accounts          Accounts                 Fee             Fee Accounts
-------------------------                --------          --------                 ---                 --------

William Chepolis                            0                        $0              0                        $0
Matthew F. MacDonald                        0                        $0              0                        $0
Gary Sullivan                               0                        $0              0                        $0
Robert Wang                                43            $8,307,356,074              3              $168,734,012
Thomas Picciochi                           10              $245,332,939              3              $168,734,012
</TABLE>

In  addition  to the  accounts  above,  an  investment  professional  may manage
accounts in a personal  capacity that may include  holdings that are similar to,
or the same as,  those of the Fund.  The  Advisor  has in place a Code of Ethics
that is designed to address  conflicts of interest and that, among other things,
imposes  restrictions  on the ability of portfolio  managers  and other  "access
persons" to invest in securities  that may be recommended or traded in the Funds
and other client accounts.

Real,  potential  or apparent  conflicts  of interest may arise when a portfolio
manager has day-to-day  portfolio  management  responsibilities  with respect to
more than one fund or account, including the following:

o        Certain  investments may be appropriate for the Fund and also for other
         clients advised by the Advisor, including other client accounts managed
         by the Fund's portfolio  management team.  Investment decisions for the
         Fund  and  other  clients  are  made  with a view  to  achieving  their
         respective  investment  objectives  and  after  consideration  of  such
         factors as their current holdings,  availability of cash for investment
         and the size of their investments  generally. A particular security may
         be bought or sold for only one client or in  different  amounts  and at
         different times for more than one but less than all clients.  Likewise,
         because   clients  of  the  Advisor  may  have   differing   investment
         strategies, a particular security may be bought for one


                                       45
<PAGE>

         or more  clients  when  one or  more  other  clients  are  selling  the
         security.  The investment results achieved for the Fund may differ from
         the results  achieved for other  clients of the  Advisor.  In addition,
         purchases  or sales of the  same  security  may be made for two or more
         clients  on the same day.  In such  event,  such  transactions  will be
         allocated  among the clients in a manner  believed by the Advisor to be
         most  equitable  to  each  client,   generally  utilizing  a  pro  rata
         allocation  methodology.  In some cases, the allocation procedure could
         potentially  have an adverse effect or positive  effect on the price or
         amount of the securities  purchased or sold by each Fund.  Purchase and
         sale orders for the Fund may be combined with those of other clients of
         the Advisor in the interest of achieving the most favorable net results
         to the Fund and the other clients.

o        To the  extent  that  a  portfolio  manager  has  responsibilities  for
         managing  multiple client  accounts,  a portfolio  manager will need to
         divide time and attention among relevant accounts. The Advisor attempts
         to minimize these conflicts by aligning its portfolio  management teams
         by  investment  strategy and by  employing  similar  investment  models
         across multiple client accounts.

o        In some cases, an apparent  conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with  respect to other  accounts it manages.  The Advisor  will not
         determine  allocations based on whether it receives a performance-based
         fee from the client. Additionally, the Advisor has in place supervisory
         oversight processes to periodically monitor performance  deviations for
         accounts with like strategies.

o        The Advisor and its affiliates and the investment  team of the Fund may
         manage other mutual funds and separate  accounts on a long-short basis.
         The  simultaneous  management  of long  and  short  portfolios  creates
         potential  conflicts  of  interest  including  the risk that short sale
         activity  could   adversely   affect  the  market  value  of  the  long
         positions(and  vice versa),  the risk arising from sequential orders in
         long and short  positions,  and the  risks  associated  with  receiving
         opposing  orders at the same time.  The Advisor has adopted  procedures
         that it believes are reasonably  designed to mitigate  these  potential
         conflicts  of  interest.  Included  in these  procedures  are  specific
         guidelines  developed to ensure fair and  equitable  treatment  for all
         clients whose accounts are managed by each Fund's portfolio  management
         team. The Advisor and the portfolio  management  team have  established
         monitoring  procedures,  a protocol for supervisory reviews, as well as
         compliance  oversight  to ensure that  potential  conflicts of interest
         relating to this type of activity are properly addressed.

The Advisor is owned by Deutsche Bank AG, a  multi-national  financial  services
company.  Therefore,  the Advisor is affiliated  with a variety of entities that
provide, and/or engage in commercial banking, insurance,  brokerage,  investment
banking,  financial  advisory,  broker-dealer  activities  (including  sales and
trading),  hedge funds, real estate and private equity investing, in addition to
the provision of investment  management services to institutional and individual
investors.  Since  Deutsche  Bank AG, its  affiliates,  directors,  officers and
employees (the "Firm") are engaged in businesses  and have interests  other than
managing  asset  management  accounts,   such  other  activities  involve  real,
potential or apparent  conflicts of interest.  These  interests  and  activities
include potential  advisory,  transactional  and financial  activities and other
interests  in  securities  and  companies  that may be  directly  or  indirectly
purchased  or sold by the Firm for its  clients'  advisory  accounts.  These are
considerations  of which  advisory  clients  should be aware and which may cause
conflicts that could be to the disadvantage of the Advisor's  advisory  clients.
The Advisor has  instituted  business and  compliance  policies,  procedures and
disclosures  that are  designed to identify,  monitor and mitigate  conflicts of
interest and, as appropriate, to report them to the Fund's Board.



                                       46
<PAGE>


                                       47
<PAGE>


                                       48
<PAGE>


                                       49
<PAGE>

Codes of Ethics

The Fund,  the Advisor and the Fund's  principal  underwriter  have each adopted
codes of ethics under rule 17j-1 under the 1940 Act. Board members,  officers of
the Trust and employees of the Advisor and principal  underwriter  are permitted
to make personal securities  transactions,  including transactions in securities
that  may be  purchased  or  held  by the  Fund,  subject  to  requirements  and
restrictions  set forth in the applicable Code of Ethics.  The Advisor's Code of
Ethics  contains  provisions and  requirements  designed to identify and address
certain  conflicts of interest  between personal  investment  activities and the
interests  of the  Fund.  Among  other  things,  the  Advisor's  Code of  Ethics
prohibits  certain types of  transactions  absent prior  approval,  imposes time
periods  during  which  personal   transactions  may  not  be  made  in  certain
securities,  and requires the submission of duplicate broker  confirmations  and
quarterly reporting of securities transactions. Additional restrictions apply to
portfolio  managers,  traders,  research  analysts  and others  involved  in the
investment  advisory  process.  Exceptions to these and other  provisions of the
Advisor's Code of Ethics may be granted in particular circumstances after review
by appropriate personnel.


Regulatory Matters and Legal Proceedings

On December 21, 2006,  DeAM  settled  proceedings  with the SEC and the New York
Attorney General on behalf of Deutsche Asset Management, Inc. ("DAMI") and DIMA,
the investment advisors to many of the DWS Scudder funds,  regarding allegations
of improper  trading of fund shares at DeAM and at the legacy Scudder and Kemper
organizations prior to their acquisition by DeAM in April 2002. These regulators
alleged that although the prospectuses for certain funds in the regulators' view
indicated  that the funds did not permit market  timing,  DAMI and DIMA breached
their  fiduciary  duty to those  funds in that their  efforts  to limit  trading
activity in the funds were not effective at certain times.  The regulators  also
alleged that DAMI and DIMA  breached  their  fiduciary  duty to certain funds by
entering into certain market timing  arrangements with investors.  These trading
arrangements  originated  in  businesses  that  existed  prior to the  currently
constituted  DeAM  organization,  which  came  together  as a result of  various
mergers of the legacy Scudder,  Kemper and Deutsche fund groups,  and all of the
arrangements were terminated prior to the start of the regulatory investigations
that  began in the summer of 2003.  No  current  DeAM  employee  approved  these
trading arrangements.  Under the terms of the settlements, DAMI and DIMA neither
admitted nor denied any wrongdoing.

The terms of the SEC settlement, which identified improper trading in the legacy
Deutsche and Kemper mutual funds only,  provide for payment of  disgorgement  in
the  amount  of $17.2  million.  The terms of the  settlement  with the New York
Attorney  General  provide for payment of  disgorgement  in the amount of $102.3
million, which is inclusive of the amount payable under the SEC settlement, plus
a civil penalty in the amount of $20 million.  The total amount payable by DeAM,
approximately  $122.3  million,  will  be  distributed  to  shareholders  of the
affected  funds in  accordance  with a  distribution  plan to be  developed by a
distribution  consultant.  The funds'  investment  advisors do not believe these
amounts  will have a material  adverse  financial  impact on them or  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.  The  above-described  amounts are not  material to Deutsche
Bank, and have already been reserved.

Among the terms of the settled orders,  DeAM is subject to certain  undertakings
regarding  the conduct of its business in the future,  including  formation of a
Code of Ethics  Oversight  Committee  to oversee all matters  relating to issues
arising  under  the  advisors'  Code of  Ethics;  establishment  of an  Internal
Compliance Controls Committee having overall compliance oversight responsibility
of the advisors; engagement of an Independent Compliance Consultant to conduct a
comprehensive review of the advisors' supervisory  compliance and other policies
and  procedures  designed to prevent  and detect  breaches  of  fiduciary  duty,
breaches  of the Code of Ethics and federal  securities  law  violations  by the
advisors and their employees; and commencing in 2008, the advisors shall undergo
a compliance review by an independent third party.

In addition,  DeAM is subject to certain  further  undertakings  relating to the
governance  of the mutual funds,  including  that at least 75% of the members of
the  Boards  of  Trustees/Directors  overseeing  the DWS  Funds  continue  to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be  independent  of DeAM;  DeAM  maintain  existing  management  fee
reductions  for  certain  funds  for a period  of five  years  and not  increase
management  fees for these certain funds during this period;  the funds retain a
senior  officer


                                       50
<PAGE>

(or  independent  consultants,  as applicable)  responsible for assisting in the
review  of fee  arrangements  and  monitoring  compliance  by the  funds and the
investment advisors with securities laws,  fiduciary duties, codes of ethics and
other  compliance  policies,  the expense of which  shall be borne by DeAM;  and
periodic account  statements,  fund  prospectuses and the mutual funds' web site
contain   additional   disclosure   and/or   tools  that  assist   investors  in
understanding  the fees and costs associated with an investment in the funds and
the impact of fees and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State regarding
market timing matters. The terms of the Illinois settlement provide for investor
education  contributions  totaling approximately $4 million and a payment in the
amount of $2 million to the Securities Audit and Enforcement Fund.

On  September  28,  2006,  the SEC and the National  Association  of  Securities
Dealers  ("NASD")  (now  known as FINRA)  announced  final  agreements  in which
Deutsche   Investment   Management   Americas  Inc.  ("DIMA"),   Deutsche  Asset
Management, Inc. ("DAMI") and Scudder Distributors,  Inc. ("DWS-SDI") (now known
as DWS Scudder Distributors,  Inc.) settled administrative proceedings regarding
disclosure of brokerage  allocation  practices in  connection  with sales of the
Scudder Funds' (now known as the DWS Scudder Funds) shares during 2001-2003. The
agreements  with the SEC and NASD are  reflected in orders  which  state,  among
other  things,  that DIMA and DAMI failed to  disclose  potential  conflicts  of
interest to the funds' Boards and to  shareholders  relating to DWS-SDI's use of
certain  funds'  brokerage  commissions  to  reduce  revenue  sharing  costs  to
broker-dealer  firms  with whom it had  arrangements  to market  and  distribute
Scudder Fund shares.  These directed  brokerage  practices were  discontinued in
October 2003.

Under the terms of the  settlements,  in which DIMA,  DAMI and  DWS-SDI  neither
admitted  nor denied any of the  regulators'  findings,  DIMA,  DAMI and DWS-SDI
agreed to pay  disgorgement,  prejudgment  interest  and civil  penalties in the
total amount of $19.3 million. The portion of the settlements distributed to the
funds was approximately $17.8 million and was paid to the funds as prescribed by
the settlement  orders based upon the amount of brokerage  commissions from each
fund used to satisfy revenue sharing  agreements  with  broker-dealers  who sold
fund shares.

As part of the  settlements,  DIMA,  DAMI and DWS-SDI  also agreed to  implement
certain measures and undertakings relating to revenue sharing payments including
making  additional  disclosures  in the funds'  Prospectuses  or  Statements  of
Additional  Information,  adopting or modifying relevant policies and procedures
and providing regular reporting to the fund Boards.

Additional  information announced by DeAM regarding the terms of the settlements
is available at www.dws-scudder.com/regulatory_settlements.

The matters alleged in the regulatory  settlements described above also serve as
the general basis of a number of private class action lawsuits involving the DWS
funds. These lawsuits name as defendants various persons,  including certain DWS
funds,  the  funds'  investment  advisors  and  their  affiliates,  and  certain
individuals,  including  in some cases fund  Trustees/Directors,  officers,  and
other parties.  Each DWS fund's  investment  advisor has agreed to indemnify the
applicable  DWS funds in connection  with these  lawsuits,  or other lawsuits or
regulatory actions that may be filed making similar allegations.

Based on currently available information, the funds' investment advisors believe
the likelihood that the pending lawsuits will have a material adverse  financial
impact on a DWS fund is remote and such  actions  are not  likely to  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.



                                       51
<PAGE>


                             FUND SERVICE PROVIDERS

Administrator


Pursuant to an administrative  services agreement (the "Administrative  Services
Agreement") with DIMA, 345 Park Avenue,  New York, New York 10154, DIMA provides
most administrative services to the Fund including,  among others, providing the
Fund with  personnel,  preparing  and making  required  filings on behalf of the
Fund,  maintaining  books and records for the Fund, and monitoring the valuation
of Fund securities.  For all services provided under the Administrative Services
Agreement,  the Fund pays DIMA a fee of 0.10% of the  Fund's  average  daily net
assets. DIMA pays the accounting agency fees out of such Administrative Services
Agreement fee.


Under  the  Administrative  Services  Agreement,  DIMA,  as  administrator,   is
obligated on a continuous basis to provide such  administrative  services as the
Board of the Fund reasonably  deems necessary for the proper  administration  of
the Fund.  DIMA provides the Fund with  personnel;  arranges for the preparation
and filing of the Fund's tax returns;  prepares and submits  reports and meeting
materials to the Board and the  shareholders;  prepares and files updates to the
Fund's  Prospectuses  and Statement of Additional  Information  as well as other
reports required to be filed by the SEC; maintains the Fund's records;  provides
the Fund with office space, equipment and services;  supervises,  negotiates the
contracts of and monitors the performance of third parties contractors; oversees
the  tabulation of proxies;  monitors the valuation of portfolio  securities and
monitors  compliance  with  Board-approved  valuation  procedures;   assists  in
establishing  the  accounting  and tax  policies  of the  Fund;  assists  in the
resolution  of  accounting  issues  that may  arise  with  respect  to the Fund;
establishes  and  monitors the Fund's  operating  expense  budgets;  reviews and
processes the Fund's bills;  assists in determining  the amount of dividends and
distributions  available to be paid by the Fund,  prepares and arranges dividend
notifications  and provides  information to agents to effect  payments  thereof;
provides to the Board periodic and special  reports;  provides  assistance  with
investor and public relations  matters;  and monitors the registration of shares
under  applicable  federal  and state  law.  DAMI  also  performs  certain  fund
accounting   services  under  the   Administrative   Services   Agreement.   The
Administrative  Services  Agreement  provides that DAMI will not be liable under
the Administrative Services


                                       52
<PAGE>

Agreement  except  for  willful  misfeasance,  bad  faith or  negligence  in the
performance of its duties or from the reckless disregard by it of its duties and
obligations thereunder.


For the period ending September 30, 2007, DIMA received $803,530 as compensation
for adminstrative services, of which $107,884 was unpaid.

For the period from July 1, 2006 through  September  30, 2006,  DIMA received an
Administration Fee of $122,624, of which $39,098 is unpaid.



Prior to July 1, 2006,  ICCC received a fee of 0.35% of the Fund's average daily
net  assets  for  serving  as  administrator  of the Fund.  For the years  ended
September 30, 2004,  September  30, 2005 and  September  30, 2006*,  ICCC earned
$7,192,789,  $3,660,465  and  $1,672,070,   respectively,  as  compensation  for
administrative and other services provided to the Fund. During the same periods,
ICCC waived  $6,208,838,  $453,691 and  $680,008,  respectively,  to the Fund to
cover expenses.  For the years ended September 30, 2004,  September 30, 2005 and
September  30,   2006**,   ICCC  earned   $1,319,427,   $661,100  and  $108,420,
respectively, for administrative and other services provided to the Portfolio.

*        For the period October 1, 2005 through June 30, 2006.

**       For the period October 1, 2005 through January 13, 2006.

Pursuant to an  agreement  between the  Administrator  and State Street Bank and
Trust Company ("SSB"),  the Administrator  has delegated certain  administrative
functions  to SSB. The costs and  expenses of such  delegation  are borne by the
Administrator, not by the Fund.

Various third-party service providers (the "Service  Providers"),  some of which
are affiliated with the Advisor,  provide certain  services to the Fund pursuant
to separate agreements with the Fund.

The  fees  paid by the  Fund to DIMA  pursuant  to the  Administrative  Services
Agreement  are  reduced by the amount of any  credits  received  from the Fund's
custodian for cash balances.


Pursuant to DeAM  procedures  approved by the Boards on behalf of the DWS funds,
proof of claim forms are  routinely  filed on behalf of the DWS funds by a third
party service provider,  with certain limited exceptions.  The Boards of the DWS
funds receive periodic reports regarding the implementation of these procedures.



Distributor

DWS-SDI, an affiliate of the Advisor, is the principal distributor for shares of
the Fund. DWS-SDI is a registered broker-dealer.  The principal business address
of DWS-SDI is 222 South Riverside Plaza, Chicago, IL 60606-5808.

Rule 12b-1 Plans

The Fund may enter into  Shareholder  Servicing  Agreements  with respect to its
Class  A  Shares  with  certain  financial  institutions  to act as  Shareholder
Servicing  Agents,  pursuant to which the Distributor will allocate a portion of
its distribution fee as compensation  for such financial  institutions'  ongoing
shareholder  services.  The Fund may enter into Shareholder Servicing Agreements
with  respect  to its  Class A Shares  pursuant  to  which  the  Advisor  or its
affiliates  will provide  compensation  out of their own  resources  for ongoing
shareholder services.  Currently, banking laws and regulations do not prohibit a
financial  holding  company  affiliate from acting as distributor or Shareholder

                                       53
<PAGE>

Servicing Agent or in other capacities for investment  companies.  Should future
legislative,   judicial  or  administrative  action  prohibit  or  restrict  the
activities  of  the  Shareholder   Servicing   Agents  in  connection  with  the
Shareholder Servicing Agreements,  the Trust may be required to alter materially
or discontinue its  arrangements  with the Shareholder  Servicing  Agents.  Such
financial  institutions  may  impose  separate  fees in  connection  with  these
services  and  investors   should  review  the  Prospectuses  and  this  SAI  in
conjunction with any such institution's fee schedule.

Class A Shares are sold subject to a  distribution  plan  adopted in  accordance
with Rule 12b-1 under the 1940 Act (the "Class A Distribution  Plan"). Under the
Class A Distribution  Plan,  Class A Shares will pay a fee to the Distributor in
an amount  computed at an annual  rate of up to 0.25% of the  average  daily net
assets of Class A Shares.

The Fund has adopted a plan of distribution for its Class B shares (the "Class B
Plan"). Under the Class B Plan, the Fund will pay a shareholder servicing fee at
an annual  rate of up to 0.25% of the  average  daily net  assets of its Class B
shares to its Distributor in addition to a distribution fee at an annual rate of
up to  0.75% of such  assets.  Pursuant  to the  Class B Plan,  shareholder  and
administrative  services  are  provided  to the Fund on  behalf  of its  Class B
shareholders under the Fund's Services Agreement with its Distributor.

Shareholders  of Class C of the Fund  have  recently  approved  an  Amended  and
Restated  Rule 12b-1 Plan (the  "Amended  Plan" and,  together  with the Class A
Distribution  Plan and the  Class B Plan,  the  "Distribution  Plans")  for that
class. Under the Amended Plan, the Fund will pay a shareholder  servicing fee at
an annual  rate of up to 0.25% of the  average  daily net  assets of its Class C
shares to its Distributor in addition to a distribution fee at an annual rate of
up to 0.75% of such  assets.  Pursuant  to the  Amended  Plan,  shareholder  and
administrative  services  are  provided  to the Fund on  behalf  of its  Class C
shareholders  under the Fund's Service  Agreement with its Distributor.  Because
12b-1 fees are paid out of Fund  assets on an  ongoing  basis,  they will,  over
time,  increase the cost of an investment  and may cost more than other types of
sales charges.

The Class B Plan and the Amended  Plan for Class C shares  provides  alternative
methods for paying  sales  charges and may help the Fund grow or maintain  asset
levels to provide  operational  efficiencies and economies of scale.  Rule 12b-1
service plans provide  compensation  to the Fund's  Distributor  for  post-sales
servicing.  Since the  Distribution  Agreement  provides  for fees payable as an
expense  of Class B and C shares  that  are used by the  Distributor  to pay for
distribution  and  services  for those  classes,  the  agreement is approved and
reviewed for Class B and C shares in  accordance  with Rule 12b-1 under the 1940
Act, which regulates the manner in which an investment  company may, directly or
indirectly,  bear the  expenses of  distributing  its shares.  The  Distribution
Agreement  may not be  amended to  increase  the fee to be paid by the Fund with
respect to a class  without  approval  by a majority of the  outstanding  voting
securities  of such class of the Fund.  Similarly,  the  Services  Agreement  is
approved  and  reviewed  separately  for the Class A shares,  Class B shares and
Class C shares in accordance with Rule 12b-1.

The  Distributor  uses these fees to finance any activity  which is  principally
intended  to result in the sale of Class A  Shares,  Class B Shares  and Class C
Shares of the Fund.  If an Amended Plan is  terminated  in  accordance  with its
terms,  the  obligation of the Fund to make payments to DWS-SDI  pursuant to the
Amended  Plan will cease and the Fund will not be required to make any  payments
not  previously  accrued  past the  termination  date.  Thus,  there is no legal
obligation for the Fund to pay any expenses  incurred by DWS-SDI other than fees
previously  accrued and  payable  under an Amended  Plan,  if for any reason the
Amended Plan is terminated in accordance  with its terms.  Future fees under the
Amended Plan may or may not be sufficient to reimburse  DWS-SDI for its expenses
incurred.

Prior to the  shareholders  approving the Amended  Plan,  the Fund had adopted a
service  plan for its Class C  shares,  under  which  the Fund  paid  Investment
Company Capital Corp. ("ICCC") service fees at an aggregate annual rate of up to
0.25% of the class's  average daily net assets.  ICCC provided  information  and
administrative  services to the Fund.  ICCC in turn had various  agreements with
financial services firms to provide personal services and/or account maintenance
services  to their  customers  and paid  these  fees  based  upon the  assets of
shareholder  accounts the firms  serviced.  For the fiscal years ended September
30, 2006, September 30, 2005 and September 30, 2004, the Fund incurred $286,411,
$420,410  and  $625,026,  respectively,  of  which  $286,411,  $420,410  and $0,
respectively, was waived, in shareholder servicing fees for Class C shares.


                                       54
<PAGE>




Expenses of the Fund paid in connection with the Rule 12b-1 Plans for each class
of  shares  are set  forth  below.  A  portion  of the  marketing  and sales and
operating expenses shown below could be considered overhead expenses.
<TABLE>
<CAPTION>


                        12b-1 Compensation to Underwriter for the                      Other Expenses Paid by Underwriter for the
                          Fiscal Year Ending September 30, 2007                           Fiscal Year Ending September 30, 2007
                          -------------------------------------                           -------------------------------------
                                      12b-1                            Advertising,
                       12b-1       Shareholder          12b-1      Sales, Literature              Marketing   Postage
                    Distribution  Administrative     Compensation   and Promotional   Prospectus   and Sales     and        Imputed
                        Fees       Services Fees    Paid to Firms      Materials       Printing    Expenses     Mailing     Interest
                        ----       -------------    -------------      ---------       --------    --------     -------     --------

<S>                         <C>    <C>               <C>                  <C>          <C>         <C>         <C>               <C>
DWS Short  Class A          $0     $325,761          $468,262             $581,466     $73,191     $117,531    $46,988           $0
Duration
Plus Fund
           Class B     $65,568       $9,515            $2,774               $2,665        $233         $596       $149      $57,723
           Class C    $827,685     $296,050        $1,563,093             $100,633     $12,607      $20,484     $8,072           $0
           Class S          $0           $0                $0                   $0          $0           $0         $0           $0
</TABLE>





                                       55
<PAGE>


                                       56
<PAGE>


DWS-SDI no longer  advances the first year  distribution  fee and service fee to
firms for sales of Class C shares to  employer-sponsored  employee benefit plans
using the OmniPlus  subaccount record keeping system made available through ADP,
Inc. under an alliance with DWS-SDI and its affiliates.


The table below sets forth,  for the fiscal year ended  September 30, 2006,  the
distribution and shareholder servicing fees paid by the Fund:

<TABLE>
<CAPTION>

                       Distribution Fee        Amount Waived     Shareholder Servicing Fee     Amount Waived
                       ----------------        -------------     -------------------------     -------------

<S>                           <C>                     <C>                  <C>                      <C>
Class A                     $241,808                $225,120                N/A                     N/A
Class C                     $884,793                $143,884              $286,411                $286,411
</TABLE>

During the fiscal  year ended  September  30,  2006,  the  Distributor  received
commissions  on the sale of the Fund's  Class A shares and  contingent  deferred
sales charges on the Fund's Class A and Class C shares as follows:

Class A Commissions                                     $10,618
Class A Contingent Deferred Sales Charge                $3,391
Class C Contingent Deferred Sales Charge                $10,163

The table below sets forth,  for the fiscal year ended  September 30, 2007,  the
distribution and shareholder servicing fees paid by the Fund:

<TABLE>
<CAPTION>

                       Distribution Fee        Amount Waived     Shareholder Servicing Fee     Amount Waived
                       ----------------        -------------     -------------------------     -------------
<S>                           <C>                     <C>                  <C>                      <C>

Class A                          N/A                     N/A              $382,555                  N/A
Class B                       24,790                  $4,300               $8,263                   $290
Class C                     $786,484                 $78,319              $260,688                $34,631
</TABLE>

During the fiscal  year ended  September  30,  2007,  the  Distributor  received
commissions  on the sale of the Fund's  Class A shares and  contingent  deferred
sales charges on the Fund's Class A, Class B and Class C shares as follows:

Class A Commissions                                     $319
Class A Contingent Deferred Sales Charge                $49,756
Class B Contingent Deferred Sales Charge                $9,228
Class C Contingent Deferred Sales Charge                $3,763


Custodian

The Fund  employs  SSB,  225 Franklin  Street,  Boston,  Massachusetts  02110 as
custodian.  SSB has entered into agreements with foreign subcustodians  approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank AG, an affiliate of the Advisor,  as subcustodian  ("DB  Subcustodian")  in
certain countries.  To the extent the Fund holds any securities in the countries
in which SSB uses DB Subcustodian as a  subcustodian,  those  securities will be
held by DB  Subcustodian  as part of a larger omnibus account in the name of SSB
(the "Omnibus  Account").  For its  services,  DB  Subcustodian  receives (1) an
annual fee based on a percentage  of the average daily net assets of the Omnibus
Account and (2)  transaction  charges  with respect to  transactions  that occur
within the Omnibus Account.

                                       57
<PAGE>

Transfer Agent

DWS-SISC serves as the Fund's  Transfer Agent.  DWS-SISC is located at 222 South
Riverside  Plaza,  Chicago,  IL 60606-5808.  Under its transfer agency agreement
with the Trust, DWS-SISC maintains the shareholder account records for the Fund,
handles certain  communications between shareholders and the Trust and causes to
be distributed any dividends and  distributions  payable by the Trust.  DWS-SISC
may be reimbursed by the Fund for its out-of-pocket expenses.


The Transfer  Agent receives an annual service fee for each account of the Fund,
based on the type of account.  For open retail  accounts,  the fee is a flat fee
ranging from $20.00 to $27.50 per account,  for open  wholesale  money funds the
fee is $32.50 per account, while for certain retirement accounts serviced on the
recordkeeping system of ADP, Inc., the fee is a flat fee up to $3.46 per account
(as of October  2006,  indexed to  inflation)  plus an asset  based fee of up to
0.25% of  average  net  assets.  1/12th of the  annual  service  charge for each
account is  charged  and  payable to the  Transfer  Agent each  month.  A fee is
charged for any account  which at any time during the month had a share  balance
in the  Fund.  Smaller  fees are also  charged  for  closed  accounts  for which
information  must be retained on the Transfer Agent's system for up to 18 months
after closing for tax reporting purposes.

Certain  out-of-pocket  expenses  incurred  by  the  Transfer  Agent,  including
expenses of printing and mailing  routine fund  disclosure  documents,  costs of
record retention and transaction  processing costs are reimbursed by the Fund or
are paid  directly  by the  Fund.  Certain  additional  out-of-pocket  expenses,
including costs of computer  hardware and software,  third party  record-keeping
and processing of proxy statements,  may only be reimbursed by the Fund with the
prior approval of the Fund's Board.

Effective  April 1, 2007,  DWS-SISC is the Transfer Agent for all classes of all
DWS funds.


Pursuant to a sub-transfer  agency  agreement  between DWS-SISC and DST Systems,
Inc. ("DST"),  DWS-SISC has delegated certain transfer agent and dividend paying
agent  functions to DST. The costs and expenses of such  delegation  are born by
DWS-SISC, not by the Fund.

Service Agent

Prior  to  July  1,  2006,  ICCC  acted  as a  Service  Agent  pursuant  to  its
Administration  Agreement with the Trust and received no additional compensation
from the Fund for such shareholder services. ICCC from its fees paid the service
fees  of any  other  Service  Agents,  including  broker-dealers.  The  services
provided  by a Service  Agent may have  included  establishing  and  maintaining
shareholder accounts, processing purchase and redemption transactions, arranging
for  bank  wires,  performing  shareholder   sub-accounting,   answering  client
inquiries  regarding the Trust,  assisting clients in changing dividend options,
account  designations and addresses,  providing periodic  statements showing the
client's account  balance,  transmitting  proxy  statements,  periodic  reports,
updated  prospectuses and other communications to shareholders and, with respect
to meetings of shareholders,  collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other  information and performing such other
services as the administrator or the Service Agent's clients may reasonably have
requested  and  agreed  upon with the  Service  Agent.  Service  Agents may have
separately  charged their  clients  additional  fees only to cover  provision of
additional  or more  comprehensive  services  not  already  provided  under  the
Administration  Agreement  with  ICCC,  or of the  type or scope  not  generally
offered  by a  mutual  fund,  such  as  cash  management  services  or  enhanced
retirement or trust  reporting.  In addition,  investors may have been charged a
transaction  fee if they effected  transactions in Fund shares through a Service
Agent. Each Service Agent had agreed to transmit to shareholders, which were its
customers, appropriate disclosures of any fees that it charged them directly.

Legal Counsel

Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019-6099,
serves as counsel to the Trust.

                                       58
<PAGE>

Ropes & Gray LLP, One International  Place,  Boston,  Massachusetts  02110-2624,
serves as counsel to the Independent Trustees of the Trust.

Independent Registered Public Accounting Firm


PricewaterhouseCoopers   LLP,  125  High  Street,  Boston,  MA  02110,  acts  as
Independent  Registered  Public  Accounting Firm of the Fund for the fiscal year
ended September 30, 2007.


                             PORTFOLIO TRANSACTIONS


The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio securities, including the allocation of brokerage.

The  policy of the  Advisor  in  placing  orders  for the  purchase  and sale of
securities  for the Funds is to seek best  execution,  taking into  account such
factors,   among  others,   as  price;   commission  (where   applicable);   the
broker-dealer's   ability  to  ensure  that  securities  will  be  delivered  on
settlement date; the willingness of the  broker-dealer to commit its capital and
purchase  a  thinly  traded   security  for  its  own  inventory;   whether  the
broker-dealer   specializes  in  block  orders  or  large  program  trades;  the
broker-dealer's  knowledge of the market and the security;  the  broker-dealer's
ability to  maintain  confidentiality;  the  broker-dealer's  ability to provide
access to new  issues;  the  broker-dealer's  ability  to provide  support  when
placing a difficult trade;  the financial  condition of the  broker-dealer;  and
whether the broker-dealer has the infrastructure and operational capabilities to
execute  and  settle  the trade.  The  Advisor  seeks to  evaluate  the  overall
reasonableness of brokerage  commissions with commissions  charged on comparable
transactions  and compares the brokerage  commissions (if any) paid by the Funds
to reported commissions paid by others. The Advisor routinely reviews commission
rates,  execution  and  settlement  services  performed  and makes  internal and
external comparisons.

Commission  rates  on  transactions  in  equity  securities  on U.S.  securities
exchanges are subject to negotiation. Commission rates on transactions in equity
securities on foreign  securities  exchanges are generally fixed.  Purchases and
sales of  fixed-income  securities and certain  over-the-counter  securities are
effected  on  a  net  basis,  without  the  payment  of  brokerage  commissions.
Transactions  in  fixed  income  and  certain  over-the-counter  securities  are
generally  placed by the  Advisor  with the  principal  market  makers for these
securities  unless the Advisor  reasonably  believes more favorable  results are
available elsewhere.  Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices.  Purchases of  underwritten  issues
will  include  an  underwriting  fee  paid  to  the  underwriter.  Money  market
instruments are normally purchased in principal  transactions  directly from the
issuer or from an underwriter or market maker.

It is  likely  that the  broker-dealers  selected  based  on the  considerations
described in this section will include  firms that also sell shares of the Funds
to their  customers.  However,  the Advisor does not consider sales of shares of
the Funds as a factor in the selection of  broker-dealers  to execute  portfolio
transactions  for the Funds  and,  accordingly,  has  implemented  policies  and
procedures  reasonably designed to prevent its traders from considering sales of
shares of the Funds as a factor in the  selection of  broker-dealers  to execute
portfolio transactions for the Funds.

The Advisor is  permitted  by Section  28(e) of the  Securities  Exchange Act of
1934, as amended ("1934 Act"), when placing  portfolio  transactions for a Fund,
to cause the Fund to pay brokerage  commissions  in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage  services if the Advisor determines that such commissions
are  reasonable in relation to the overall  services  provided.  The Advisor may
from  time to time,  in  reliance  on  Section  28(e) of the 1934  Act,  execute
portfolio  transactions with  broker-dealers that provide research and brokerage
services to the Advisor.  Consistent  with the Advisor's  policy  regarding best
execution,  where more than one broker is  believed  to be capable of  providing
best execution for a particular  trade, the Advisor may take into  consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute  the trade.  Although  certain  research  and  brokerage  services  from
broker-dealers may be useful to a Fund and to the Advisor,  it is the opinion of
the Advisor that such information only supplements its own


                                       59
<PAGE>

research  effort  since the  information  must still be  analyzed,  weighed  and
reviewed by the  Advisor's  staff.  To the extent that  research  and  brokerage
services of value are  received by the Advisor,  the Advisor may avoid  expenses
that it might otherwise incur.  Research and brokerage  services received from a
broker-dealer  may be useful to the  Advisor  and its  affiliates  in  providing
investment  management services to all or some of its clients,  which includes a
Fund.   Services   received  from   broker-dealers   that  executed   securities
transactions  for a  Portfolio  will  not  necessarily  be used  by the  Advisor
specifically to service such Fund.

Research and brokerage services provided by broker-dealers may include,  but are
not limited to,  information on the economy,  industries,  groups of securities,
individual   companies,   statistical   information,   accounting  and  tax  law
interpretations,  political developments, legal developments affecting portfolio
securities,  technical  market action,  pricing and appraisal  services,  credit
analysis,  risk measurement  analysis,  performance analysis and measurement and
analysis of corporate responsibility issues. Research and brokerage services are
typically  received  in the form of written  or  electronic  reports,  access to
specialized  financial  publications,  telephone  contacts and personal meetings
with  security  analysts,  but may also be  provided  in the form of  access  to
various  computer  software and meetings  arranged  with  corporate and industry
representatives.

The Advisor may also select  broker-dealers  and obtain from them  research  and
brokerage  services that are used in connection  with executing  trades provided
that such services are consistent  with  interpretations  under Section 28(e) of
the 1934 Act.  Typically,  these  services  take the form of  computer  software
and/or  electronic  communication  services  used by the  Advisor to  facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations  thereunder.

The Advisor may use brokerage  commissions to obtain certain brokerage  products
or services that have a mixed use (i.e., it also serves a function that does not
relate to the investment  decision-making process). In those circumstances,  the
Advisor  will make a good faith  judgment to evaluate  the various  benefits and
uses to which it  intends to put the mixed use  product or service  and will pay
for that portion of the mixed use product or service that it reasonably believes
does not constitute research and brokerage services with its own resources.

DIMA will  monitor  regulatory  developments  and market  practice in the use of
client  commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment  decisions for each Fund and for other investment accounts managed by
the  Advisor  are  made  independently  of each  other  in  light  of  differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases,  simultaneous  transactions are inevitable. To the
extent  permitted by law, the Advisor may aggregate the securities to be sold or
purchased  for a Fund with those to be sold or purchased  for other  accounts in
executing  transactions.  Purchases  or sales are then  averaged as to price and
commission  and  allocated  as to amount in a manner  deemed  equitable  to each
account.  While in some cases this practice  could have a detrimental  effect on
the price  paid or  received  by,  or on the size of the  position  obtained  or
disposed of for,  the Fund,  in other  cases it is believed  that the ability to
engage in volume transactions will be beneficial to the Fund.

DIMA and its affiliates and the Funds' management team manage other mutual funds
and separate accounts,  some of which use short sales of securities as a part of
its  investment  strategy.  The  simultaneous   management  of  long  and  short
portfolios creates potential conflicts of interest including the risk that short
sale activity could adversely affect the market value of the long positions (and
vice  versa),  the  risk  arising  from  sequential  orders  in long  and  short
positions,  and the risks associated with receiving  opposing orders at the same
time.

                                       60
<PAGE>

DIMA has adopted procedures that it believes are reasonably designed to mitigate
these  potential  conflicts  of interest.  Incorporated  in the  procedures  are
specific  guidelines  developed to ensure fair and  equitable  treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory  reviews,  as well as compliance  oversight to ensure
that  potential  conflicts  of interest  relating  to this type of activity  are
properly addressed.

Deutsche Bank AG or one of its  affiliates may act as a broker for the Funds and
receive brokerage commissions or other transaction-related compensation from the
Funds in the purchase and sale of securities, options or futures contracts when,
in the judgment of the Advisor,  and in accordance with  procedures  approved by
the Funds'  Boards,  the  affiliated  broker  will be able to obtain a price and
execution at least as favorable as those obtained from other  qualified  brokers
and if, in the  transaction,  the  affiliated  broker  charges  the Funds a rate
consistent  with that charged to  comparable  unaffiliated  customers in similar
transactions.



                                       61
<PAGE>


                                       62
<PAGE>



For the fiscal year ended September 30, 2007, the Fund and/or the Portfolio paid
brokerage commissions in the amount of $106,407.

For the fiscal  years ended  September  30, 2006 and  September  30,  2005,  the
Portfolio  paid  brokerage   commissions  in  the  amount  of  $91,836  and  $0,
respectively.

Securities  of Regular  Broker-Dealers.  The Fund is required  to  identify  any
securities  of its "regular  brokers or dealers" (as such term is defined in the
1940 Act) that the Fund has acquired  during the most recent  fiscal year. As of
September  30,  2007,  the Fund held the  following  securities  of its  regular
brokers or dealers:

<TABLE>
<CAPTION>

Name of Regular Broker or Dealer or Parent (Issuer)          Value of Securities Owned as of September 30, 2007
---------------------------------------------------          --------------------------------------------------

<S>                                                                                  <C>
Eaton Vance Corp.                                                                    $12,663,000
Affiliated Managers Group, Inc.                                                      $57,188,000
T. Rowe Price Group, Inc. $28,937,000
FCStone Group Inc.                                                                    $4,173,000
Bank of New York                                                                      $3,495,000
Bank One Corp.                                                                        $3,016,000
Bear Stearns & Co., Inc.                                                             $23,940,000
Wachovia Bank  NA                                                                    $25,219,000
E*Trade Financial Corp.                                                             $194,000,000
JP Morgan Chase & Co.                                                                $53,530,000
DLJ Commercial Mortgage Corp.                                                         $5,074,000
</TABLE>



Portfolio Turnover

Portfolio  turnover  rate is  defined  by the SEC as the ratio of the  lesser of
sales or purchases to the monthly average value of such securities  owned during
the year,  excluding all securities  whose  remaining  maturities at the time of
acquisition were one year or less.

Higher levels of activity by the Fund result in higher transaction costs and may
also  result  in  taxes on  realized  capital  gains  to be borne by the  Fund's
shareholders.  Purchases and sales are made whenever necessary, in the Advisor's
discretion, to meet the Fund's objective.


Portfolio  turnover rate measures the frequency that the Fund sells and replaces
the value of its securities  within a given period.  A 100% annual turnover rate
would occur,  for example,  if all portfolio  securities  (excluding  short-term
obligations)  were  replaced  once in a  period  of one  year,  or if 10% of the
portfolio  securities were replaced ten times in one year. The rate of portfolio
turnover of the Fund may exceed that of certain other mutual funds with the same
investment objectives.  High turnover can increase the Fund's transaction costs,
thereby lowering its returns.  For the fiscal years ended September 30, 2006 and
September 30, 2007, the Fund and/or the Portfolio's turnover rates were 129% and
57%, respectively.


                                       63
<PAGE>

                        PURCHASE AND REDEMPTION OF SHARES

General Information

Policies and procedures affecting  transactions in Fund shares can be changed at
any  time  without  notice,  subject  to  applicable  law.  Transactions  may be
contingent  upon proper  completion of application  forms and other documents by
shareholders  and their  receipt by the  Fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the Fund and its  agents  may  occur.  Shareholders  (or  their
financial  service firms) are responsible for all losses and fees resulting from
bad checks,  cancelled orders or the failure to consummate transactions effected
pursuant to instructions reasonably believed to be genuine.

A  distribution  will be  reinvested in shares of the same Fund and class if the
distribution check is returned as undeliverable.

Orders  will be  confirmed  at a price  based on the net asset value of the Fund
(including any applicable  sales charge) next  determined  after receipt in good
order by DWS Scudder Distributors Inc., the Fund's distributor ("DWS-SDI" or the
"Distributor") of the order  accompanied by payment.  Orders received by dealers
or other financial  services firms prior to the determination of net asset value
and received in good order by DWS-SDI  prior to the  determination  of net asset
value will be confirmed at a price based on the net asset value next  determined
after receipt by DWS- SDI ("trade date").

Certificates. Share certificates will not be issued. Share certificates now in a
shareholder's  possession may be sent to the transfer agent for cancellation and
book-entry  credit to such  shareholder's  account.  Certain telephone and other
procedures   require   book-entry   holdings.   Shareholders   with  outstanding
certificates bear the risk of loss.

Use of Financial  Services  Firms.  Investment  dealers and other firms  provide
varying arrangements for their clients to purchase and redeem the Fund's shares,
including higher minimum investments,  and may assess transaction or other fees.
Firms may arrange  with their  clients for other  investment  or  administrative
services.  Such firms may independently  establish and charge additional amounts
to their  clients for such  services.  Firms also may hold the Fund's  shares in
nominee or street  name as agent for and on behalf of their  customers.  In such
instances,  the Fund's transfer agent, DWS Scudder  Investments  Service Company
(the "Transfer  Agent" or "DWS-SISC"),  will have no information with respect to
or control over the accounts of specific  shareholders.  Such  shareholders  may
obtain access to their accounts and  information  about their accounts only from
their  firm.  Certain  of these  firms may  receive  compensation  from the Fund
through the  Shareholder  Service Agent for  record-keeping  and other  expenses
relating to these nominee accounts. In addition, certain privileges with respect
to the purchase and  redemption of shares or the  reinvestment  of dividends may
not be available  through such firms.  Some firms may  participate  in a program
allowing  them  access to their  clients'  accounts  for  servicing,  including,
without  limitation,  transfers of registration and dividend payee changes,  and
may  perform  functions  such  as  generation  of  confirmation  statements  and
disbursement of cash dividends. Such firms, including affiliates of DWS-SDI, may
receive  compensation  from the Fund through the  Shareholder  Service Agent for
these services.


The Fund has authorized one or more financial  service  institutions,  including
certain members of FINRA other than the Distributor ("financial  institutions"),
to accept purchase and redemption  orders for the Fund's shares.  Such financial
institutions  may also  designate  other parties,  including plan  administrator
intermediaries,  to accept purchase and redemption  orders on the Fund's behalf.
Orders for purchases or redemptions  will be deemed to have been received by the
Fund when  such  financial  institutions  or, if  applicable,  their  authorized
designees  accept the orders.  Subject to the terms of the contract  between the
Fund and the  financial  institution,  ordinarily  orders  will be priced at the
Fund's  net  asset  value  next  computed  after  acceptance  by such  financial
institution or its authorized  designees and accepted by the Fund.  Further,  if
purchases or  redemptions  of the Fund's  shares are arranged and  settlement is
made  at  an  investor's   election  through  any  other  authorized   financial
institution, that financial institution may, at its discretion, charge a fee for
that  service.  The  Board of  Trustees  and the  Distributor,  also the  Fund's
principal  underwriter,  each has the right to limit the amount of purchases by,
and to refuse to sell to, any  person.  The  Trustees  and the  Distributor  may
suspend  or  terminate  the  offering  of shares of the Fund at any time for any
reason.

                                       64
<PAGE>

DWS-SDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents  ("DWS Scudder  Wholesalers").  Generally,  DWS Scudder
Wholesalers  market shares of the DWS funds to financial  advisors,  who in turn
may  recommend  that  investors  purchase  shares of a DWS fund.  The Plan is an
incentive program that combines a monthly  incentive  component with a quarterly
strategic bonus component.  Under the Plan, DWS Scudder Wholesalers will receive
a monetary  monthly  incentive based on the amount of sales generated from their
marketing of the funds,  and that incentive will differ depending on the product
category  of  the  fund.   Each  fund  is  assigned  to  one  of  four   product
categories--"Core,"    "Strategic,"   "Satellite"   or   "Non-CSS"-taking   into
consideration, among other things, the following criteria, where applicable:

o        The Fund's 3-year performance;
o        The Fund's Morningstar rating;
o        Market size for the fund category;
o        The Fund's size, including sales and redemptions of the Fund's shares;
o        The length of time the Fund's Portfolio Managers have managed the Fund;
         and
o        The Fund's consistency with DWS Scudder's branding.

This  information  and other factors are  presented to a committee  comprised of
representatives  from  various  groups  within  DWS  Scudder,  who  review  on a
quarterly basis the funds assigned to each product category described above, and
make any  changes to those  assignments  at that time.  No one  factor,  whether
positive or negative,  determines a fund's  placement in a given  category;  all
these factors together are considered, and the designation of funds in the Core,
Strategic and Satellite categories represents management's judgment based on the
above criteria.  In addition,  management may consider a fund's profile over the
course  of  several  review  periods  before  making  a change  to its  category
assignment.  These  category  assignments  will be posted  quarterly  to the DWS
funds' Web site at www.dws-scudder.com, approximately one month after the end of
each quarter.  DWS Scudder Wholesalers will receive the highest compensation for
Core and Strategic  funds,  less for Satellite  funds and the lowest for Non-CSS
funds.   The  level  of   compensation   among  these   categories   may  differ
significantly.

In the normal course of business,  DWS Scudder will from time to time  introduce
new funds into the DWS family of funds. As a general rule, all new funds will be
placed in the  Strategic  compensation  category  for a  minimum  period of four
consecutive quarters, and DWS Scudder Wholesalers will be paid at a rate that is
equivalent to that of the Core Fund  category.  After that four quarter  period,
each new fund in the  Strategic  category  will be reviewed by the committee and
either  assigned to one of the four  categories or continued as a Strategic fund
at that time.

The prospect of receiving,  or the receipt of, additional  compensation by a DWS
Scudder  Wholesaler  under the Plan may provide an incentive to favor  marketing
the Core,  Strategic  or  Satellite  funds  over the  Non-CSS  funds.  The Plan,
however,  will not change  the price that you pay for shares of a fund.  The DWS
Scudder  Compliance  Department  monitors DWS Scudder Wholesaler sales and other
activity  in an  effort  to  detect  unusual  activity  in  the  context  of the
compensation  structure under the Plan. However,  investors may wish to take the
Plan  and the  product  category  of the  fund  into  account  when  considering
purchasing a fund or evaluating any recommendations relating to fund shares.



                                       65
<PAGE>


Telephone  and  Electronic  Transaction  Procedures.  Shareholders  have various
telephone, Internet, wire and other electronic privileges available. The Fund or
its  agents may be liable  for any  losses,  expenses  or costs  arising  out of
fraudulent or unauthorized  instructions pursuant to these privileges unless the
Fund or its  agents  reasonably  believe,  based  upon  reasonable  verification
procedures, that the instructions were genuine.  Verification procedures include
recording instructions,  requiring certain identifying information before acting
upon instructions and sending written  confirmations.  During periods when it is
difficult to contact the  Shareholder  Service Agent, it may be difficult to use
telephone, wire and other privileges.


QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via
the Automated  Clearing House System (minimum $50 and maximum  $250,000) from or
to a shareholder's bank, savings and loan, or credit union account in connection
with the purchase or  redemption  of Fund shares.  Shares  purchased by check or
through  QuickBuy and QuickSell or Direct Deposit may not be redeemed under this
privilege  until  such  Shares  have been owned for at least 10  calendar  days.
QuickBuy and  QuickSell  cannot be used with  passbook  savings  accounts or for
certain tax-deferred plans.


Share  Pricing.  Purchases  will be filled at the net asset value per share next
computed  after  receipt  of the  application  in good  order.  Net asset  value
normally  will be computed for each class as of the close of regular  trading on
the Exchange on each day during  which the Exchange is open for trading.  Orders
received after the close of regular  trading on the Exchange will be executed at
the next  business  day's net  asset  value.  If the order has been  placed by a
member of FINRA,  other than the Distributor,  it is the  responsibility  of the
member  broker,  rather than the Fund, to forward the purchase order to DWS-SISC
in Kansas City by the close of regular trading on the Exchange.

Dividend  Payment  Option.   Investors  may  have  dividends  and  distributions
automatically   deposited  to  their  predesignated  bank  account  through  DWS
Scudder's Dividend Payment Option request form. Shareholders whose predesignated
checking  account of record is with a member bank of  Automated  Clearing  House
Network  (ACH) can have  income and  capital  gain  distributions  automatically
deposited to their  personal  bank account  usually  within


                                       66
<PAGE>

three  business  days after a Fund pays its  distribution.  A  Dividend  Payment
Option   request   form  can  be  obtained   by   visiting   our  Web  site  at:
www.dws-scudder.com or calling (800) 621-1048.  Confirmation  Statements will be
mailed to shareholders as notification that distributions have been deposited.



Tax-Sheltered   Retirement   Plans.  The  Shareholder   Service  Agent  provides
retirement  plan  services  and  documents  and DWS-SDI can  establish  investor
accounts in any of the following types of retirement plans:

o        Traditional,  Roth and Education IRAs. This includes Savings  Incentive
         Match Plan for  Employees  of Small  Employers  ("SIMPLE"),  Simplified
         Employee Pension Plan ("SEP") IRA accounts and prototype documents.

o        403(b)(7)  Custodial  Accounts.  This  type  of plan  is  available  to
         employees of most non-profit organizations.

o        Prototype  money  purchase  pension  and  profit-sharing  plans  may be
         adopted by employers.

Brochures  describing these plans as well as model defined benefit plans, target
benefit plans,  457 plans,  401(k) plans,  simple 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
Additional fees and transaction policies and procedures may apply to such plans.
Investors  should  consult with their own tax  advisors  before  establishing  a
retirement plan.

Purchases

The Fund  reserves the right to withdraw all or any part of the offering made by
the prospectuses  and to reject purchase orders for any reason.  Also, from time
to time,  the Fund may  temporarily  suspend  the  offering  of any class of its
shares to new investors.  During the period of such suspension,  persons who are
already  shareholders  of such class of the Fund may be permitted to continue to
purchase additional shares of such class and to have dividends reinvested.

To help the  government  fight the  funding of  terrorism  and money  laundering
activities,  federal law requires all financial  institutions to obtain,  verify
and record  information  that identifies  each person who opens an account.  For
more   information,   please  see  "Policies  You  Should  Know  About"  in  the
Prospectuses.

Financial Services Firms' Compensation. Banks and other financial services firms
may provide  administrative  services  related to order placement and payment to
facilitate transactions in shares of the Fund for their clients, and DWS-SDI may
pay  them a  transaction  fee up to the  level  of the  discount  or  commission
allowable or payable to dealers.


DWS-SDI may,  from time to time,  pay or allow to firms a 1%  commission  on the
amount  of  shares of the Fund sold  under  the  following  conditions:  (i) the
purchased  shares are held in a DWS  Scudder  IRA  account,  (ii) the shares are
purchased as a direct "roll over" of a distribution from a qualified  retirement
plan account  maintained on the subaccount  record keeping system maintained for
DWS-branded  plans  by  ADP,  Inc.  under  an  alliance  with  DWS-SDI  and  its
affiliates, (iii) the registered representative placing the trade is a member of
Executive Council, a group of persons designated by DWS-SDI in acknowledgment of
their dedication to the employee benefit plan area; and (iv) the purchase is not
otherwise subject to a commission.


In  addition  to  the  discounts  or  commissions  described  herein  and in the
Prospectuses,  DWS-SDI,  the  Advisor,  or  its  affiliates  may  pay  or  allow
additional  discounts,  commissions  or promotional  incentives,  in the form of
cash, to


                                       67
<PAGE>

firms that sell  shares of the Fund.  In some  instances,  such  amounts  may be
offered only to certain firms that sell or are expected to sell during specified
time  periods  certain  minimum  amounts of shares of the Fund,  or other  funds
underwritten by DWS-SDI.

Upon  notice to all  dealers,  DWS-SDI  may  re-allow  to dealers up to the full
applicable Class A sales charge during periods and for transactions specified in
such notice and such re-allowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is re-allowed,  such
dealers  may be deemed to be  underwriters  as that term is  defined in the 1933
Act.

DWS-SDI may at its discretion  compensate  investment dealers or other financial
services  firms in  connection  with  the sale of Class A shares  of the Fund in
accordance  with the Large  Order NAV  Purchase  Privilege  and one of the three
compensation schedules up to the following amounts:


        Compensation Schedule #1:          Compensation Schedule #2: DWS Scudder
        --------------------------         -------------------------------------
Retail Sales and DWS Scudder Flex Plan(1)             Retirement Plans(2)
--------------------------------------                ------------------
                     As a Percentage                                As a
  Amount of               of Net            Amount of         Percentage of Net
 Shares Sold           Asset Value         Shares Sold           Asset Value
 -----------           -----------         -----------           -----------


$250,000 to $50 million     0.50%        Over $3 million          0.00% -- 0.50%


Over $50 million            0.25%                 --                     --

      Compensation Schedule #3: DWS Scudder Choice Plan(3)
      -------------------------------------------------
            Amount of                 As a Percentage of Net
           Shares Sold                      Asset Value

All amounts                                    0.85%

(1)      For purposes of determining the appropriate commission percentage to be
         applied to a particular sale under the foregoing schedule, DWS-SDI will
         consider the  cumulative  amount  invested by the purchaser in the Fund
         and other DWS  Funds  including  purchases  pursuant  to the  "Combined
         Purchases,"  "Letter  of Intent"  and  "Cumulative  Discount"  features
         referred to below.

(2)      Compensation  Schedule 2 applies to employer sponsored employee benefit
         plans  using  the  OmniPlus   subaccount  record  keeping  system  made
         available  through  ADP,  Inc.  under an alliance  with DWS-SDI and its
         affiliates.

(3)      DWS-SDI compensates UBS Financial 0.50%.

DWS-SDI  compensates  firms for sales of Class B shares at the time of sale at a
commission  rate of up to 3.75%  of the  amount  of  Class B  shares  purchased.
DWS-SDI is  compensated  by the Fund for services as  distributor  and principal
underwriter for Class B shares.  Except as provided below,  for sales of Class C
shares,  DWS-SDI advances to firms the first year  distribution fee at a rate of
0.75% of the  purchase  price of such shares,  and, for periods  after the first
year,  DWS-SDI  currently  pays firms for sales of Class C shares a distribution
fee, payable quarterly, at an annual rate of 0.75% of net assets attributable to
Class C shares  maintained and serviced by the firm. For sales of Class C shares
to employer  sponsored  employee  benefit  plans using the  OmniPlus  subaccount
record keeping  system made  available  through ADP, Inc. under an alliance with
DWS-SDI and its affiliates, DWS-SDI does not advance the first year distribution
fee and for  periods  after the date of sale,  DWS-SDI  currently  pays  firms a
distribution  fee,  payable  quarterly,  at an annual rate of 0.75% based on net
assets as of the last business day of the month  attributable  to Class C shares
maintained  and  serviced by the firm.  DWS-SDI is  compensated  by the Fund for
services as distributor and principal underwriter for Class C shares.

                                       68
<PAGE>


Revenue Sharing

In light of recent  regulatory  developments,  the Advisor,  the Distributor and
their affiliates have undertaken to furnish certain additional information below
regarding  the  level  of  payments  made  by them to  selected  affiliated  and
unaffiliated  brokers,  dealers,  participating  insurance  companies  or  other
financial  intermediaries  ("financial  advisors") in  connection  with the sale
and/or  distribution  of  Fund  shares  or the  retention  and/or  servicing  of
investors and Fund shares ("revenue sharing").

The  Advisor,  the  Distributor  and/or  their  affiliates  may  pay  additional
compensation,  out of their own  assets and not as an  additional  charge to the
Fund, to financial  advisors in connection with the sale and/or  distribution of
Fund shares or the retention and/or servicing of Fund investors and Fund shares.
Such revenue  sharing  payments are in addition to any  distribution  or service
fees  payable  under any Rule  12b-1 or  service  plan of any fund,  any  record
keeping/sub-transfer  agency/networking  fees  payable  by the  Fund  (generally
through the  Distributor  or an  affiliate)  and/or the  Distributor  to certain
financial   advisors  for  performing  such  services  and  any  sales  charges,
commissions,   non-cash  compensation  arrangements  expressly  permitted  under
applicable  rules of FINRA or other  concessions  described  in the fee table or
elsewhere in the  Prospectuses or the SAI as payable to all financial  advisors.
For example, the Advisor, the Distributor and/or their affiliates may compensate
financial  advisors  for  providing  the Fund with "shelf  space" or access to a
third  party  platform  or fund  offering  list,  or  other  marketing  programs
including, without limitation, inclusion of the Fund on preferred or recommended
sales  lists,  mutual  fund  "supermarket"  platforms  and  other  formal  sales
programs;  granting the  Distributor  access to the  financial  advisor's  sales
force;  granting the Distributor access to the financial  advisor's  conferences
and meetings;  assistance  in training and  educating  the  financial  advisor's
personnel; and, obtaining other forms of marketing support. The level of revenue
sharing payments made to financial advisors may be a fixed fee or based upon one
or more of the following factors:  gross sales,  current assets and/or number of
accounts of the Fund attributable to the financial advisor,  the particular fund
or fund type or other  measures  as agreed to by the  Advisor,  the  Distributor
and/or their affiliates and the financial  advisors or any combination  thereof.
The amount of these payments is determined at the discretion of the Advisor, the
Distributor  and/or their affiliates from time to time, may be substantial,  and
may be different for different  financial  advisors  based on, for example,  the
nature of the services provided by the financial advisor.

The Advisor,  the  Distributor  and/or their  affiliates  currently make revenue
sharing  payments  from  their own  assets in  connection  with the sale  and/or
distribution of DWS Fund shares, or the retention and/or servicing of investors,
to financial  advisors in amounts that  generally  range from .01% up to .50% of
assets of the Fund serviced and  maintained by the  financial  advisor,  .10% to
..25% of sales of the Fund attributable to the financial  advisor,  a flat fee of
$12,500 up to $500,000, or any combination thereof. These amounts are subject to
change  at  the  discretion  of  the  Advisor,   the  Distributor  and/or  their
affiliates.   Receipt  of,  or  the  prospect  of  receiving,   this  additional
compensation, may influence your financial advisor's recommendation of this Fund
or of any  particular  share class of the Fund. You should review your financial
advisor's  compensation  disclosure  and/or  talk to your  financial  advisor to
obtain  more  information  on how this  compensation  may have  influenced  your
financial advisor's recommendation of this Fund.

The Advisor,  the Distributor and/or their affiliates may also make such revenue
sharing  payments  to  financial  advisors  under the terms  discussed  above in
connection  with  the  distribution  of both  DWS  funds  and  non-DWS  funds by
financial  advisors to retirement plans that obtain record keeping services from
ADP, Inc. on the DWS Scudder branded  retirement plan platform (the  "Platform")
with the level of revenue  sharing  payments  being based upon sales of both the
DWS funds and the  non-DWS  funds by the  financial  advisor on the  Platform or
current  assets  of both  the DWS  funds  and the  non-DWS  funds  serviced  and
maintained by the financial advisor on the Platform.

As of the  date  hereof,  the  Fund  has been  advised  that  the  Advisor,  the
Distributor  and their  affiliates  expect that the following firms will receive
revenue sharing payments at different points during the coming year as described
above:

Channel: Broker-Dealers and Financial Advisors

A G Edwards & Sons Inc.

                                       69
<PAGE>

AIG Advisors Group
Ameriprise
Cadaret, Grant & Co. Inc.
Capital Analyst, Incorporated
Citigroup Global Markets, Inc. (dba Smith Barney)
Commonwealth  Equity Services,  LLP (dba Commonwealth  Financial  Network)
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Group
LaSalle Financial Services, Inc. (dba ABN Amro)
Linsco/Private Ledger Corp.
Marsh Insurance and Investment Company
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
Pacific Select Distributors Group
Raymond James & Associates
Raymond James Financial Services
RBC Dain Rauscher, Inc
Securities America, Inc.
UBS Financial Services
Wells Fargo Investments, LLC

Channel: Cash Product Platform

ADP Clearing & Outsourcing
Allegheny Investments LTD
Bank of New York (Hare & Co.)
Bear, Stearns Securities Corp.
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange
Citibank NA
D.A. Davidson & Company
Deutsche Bank Securities Inc.
Deutsche Bank Trust Company Americas
Emmett A. Larkin Company
Fiduciary Trust Co. - International
H.C. Denison Co.
Huntleigh Securities
Investors Bank & Trust
JPMorgan Chase
Lincoln Investment Planning
Linsco Private Ledger Financial Services
Mellon  Financial  Markets LLC
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Romano Brothers and Company
SAMCO Capital Markets (Fund Services, Inc.)
Smith Moore & Company
State Street Bank & Trust Co.
Sungard Institutional Brokerage Inc.
US Bancorp

                                       70
<PAGE>

UBS Financial Services Inc.
William Blair & Company

Channel: Third Party Insurance Platforms

Acacia National Life Insurance
Allmerica Financial Life Insurance Company
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
American General Life Insurance Company
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
Genworth Life Insurance Company of New York
Genworth Life and Annuity Insurance Company
Great West Life and Annuity  Insurance  Company
Hartford Life Insurance Company
ICMG Registered Variable Life
Integrity Life Insurance Company
John Hancock Life Insurance companies
Kemper Investors Life Insurance Company
Lincoln Benefit Life Insurance Company
Lincoln Life & Annuity Company of New York
Lincoln National Life Insurance Company
Massachusetts Mutual Life Insurance Group
MetLife Group
Minnesota Life Insurance Company
Mutual of America Life Insurance Company
National Life Insurance Company
National Integrity Life Insurance Company
Nationwide Group
New York Life Insurance and Annuity Corporation
Phoenix Life Insurance Company
Protective Life Insurance
Provident Mutual Life Insurance
Prudential Insurance Company of America
Sun Life GroupSymetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

Any additions,  modifications or deletions to the financial advisors  identified
above that have occurred since the date hereof are not reflected.

The Advisor,  the  Distributor  or their  affiliates  may enter into  additional
revenue sharing arrangements or change or discontinue existing arrangements with
financial advisors at any time without notice.

                                       71
<PAGE>

The  prospect  of  receiving,  or the  receipt  of  additional  compensation  or
promotional  incentives  described above by financial  advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS Funds or a particular  DWS Fund over sales of shares of mutual
funds (or  non-mutual  fund  investments)  with  respect to which the  financial
advisor does not receive additional compensation or promotional  incentives,  or
receives  lower levels of additional  compensation  or  promotional  incentives.
Similarly,  financial advisors may receive different  compensation or incentives
that may influence  their  recommendation  of any particular  share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that the Fund receives
to invest on behalf of an investor and will not increase Fund expenses.  You may
wish to take  such  payment  arrangements  into  account  when  considering  and
evaluating  any  recommendations  relating to Fund shares and you should discuss
this matter with your  financial  advisor  and review your  financial  advisor's
disclosures.



                                       72
<PAGE>


                                       73
<PAGE>


                                       74
<PAGE>


                                       75
<PAGE>


                                       76
<PAGE>


Class A Purchases.  The public  offering  price of Class A shares for purchasers
choosing  the initial  sales  charge  alternative  is the net asset value plus a
sales charge, as set forth below.



<TABLE>
<CAPTION>

                                                             Sales Charge
                                                             ------------


                            As a Percentage of      As a Percentage of Net       Allowed to Dealers as a
Amount of Purchase          Offering Price*, **          Asset Value**         Percentage of Offering Price
------------------          -------------------          -------------         ----------------------------

<S>       <C>                      <C>                        <C>                      <C>
Less than $100,000                 2.75%                      2.83%                    2.25%
$100,000 but less than $250,000    2.50                       2.56                     2.00
$250,000 and over                  0.00****                   0.00****                 0.00*****
</TABLE>


*        The Offering Price includes the sales charge.

**       Because of rounding  in the  calculation  of the  offering  price,  the
         actual maximum front-end sales charge paid by an investor may be higher
         or lower than the percentages noted above.

***      Rounded to the nearest one-hundredth percent.

****     Redemption  of shares  may be subject to a  contingent  deferred  sales
         charge as discussed below.

*****    Commission is payable by DWS-SDI as discussed above.



                                       77
<PAGE>

Class A  Quantity  Discounts.  An  investor  or the  investor's  dealer or other
financial  services  firm must notify the  Shareholder  Service Agent or DWS-SDI
whenever  a  quantity  discount  or  reduced  sales  charge is  applicable  to a
purchase.  In order to qualify  for a lower  sales  charge,  all orders  from an
organized  group will have to be placed  through a single  investment  dealer or
other firm and identified as originating from a qualifying purchaser.

Combined  Purchases.  The  Fund's  Class A shares may be  purchased  at the rate
applicable to the sales charge discount  bracket  attained by combining same day
investments in Class A shares of any DWS Funds that bear a sales charge.

Letter of Intent.  The reduced sales charges for Class A shares, as shown in the
applicable Prospectus,  also apply to the aggregate amount of purchases of Class
A shares of DWS Funds that bear a sales  charge made by any  purchaser  within a
24-month period under a written Letter of Intent ("Letter") provided by DWS-SDI.
The Letter,  which imposes no obligation to purchase or sell additional  Class A
shares,  provides  for a price  adjustment  depending  upon  the  actual  amount
purchased  within  such  period.  The Letter  provides  that the first  purchase
following  execution  of the  Letter  must be at least 5% of the  amount  of the
intended  purchase,  and that 5% of the amount of the intended purchase normally
will be held in escrow in the form of shares pending  completion of the intended
purchase.  If the total  investments under the Letter are less than the intended
amount and thereby  qualify only for a higher sales charge than  actually  paid,
the  appropriate  number of escrowed  shares are redeemed and the proceeds  used
toward  satisfaction  of the obligation to pay the increased  sales charge.  The
Letter  for  an  employer-sponsored  employee  benefit  plan  maintained  on the
subaccount  record keeping system available  through ADP, Inc. under an alliance
with DWS-SDI and its affiliates may have special provisions regarding payment of
any  increased  sales charge  resulting  from a failure to complete the intended
purchase under the Letter.  A shareholder  may include the value (at the maximum
offering price,  which is determined by adding the maximum applicable sales load
charged to the net asset  value) of all Class A shares of such DWS Funds held of
record as of the  initial  purchase  date under the  Letter as an  "accumulation
credit" toward the  completion of the Letter,  but no price  adjustment  will be
made on such shares.

Class A Cumulative Discount. Class A shares of the Fund may also be purchased at
the rate  applicable to the discount  bracket  attained by adding to the cost of
shares being purchased, the value of all Class A shares of DWS Funds that bear a
sales charge (computed at the maximum offering price at the time of the purchase
for which the discount is  applicable)  already  owned by the investor or his or
her immediate  family members  (including the investor's  spouse or life partner
and children or stepchildren age 21 or younger).


For purposes of the Combined Purchases, Letter of Intent and Cumulative Discount
features  described above,  employer  sponsored employee benefit plans using the
Flex  subaccount  record  keeping  system  available  through ADP, Inc. under an
alliance with SDI and its affiliates may include: (a) Money Market Funds as "DWS
Funds", (b) all classes of shares of any DWS Fund and (c) the value of any other
plan investments,  such as guaranteed  investment  contracts and employer stock,
maintained on such subaccount  record keeping system.  Once eligible plan assets
under this provision reach the $1,000,000  threshold  ($250,000 threshold in the
case of DWS Short Duration Plus Fund and DWS Short-Term  Municipal Bond Fund for
the Large Order NAV  Purchase  Privilege),  a later  decline in assets below the
$1,000,000  threshold ($250,000 threshold in the case of DWS Short Duration Plus
Fund and DWS Short-Term  Municipal Bond Fund) will not affect the plan's ability
to continue to purchase Class A shares at net asset value.



                                       78
<PAGE>


                                       79
<PAGE>




Class A NAV Sales. Class A shares may be sold at net asset value to:

(a)      a current  or former  director  or trustee  of  Deutsche  or DWS mutual
         funds;

(b)      an  employee  (including  the  employee's  spouse or life  partner  and
         children or  stepchildren  age 21 or  younger) of Deutsche  Bank or its
         affiliates or of a subadvisor to any fund in the DWS family of funds or
         of a  broker-dealer  authorized  to sell  shares of the Fund or service
         agents of the Funds;

(c)      certain  professionals  who assist in the promotion of DWS mutual funds
         pursuant to personal services contracts with DWS-SDI, for themselves or
         members of their  families.  DWS-SDI in its  discretion  may compensate
         financial  services  firms  for  sales  of Class A  shares  under  this
         privilege at a commission rate of 0.50% of the amount of Class A shares
         purchased;

(d)      any trust, pension,  profit-sharing or other benefit plan for only such
         persons listed under the preceding paragraphs (a) and (b);

(e)      persons who purchase such shares  through bank trust  departments  that
         process  such  trades  through an  automated,  integrated  mutual  fund
         clearing program provided by a third party clearing firm;

(f)      selected  employees  (including  their  spouses  or life  partners  and
         children  or  stepchildren  age  21 or  younger)  of  banks  and  other
         financial services firms that provide  administrative  services related
         to order placement and payment to facilitate  transactions in shares of
         the Fund for their clients pursuant to an agreement with DWS-SDI or one
         of its  affiliates.  Only those employees of such banks and other firms
         who  as  part  of  their  usual  duties  provide  services  related  to
         transactions in Fund shares qualify;

(g)      unit  investment  trusts  sponsored  by Ranson &  Associates,  Inc. and
         unitholders of unit investment trusts sponsored by Ranson & Associates,
         Inc. or its predecessors through reinvestment programs described in the
         prospectuses of such trusts that have such programs;

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<PAGE>

(h)      through certain  investment  advisors  registered  under the Investment
         Advisers Act of 1940 and other  financial  services firms acting solely
         as  agent  for  their  clients,   that  adhere  to  certain   standards
         established  by DWS-SDI,  including a  requirement  that such shares be
         sold for the benefit of their  clients  participating  in an investment
         advisory program or agency commission  program under which such clients
         pay a fee to  the  investment  advisor  or  other  firm  for  portfolio
         management  or agency  brokerage  services.  Such  shares  are sold for
         investment  purposes and on the condition  that they will not be resold
         except through redemption or repurchase by the Fund;

(i)      employer  sponsored  employee  benefit plans using the Flex  subaccount
         recordkeeping system ("Flex Plans") made available through ADP under an
         alliance with DWS-SDI and its affiliates,  established prior to October
         1, 2003,  provided  that the Flex Plan is a  participant-directed  plan
         that has not less than 200 eligible employees;

(j)      investors  investing  $250,000 or more, either as a lump sum or through
         the "Combined  Purchases," "Letter of Intent" and "Cumulative Discount"
         features referred to above (collectively, the "Large Order NAV Purchase
         Privilege"). The Large Order NAV Purchase Privilege is not available if
         another net asset value purchase privilege is available.

(k)      defined contribution investment only plans with a minimum of $1,000,000
         in plan assets regardless of the amount allocated to the DWS funds;

In addition, Class A shares may be sold at net asset value in connection with:

(l)      the  acquisition  of the  assets  of or merger  or  consolidation  with
         another investment  company,  or to shareholders in connection with the
         investment or reinvestment  of income and capital gain  dividends,  and
         under other circumstances  deemed appropriate by DWS-SDI and consistent
         with regulatory requirements; and

(m)      a  direct  "roll  over"  of a  distribution  from a Flex  Plan  or from
         participants in employer sponsored employee benefit plans maintained on
         the OmniPlus  subaccount  record keeping system made available  through
         ADP, Inc. under an alliance with DWS-SDI and its affiliates  into a DWS
         Scudder IRA;

(n)      reinvestment of fund dividends and distributions;

(o)      exchanging  an  investment in Class A shares of another fund in the DWS
         family of funds for an investment in the fund.

Class A shares also may be purchased at net asset value in any amount by members
of the plaintiff class in the proceeding known as Howard and Audrey Tabankin, et
al. v. Kemper  Short-Term  Global  Income Fund, et al., Case No. 93 C 5231 (N.D.
IL). This privilege is generally non-transferable and continues for the lifetime
of individual class members and for a ten-year period for  non-individual  class
members.  To make a  purchase  at net asset  value  under  this  privilege,  the
investor  must,  at the time of  purchase,  submit a  written  request  that the
purchase be processed at net asset value pursuant to this privilege specifically
identifying the purchaser as a member of the "Tabankin  Class." Shares purchased
under this privilege will be maintained in a separate account that includes only
shares  purchased  under  this  privilege.  For  more  details  concerning  this
privilege,  class members should refer to the Notice of (i) Proposed  Settlement
with Defendants;  and (ii) Hearing to Determine Fairness of Proposed Settlement,
dated  August 31,  1995,  issued in  connection  with the  aforementioned  court
proceeding.  For  sales of Fund  shares  at net  asset  value  pursuant  to this
privilege,  DWS-SDI  may in its  discretion  pay  investment  dealers  and other
financial services firms a concession,  payable quarterly,  at an annual rate of
up to 0.25% of net assets attributable to such


                                       81
<PAGE>

shares  maintained  and serviced by the firm.  A firm  becomes  eligible for the
concession based upon assets in accounts  attributable to shares purchased under
this  privilege  in the month  after the month of  purchase  and the  concession
continues  until  terminated by DWS-SDI.  The  privilege of  purchasing  Class A
shares of the Fund at net asset value under this  privilege is not  available if
another net asset value purchase privilege also applies.

Class B Purchases. Class B shares of the Fund are offered at net asset value. No
initial  sales charge is imposed.  Class B shares sold without an initial  sales
charge allow the full amount of the investor's  purchase  payment to be invested
in Class B shares  for his or her  account.  Class B  shares  have a  contingent
deferred  sales charge of 4.00% that  declines over time (for shares sold within
six  years  of  purchase)  and Rule  12b-1  fees,  as  described  in the  Funds'
Prospectuses  and SAI.  Class B shares  automatically  convert to Class A shares
after six years.

Class B shares have been created  especially for former Class B shareholders  of
DWS Short Term Bond  Fund.  Class B shares of DWS Short  Duration  Plus Fund are
closed to new  investors  except as  described  below.  Unless  you fit into the
investor  eligibility  categories described below, you may not invest in Class B
shares of the fund.

You may purchase  Class B shares of the fund through your  existing fund account
and reinvest  dividends and capital  gains if you are a  shareholder  of Class B
shares of DWS Short  Duration Plus Fund who became a shareholder  of the fund in
connection with the fund's  acquisition of DWS Short Term Bond Fund on April 23,
2007.

New accounts may be opened for:

o        transfers of shares from existing  accounts in this fund (including IRA
         rollovers);

o        any group retirement,  employee stock bonus,  pension or profit sharing
         plan that offers the fund as an investment option as of April 23, 2007;

o        purchases  through any comprehensive or "wrap" fee program or other fee
         based program that offers the fund as an investment  option as of April
         23, 2007; or

o        accounts  managed  by  Deutsche  Investment  Management  Americas  Inc.
         ("DIMA"),  any  advisory  products  offered  by  DIMA  or  DWS  Scudder
         Distributors,  Inc.  ("DWS-SDI")  and for the  Funds of DWS  Allocation
         Series or other fund of funds managed by DIMA or its affiliates.

Except as otherwise noted, these restrictions apply to investments made directly
with  DWS-SDI,  the fund's  principal  underwriter  or  through an  intermediary
relationship with a financial  services firm established with respect to the DWS
Funds.  Institutions that maintain omnibus account  arrangements are not allowed
to open new Class B subaccounts for new investors, unless the investor is one of
the types listed above.  Once an account is closed,  new  investments in Class B
will  not be  accepted  unless  you  satisfy  one of  the  investor  eligibility
categories listed above.

Exchanges  will not be permitted  into Class B unless the exchange is being made
into an existing fund account.


Class C Purchases. Class C shares of the Fund are offered at net asset value. No
initial sales charge is imposed,  which allows the full amount of the investor's
purchase payment to be invested in Class C shares for his or her account.  Class
C shares are subject to a contingent  deferred sales charge of 1.00% (for shares
sold within one year of  purchase)  and Rule 12b-1  fees,  as  described  in the
Fund's Prospectus and Statement of Additional Information.


Multi-Class  Suitability.  DWS-SDI  has  established  the  following  procedures
regarding  the  purchase  of Class A,  Class B and  Class C  shares.  Orders  to
purchase  Class B shares of  $100,000  or more and  orders to  purchase  Class C
shares  of  $250,000  or more  will be  declined  with the  exception  of orders
received from financial  representatives acting for clients whose shares will be
held in an omnibus account and employer  sponsored  employee benefit plans using
the subaccount record keeping system ("System") maintained for DWS-branded plans
under an alliance with DWS-SDI and its affiliates  ("DWS Scudder Flex Plans" and
"DWS Scudder Choice Plans").


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<PAGE>


The following  provisions apply to DWS Scudder Flex Plans and DWS Scudder Choice
Plans.

a.       Class B Share DWS Scudder Flex Plans. Class B shares have not been sold
         to DWS Scudder  Flex Plans that were  established  on the System  after
         October 1, 2003.  Orders to  purchase  Class B shares for a DWS Scudder
         Flex Plan  established  on the System prior to October 1, 2003 that has
         regularly been  purchasing  Class B shares will be invested  instead in
         Class A shares at net asset value when the combined subaccount value in
         DWS Funds or other  eligible  assets  held by the plan is  $100,000  or
         more.  This  provision  will be imposed  for the first  purchase  after
         eligible plan assets reach the $100,000  threshold.  A later decline in
         assets below the $100,000  threshold will not affect the plan's ability
         to continue to purchase Class A shares at net asset value.

b.       Class C Share DWS Scudder Flex Plans. Orders to purchase Class C shares
         for a  DWS  Scudder  Flex  Plan,  regardless  of  when  such  plan  was
         established on the System,  will be invested  instead in Class A shares
         at net asset value when the combined  subaccount  value in DWS Funds or
         other  eligible  assets held by the plan is  $1,000,000  or more.  This
         provision  will be imposed for the first  purchase  after eligible plan
         assets reach the $1,000,000 threshold.  A later decline in assets below
         the $1,000,000 threshold will not affect the plan's ability to continue
         to purchase Class A shares at net asset value.

c.       Class C Share DWS Scudder  Choice  Plans.  Orders to  purchase  Class C
         shares for a DWS Scudder Choice Plan that has been regularly purchasing
         Class C shares will be invested  instead in Class A shares at net asset
         value when the combined subaccount value in DWS Funds or other eligible
         assets held by the plan is $1,000,000 or more.  This  provision will be
         imposed for purchases  made  beginning in the month after eligible plan
         assets reach the $1,000,000  threshold.  In addition, as a condition to
         being permitted to use the Choice Plan platform, plans must agree that,
         within  one month  after  eligible  plan  assets  reach the  $1,000,000
         threshold,  all  existing  Class  C  shares  held in the  plan  will be
         automatically converted to Class A shares.

The procedures  above do not reflect in any way the  suitability of a particular
class of shares for a particular investor and should not be relied upon as such.
A suitability  determination  must be made by investors  with the  assistance of
their financial representative.


Automatic Investment Plan. A shareholder may purchase shares of the Fund through
an automatic investment program.  With the Direct Deposit Purchase Plan ("Direct
Deposit"), investments are made automatically (minimum $500 and maximum $250,000
for  initial  investments  and a  minimum  of  $50  and a  maximum  of  $250,000
forsubsequent investments) from the shareholder's account at a bank, savings and
loan or credit  union into the  shareholder's  Fund  account.  Termination  by a
shareholder  will become  effective  within  thirty  days after the  Shareholder
Service  Agent has received the request.  The Fund may  immediately  terminate a
shareholder's  Direct  Deposit  in the  event  that  any item is  unpaid  by the
shareholder's financial institution.

Minimum Subsequent  Investment Policies.  For current shareholders of Class A, B
or C  shares  there  is a $50  minimum  investment  requirement  for  subsequent
investments in the fund. There is no minimum subsequent  investment  requirement
in Class A shares for investments on behalf of participants in certain fee-based
and wrap  programs  offered  through  financial  intermediaries  approved by the
Advisor.


Payroll  Investment  Plans. A shareholder  may purchase  shares through  Payroll
Direct Deposit or Government  Direct  Deposit.  Under these  programs,  all or a
portion of a shareholder's  net pay or government check is invested each payment
period.  A shareholder may terminate  participation  in these programs by giving
written  notice  to  the


                                       83
<PAGE>

shareholder's employer or government agency, as appropriate.  (A reasonable time
to act is  required.)  The Fund is not  responsible  for the  efficiency  of the
employer or government  agency making the payment or any financial  institutions
transmitting payments.

It is our policy to offer purchase  privileges to current or former directors or
trustees of the Deutsche or DWS Scudder mutual funds,  employees,  their spouses
or life  partners  and children or  step-children  age 21 or younger of Deutsche
Bank or its  affiliates or a sub-adviser  to any fund in the DWS family of funds
or a broker-dealer authorized to sell shares of the funds. Qualified individuals
will  generally  be  allowed  to  purchase  shares in the class  with the lowest
expense ratio,  usually the Institutional Class shares. If a Fund does not offer
Institutional  Class shares,  these  individuals  will be allowed to buy Class A
shares at NAV.  The Funds also  reserve the right to waive the  minimum  account
balance  requirement for employee and director accounts.  Fees generally charged
to IRA accounts will be charged to accounts of employees and directors.


Expedited Purchase Procedures for Existing  Shareholders.  Shareholders of other
DWS Funds who have  submitted an account  application  and have  certified a tax
identification  number, clients having a regular investment counsel account with
the Advisor or its affiliates and members of their immediate families,  officers
and  employees  of the  Advisor  or of any  affiliated  organization  and  their
immediate  families,  members of FINRA, and banks may open an account by wire by
calling (800) 621-1048 for instructions. The investor must send a duly completed
and signed application to the Fund promptly.  A subsequent purchase order may be
placed by telephone,  etc. by  established  shareholders  (except by DWS Scudder
Individual  Retirement  Account  (IRA),  DWS Scudder  Horizon Plan,  DWS Scudder
Profit  Sharing and Money  Purchase  Pension  Plans,  DWS Scudder 401(k) and DWS
Scudder 403(b) Plan holders), members of FINRA, and banks.


Redemptions

Redemption fee. The Fund imposes a redemption fee of 2% of the total  redemption
amount  (calculated  at net asset  value,  without  regard to the  effect of any
contingent  deferred sales charge; any contingent  deferred sales charge is also
assessed on the total redemption  amount without regard to the assessment of the
2% redemption  fee) on all Fund shares  redeemed or exchanged  within 15 days of
buying  them  (either by  purchase  or  exchange).  The  redemption  fee is paid
directly to the Fund, and is designed to encourage  long-term  investment and to
offset  transaction  and other costs  associated  with  short-term  or excessive
trading. For purposes of determining whether the redemption fee applies,  shares
held the longest  time will be treated as being  redeemed  first and shares held
the shortest time will be treated as being  redeemed last. The redemption fee is
applicable  to Fund  shares  purchased  either  directly  or through a financial
intermediary,   such  as  a  broker-dealer.   Transactions   through   financial
intermediaries  typically  are  placed  with the Fund on an  omnibus  basis  and
include  both  purchase  and sale  transactions  placed on  behalf  of  multiple
investors. These purchase and sale transactions are generally netted against one
another and placed on an aggregate  basis;  consequently  the  identities of the
individuals on whose behalf the  transactions are placed generally are not known
to the Fund.  For this  reason,  the Fund has  undertaken  to  notify  financial
intermediaries  of their  obligation  to assess the  redemption  fee on customer
accounts  and to collect  and remit the  proceeds to the Fund.  However,  due to
operational   requirements,   the  intermediaries'   methods  for  tracking  and
calculating  the fee may be  inadequate  or  differ  in some  respects  from the
Fund's.

General.  Policies and procedures  affecting  transactions in Fund shares can be
changed at any time without notice,  subject to applicable law. Transactions may
be contingent upon proper completion of application forms and other documents by
shareholders  and their  receipt by the  Fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the Fund and its  agents  may  occur.  Shareholders  (or  their
financial  service firms) are responsible for all losses and fees resulting from
bad checks,  cancelled orders or the failure to consummate transactions effected
pursuant to instructions reasonably believed to be genuine.

In addition,  the fund reserves the right to suspend or postpone  redemptions as
permitted  pursuant  to Section  22(e) of the  Investment  Company  Act of 1940.
Generally, those circumstances are when 1) the New York Stock Exchange is closed
other than  customary  weekend or holiday  closings;  2) trading on the New York
Stock Exchange is restricted; 3) an emergency exists which makes the disposal of
securities owned by a fund or the fair  determination of the value of the fund's
net assets not  reasonably  practicable;  or 4) the SEC,  by order,  permits the
suspension of the right of


                                       84
<PAGE>

edemption.  Redemption  payments  by wire may also be  delayed in the event of a
non-routine closure of the Federal Reserve wire payment system.

A  request  for  repurchase  (confirmed  redemption)  may be  communicated  by a
shareholder  through a  financial  services  firm to  DWS-SDI,  which firms must
promptly submit orders to be effective.

Redemption  requests  must be  unconditional.  Redemption  requests (and a stock
power for certificated  shares) must be duly endorsed by the account holder.  As
specified  in the  Prospectuses,  signatures  may  need  to be  guaranteed  by a
commercial bank, trust company,  savings and loan  association,  federal savings
bank,  member  firm  of  a  national  securities  exchange  or  other  financial
institution  permitted by SEC rule.  Additional  documentation  may be required,
particularly  from   institutional  and  fiduciary  account  holders,   such  as
corporations,  custodians  (e.g.,  under the Uniform  Transfers  to Minors Act),
executors, administrators, trustees or guardians.

If the proceeds of the  redemption  (prior to the  imposition of any  contingent
deferred  sales charge) are $100,000 or less and the proceeds are payable to the
shareholder of record at the address of record,  normally a telephone request or
a written  request by any one account  holder  without a signature  guarantee is
sufficient  for  redemptions  by individual or joint account  holders and trust,
executor  and  guardian  account  holders,  provided  the  trustee,  executor or
guardian  is named in the  account  registration.  Other  institutional  account
holders may  exercise  this special  privilege of redeeming  shares by telephone
request or  written  request  without  signature  guarantee  subject to the same
conditions as individual account holders,  provided that this privilege has been
pre-authorized by the institutional account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed.  This privilege may not be
used to  redeem  shares  held in  certificated  form  and may not be used if the
shareholder's account has had an address change within 15 days of the redemption
request.

Wires.  Delivery of the proceeds of a wire redemption of $250,000 or more may be
delayed by the Fund for up to seven days if the Fund or the Shareholder  Service
Agent deems it appropriate under then-current market conditions.  The ability to
send wires is limited by the business hours and holidays of the firms  involved.
The Fund is not responsible for the efficiency of the federal wire system or the
account  holder's  financial  services  firm or  bank.  The  account  holder  is
responsible  for any charges  imposed by the account  holder's  firm or bank. To
change the  designated  account  to receive  wire  redemption  proceeds,  send a
written request to the Fund Shareholder Service Agent with signatures guaranteed
as described above or contact the firm through which Fund shares were purchased.

Automatic  Withdrawal Plan. The owner of $5,000 or more of a class of the Fund's
shares at the  offering  price (net  asset  value  plus,  in the case of Class A
shares,  the initial  sales charge) may provide for the payment from the owner's
account of any  requested  dollar amount to be paid to the owner or a designated
payee monthly,  quarterly,  semiannually or annually. The $5,000 minimum account
size is not applicable to IRAs. The minimum periodic payment is $50. The maximum
annual  rate at which  shares  subject to CDSC may be redeemed is 12% of the net
asset value of the account. Shares are redeemed so that the payee should receive
payment  approximately  the first of the month.  Investors  using this Plan must
reinvest Fund distributions.

Non-retirement plan shareholders may establish an Automatic Withdrawal Plan (the
"Plan") to receive  monthly,  quarterly or periodic  redemptions from his or her
account for any  designated  amount of $50 or more.  Shareholders  may designate
which day they want the automatic withdrawal to be processed.  The check amounts
may be based on the  redemption  of a fixed dollar  amount,  fixed share amount,
percent of account  value or  declining  balance.  The Plan  provides for income
dividends  and  capital  gains  distributions,  if  any,  to  be  reinvested  in
additional  shares.  Shares are then  liquidated  as  necessary  to provide  for
withdrawal  payments.  Since the  withdrawals  are in  amounts  selected  by the
investor and have no relationship to yield or income,  payments  received cannot
be  considered  as  yield  or  income  on  the   investment  and  the  resulting
liquidations may deplete or possibly  extinguish the initial  investment and any
reinvested dividends and capital gains distributions.  Any such requests must be
received by the transfer agent ten days prior to the date of the first automatic
withdrawal.  An Automatic  Withdrawal  Plan may be terminated at any time by the
shareholder,  the Trust or its agent on written  notice,  and will be terminated
when all Fund shares under the Plan have been  liquidated or upon receipt by the
Trust of notice of death of the shareholder.

                                       85
<PAGE>

Contingent  Deferred Sales Charge (CDSC).  The rate of the CDSC is determined by
the  length of the period of  ownership.  Investments  are  tracked on a monthly
basis.  The period of  ownership  for this  purpose  begins the first day of the
month in which  the  order for the  investment  is  received.  For  example,  an
investment  made in March of the year of  investment  will be  eligible  for the
second year's charge if redeemed on or after March of the following year. In the
event no specific order is requested  when  redeeming  shares subject to a CDSC,
the redemption will be made first from shares representing  reinvested dividends
and then  from the  earliest  purchase  of  shares.  DWS-SDI  receives  any CDSC
directly. The charge will not be imposed upon redemption of reinvested dividends
or share appreciation.


The Class A CDSC will be waived in the event of:

(a)      redemptions  by  a   participant-directed   qualified  retirement  plan
         described in Code Section 401(a), a participant-directed  non-qualified
         deferred   compensation  plan  described  in  Code  Section  457  or  a
         participant-directed   qualified  retirement  plan  described  in  Code
         Section 403(b)(7) which is not sponsored by a K-12 school district;


(b)      redemptions  by  employer-sponsored  employee  benefit  plans using the
         subaccount record keeping system made available through ADP, Inc. under
         an alliance with DWS-SDI and its affiliates;


(c)      redemption  of shares of a  shareholder  (including a registered  joint
         owner) who has died or is disabled (under certain circumstances);


(d)      redemption  of shares of a  shareholder  (including a registered  joint
         owner) who after purchase of the shares being redeemed  becomes totally
         disabled  (as  evidenced  by a  determination  by  the  federal  Social
         Security Administration);


(e)      redemptions under the Fund's Automatic  Withdrawal Plan at a maximum of
         12% per year of the net asset value of the account;


(f)      redemptions  of  shares  whose  dealer  of  record  at the  time of the
         investment  notifies  DWS-SDI that the dealer waives the  discretionary
         commission applicable to such Large Order NAV Purchase; and


(g)      redemptions for certain loan advances,  hardship  provisions or returns
         of excess contributions from retirement plans.

The Class B CDSC will be waived  for the  circumstances  set forth in items (c),
(d), (e) and (g) for Class A shares. In addition, this CDSC will be waived:

(h)      for redemptions made pursuant to any IRA systematic withdrawal based on
         the  shareholder's  life  expectancy  including,  but not  limited  to,
         substantially  equal periodic  payments  described in Internal  Revenue
         Code Section 72(t)(2)(A)(iv) prior to age 59 1/2;


(i)      for redemptions to satisfy required minimum  distributions after age 70
         1/2 from an IRA account (with the maximum amount subject to this waiver
         being based only upon the shareholder's DWS Scudder IRA accounts); and


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<PAGE>

(j)      in connection with the following redemptions of shares held by employer
         sponsored  employee benefit plans  maintained on the subaccount  record
         keeping  system  made  available  through  ADP under an  alliance  with
         DWS-SDI and its affiliates:  (1) to satisfy  participant  loan advances
         (note that loan repayments constitute new purchases for purposes of the
         CDSC and the conversion  privilege),  (2) in connection with retirement
         distributions  (limited  at any one time to 12% of the  total  value of
         plan assets invested in the Fund), (3) in connection with distributions
         qualifying under the hardship  provisions of the Internal Revenue Code,
         (4) representing  returns of excess contributions to such plans and (5)
         in connection  with direct "roll over"  distributions  from a Flex Plan
         into a DWS  Scudder  IRA under the  Class A net  asset  value  purchase
         privilege.


The Class C CDSC will be waived  for the  circumstances  set forth in items (b),
(c), (d), (e) and (g) for Class A shares and for the  circumstances set forth in
items (h) and (i) for Class B shares. In addition, this CDSC will be waived for:

(k)      redemption  of shares by an employer  sponsored  employee  benefit plan
         that offers  funds in addition to DWS Funds and whose  dealer of record
         has waived the  advance of the first year  administrative  service  and
         distribution  fees applicable to such shares and agrees to receive such
         fees quarterly; and


(l)      redemption  of  shares  purchased  through  a  dealer-sponsored   asset
         allocation  program  maintained  on an  omnibus  record-keeping  system
         provided  the dealer of record had waived the advance of the first year
         administrative services and distribution fees applicable to such shares
         and has agreed to receive such fees quarterly.



                                       87
<PAGE>



In-kind  Redemptions.  The Fund  reserves  the  right to honor any  request  for
redemption or repurchase  by making  payment in whole or in part in  securities.
These  securities will be chosen by the Fund and valued as they are for purposes
of computing  the Fund's net asset value.  A shareholder  may incur  transaction
expenses in converting these securities to cash.

Sale or Redemption of Shares. The sale,  exchange or redemption of shares of the
Fund may give rise to a gain or loss equal to the difference  between the amount
realized and the basis in such  shares.  In general,  any gain or loss  realized
upon a taxable  disposition of shares will be treated as long-term  capital gain
or loss if the shares have been held for more than one year. Otherwise, the gain
or loss on the  taxable  disposition  of shares of the Fund will be  treated  as
short-term  capital  gain or loss.  However,  any loss  realized  upon a taxable
disposition  of shares held for six months or less will be treated as long-term,
rather  than   short-term,   to  the  extent  of  any  long-term   capital  gain
distributions  received (or deemed  received) by the shareholder with respect to
the shares. All or a portion of any loss realized upon a taxable  disposition of
shares of the Fund will be disallowed if other substantially identical shares of

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<PAGE>

the Fund are purchased within 30 days before or after the disposition. In such a
case,  the basis of the newly  purchased  shares will be adjusted to reflect the
disallowed loss.

Exchanges

Shareholders  may request a taxable  exchange of their  shares for shares of the
corresponding  class of other DWS Funds  without  imposition  of a sales charge,
subject to the provisions  below. For purposes of calculating any CDSC,  amounts
exchanged retain their original cost and purchase date.


Shares of money  market  funds that were  acquired  by purchase  (not  including
shares acquired by dividend  reinvestment)  are subject to the applicable  sales
charge on exchange.  Certain series of DWS Target Fund are available on exchange
only during the offering  period for such series as described in the  applicable
prospectus.  Tax Free Money Fund --  Investment  Class,  NY Tax-Free  Money Fund
--Investment Class, Treasury Money Fund --Investment Class, Money Market Fund --
Investment  Class,  Cash  Management  Fund  Institutional,  Cash  Reserves  Fund
Institutional,  Treasury Money Fund -- Institutional  Class,  Cash Reserve Fund,
Inc. Prime Series,  Tax-Exempt  California Money Market Fund, Cash Account Trust
and Investors  Cash Trust are available on exchange but only through a financial
services  firm having a services  agreement  with DWS-SDI.  All exchanges  among
money  funds  must  meet   applicable   investor   eligibility   and  investment
requirements.  Exchanges  may only be made for funds that are available for sale
in the shareholder's state of residence.  Currently, Tax-Exempt California Money
Market Fund is available for sale only in California.



Shareholders must obtain  prospectuses of the Fund they are exchanging into from
dealers, other firms or DWS-SDI.  Exchanges are taxable transactions for federal
income tax purposes

Automatic Exchange Plan. The owner of $1,000 or more of any class of shares of a
DWS Fund may  authorize  the  automatic  exchange  of a  specified  amount  ($50
minimum) of such  shares for shares of the same class of another  such DWS Fund.
Exchanges will be made automatically  until the shareholder or a Fund terminates
the  privilege.  Exchanges  are  subject to the terms and  conditions  described
above.

                                    DIVIDENDS

The Fund intends to follow the practice of distributing substantially all of its
investment  company  taxable  income,  which includes any excess of net realized
short-term  capital gains over net realized  long-term capital losses.  The Fund
may follow the  practice  of  distributing  the  entire  excess of net  realized
long-term capital gains over net realized  short-term  capital losses.  However,
the Fund may retain all or part of such gain for reinvestment,  after paying the
related federal taxes for which  shareholders may then be able to claim a credit
against their federal tax liability.  If the Fund does not distribute the amount
of capital gain and/or  ordinary  income required to be distributed by an excise
tax  provision  of the Code,  the Fund may be subject  to that  excise  tax.  In
certain  circumstances,  the Fund may  determine  that it is in the  interest of
shareholders to distribute less than the required amount.

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<PAGE>

Any dividends or capital gains  distributions  declared in October,  November or
December  with a record  date in such a month  and  paid  during  the  following
January will be treated by  shareholders  for federal  income tax purposes as if
received on December 31 of the calendar  year  declared and to have been paid by
the Fund not later than such December 31.

Prior to August 28, 2006, net investment income was declared as a daily dividend
and  distributed  to  shareholders  monthly.  Effective  August  28,  2006,  net
investment income is declared and distributed to shareholders monthly.

Income and  capital  gain  dividends,  if any,  of the Fund will be  credited to
shareholder accounts in full and fractional Shares of the same class of the Fund
at net asset value on the reinvestment  date,  except that, upon written request
to the Shareholder  Service Agent, a shareholder may select one of the following
options:

1.       To receive income and short-term capital gain distributions in cash and
         long-term capital gain distributions in shares of the same class at net
         asset value; or

2.       To receive income and capital gain distributions in cash.

Dividends  will be  reinvested  in shares of the same  class of the Fund  unless
shareholders  indicate in writing  that they wish to receive  them in cash.  The
Fund will reinvest dividend checks (and future dividends) in shares of that same
Fund and class if checks are  returned  as  undeliverable.  Dividends  and other
distributions  of  the  Fund  in  the  aggregate  amount  of  $10  or  less  are
automatically  reinvested in shares of the Fund unless the shareholder  requests
that such policy not be applied to the shareholder's account.

If  a  shareholder   has  elected  to  reinvest  any   dividends   and/or  other
distributions,  such  distributions  will be  made in  shares  of the  Fund  and
confirmations will be mailed to each shareholder. If a shareholder has chosen to
receive cash, a check will be sent.  Distributions of investment company taxable
income and net realized  capital  gains are  taxable,  whether made in shares or
cash.

Each  distribution  is  accompanied  by a  brief  explanation  of the  form  and
character of the  distribution.  The  characterization  of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund  issues to each  shareholder  a  statement  of the
federal income tax status of all distributions in the prior calendar year.

The Fund may at any time vary its foregoing dividend  practices and,  therefore,
reserves  the  right  from  time to time to  either  distribute  or  retain  for
reinvestment  such of its net investment income and net short-term and long-term
capital  gains as its  Board  determines  appropriate  under  the  then  current
circumstances.  In particular,  and without limiting the foregoing, the Fund may
make additional distributions of net investment income or capital gains in order
to satisfy the minimum distribution requirements contained in the Code.

Dividends received deduction.  Dividends from domestic corporations may comprise
a part of the Fund's gross income. If any such dividends constitute a portion of
the Fund's gross income,  a portion of the income  distributions of the Fund may
be eligible  for the 70%  deduction  for  dividends  received  by  corporations.
Shareholders will be informed of the portion of dividends which so qualify.  The
dividends-received  deduction  is  reduced  to the extent the shares of the Fund
with respect to which the  dividends  are received are treated as  debt-financed
under  federal  income tax law and is  eliminated  if either those shares or the
shares of the Fund are deemed to have been held by the Fund or the  shareholder,
as the case may be, for less than 46 days during the 91-day period  beginning 45
days before the shares become ex-dividend.

                                      TAXES

The following is intended to be a general  summary of certain federal income tax
consequences  of  investing  in the  Fund.  It is  not  intended  as a  complete
discussion  of all such  consequences,  nor  does it  purport  to deal  with all
categories  of  investors,  some of which may be subject  to special  tax rules.
Investors are therefore advised to consult with their tax advisors before making
an  investment  in the Fund.  The  summary is based on the laws in effect on the

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<PAGE>

date of this  SAI  and  existing  judicial  and  administrative  interpretations
thereof, all of which are subject to change, possibly with retroactive effect.

Taxation of the Fund

The Fund intends to continue to qualify to be treated as a regulated  investment
company  under  Subchapter M of the Code in each taxable year as required  under
the Code in order to avoid payment of federal  income tax at the Fund level.  In
order to qualify as a regulated  investment company,  the Fund must meet certain
requirements  regarding  the source of its income,  the  diversification  of its
assets, and the distribution of its income:

(a)      The Fund  must  derive at least 90% of its  gross  annual  income  from
         dividends, interest, payments with respect to certain securities loans,
         and gains from the sale of stock,  securities  and foreign  currencies,
         other income (including but not limited to gains from options, futures,
         or forward contracts) derived with respect to its business of investing
         in such stock,  securities,  or currencies  or net income  derived from
         interests  in   "qualified   publicly   traded   partnerships"   (i.e.,
         partnerships  that are traded on an  established  securities  market or
         tradable on a secondary market, other than partnerships that derive 90%
         of their income from  interest,  dividends,  capital  gains,  and other
         traditional permitted mutual fund income);

(b)      The Fund  must  diversify  its  holdings  so  that,  at the end of each
         quarter of its taxable  year,  (i) at least 50% of the market  value of
         the Fund's assets is represented by cash and cash items,  US government
         securities,  securities of other regulated  investment  companies,  and
         other  securities  limited  in  respect of any one issuer of such other
         securities  to a value not  greater  than 5% of the value of the Fund's
         total  assets  and to not  more  than  10%  of the  outstanding  voting
         securities  of such issuer,  and (ii) not more than 25% of the value of
         its assets is  invested in the  securities  (other than those of the US
         Government or other regulated investment  companies) of any one issuer,
         of two or more issuers of which the Fund owns 20% or more of the voting
         securities  and which are  engaged  in the same,  similar,  or  related
         trades or  businesses  or in the  securities  of one or more  qualified
         publicly traded partnerships.

(c)      The Fund is required to distribute to its  shareholders at least 90% of
         its  investment  company  taxable  income  and  net  tax-exempt  income
         (including the excess of net short-term capital gain over net long-term
         capital  losses) and generally is not subject to federal  income tax to
         the extent that it distributes  annually such net investment income and
         net realized capital gains in the manner required under the Code.

Fund  investments  in  partnerships,  including  in  qualified  publicly  traded
partnerships,  may result in the Fund's being subject to state, local or foreign
income, franchise or withholding tax liabilities.

If the Fund  retains for  investment  an amount equal to all or a portion of its
net  long-term  capital  gains in excess of its net  short-term  capital  losses
(including  any capital loss  carryovers),  it will be subject to tax at regular
corporate rates,  currently at a maximum rate of 35%, on the amount retained. In
that event,  the Fund will  designate  such  retained  amounts as  undistributed
capital  gains in a notice  to its  shareholders  who (a)  will be  required  to
include in income  for US federal  income tax  purposes,  as  long-term  capital
gains,  their  proportionate  shares of the  undistributed  amount,  (b) will be
entitled to credit their proportionate shares of the 35% tax paid by the Fund on
the  undistributed  amount against their US federal income tax  liabilities,  if
any, and to claim refunds to the extent their credits exceed their  liabilities,
if any,  and (c) will be entitled to  increase  their tax basis,  for US federal
income tax purposes,  in their shares by an amount equal to 65% of the amount of
undistributed capital gains included in the shareholder's income.  Organizations
or persons not subject to US federal  income tax on such  capital  gains will be
entitled to a refund of their pro rata share of such taxes paid by the Fund upon
filing appropriate returns or claims for refund with the IRS.

The Code imposes a 4% nondeductible excise tax on the Fund to the extent it does
not  distribute  by the end of any  calendar  year at least 98% of its  ordinary
income  for that  year and at least 98% of its  capital  gain net  income  (both
long-term and short-term) for the one-year period ending,  as a general rule, on
October 31 of that year.  For this  purpose,  however,  any  ordinary  income or
capital gain net income retained by the Fund that is subject to corporate income
tax will be considered to have been  distributed by year-end.  In addition,  the
minimum  amounts  that must be  distributed  in any year to avoid the excise tax
will  be   increased  or   decreased   to  reflect  any   underdistribution   or

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<PAGE>

overdistribution,  as the case may be,  from the  previous  year.  Although  the
Fund's distribution policies should enable it to avoid excise tax liability, the
Fund may  retain,  and be  subject  to income or excise tax on, a portion of its
capital gains or other income if it appears to be in the interest of the Fund.

If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal  income tax at regular  corporate  rates (without any
deduction for distributions to its  shareholders),  and all  distributions  from
earnings and profits,  including any  distributions of net tax-exempt income and
net  long-term  capital  gains,  would be taxable to  shareholders  as  ordinary
income.  Such  distributions  would be eligible  (i) to be treated as  qualified
dividend  income in the case of  shareholders  taxed as individuals and (ii) for
the  dividends  received  deduction  in the case of corporate  shareholders.  In
addition,  the  Fund  could be  required  to  recognize  unrealized  gains,  pay
substantial  taxes  and  interest  and  make  substantial  distributions  before
requalifying  as a regulated  investment  company  that is accorded  special tax
treatment.

Taxation of Fund Distributions

Distributions  from  the Fund  generally  will be  taxable  to  shareholders  as
ordinary income to the extent derived from investment  income and net short-term
capital  gains.  Distributions  of net capital gains (that is, the excess of net
gains  from the sale of capital  assets  held more than one year over net losses
from the sale of  capital  assets  held for not  more  than one  year)  properly
designated  as  capital  gain  dividends  will be  taxable  to  shareholders  as
long-term capital gain, regardless of how long a shareholder has held the shares
in the Fund.

Long-term  capital gain rates  applicable to individuals  have been  temporarily
reduced -- in general, to 15% with a lower rate applying to taxpayers in the 10%
and 15% rate brackets -- for taxable years beginning before January 1, 2011.

For taxable years beginning before January 1, 2011,  "qualified dividend income"
received by an  individual  will be taxed at the rates  applicable  to long-term
capital gain assuming certain holding period and other requirements are met. For
this purpose,  "qualified dividend income" generally means income from dividends
received by the Fund from US corporations  and qualified  foreign  corporations,
provided that the Fund satisfies certain holding period  requirements in respect
of the stock of such  corporations  and has not hedged its position in the stock
in certain  ways.  However,  qualified  dividend  income  does not  include  any
dividends received from tax exempt corporations. Also, dividends received by the
Fund from a real estate investment trust or another regulated investment company
generally  are  qualified  dividend  income  only  to the  extent  the  dividend
distributions  are made out of qualified  dividend  income received by such real
estate investment trust or other regulated  investment  company.  In the case of
securities lending transactions, payments in lieu of dividends are not qualified
dividend income.  If a shareholder  elects to treat Fund dividends as investment
income  for  purposes  of the  limitation  on the  deductibility  of  investment
interest, such dividends would not be a qualified dividend income. The Fund does
not expect to generate substantial amounts of qualified dividend income.

Capital gains  distributions  may be reduced if Fund capital loss  carryforwards
are  available.  Any  capital  loss  carryforwards  and  any  post-October  loss
deferrals to which the Fund is entitled are  disclosed in the Fund's  annual and
semi-annual reports to shareholders.

All  distributions  by the Fund result in a reduction  in the net asset value of
the Fund's  shares.  Should a  distribution  reduce the net asset  value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above,  even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular,  investors  should be careful to consider  the tax  implications  of
buying  shares just prior to a  distribution.  The price of shares  purchased at
that time includes the amount of the forthcoming distribution.  Those purchasing
just prior to a  distribution  will receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.

The Fund is permitted to pay "exempt-interest  dividends" to its shareholders in
any year that,  at the close of each  quarter,  at least 50% of the value of the
Fund's  assets  consists  of  obligations  the  interest on which is exempt from
federal  income  tax.   Distributions  that  the  Fund  properly  designates  as
exempt-interest  dividends are generally


                                       92
<PAGE>

treated as interest  excludable from the shareholders'  gross income for federal
income tax purposes;  exempt-interest  dividends  may,  however,  be taxable for
alternative  minimum  tax  purposes.   If  the  Fund  were  to  qualify  to  pay
exempt-interest  dividends,  it would be required to inform its  shareholders of
the percentage of its distributions  that qualify as  exempt-interest  dividends
within  60 days of its  fiscal  year end.  The Fund  does not  expect to pay any
exempt-interest dividends.

Sale or  redemption of shares.  The sale,  exchange or redemption of Fund shares
may give rise to a gain or loss.  In general,  any gain or loss  realized upon a
taxable  disposition of shares will be treated as long-term capital gain or loss
if the shares have been held for more than one year. Otherwise, the gain or loss
on the taxable  disposition of Fund shares will be treated as short-term capital
gain or loss.  However,  any loss realized upon a taxable  disposition of shares
held  for six  months  or  less  will  be  treated  as  long-term,  rather  than
short-term,  to the extent of any long-term capital gain distributions  received
(or deemed  received) by the  shareholder  with respect to the shares.  All or a
portion of any loss realized upon a taxable  disposition  of Fund shares will be
disallowed  if other  substantially  identical  shares of the Fund are purchased
within 30 days before or after the disposition. In such a case, the basis of the
newly purchased shares will be adjusted to reflect the disallowed loss.

If any dividends from domestic  corporations  constitute a portion of the Fund's
gross income, a portion of the income  distributions of the Fund may be eligible
for the 70% deduction for dividends  received by corporations  assuming  certain
holding period and other  requirements are met. The Fund does not expect to earn
a substantial amount of dividend income.

Foreign  Taxation.  Foreign  withholding  or other foreign taxes with respect to
income  (possibly  including,  in some cases,  capital gains) on certain foreign
securities may occur.  These taxes may be reduced or eliminated  under the terms
of an applicable US income tax treaty.  As it is not expected that more than 50%
of the value of the Fund's  total assets will  consist of  securities  issued by
foreign corporations,  the Fund will not be eligible to pass through to the Fund
and its shareholders their  proportionate  share of any foreign taxes paid, with
the result that shareholders will not be able to include in income, and will not
be entitled to take any credits or deductions for such foreign taxes.

Tax Effects of Certain Transactions

The Fund's use of  options,  futures  contracts  and forward  contracts  (to the
extent   permitted)   will  be   subject  to   special   tax  rules   (including
mark-to-market,  constructive  sale,  straddle,  wash sale, short sale and other
rules),  the effect of which may be to accelerate  income,  defer losses,  cause
adjustments  in the holding  periods of portfolio  securities,  convert  capital
gains into ordinary income and convert  short-term capital losses into long-term
capital  losses.  These rules  could  therefore  affect the  amount,  timing and
character of distributions  to investors.  These rules also (a) will require the
Fund to  mark-to-market  certain types of the positions in its portfolio  (i.e.,
treat them as if they were closed out at the end of each year) and (b) may cause
the Fund to recognize income without  receiving cash with which to pay dividends
or  make   distributions  in  amounts  necessary  to  satisfy  the  distribution
requirements  for avoiding  income and excise  taxes.  The Fund will monitor its
transactions,  make the  appropriate  tax  elections  and  make the  appropriate
entries in its books and records in order to mitigate  the effect of these rules
and prevent disqualification of the Fund as a regulated investment company.

Transactions in foreign currencies, foreign investment currency-denominated debt
securities and certain foreign  currency  options,  futures  contracts,  forward
contracts and similar  instruments  (to the extent  permitted)  may give rise to
ordinary  income  or  loss to the  extent  such  income  or  loss  results  from
fluctuations in the value of the foreign currency concerned.

The Fund's  investment in so-called  "section 1256 contracts," such as regulated
futures  contracts,  most  foreign  currency  forward  contracts  traded  in the
interbank  market and options on most stock indices,  are subject to special tax
rules.  All section  1256  contracts  held by the Fund at the end of its taxable
year are required to be marked to their market value, and any unrealized gain or
loss on  those  positions  will be  included  in the  Fund's  income  as if each
position had been sold for its fair market value at the end of the taxable year.
The  resulting  gain or loss will be combined  with any gain or loss realized by
the Fund from  positions in section  1256  contracts  closed  during the taxable
year. Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of


                                       93
<PAGE>

such  net gain or loss  will be  treated  as  short-term  capital  gain or loss,
regardless of the period of time the positions were actually held by the Fund.

As a result  of  entering  into  swap  contracts,  the Fund may make or  receive
periodic net  payments.  The Fund may also make or receive a payment when a swap
is  terminated  prior to  maturity  through an  assignment  of the swap or other
closing  transaction.  Periodic net payments will generally  constitute ordinary
income or  deductions,  while  termination  of a swap will  generally  result in
capital gain or loss (which will be a long-term capital gain or loss if the Fund
has been a party to the swap for more than one year).  The tax treatment of many
types of credit default swaps is uncertain.

The Fund's  investment  in zero coupon bonds and other debt  obligations  having
original issue  discount may cause the Fund to recognize  recognition of taxable
income in excess of any cash received from the investment.

Certain types of income received by the Fund from real estate investment trusts,
REMICs,  taxable  mortgage  pools or other  investments  may  cause  the Fund to
designate some or all of its distributions as "excess inclusion income." To Fund
shareholders such excess inclusion income may (1) constitute  taxable income, as
UBTI for those shareholders who would otherwise be tax-exempt such as individual
retirement  accounts,  401(k) accounts,  Keogh plans,  pension plans and certain
charitable  entities;  (2) not be offset  against net  operating  losses for tax
purposes; (3) not be eligible for reduced US withholding for non-US shareholders
even from tax treaty  countries;  and (4) cause the Fund to be subject to tax if
certain   "disqualified   organizations"   as  defined  by  the  Code  are  Fund
shareholders.

In  addition,  a  tax-exempt  shareholder  could  realize  UBTI by virtue of its
investment in the Fund if shares in the Fund constitute  debt-financed  property
in the hands of the tax-exempt  shareholder within the meaning of Section 514(b)
of the Code. If a charitable  remainder  trust (as defined in Section 664 of the
Code) realizes any UBTI for a taxable year, it will lose its  tax-exempt  status
for the year.

Other Tax Considerations

Under the backup withholding provisions of the Code, redemption proceeds as well
as  distributions  may be subject to federal income tax  withholding for certain
shareholders,  including  those who fail to furnish the Fund with their taxpayer
identification  numbers  and  certifications  as to their  tax  status.  Certain
shareholders are exempt from backup  withholding.  Backup  withholding is not an
additional tax and any amount  withheld may be credited  against a shareholder's
US Federal income tax liability.

Shareholders   of  the  Fund  may  be  subject  to  state  and  local  taxes  on
distributions received from the Fund and on redemptions of the Fund's shares.

Special tax rules apply to investments  through defined  contribution  plans and
other  tax-qualified  plans.  Shareholders  should consult their tax advisers to
determine the  suitability  of shares of the Fund as an investment  through such
plans and the precise effect of an investment on their particular tax situation.

If a  shareholder  recognizes  a loss with  respect to the  Fund's  shares of $2
million  or more for an  individual  shareholder  or $10  million  or more for a
corporate  shareholder,  the  shareholder  must file  with the IRS a  disclosure
statement on Form 8886. Direct shareholders of portfolio  securities are in many
cases  excepted from this  reporting  requirement,  but under current  guidance,
shareholders of a regulated investment company are not excepted. The fact that a
loss  is  reportable   under  these   regulations  does  not  affect  the  legal
determination  of  whether  the  taxpayer's  treatment  of the  loss is  proper.
Shareholders should consult their tax advisors to determine the applicability of
these regulations in light of their individual circumstances.

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor the Fund will be liable for any income or franchise tax in
the Commonwealth of  Massachusetts,  provided that the Fund continues to qualify
as a regulated  investment  company under  Subchapter M of the Code (and, in the
case of the Trust,  provided that each of its other series  continues to qualify
as a regulated investment company under Subchapter M of the Code).

                                       94
<PAGE>

Non-US Shareholders

Taxation of  dividends  paid by the Fund to non-US  shareholders  are  generally
subject  to  withholding  tax at a 30% rate or a reduced  rate  specified  by an
applicable  income tax treaty to the extent derived from  investment  income and
short-term  capital gains. In order to obtain a reduced rate of  withholding,  a
non-US shareholder will be required to provide an IRS Form W-8BEN certifying its
entitlement to benefits under a treaty.  The  withholding  tax does not apply to
regular  dividends  paid to a non-US  shareholder  who  provides a Form  W-8ECI,
certifying  that  the  dividends  are  effectively  connected  with  the  non-US
shareholder's conduct of a trade or business within the United States.  Instead,
the effectively  connected dividends will be subject to regular US income tax as
if the non-US shareholder were a US shareholder.  A non-US corporation receiving
effectively  connected  dividends  may also be  subject  to  additional  "branch
profits  tax"  imposed  at a rate of 30%  (or a lower  treaty  rate).  A  non-US
shareholder who fails to provide an IRS Form W-8BEN or other applicable form may
be subject to backup withholding at the appropriate rate.

In general,  United States federal withholding tax will not apply to any gain or
income realized by a non-US  shareholder in respect of any  distributions of net
long-term  capital gains over net  short-term  capital  losses,  exempt-interest
dividends, or upon the sale or other disposition of shares of the Fund.

For  taxable  years  beginning  before  January  1,  2008,   properly-designated
dividends are generally exempt from United States federal  withholding tax where
they (i) are paid in respect  of the  Fund's  "qualified  net  interest  income"
(generally,  the Fund's US source interest income, other than certain contingent
interest and interest from  obligations of a corporation or partnership in which
the Fund is at least a 10%  shareholder,  reduced by expenses that are allocable
to such income) or (ii) are paid in respect of the Fund's "qualified  short-term
capital gains" (generally,  the excess of the Fund's net short-term capital gain
over  the  Fund's  long-term  capital  loss  for such  taxable  year).  However,
depending on its circumstances,  the Fund may designate all, some or none of its
potentially  eligible  dividends as such  qualified  net  interest  income or as
qualified short-term capital gains, and/or treat such dividends,  in whole or in
part, as ineligible for this exemption from withholding. In order to qualify for
this exemption from withholding,  a non-US  shareholder will need to comply with
applicable certification  requirements relating to its non-US status (including,
in general,  furnishing an IRS Form W-8BEN or substitute  Form).  In the case of
shares held through an  intermediary,  the intermediary may withhold even if the
Fund  designates  the payment as  qualified  net  interest  income or  qualified
short-term capital gain. Non-US shareholders should contact their intermediaries
with respect to the application of these rules to their accounts.

Every non-US shareholder is urged to consult his own tax advisor with respect to
the application of this legislation to his own circumstances.

The  foregoing  is  only a  summary  of  certain  material  federal  income  tax
consequences affecting the Fund. Prospective shareholders are advised to consult
their Plan  documents and their own tax advisers with respect to the  particular
tax consequences to them of an investment in the Fund.

                                 NET ASSET VALUE

The net asset value of Shares of the Fund is computed as of the close of regular
trading on the New York Stock Exchange ("the Exchange") on each day the Exchange
is open for trading (the "Value  Time").  The Exchange is scheduled to be closed
on the following  holidays:  New Year's Day, Dr.  Martin  Luther King,  Jr. Day,
Presidents'  Day,  Good  Friday,  Memorial  Day,  Independence  Day,  Labor Day,
Thanksgiving  and Christmas,  and on the preceding  Friday or subsequent  Monday
when one of these  holidays  falls on a Saturday  or Sunday,  respectively.  Net
asset  value  per share is  determined  separately  for each  class of shares by
dividing the value of the total assets of the Fund attributable to the shares of
that class, less all liabilities attributable to that class, by the total number
of shares of that class outstanding.  The per share net asset value may be lower
for  certain  classes  of the Fund  because  of higher  expenses  borne by these
classes.

An equity  security is valued at its most  recent  sale price on the  security's
primary  exchange  or  over-the-counter  ("OTC")  market as of the  Value  Time.
Lacking any sales,  the  security is valued at the  calculated  mean between the

                                       95
<PAGE>

most recent bid quotation and the most recent asked  quotation (the  "Calculated
Mean")  on such  exchange  or OTC  market  as of the  Value  Time.  If it is not
possible to determine the  Calculated  Mean,  the security is valued at the most
recent bid quotation on such exchange or OTC market as of the Value Time. In the
case of certain foreign exchanges or OTC markets,  the closing price reported by
the exchange or OTC market  (which may sometimes be referred to as the "official
close" or the "official closing price" or other similar term) will be considered
the most recent sale price.

Debt securities are valued as follows.  Money market instruments  purchased with
an  original or  remaining  maturity  of 60 days or less,  maturing at par,  are
valued at amortized  cost.  Other money market  instruments  are valued based on
information  obtained from an approved  pricing agent or, if such information is
not readily  available,  by using  matrix  pricing  techniques  (formula  driven
calculations based primarily on current market yields). Bank loans are valued at
prices supplied by an approved  pricing agent (which are intended to reflect the
mean between the bid and asked prices), if available,  and otherwise at the mean
of the most recent bid and asked quotations or evaluated  prices, as applicable,
based  on   quotations   or  evaluated   prices   obtained   from  one  or  more
broker-dealers.  Privately  placed  debt  securities,  other than Rule 144A debt
securities,  initially are valued at cost and  thereafter  based on all relevant
factors  including  type  of  security,  size of  holding  and  restrictions  on
disposition.  Municipal  debt  securities  are valued at prices  supplied  by an
approved  pricing  agent (which are intended to reflect the mean between the bid
and asked  prices),  if available,  and otherwise at the mean of the most recent
bid and asked quotations or evaluated price obtained from a broker-dealer. Other
debt securities not addressed above are valued at prices supplied by an approved
pricing agent,  if available,  and otherwise at the most recent bid quotation or
evaluated price, as applicable, obtained from one or more broker-dealers.  If it
is not  possible  to value a  particular  debt  security  pursuant  to the above
methods,  the  security  is valued on the basis of  factors  including  (but not
limited to) maturity, coupon,  creditworthiness,  currency denomination, and the
movement of the market in which the security is normally traded.

An exchange-traded option contract on securities, currencies and other financial
instruments  is valued at its most recent sale price on the  relevant  exchange.
Lacking any sales,  the option contract is valued at the Calculated  Mean. If it
is not possible to determine the Calculated  Mean, the option contract is valued
at the most recent bid quotation in the case of a purchased  option  contract or
the most recent asked  quotation in the case of a written  option  contract,  in
each case as of the Value Time. An option contract on securities, currencies and
other financial instruments traded in the OTC market is valued on the Value Date
at the evaluated price provided by the  broker-dealer  with which it was traded.
Futures contracts (and options thereon) are valued at the most recent settlement
price, if available,  on the exchange on which they are traded most extensively.
With the exception of stock index futures  contracts  which trade on the Chicago
Mercantile Exchange,  closing settlement times are prior to the close of trading
on the  Exchange.  For stock index futures  contracts  that trade on the Chicago
Mercantile  Exchange,  closing  settlement  prices  are  normally  available  at
approximately  4:20 p.m. Eastern time. If no settlement price is available,  the
last traded price on such  exchange  will be used.  If market  quotations  for a
portfolio  asset are not readily  available or the value of a portfolio asset as
determined in accordance with  Board-approved  procedures does not represent the
fair market value of the portfolio  asset,  the value of the portfolio  asset is
taken to be an amount which, in the opinion of the Fund's Pricing Committee (or,
in some cases, the Board's Valuation  Committee),  represents fair market value.
The  value of other  portfolio  holdings  owned by the Fund is  determined  in a
manner which is intended to fairly reflect the fair market value of the asset on
the valuation date,  based on valuation  procedures  adopted by the Fund's Board
and overseen primarily by the Fund's Pricing Committee.

                              TRUSTEES AND OFFICERS


The following table presents certain information  regarding the Board Members of
the Trust.  Each Board Member's year of birth is set forth in parentheses  after
his or her name.  Unless  otherwise  noted, (i) each Board Member has engaged in
the principal occupation(s) noted in the table for at least the most recent five
years,  although not  necessarily in the same capacity,  and (ii) the address of
each Board  Member  that is not an  "interested  person" (as defined in the 1940
Act) of the Trust or the Advisor (each, an "Independent  Board Member"),  is c/o
Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for
each Board  Member is until the election and  qualification  of a successor,  or
until  such Board  Member  sooner  dies,  resigns,  is  removed or as  otherwise
provided in the governing documents of the Trust. Because the Fund does not hold
an annual  meeting of  shareholders,  each Board  Member will hold office for an
indeterminate  period.  The Board  Members may also serve


                                       96
<PAGE>

in similar  capacities  with other funds in the DWS fund complex.  The Length of
Time Served  represents  the year in which the Board Member  joined the board of
one or more DWS funds now overseen by the Board.

Independent Board Members

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                        <C>                                                                          <C>
Dawn-Marie Driscoll (1946) President, Driscoll Associates (consulting firm); Executive Fellow,          76
Chairperson since 2006     Center for Business Ethics, Bentley College; formerly, Partner,
Board Member since         Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and
1987                       General Counsel, Filene's (1978-1988). Directorships: Trustee of 8
                           open-end mutual funds managed by Sun Capital Advisers, Inc. (since
                           2007); Director of ICI Mutual Insurance Company (since 2007);
                           Advisory Board, Center for Business Ethics, Bentley College;
                           Trustee, Southwest Florida Community Foundation (charitable
                           organization); Former Directorships: Investment Company Institute
                           (audit, executive, nominating committees) and Independent Directors
                           Council (governance, executive committees)
--------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr.      Vice Chair, WGBH Educational Foundation. Directorships: Association          76
 (1943)                    of Public Television Stations; Becton Dickinson and Company (1)
 Board Member since        (medical technology company); Belo Corporation (1) (media company);
 1990                      Boston Museum of Science; Public Radio International. Former
                           Directorships: American Public Television; Concord Academy; New
                           England Aquarium; Mass. Corporation for Educational
                           Telecommunications; Committee for Economic Development; Public
                           Broadcasting Service
--------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)        Managing General Partner, Exeter Capital Partners (a series of               76
Board Member since         private equity funds). Directorships: Progressive Holding
1996                       Corporation (kitchen goods importer and distributor); Natural
                           History, Inc. (magazine publisher); Box Top Media Inc.
                           (advertising); The Kennel Shop (retailer)
--------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss        Clinical Professor of Finance, NYU Stern School of Business                  76
(1945)                     (1997-present); Member, Finance Committee, Association for Asian
Board Member since         Studies (2002-present); Director, Mitsui Sumitomo Insurance Group
2001                       (US) (2004-present); prior thereto, Managing Director, J.P. Morgan
                           (investment banking firm) (until 1996)
--------------------------------------------------------------------------------------------------------------------
Martin J. Gruber           Nomura Professor of Finance, Leonard N. Stern School of Business,            76
(1937)                     New York University (since September 1965); Director, Japan Equity
Board Member since         Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since
1999                       January 2000), Singapore Fund, Inc. (since January 2000), National
                           Bureau of Economic Research (since January 2006). Formerly, Trustee,
                           TIAA (pension funds) (January 1996-January 2000); Trustee, CREF and
                           CREF Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF
                           Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen
                           Mutual Funds (January 1985-January 2001)
--------------------------------------------------------------------------------------------------------------------

                                       97
<PAGE>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
--------------------------------------------------------------------------------------------------------------------
Richard J. Herring         Jacob Safra Professor of International Banking and Professor,                76
(1946)                     Finance Department, The Wharton School, University of Pennsylvania
Board Member since         (since July 1972); Co-Director, Wharton Financial Institutions
1999                       Center (since July 2000); Director, Japan Equity Fund, Inc. (since
                           September 2007), Thai Capital Fund, Inc. (since September 2007),
                           Singapore Fund, Inc. (since September 2007). Formerly, Vice Dean and
                           Director, Wharton Undergraduate Division (July 1995-June 2000);
                           Director, Lauder Institute of International Management Studies (July
                           2000-June 2006)
--------------------------------------------------------------------------------------------------------------------
Graham E. Jones            Senior Vice President, BGK Realty, Inc. (commercial real estate)             76
(1933)                     (since 1995). Formerly, Trustee of various investment companies
Board Member since         managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley
2002                       Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005)
--------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel           President and Chief Executive Officer, The Pew Charitable Trusts             76
(1951)                     (charitable organization) (1994 to present); Trustee, Thomas
Board Member since         Jefferson Foundation (charitable organization) (1994 to present);
2002                       Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001
                           to present). Formerly, Executive Vice President, The Glenmede Trust
                           Company (investment trust and wealth management) (1983 to 2004);
                           Board Member, Investor Education (charitable organization)
                           (2004-2005); Director, Viasys Health Care(1) (January 2007-June 2007)
--------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.     Private investor since October 2003; Trustee of 8 open-end mutual            76
(1946)                     funds managed by Sun Capital Advisers, Inc. (since October 1998).
Board Member since         Formerly, Pension & Savings Trust Officer, Sprint Corporation((1))
2002                       (telecommunications) (November 1989-September 2003)
--------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg     Retired. Formerly, Consultant (1997-2001); Director, US Government           76
(1943)                     Accountability Office (1996-1997); Partner, Fulbright & Jaworski,
Board Member since         L.L.P. (law firm) (1978-1996). Directorships: The William and Flora
1997                       Hewlett Foundation; Service Source, Inc. Former Directorships:
                           Mutual Fund Directors Forum (2002-2004), American Bar Retirement
                           Association (funding vehicle for retirement plans) (1987-1990 and
                           1994-1996)
--------------------------------------------------------------------------------------------------------------------
Carl W. Vogt               Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm);             74
(1936)                     formerly, President (interim) of Williams College (1999-2000);
Board Member since         formerly, President of certain funds in the Deutsche Asset
2006                       Management family of funds (formerly, Flag Investors family of
                           funds) (registered investment companies) (1999-2000). Directorships:
                           Yellow Corporation (trucking); American Science & Engineering (x-ray
                           detection equipment). Former Directorships: ISI Family of Funds
                           (registered investment companies, 4 funds overseen); National
                           Railroad Passenger Corporation (Amtrak) Waste Management, Inc.
                           (solid waste disposal); formerly, Chairman and Member, National
                           Transportation Safety Board
--------------------------------------------------------------------------------------------------------------------

                                       98
<PAGE>

Interested Board Member

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
--------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(2)         Managing Director(4), Deutsche Asset Management; Head of Deutsche            82
 (1958)                    Asset Management Americas; CEO of DWS Scudder; formerly board member
 Board Member since        of DWS Investments, Germany (1999-2005); formerly, Head of Sales and
 2006                      Product Management for the Retail and Private Banking Division of
                           Deutsche Bank in Germany (1997-1999); formerly, various strategic
                           and operational positions for Deutsche Bank Germany Retail and
                           Private Banking Division in the field of investment funds, tax
                           driven instruments and asset management for corporates (1989-1996)
--------------------------------------------------------------------------------------------------------------------

Officers(3)
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(5)        Managing Director(4), Deutsche Asset Management (2006-present); President of DWS
 (1965)                     family of funds; Director, ICI Mutual Insurance Company (since October 2007);
 President, 2006-present    formerly, Director of Fund Board Relations (2004-2006) and Director of Product
                            Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President
                            Operations, Merrill Lynch Asset Management (1999-2000)
--------------------------------------------------------------------------------------------------------------------
 John Millette(6) (1962)    Director(4), Deutsche Asset Management
 Vice President and
 Secretary, 2003-present
--------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(5)        Managing Director(4), Deutsche Asset Management (since July 2004); formerly,
 (1963)                     Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of
 Chief Financial Officer,   Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global
 2004-present               Asset Management (1994-1998)
 Treasurer, 2005-present
--------------------------------------------------------------------------------------------------------------------
 Patricia DeFilippis(5)     Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New
 (1963)                     York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co.
 Assistant Secretary,       LLC (1998-2003)
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Elisa D. Metzger(5)        Director(4), Deutsche Asset Management (since September 2005); formerly, Counsel,
 (1962)                     Morrison and Foerster LLP (1999-2005)
 Assistant Secretary,
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(6)        Managing Director(4), Deutsche Asset Management
 (1962)
 Assistant Secretary,
 2002-present
--------------------------------------------------------------------------------------------------------------------
 Paul Antosca(6)            Director(4), Deutsche Asset Management (since 2006); formerly, Vice President, The
 (1957)                     Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------

                                       99
<PAGE>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Jack Clark (6)             Director(4), Deutsche Asset Management (since 2007); formerly, Vice President, State
 (1967)                     Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Kathleen Sullivan          Director(4), Deutsche Asset Management
 D'Eramo(6)
 (1957)
 Assistant Treasurer,
 2003-present
--------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(6)         Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(5) (1972)    Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
 Anti-Money Laundering      Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations
 Compliance Officer,        Manager for AXA Financial (1999-2004)
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(5) (1962)     Managing Director(4), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance           Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The
 Officer, 2006-present      Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company
                            (1984-1988)
--------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(5)  Director(4), Deutsche Asset Management (2006-present); formerly, Director, Senior
 (1951)                     Vice President, General Counsel, and Assistant Secretary, Hansberger Global
 Chief Legal Officer,       Investors, Inc. (1996-2006); Director, National Society of Compliance Professionals
 2006-present               (2002-2005)(2006-2009)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      A publicly held company with securities  registered pursuant to Section
         12 of the Securities Exchange Act of 1934.

(2)      The  mailing  address  of Axel  Schwarzer  is c/o  Deutsche  Investment
         Management  Americas Inc.,  345 Park Avenue,  New York, New York 10154.
         Mr.  Schwarzer is an interested Board Member by virtue of his positions
         with Deutsche Asset Management.  As an interested person, Mr. Schwarzer
         receives no compensation from the Funds.

(3)      As a result of their respective positions held with the Advisor,  these
         individuals are considered  "interested  persons" of the Advisor within
         the meaning of the 1940 Act. Interested persons receive no compensation
         from the Funds.

(4)      Executive title, not a board directorship.

(5)      Address:  345 Park Avenue, New York, New York 10154.

(6)      Address: Two International Place, Boston, Massachusetts 02110.

Each Officer also holds  similar  positions for other  investment  companies for
which DIMA or an affiliate serves as the advisor.

                                      100
<PAGE>

Officer's Role with Principal Underwriter:  DWS Scudder Distributors, Inc.

 Paul H. Schubert:                         Vice President
 Caroline Pearson:                         Secretary

Information Concerning Committees and Meetings of Board Members

The  Board of the  Trust met ten (10)  times  during  the  calendar  year  ended
December 31, 2007 and each Board Member attended at least 80% of the meetings of
the Board and meetings of the committees of the Board on which such Board Member
served.

Board  Committees.  Ms.  Driscoll  has served as Chair of the Board of the Funds
since May 2006.

The Board has established the following  standing  committees:  Audit Committee,
Nominating/Corporate Governance Committee, Valuation Committee, Equity Oversight
Committee, Fixed Income Oversight Committee,  Marketing/Distribution/Shareholder
Service Committee,  Legal/Regulatory/Compliance Committee and Expense/Operations
Committee.

The Audit  Committee  assists the Board in  fulfilling  its  responsibility  for
oversight of the quality and integrity of the accounting, auditing and financial
reporting  practices  of the  applicable  Fund.  It also  makes  recommendations
regarding the selection of an independent  registered public accounting firm for
a Fund,  reviews the  independence of such firm,  reviews the scope of audit and
internal  controls,  considers and reports to the Board on matters relating to a
Fund's  accounting and financial  reporting  practices,  and performs such other
tasks as the full Board deems  necessary  or  appropriate.  The Audit  Committee
receives  annual   representations   from  the  independent   registered  public
accounting firm as to its  independence.  The members of the Audit Committee are
Keith R. Fox (Chair and Audit Committee Financial Expert),  Kenneth C. Froewiss,
Richard J. Herring, William N. Searcy, Jr. and Jean Gleason Stromberg. The Audit
Committee held nine (9) meetings during the calendar year 2007.

The  Nominating/Corporate  Governance  Committee  (i)  recommends  to the  Board
candidates  to serve as Board  Members and (ii)  oversees  and, as  appropriate,
makes  recommendations  to the Board  regarding  other  fund  governance-related
matters,  including but not limited to Board compensation practices,  retirement
policies,  self-evaluations  of effectiveness,  review of possible  conflicts of
interest  and  independence  issues  involving  Board  Members,  allocations  of
assignments  and  functions  of  committees  of the Board,  and share  ownership
policies. The members of the Nominating/Corporate Governance Committee are Henry
P.  Becton,  Jr.  (Chair),  Graham E. Jones,  Rebecca W. Rimel and Jean  Gleason
Stromberg.  The  Nominating/Corporate  Governance Committee (previously known as
the  Committee on  Independent  Directors)  held three (3)  meetings  during the
calendar year 2007.

The Valuation  Committee  oversees Fund  valuation  matters,  reviews  valuation
procedures  adopted  by the  Board,  determines  the fair  value  of the  Fund's
securities as needed in accordance  with the valuation  procedures  and performs
such other tasks as the full Board deems necessary or  appropriate.  The members
of the Valuation Committee are Keith R. Fox, Kenneth C. Froewiss (Chair), Martin
J.  Gruber and Richard J.  Herring.  The  Valuation  Committee  held  [number of
meetings varies by fund -- minimum 6] meetings during the calendar year 2007.

The Board has established two Investment Oversight  Committees,  one focusing on
Funds  primarily   investing  in  equity   securities  (the  "Equity   Oversight
Committee")  and one  focusing  on Funds  primarily  investing  in fixed  income
securities  (the "Fixed Income  Oversight  Committee").  These  Committees  meet
regularly with Fund portfolio managers and other investment  personnel to review
the relevant  Funds'  investment  strategies  and  investment  performance.  The
members of the Equity  Oversight  Committee are Henry P. Becton,  Jr., Martin J.
Gruber  (Chair),  Richard J.  Herring,  Rebecca  W. Rimel and Carl W. Vogt.  The
members of the Fixed Income Oversight Committee are Dawn-Marie  Driscoll,  Keith
R. Fox, Kenneth C. Froewiss, Graham E. Jones, William N. Searcy, Jr. (Chair) and
Jean  Gleason  Stromberg.  Each  Investment  Oversight  Committee  held  six (6)
meetings during the calendar year 2007.

The  Marketing/Distribution/Shareholder   Service  Committee  oversees  (i)  the
quality, costs and types of shareholder services provided to the Funds and their
shareholders,  and (ii) the distribution-related  services provided


                                      101
<PAGE>

to   the    Funds    and    their    shareholders.    The    members    of   the
Marketing/Distribution/Shareholder  Service  Committee  are  Martin  J.  Gruber,
Richard J. Herring (Chair), Rebecca W. Rimel, Jean Gleason Stromberg and Carl W.
Vogt. The  Marketing/Distribution/Shareholder  Service  Committee held seven (7)
meetings during the calendar year 2007.

The  Legal/Regulatory/Compliance  Committee  oversees (i) the significant  legal
affairs of the Funds, including the handling of pending or threatened litigation
or  regulatory  action  involving  the Funds,  (ii) general  compliance  matters
relating   to  the  Funds  and  (iii)   proxy   voting.   The   members  of  the
Legal/Regulatory/Compliance  Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie
Driscoll,  Rebecca W. Rimel,  William N. Searcy, Jr., Jean Gleason Stromberg and
Carl W. Vogt (Chair).  The  Legal/Regulatory/Compliance  Committee  held six (6)
meetings during the calendar year 2007.

The Expense/Operations Committee (i) monitors the Fund's total operating expense
levels,  (ii)  oversees the  provision of  administrative  services to the Fund,
including the Fund's custody,  fund accounting and insurance  arrangements,  and
(iii) reviews the Fund's investment advisers' brokerage practices, including the
implementation  of  related  policies.  The  members  of the  Expense/Operations
Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie  Driscoll,  Keith R. Fox and
William  N.  Searcy,  Jr.  This  committee  held seven (7)  meetings  during the
calendar year 2007.

Ad Hoc Committees.  In addition to the standing committees described above, from
time to time the Board also forms ad hoc committees to consider specific issues.

Remuneration.  Each Independent Board Member receives compensation from the Fund
for his or her services, which includes an annual retainer and an attendance fee
for each meeting attended. No additional compensation is paid to any Independent
Board Member for travel time to meetings,  attendance at directors'  educational
seminars  or  conferences,   service  on  industry  or  association  committees,
participation  as speakers at directors'  conferences or service on special fund
industry director task forces or subcommittees. Independent Board Members do not
receive any employee  benefits such as pension or retirement  benefits or health
insurance from the Fund or any fund in the DWS fund complex.

Members of the Board who are officers,  directors,  employees or stockholders of
Deutsche Asset Management or its affiliates receive no direct  compensation from
a Fund, although they are compensated as employees of Deutsche Asset Management,
or its affiliates,  and as a result may be deemed to participate in fees paid by
the Funds.  The following tables show  compensation  from the Fund and aggregate
compensation  from all of the  funds in the DWS fund  complex  received  by each
Board Member during the calendar year 2007. Mr. Schwarzer became a member of the
Board on May 5,  2006,  is an  interested  person of the Funds and  received  no
compensation  from the  Funds or any fund in the DWS  fund  complex  during  the
relevant periods.

<TABLE>
<CAPTION>

                                      Aggregate Compensation         Total Compensation
                                     from DWS Short Duration           from Fund and
Name of Board Member                        Plus Fund                DWS Fund Complex(1)
--------------------                        ---------                -------------------

<S>                                           <C>                         <C>
Henry P. Becton, Jr.(3)(4)                    $2,008                      $200,000
Dawn-Marie Driscoll(2)(3)(4)                  $2,517                      $253,000
Keith R. Fox(3)(4)                            $2,029                      $203,000
Kenneth C. Froewiss(3)(4)                     $2,000                      $200,000
Martin J. Gruber(3)(4)                        $1,918                      $198,000
Richard J. Herring(3)(4)                      $1,933                      $195,000
Graham E. Jones(3)                            $2,079                      $207,000
Rebecca W. Rimel(3)(4)                        $1,884                      $194,000
William N. Searcy, Jr.(3)(4)                  $2,000                      $199,000
Jean Gleason Stromberg(3)(4)                  $1,870                      $200,000
Carl W. Vogt(3)(4)                            $1,946                      $194,000
</TABLE>

(1)      The DWS Fund Complex is composed of 138 funds as of December 31, 2007.

                                      102
<PAGE>

(2)      Includes  $50,000 in annual  retainer  fees in Ms.  Driscoll's  role as
         Chairperson of the Board.

(3)      For each Board Member, except Mr. Vogt, total compensation for calendar
         year 2007 includes  compensation,  as of December 31, 2007, for service
         on   the   boards   of   30   trusts/corporations   comprised   of   76
         funds/portfolios.  For Mr. Vogt total  compensation  for calendar  year
         2007   includes   compensation   for   service  on  the  boards  of  28
         trusts/corporations comprised of 74 funds/portfolios.

(4)      Aggregate  compensation  includes amounts paid to the Board Members for
         special  meetings of ad hoc committees of the board in connection  with
         the  possible  consolidation  of the various DWS Fund boards and funds,
         meetings for considering fund expense simplification  initiatives,  and
         consideration  of issues  specific  to the Funds'  direct  shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $1,000 for Mr. Becton, $1,000 for
         Ms. Driscoll,  $1,000 for Mr. Fox, $1,000 for Mr. Froewiss,  $5,000 for
         Mr. Gruber,  $1,000 for Dr. Herring,  $5,000 for Ms. Rimel,  $1,000 for
         Mr.  Searcy,  $1,000 for Ms.  Stromberg and $1,000 for Mr. Vogt.  These
         meeting fees were borne by the Advisor.

Board Member Ownership in the Fund

The  following  table shows the dollar range of equity  securities  beneficially
owned by each Board  Member in the Fund and DWS Fund  Complex as of December 31,
2007.

<TABLE>
<CAPTION>

                                          Dollar Range of Beneficial           Aggregate Dollar Range of
                                                   Ownership              Ownership in all Funds Overseen by
                                             in DWS Short Duration                   Board Member
Board Member                                       Plus Fund                 in the DWS Fund Complex((1))
------------                                       ---------                 ----------------------------

Independent Board Member:
-------------------------

<S>                                            <C>                                 <C>
Henry P. Becton, Jr.                           $10,001-$50,000                    Over $100,000
Dawn-Marie Driscoll                               $1-$10,000                      Over $100,000
Keith R. Fox                                         None                         Over $100,000
Kenneth C. Froewiss                            $10,001-$50,000                    Over $100,000
Martin J. Gruber                                     None                         Over $100,000
Richard J. Herring                                   None                         Over $100,000
Graham E. Jones                                      None                         Over $100,000
Rebecca W. Rimel                                     None                         Over $100,000
William N. Searcy, Jr.                               None                         Over $100,000
Jean Gleason Stromberg                               None                         Over $100,000
Carl W. Vogt                                         None                         Over $100,000

Interested Board Member:
------------------------

Axel Schwarzer                                       None                           Over $100,000
</TABLE>

(1)      Securities  beneficially  owned as defined  under the 1934 Act  include
         direct and/or indirect ownership of securities where the Board Member's
         economic interest is tied to the securities,  employment  ownership and
         securities  when the Board  Member can exert  voting power and when the
         Board Member has  authority to sell the  securities.  The dollar ranges
         are:  None,   $1-$10,000,   $10,001-$50,000,   $50,001-$100,000,   over
         $100,000.

                                      103
<PAGE>

Ownership in Securities of the Advisor and Related Companies

As  reported  to the Fund,  the  information  in the  following  table  reflects
ownership by the Independent Board Members and their immediate family members of
certain  securities as of December 31, 2007. An immediate family member can be a
spouse,  children  residing in the same  household  including  step and adoptive
children and any dependents.  The securities  represent ownership in the Advisor
or principal  underwriter  of the Fund and any persons  (other than a registered
investment company) directly or indirectly controlling,  controlled by, or under
common control with the Advisor or principal  underwriter of the Fund (including
Deutsche Bank AG).

<TABLE>
<CAPTION>

                                                                                   Value of        Percent of
                                   Owner and                                     Securities on     Class on an
Independent                     Relationship to                     Title of     an Aggregate       Aggregate
Board Member                      Board Member         Company        Class          Basis            Basis
------------                      ------------         -------        -----          -----            -----

<S>                               <C>                   <C>           <C>             <C>              <C>
Henry P. Becton, Jr.                                None
Dawn-Marie Driscoll                                 None
Keith R. Fox                                        None
Kenneth C. Froewiss                                 None
Martin J. Gruber                                    None
Richard J. Herring                                  None
Graham E. Jones                                     None
Rebecca W. Rimel                                    None
William N. Searcy, Jr.                              None
Jean Gleason Stromberg                              None
Carl W. Vogt                                        None

</TABLE>

                                      104
<PAGE>


                                      105
<PAGE>


                                      106
<PAGE>


                                      107
<PAGE>


                                      108
<PAGE>


                                      109
<PAGE>


                                      110
<PAGE>


                                      111
<PAGE>


Securities Beneficially Owned


As of January 8, 2008,  the Board Members and officers of the Trust owned,  as a
group, less than 1% of the outstanding shares of the Fund.

To the best of the Fund's  knowledge,  as of January 8, 2008, no person owned of
record or beneficially 5% or more of any class of the Fund's outstanding shares,
except as noted below.

<TABLE>
<CAPTION>

Name and Address of Investor Ownership                      Shares                                 % of Total Shares
--------------------------------------                      ------                                 -----------------

<S>                                                          <C>                            <C>
CHARLES SCHWAB & CO                                          13,308,955.94                  30.33% of Class A
MUTUAL FUNDS DEPT
SAN FRANCISCO CA  94104-4151

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   40,106.25                    6.24% of Class B
ATTN FUND ADMINISTRATION #97D64
JACKSONVILLE FL  32246-6484

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                 2,328,948.13                   15.59% of Class C
ATTN FUND ADMINISTRATION 9K551
JACKSONVILLE FL  32246-6484

MORGAN STANLEY & CO.                                         1,935,663.49                   12.96% of Class C
HARBORSIDE FINANCIAL CENTER PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311

CHARLES SCHWAB & CO                                          10,231,767.91                  11.19% of Class S
OMNIBUS ACCOUNT REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA  94104-4151
</TABLE>

                                      112
<PAGE>

Agreement to Indemnify Independent Trustees for Certain Expenses

In connection with litigation or regulatory  action related to possible improper
market timing or other improper trading activity or possible improper  marketing
and sales  activity  in the Funds,  each Fund's  investment  advisor has agreed,
subject to  applicable  law and  regulation,  to indemnify and hold harmless the
applicable  Funds  against  any and all loss,  damage,  liability  and  expense,
arising  from  market  timing or  marketing  and sales  matters  alleged  in any
enforcement actions brought by governmental authorities involving or potentially
affecting the Funds or the investment  advisor  ("Enforcement  Actions") or that
are the basis for private  actions  brought by shareholders of the Funds against
the Funds,  their directors and officers,  the Funds' investment  advisor and/or
certain other parties ("Private Litigation"), or any proceedings or actions that
may  be  threatened  or  commenced  in  the  future  by  any  person  (including
governmental authorities), arising from or similar to the matters alleged in the
Enforcement Actions or Private Litigation.  In recognition of its undertaking to
indemnify  the  applicable  Funds  and in  light of the  rebuttable  presumption
generally  afforded to independent  directors/trustees  of investment  companies
that they have not engaged in disabling conduct,  each Fund's investment advisor
has also agreed,  subject to  applicable  law and  regulation,  to indemnify the
applicable  Funds'   Independent   Trustees  against  certain   liabilities  the
Independent  Trustees  may incur from the  matters  alleged  in any  Enforcement
Actions or Private  Litigation or arising from or similar to the matters alleged
in the Enforcement Actions or Private Litigation,  and advance expenses that may
be  incurred by the  Independent  Trustees in  connection  with any  Enforcement
Actions  or  Private  Litigation.  The  applicable  investment  advisor  is not,
however,  required to provide  indemnification and advancement of expenses:  (1)
with respect to any  proceeding  or action with respect to which the  applicable
Fund's Board  determines that the Independent  Trustee  ultimately  would not be
entitled to indemnification or (2) for any liability of the Independent  Trustee
to the  Funds or their  shareholders  to which  the  Independent  Trustee  would
otherwise  be  subject  by reason  of  willful  misfeasance,  bad  faith,  gross
negligence  or  reckless  disregard  of the  Independent  Trustee's  duties as a
director or trustee of the Funds as determined in a final  adjudication  in such
action or proceeding.  The estimated amount of any expenses that may be advanced
to the Independent Trustees or indemnity that may be payable under the indemnity
agreements is currently  unknown.  These  agreements  by each Fund's  investment
advisor will survive the  termination  of the investment  management  agreements
between the applicable investment advisor and the Funds.



                                      113
<PAGE>

                               TRUST ORGANIZATION

The Fund is a series of DWS Advisor Funds (the "Trust"),  an open-end management
investment company. The Trust is a Massachusetts  business trust organized under
the laws of  Massachusetts  on July 21, 1986,  and is governed by an Amended and
Restated  Declaration of Trust that was approved by  shareholders  in the second
quarter of 2006, as may be further  amended from time to time (the  "Declaration
of Trust").  The Trust was organized under the name BT Tax-Free Investment Trust
and assumed its former name of BT Investment  Funds on May 16, 1988. The Trust's
name was  changed to Scudder  Advisor  Funds  effective  May 16, 2003 and to DWS
Advisor  Funds as of February 6, 2006.  All shares  issued and  outstanding  are
fully paid and non-assessable,  transferable,  have no pre-emptive or conversion
rights (except as may be determined by the Board of Trustees) and are redeemable
as described in the SAI and the Fund's  Prospectus.  Each share has equal rights
with each other  share of the same  class of the Fund as to  voting,  dividends,
exchanges, conversion features and liquidation. Shareholders are entitled to one
vote for each full share held and fractional votes for fractional shares held.

The Fund generally is not required to hold meetings of its  shareholders.  Under
the  Declaration  of  Trust,  however,  shareholder  meetings  will  be  held in
connection  with the  following  matters to the extent  and as  provided  in the
Declaration  of Trust and as required by  applicable  law:  (a) the  election or
removal of trustees if a meeting is called for such purpose; (b) the termination
of the Trust or the Fund; (c) an amendment of the Declaration of Trust;  and (d)
such  additional  matters  as may be  required  by  law or as the  Trustees  may
determine to be necessary or desirable.  Shareholders  also vote upon changes in
fundamental policies or restrictions.

The Declaration of Trust provides that shareholder  meeting quorum  requirements
shall be established  in the Trust's  By-laws.  The By-laws  currently in effect
provide that the presence in person or by proxy of the holders of thirty percent
of the shares entitled to vote at a meeting (or of an individual series or class
if required to vote separately) shall constitute a quorum for the transaction of
business at meetings of shareholders of the Trust.

On any  matter  submitted  to a vote of  shareholders,  all  shares of the Trust
entitled to vote shall,  except as otherwise provided in the Trust's By-Laws, be
voted in the aggregate as a single class without  regard to series or classes of
shares,  except (a) when required by applicable  law or when the Trustees  shall
have  determined that the matter affects one or more series or classes of shares
materially differently, shares shall be voted by individual series or class; and
(b) when the Trustees have determined that the matter affects only the interests
of one or more series or classes,  only  shareholders  of such series or classes
shall be entitled to vote thereon.

The  Declaration  of Trust  provides  that the  Board of  Trustees  may,  in its
discretion,  establish  minimum  investment  amounts for  shareholder  accounts,
impose  fees on  accounts  that do not  exceed a minimum  investment  amount and
involuntarily  redeem  shares in any such  account in payment of such fees.  The
Board of Trustees,  in its sole  discretion,  also may cause the Trust to redeem
all of the  shares of the Trust or one or more  series  or  classes  held by any
shareholder for any reason, to the extent permissible by the 1940 Act, including
(a) if the  shareholder  owns shares having an aggregate net asset value of less
than a specified minimum amount, (b) if a particular  shareholder's ownership of
shares would disqualify a series from being a regulated  investment company, (c)
upon a shareholder's failure to provide sufficient  identification to permit the
Trust to verify the shareholder's  identity, (d) upon a


                                      114
<PAGE>

shareholder's  failure to pay for shares or meet or maintain the  qualifications
for  ownership  of a particular  class or series of shares,  (e) if the Board of
Trustees  determines  (or  pursuant to policies  established  by the Board it is
determined) that share ownership by a particular  shareholder is not in the best
interests of remaining shareholders, (f) when the Fund is requested or compelled
to  do  so  by  governmental   authority  or  applicable  law  and  (g)  upon  a
shareholder's  failure to comply with a request for information  with respect to
the direct or indirect  ownership  of shares of the Trust.  The  Declaration  of
Trust also  authorizes  the Board of Trustees to terminate the Fund or any class
of the Fund without shareholder approval, and the Trust may suspend the right of
shareholders  to require  the Trust to redeem  shares to the extent  permissible
under the 1940 Act.

Upon the  termination  of the Trust or any series,  after  paying or  adequately
providing for the payment of all liabilities which may include the establishment
of a liquidating  trust or similar  vehicle,  and upon receipt of such releases,
indemnities   and  refunding   agreements  as  they  deem  necessary  for  their
protection, the Trustees may distribute the remaining Trust property or property
of the series,  in cash or in kind or partly each,  to the  shareholders  of the
Trust or the series involved,  ratably  according to the number of shares of the
Trust or such  series  held by the  several  shareholders  of the  Trust or such
series on the date of termination,  except to the extent  otherwise  required or
permitted by the  preferences  and special or relative  rights and privileges of
any classes of shares of a series  involved,  provided that any  distribution to
the  shareholders  of a  particular  class  of  shares  shall  be  made  to such
shareholders  pro rata in  proportion to the number of shares of such class held
by  each  of  them.  The  composition  of any  such  distribution  (e.g.,  cash,
securities  or  other  assets)  shall  be  determined  by the  Trust in its sole
discretion, and may be different among shareholders (including differences among
shareholders in the same series or class).

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Fund. The Declaration of Trust,  however,  disclaims  shareholder  liability for
acts or obligations  of the Fund and requires that notice of such  disclaimer be
given in each agreement,  obligation,  or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification  out of  Fund  property  for  all  losses  and  expenses  of any
shareholder held personally  liable for the obligations of the Fund and the Fund
may be  covered by  insurance  which the  Trustees  consider  adequate  to cover
foreseeable  tort claims.  Thus, the risk of a shareholder  incurring  financial
loss on account of shareholder liability is considered by the Advisor remote and
not  material,  since it is limited to  circumstances  in which a disclaimer  is
inoperative and the Fund itself is unable to meet its obligations.

                             PROXY VOTING GUIDELINES

The Fund has delegated proxy voting  responsibilities to its investment advisor,
subject to the Board's general oversight. The Fund has delegated proxy voting to
the Advisor with the direction that proxies should be voted  consistent with the
Fund's best  economic  interests.  The Advisor has adopted its own Proxy  Voting
Policies and Procedures ("Policies") and Proxy Voting Guidelines  ("Guidelines")
for this  purpose.  The  Policies  address,  among other  things,  conflicts  of
interest  that may arise  between the interests of the Fund and the interests of
the Advisor and its affiliates,  including the Fund's principal underwriter. The
Guidelines set forth the Advisor's general position on various  proposals,  such
as:

o        Shareholder  Rights -- The Advisor  generally  votes against  proposals
         that restrict shareholder rights.

o        Corporate  Governance -- The Advisor  generally votes for  confidential
         and cumulative voting and against supermajority voting requirements for
         charter and bylaw amendments. The Advisor generally votes for proposals
         to restrict a chief  executive  officer from serving on more than three
         outside  boards of  directors.  The  Advisor  generally  votes  against
         proposals  that  require a company  to  appoint  a  Chairman  who is an
         independent director.

o        Anti-Takeover Matters -- The Advisor generally votes for proposals that
         require shareholder ratification of poison pills or that request boards
         to redeem poison pills,  and votes against the adoption of poison pills
         if  they  are  submitted  for  shareholder  ratification.  The  Advisor
         generally votes for fair price proposals.

                                      115
<PAGE>

o        Compensation  Matters -- The Advisor generally votes for executive cash
         compensation  proposals,  unless they are unreasonably  excessive.  The
         Advisor generally votes against stock option plans that do not meet the
         Advisor's criteria.

o        Routine Matters -- The Advisor  generally votes for the ratification of
         auditors,  procedural matters related to the annual meeting and changes
         in company name, and against bundled proposals and adjournment.

The general provisions described above do not apply to investment companies. The
Advisor generally votes proxies solicited by investment  companies in accordance
with the  recommendations  of an  independent  third  party,  except for proxies
solicited by or with respect to investment companies for which the Advisor or an
affiliate  serves as investment  advisor or principal  underwriter  ("affiliated
investment companies").  The Advisor votes affiliated investment company proxies
in  the  same  proportion  as  the  vote  of  the  investment   company's  other
shareholders  (sometimes called "mirror" or "echo" voting).  Master fund proxies
solicited from feeder funds are voted in accordance with applicable requirements
of the 1940 Act.

Although the  Guidelines  set forth the Advisor's  general  voting  positions on
various proposals,  the Advisor may,  consistent with the Fund's best interests,
determine under some circumstances to vote contrary to those positions.

The  Guidelines  on a  particular  issue  may or may  not  reflect  the  view of
individual members of the Board or of a majority of the Board. In addition,  the
Guidelines may reflect a voting position that differs from the actual  practices
of  the  public  companies  within  the  Deutsche  Bank  organization  or of the
investment  companies for which the Advisor or an affiliate serves as investment
advisor or sponsor.

The  Advisor  may  consider  the views of a portfolio  company's  management  in
deciding how to vote a proxy or in establishing general voting positions for the
Guidelines, but management's views are not determinative.

As mentioned above, the Policies  describe the way in which the Advisor resolves
conflicts  of  interest.  To  resolve  conflicts,   the  advisor,  under  normal
circumstances,  votes proxies in accordance with its Guidelines.  If the Advisor
departs  from  the  Guidelines  with  respect  to a  particular  proxy or if the
Guidelines do not specifically  address a certain proxy proposal, a proxy voting
committee established by the advisor will vote the proxy. Before voting any such
proxy,  however,  the  Advisor's  conflicts  review  committee  will  conduct an
investigation to determine whether any potential  conflicts of interest exist in
connection with the particular proxy proposal. If the conflicts review committee
determines  that the Advisor has a material  conflict  of  interest,  or certain
individuals on the proxy voting committee  should be recused from  participating
in a  particular  proxy vote,  it will  inform the proxy  voting  committee.  If
notified  that the Advisor has a material  conflict,  or fewer than three voting
members are eligible to  participate  in the proxy vote,  typically  the Advisor
will  engage an  independent  third  party to vote the proxy or follow the proxy
voting recommendations of an independent third party.

Under certain circumstances,  the Advisor may not be able to vote proxies or the
Advisor  may find that the  expected  economic  costs from voting  outweigh  the
benefits  associated with voting. For example,  the Advisor may not vote proxies
on certain foreign securities due to local restrictions or customs.  The Advisor
generally  does  not vote  proxies  on  securities  subject  to  share  blocking
restrictions.

You may  obtain  information  about how the Fund  voted  proxies  related to its
portfolio  securities  during the 12-month  period ended June 30 by visiting the
SEC's Web site at www.sec.gov or by visiting our Web site at www.dws-scudder.com
(click on "proxy voting" at the bottom of the page).

                              FINANCIAL STATEMENTS


The financial  statements  for the Fund for the fiscal year ended  September 30,
2007 are  incorporated  herein by reference to the Annual Report to shareholders
of the Fund  dated  September  30,  2007.  A copy of the  Annual  Report  may be
obtained without charge by contacting the Fund.


                                      116
<PAGE>

                             ADDITIONAL INFORMATION

The CUSIP numbers for each class of DWS Short Duration Plus Fund are:

Class A:  23336Y748

Class B:  23336Y623

Class C:  23336Y730

DWS Short Duration Plus Fund has a fiscal year ending September 30.

Many of the investment changes in the Fund will be made at prices different from
those  prevailing  at the time  they may be  reflected  in a  regular  report to
shareholders of the Fund. These transactions will reflect  investment  decisions
made by the Advisor in light of the Fund's  investment  objective  and policies,
its other portfolio holdings and tax considerations, and should not be construed
as recommendations for similar action by other investors.

The Fund's  prospectuses  and this  Statement  of  Additional  Information  omit
certain information  contained in the Registration  Statement and its amendments
which the Fund has  filed  with the SEC  under  the  Securities  Act of 1933 and
reference is hereby made to the Registration  Statement for further  information
with  respect to a Fund and the  securities  offered  hereby.  The  Registration
Statement and its  amendments  are available for inspection by the public at the
offices of the SEC in Washington, D.C.


                                      117
<PAGE>


                                    APPENDIX

Description of Moody's Corporate Bond Ratings

Aaa -- Bonds  rated Aaa are  judged to be of the best  quality.  They  carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally  stable margin
and  principal is secure.  While the various  protective  elements are likely to
change,  such  changes  as can be  visualized  are most  unlikely  to impair the
fundamentally strong position of such issues.

Aa -- Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally  known as high-grade  bonds.
They are rated lower than the best bonds because  margins of protection  may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater  amplitude  or  there  may be  other  elements  present  which  make the
long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds rated A possess many  favorable  investment  attributes and are to be
considered  as  upper-medium-grade  obligations.   Factors  giving  security  to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly  protected nor poorly  secured.  Interest  payments and principal
security appear adequate for the present but certain protective  elements may be
lacking or may be  characteristically  unreliable over any great length of time.
Such  bonds  lack  outstanding  investment  characteristics  and  in  fact  have
speculative characteristics as well.

Ba -- Bonds  rated Ba are  judged to have  speculative  elements.  Their  future
cannot be  considered  as well  assured.  Often the  protection  of interest and
principal  payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future.  Uncertainty of position  characterizes
bonds in this class.

B -- Bonds rated B generally  lack  characteristics  of a desirable  investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa -- Bonds  rated Caa are of poor  standing.  Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca -- Bonds  rated Ca  represent  obligations  which are  speculative  in a high
degree. Such issues are often in default or have other marked shortcomings.

C -- Bonds rated C are the  lowest-rated  class of bonds and issued so rated can
be  regarded as having  extremely  poor  prospects  of ever  attaining  any real
investment standing.

Moody's  applies  numerical  modifiers,  1, 2,  and 3, in  each  generic  rating
classification  from Aa through B in its corporate  bond system.  The modifier 1
indicates  that the  security  ranks in the  higher  end of its  generic  rating
category;  the  modifier 2  indicates a mid-range  ranking;  and the  modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Description of S&P's Corporate Bond Ratings

AAA  --  Debt  rated  AAA  has  the  highest  rating  assigned  by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA -- Debt  rated  AA has a very  strong  capacity  to pay  interest  and  repay
principal and differs from the higher-rated issues only in small degree.

                                      118
<PAGE>

A -- Debt rated A has a strong  capacity to pay  interest  and repay  principal,
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and  repay  principal.   Whereas  it  normally  exhibits   adequate   protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB -- Debt  rate BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate capacity to meet timely interest and principal payments.

B -- Debt rated B has a greater  vulnerability  to default but currently has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay  principal.  The B rating  category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC -- Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely  payment of interest and repayment of principal.  In the event of adverse
business,  financial,  or  economic  conditions,  it is not  likely  to have the
capacity to pay interest and repay principal.

CC -- Debt rated CC is  typically  applied to debt  subordinated  to senior debt
which is assigned an actual or implied CCC debt rating.

C -- The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation  where a  bankruptcy  petition has been filed but debt service
payments are continued.

CI -- The rating CI is reserved  for income  bonds on which no interest is being
paid.

D -- Debt  rated D is in payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless S&P believes that such payments
will be made during such grace  period.  The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or minus (-):  The  ratings  from "AA" to "CCC" may be  modified by the
addition  of a plus or minus  sign to show  relative  standing  within the major
rating categories.

Fitch's Long-Term Debt Ratings
Investment Grade

AAA
Highest credit  quality.  "AAA" ratings denote the lowest  expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment  of  financial  commitments.  This  capacity  is highly  unlikely  to be
adversely affected by foreseeable events.

AA
Very high credit  quality.  "AA" ratings denote a very low expectation of credit
risk.  They  indicate  very  strong  capacity  for timely  payment of  financial
commitments.  This  capacity  is not  significantly  vulnerable  to  foreseeable
events.

                                      119
<PAGE>

A
High credit  quality.  "A" ratings denote a low  expectation of credit risk. The
capacity for timely payment of financial  commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB
Good  credit  quality.  "BBB"  ratings  indicate  that there is  currently a low
expectation  of credit  risk.  The  capacity  for timely  payment  of  financial
commitments is considered adequate,  but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity.  This is the lowest
investment-grade category.

Speculative Grade

BB
Speculative.  "BB" ratings  indicate that there is a possibility  of credit risk
developing,  particularly  as the result of adverse  economic  change over time;
however,  business or financial alternatives may be available to allow financial
commitments  to be met.  Securities  rated in this  category are not  investment
grade.

B
Highly  speculative.  "B"  ratings  indicate  that  significant  credit  risk is
present,  but a limited  margin of safety  remains.  Financial  commitments  are
currently being met; however,  capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC, CC, C
High default risk. Default is a real possibility. Capacity for meeting financial
commitments is solely  reliant upon  sustained,  favorable  business or economic
developments.  A "CC"  rating  indicates  that  default  of  some  kind  appears
probable. "C" ratings signal imminent default.

DDD, DD, D
Default.  The  ratings  of  obligations  in this  category  are  based  on their
prospects  for  achieving  partial  or  full  recovery  in a  reorganization  or
liquidation  of  the  obligor.   While  expected   recovery  values  are  highly
speculative  and cannot be estimated with any precision,  the following serve as
general  guidelines.  "DDD" obligations have the highest potential for recovery,
around  90%-100% of  outstanding  amounts and accrued  interest.  "DD" indicates
potential  recoveries  in the  range  of  50%-90%  and "D" the  lowest  recovery
potential, i.e., below 50%.

Entities  rated  in  this  category  have  defaulted  on  some  or all of  their
obligations.  Entities  rated "DDD" have the highest  prospect for resumption of
performance  or  continued  operation  with or  without a formal  reorganization
process.  Entities  rated  "DD"  and  "D"  are  generally  undergoing  a  formal
reorganization or liquidation process;  those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect of repaying all obligations.

Notes:

"+" or "-" may be appended to a rating to denote  relative  status  within major
rating  categories.  Such  suffixes  are not added to the "AAA"  category  or to
categories below "CCC".

"NR"  indicates that Fitch Ratings does not publicly rate the issuer or issue in
question.

"Withdrawn":  A rating is  withdrawn  when  Fitch  Ratings  deems the  amount of
information  available  to  be  inadequate  for  rating  purposes,  or  when  an
obligation matures, is called, or refinanced.

Rating Watch:  Ratings are placed on Rating Watch to notify investors that there
is a reasonable  probability of a rating change and the likely direction of such
change.  These are  designated as  "Positive,"  indicating a potential  upgrade,
"Negative," for a potential downgrade,  or "Evolving," if ratings may be raised,
lowered or  maintained.  Rating  Watch is typically  resolved  over a relatively
short period.

                                      120
<PAGE>

A Rating  Outlook  indicates the direction a rating is likely to move over a one
to two-year period. Outlooks may be positive, stable, or negative. A positive or
negative Rating Outlook does not imply a rating change is inevitable. Similarly,
ratings for which outlooks are "stable"  could be upgraded or downgraded  before
an outlook  moves to  positive  or negative  if  circumstances  warrant  such an
action. Occasionally,  Fitch may be unable to identify the fundamental trend and
in these cases, the Rating Outlook may be described as "evolving."

Description of Moody's Short-Term Debt Ratings

Issuers  rated  Prime-1 (or  related  supporting  institutions)  have a superior
capacity for repayment of short-term promissory  obligations.  Prime-1 repayment
capacity will normally be evidenced by the  following  characteristics:  leading
market positions in well-established  industries;  high rates of return on funds
employed;  conservative capitalization structures with moderate reliance on debt
and  ample  asset  protection;  broad  margins  in  earnings  coverage  of fixed
financial charges and high internal cash generation;  well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers  rated  Prime-2  (or  related  supporting  institutions)  have a  strong
capacity for repayment of short-term promissory obligations.  This will normally
be evidenced by many of the characteristics  cited above but to a lesser degree.
Earnings  trends and  coverage  ratios,  while  sound,  will be more  subject to
variation. Capitalization characteristics,  while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rates Prime-3 (or related  supporting  institutions)  have an acceptable
capacity  for  repayment of  short-term  promissory  obligations.  The effect of
industry   characteristics  and  market  composition  may  be  more  pronounced.
Variability in earnings and  profitability may result in changes in the level of
debt protection  measurements  and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Description of S&P Short-Term Issuer Credit Ratings

A-1  An  obligor  rated  "A-1"  has  STRONG   capacity  to  meet  its  financial
commitments.  It is rated in the highest  category by Standard & Poor's.  Within
this  category,  certain  obligors  are  designated  with a plus sign (+).  This
indicates  that the  obligor's  capacity to meet its  financial  commitments  is
EXTREMELY STRONG.

A-2 An obligor  rated  "A-2" has  SATISFACTORY  capacity  to meet its  financial
commitments.  However, it is somewhat more susceptible to the adverse effects of
changes in  circumstances  and economic  conditions than obligors in the highest
rating category.

A-3 An  obligor  rated  "A-3"  has  ADEQUATE  capacity  to  meet  its  financial
obligations.  However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened  capacity of the obligor to meet its financial
commitments.

Description of Fitch's Commercial Paper Ratings

F1
Highest credit quality.  Indicates the strongest  capacity for timely payment of
financial commitments;  may have an added "+" to denote any exceptionally strong
credit feature.

F2
Good credit  quality.  A  satisfactory  capacity for timely payment of financial
commitments,  but the  margin  of  safety  is not as great as in the case of the
higher ratings.

F3
Fair credit quality. The capacity for timely payment of financial commitments is
adequate;  however,  near-term  adverse  changes  could result in a reduction to
non-investment grade.

                                      121
<PAGE>

B
Speculative.  Minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

C
High default risk. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained,  favorable business and economic
environment.

D
Default. Denotes actual or imminent payment default.

Notes

"+" or "-" may be  appended to an "F1" rating  class to denote  relative  status
within the category.

"NR"  indicates that Fitch Ratings does not publicly rate the issuer or issue in
question.

"Withdrawn":  A rating is  withdrawn  when  Fitch  Ratings  deems the  amount of
information  available  to  be  inadequate  for  rating  purposes,  or  when  an
obligation matures, is called, or refinanced.
Rating Watch: Ratings are placed on Rating

Watch to notify  investors  that there is a reasonable  probability  of a rating
change  and the  likely  direction  of such  change.  These  are  designated  as
"Positive,"  indicating  a  potential  upgrade,   "Negative,"  for  a  potential
downgrade,  or  "Evolving,"  if ratings  may be raised,  lowered or  maintained.
Rating Watch is typically resolved over a relatively short period.



                                      122
<PAGE>

                                             STATEMENT OF ADDITIONAL INFORMATION


                                                                February 1, 2008




Investment Advisor
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY 10154

Administrator
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY 10154

Transfer Agent
DWS SCUDDER INVESTMENTS SERVICE COMPANY
222 South Riverside Plaza
Chicago, IL 60606-5808

Custodian
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110

Distributor
DWS SCUDDER DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606-5808

Independent Registered Public Accounting Firm
PRICEWATERHOUSECOOPERS LLP
125 High Street
Boston, MA 02110

Legal Counsel
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, NY  10019-6099

No  person  has  been  authorized  to  give  any  information  or  to  make  any
representations  other than those contained in the Fund's Prospectuses,  its SAI
or the Fund's  official sales  literature in connection with the offering of the
Fund's shares and, if given or made, such other  information or  representations
must not be  relied on as having  been  authorized  by the  Trust.  Neither  the
Prospectuses  nor this SAI constitute an offer in any state in which,  or to any
person to whom, such offer may not lawfully be made.




                                      123
<PAGE>


<PAGE>


                                DWS ADVISOR FUNDS


                          DWS Short Duration Plus Fund
                       Class S (formerly Investment Class)








                       STATEMENT OF ADDITIONAL INFORMATION


                                February 1, 2008

This Statement of Additional  Information is not a prospectus and should be read
in conjunction  with the prospectus dated February 1, 2008, as amended from time
to time, for DWS Short Duration Plus Fund (the "Fund"),  a series of DWS Advisor
Funds  (the  "Trust"),  copies  of  which  may be  obtained  without  charge  by
contacting DWS Scudder  Distributors,  Inc., 222 South Riverside Plaza, Chicago,
Illinois 60606,  (800)  621-1148,  or from the firm from which this Statement of
Additional Information was obtained and are available along with other materials
on   the    Securities   and   Exchange    Commission's    Internet   Web   site
(http://www.sec.gov).

The Annual Report to  Shareholders,  dated  September 30, 2007, is  incorporated
herein by reference  and is deemed to be part of this  Statement  of  Additional
Information.  A copy of the Fund's Annual Report may be obtained  without charge
by calling the Fund at the toll-free number (800) 621-1048.


This Statement of Additional  Information  ("SAI") is  incorporated by reference
into the prospectus for the Fund.







<PAGE>



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----


INVESTMENT RESTRICTIONS.......................................................1

INVESTMENT POLICIES AND TECHNIQUES............................................2
   Portfolio Holdings........................................................35

MANAGEMENT OF THE FUND.......................................................37
   Investment Advisor........................................................37
   Investment Management Agreement...........................................37
   Compensation of Portfolio Managers........................................41
   Fund Ownership of Portfolio Managers......................................42
   Conflicts of Interest.....................................................42
   Other Accounts Managed:...................................................43

FUND SERVICE PROVIDERS.......................................................50
   Administrator.............................................................50
   Distributor...............................................................51
   Custodian.................................................................53
   Transfer Agent............................................................53
   Service Plan..............................................................53
   Legal Counsel.............................................................54
   Independent Registered Public Accounting Firm.............................54

PORTFOLIO TRANSACTIONS.......................................................54

PURCHASE AND REDEMPTION OF SHARES............................................59

DIVIDENDS....................................................................77

TAXES........................................................................78

NET ASSET VALUE..............................................................83

TRUSTEES AND OFFICERS........................................................84

TRUST ORGANIZATION..........................................................101

PROXY VOTING GUIDELINES.....................................................102

FINANCIAL STATEMENTS........................................................104

ADDITIONAL INFORMATION......................................................104

APPENDIX....................................................................105





                                       i
<PAGE>





                                       ii
<PAGE>


                             INVESTMENT RESTRICTIONS


Except as otherwise indicated,  the Fund's investment objective and policies are
not  fundamental  and may be changed by the Board of Trustees  without a vote of
shareholders. There can be no assurance that the Fund's objective will be met.


Any  investment  restrictions  herein  which  involve  a maximum  percentage  of
securities  or assets shall not be  considered  to be violated  unless an excess
over the percentage occurs  immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.


The Fund has  elected to be  classified  as a  diversified  series of a separate
open-end investment management company. A diversified Fund may not, with respect
to 75% of total assets, invest more than 5% of total assets in the securities of
a single issuer (other than US government securities or securities of investment
companies) or invest in more than 10% of the  outstanding  voting  securities of
such issuer.


As a matter of fundamental policy, the Fund may not:

(1)      borrow  money,   except  as  permitted  under  the  1940  Act,  and  as
         interpreted or modified by regulatory  authority  having  jurisdiction,
         from time to time;

(2)      issue senior securities, except as permitted under the 1940 Act, and as
         interpreted or modified by regulatory  authority  having  jurisdiction,
         from time to time;

(3)      concentrate its investments in a particular  industry,  as that term is
         used in the 1940 Act,  and as  interpreted  or modified  by  regulatory
         authority having jurisdiction, from time to time;

(4)      engage in the  business of  underwriting  securities  issued by others,
         except to the extent  that the Fund may be deemed to be an  underwriter
         in connection with the disposition of portfolio securities;

(5)      purchase  or  sell  real  estate,  which  term  does  not  include  (a)
         securities  of companies  which deal in real estate or mortgages or (b)
         investments  secured by real estate or interests  therein,  except that
         the Fund  reserves  freedom  of action to hold and to sell real  estate
         acquired as a result of the Fund's ownership of securities;

(6)      purchase or sell commodities,  except as permitted by the 1940 Act, and
         as  interpreted  or  modified  by  the  regulatory   authority   having
         jurisdiction, from time to time; and


(7)      make loans,  except as permitted under the 1940 Act, and as interpreted
         or modified by regulatory authority having  jurisdiction,  from time to
         time.


A  fundamental  policy may not be changed  without the approval of a majority of
the outstanding  voting securities of the Fund which, under the 1940 Act and the
rules thereunder and as used in this Statement of Additional Information,  means
the lesser of (1) 67% or more of the voting securities present at a meeting,  if
the holders of more than 50% of the  outstanding  voting  securities of the Fund
are present or  represented  by proxy,  or (2) more than 50% of the  outstanding
voting securities of the Fund.

Non-Fundamental Restrictions

In order to comply with certain statutes and policies and for other reasons, the
Fund will not,  as a matter  of  operating  policy  (these  restrictions  may be
changed by a vote of the Trustees of the Trust without shareholder approval):

                                       1
<PAGE>

(i)      purchase any security or evidence of interest therein on margin, except
         that  short-term  credits  necessary for the clearance of purchases and
         sales of  securities  may be  obtained  and  deposits  of  initial  and
         variation   margin  may  be  made  in  connection  with  the  purchase,
         ownership, holding or sale of futures contracts;

(ii)     sell securities it does not own (short sales).  (This  restriction does
         not  preclude  short  sales  "against  the  box"  (that  is,  sales  of
         securities  (a) the Fund  contemporaneously  owns or (b) where the Fund
         has the right to obtain  securities  equivalent  in kind and  amount to
         those  sold).  (The Fund has no  current  intention  to engage in short
         selling);

(iii)    purchase  securities  issued by any  investment  company  except to the
         extent   permitted  by  the  1940  Act  (including  any  exemptions  or
         exclusions  therefrom),  except that this  limitation does not apply to
         securities  received  or  acquired  as  dividends,  through  offers  of
         exchange, or as a result of reorganization, consolidation or merger;


(iv)     lend  portfolio  securities  in an amount  greater  than 33 1/3% of its
         total assets;

(v)      invest more than 15% of the Fund's net assets  (taken at the greater of
         cost or market  value) in  securities  that are illiquid or not readily
         marketable  (excluding  Rule  144A  securities  deemed  by the Board of
         Trustees of the Trust to be liquid); and

(vi)     acquire  securities  of  registered  open-end  investment  companies or
         registered unit investment  trusts in reliance on Sections  12(d)(1)(F)
         or 12(d)(1)(G) of the 1940 Act.


An investment restriction will not be considered violated if that restriction is
complied with at the time the relevant action is taken,  notwithstanding a later
change in the market  value of an  investment,  in net or total assets or in the
change of securities rating of the investment or any other later change.

To meet  federal  income  tax  requirements  for  qualification  as a  regulated
investment company,  the Fund must, among other things, limit its investments so
that at the close of each  quarter of its  taxable  year (1) no more than 25% of
the  value of its  total  assets  is  invested  in the  securities  (other  than
securities of the US Government or a regulated  investment  company) of a single
issuer or two or more issuers  which the Fund  controls and which are engaged in
the same, similar or related trades or businesses or in the securities of one or
more qualified publicly traded  partnerships,  and (2) at least 50% of the value
of its total assets is represented by cash, cash items (including  receivables),
US Government securities, securities of other regulated investment companies and
other securities of any issuer that does not represent more than 5% of the value
of the Fund's  total  assets and not more than 10% of the  issuer's  outstanding
voting securities.

Master/feeder Fund Structure. The Board of Trustees has the discretion to retain
the current distribution arrangement for a Fund while investing in a master fund
in a master/feeder fund structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing  directly in a portfolio of securities,  invests most or all of its
investment  assets in a separate  registered  investment  company  (the  "master
fund") with  substantially  the same  investment  objective  and policies as the
feeder  fund.  Such a  structure  permits  the  pooling of assets of two or more
feeder funds,  preserving  separate  identities or distribution  channels at the
feeder  fund  level.  Based on the  premise  that  certain  of the  expenses  of
operating an investment  portfolio are  relatively  fixed,  a larger  investment
portfolio may eventually  achieve a lower ratio of operating expenses to average
net assets. An existing  investment  company is able to convert to a feeder fund
by  selling  all  of  its  investments,   which  involves  brokerage  and  other
transaction  costs and realization of a taxable gain or loss, or by contributing
its assets to the master  fund and  avoiding  transaction  costs and,  if proper
procedures are followed, the realization of taxable gain or loss.

                       INVESTMENT POLICIES AND TECHNIQUES

Investment Techniques


                                       2
<PAGE>


Descriptions  in  this  Statement  of  Additional  Information  of a  particular
investment  practice  or  technique  in which the Fund may  engage  are meant to
describe  the  spectrum  of  investments  that  Deutsche  Investment  Management
Americas Inc.  ("DIMA" or the  "Advisor") in its  discretion  might,  but is not
required to, use in managing the Fund's portfolio assets. The Advisor may in its
discretion at any time employ such practice,  technique or instrument for one or
more funds, including the Fund but not for all funds advised by it. Furthermore,
it is  possible  that  certain  types of  financial  instruments  or  investment
techniques  described  herein may not be  available,  permissible,  economically
feasible  or  effective  for their  intended  purposes in all  markets.  Certain
practices,  techniques  or  instruments  may not be principal  activities of the
Fund,  but,  to the  extent  employed,  could  from time to time have a material
impact on the Fund's  performance.  The Fund may  engage in  certain  additional
practices not described herein.


Short-Term Instruments

When the Fund experiences large cash inflows -- for example, through the sale of
securities  --  and  attractive   investments   are  unavailable  in  sufficient
quantities,  the Fund may hold short-term investments (or shares of money market
mutual funds) for a limited time pending  availability of such  investments.  In
addition,  when in the  Advisor's  opinion it is  advisable to adopt a temporary
defensive position because of unusual and adverse market or other conditions, up
to 100% of the Fund's assets may be invested in such short-term instruments.

Short-term   instruments  consist  of  foreign  and  domestic:   (1)  short-term
obligations  of sovereign  governments  and their  agencies,  instrumentalities,
authorities or political  subdivisions;  (2) other  short-term  debt  securities
rated AA or higher by S&P or Aa or higher by Moody's or, if  unrated,  deemed to
be of comparable  quality in the opinion of the Advisor;  (3) commercial  paper;
(4)  bank  obligations,  including  negotiable  certificates  of  deposit,  time
deposits and bankers' acceptances;  and (5) repurchase  agreements.  At the time
the Fund invests in commercial paper, bank obligations or repurchase agreements,
the issuer or the issuer's parent must have  outstanding debt rated AA or higher
by the Standard & Poor's Division of The McGraw-Hill Companies,  Inc. ("S&P") or
Aa or  higher  by  Moody's  Investors  Service,  Inc.  ("Moody's");  outstanding
commercial paper or bank obligations rated A-1 by S&P or Prime-1 by Moody's; or,
if no such  ratings  are  available,  the  instrument  must be  deemed  to be of
comparable  quality in the  opinion of the  Advisor.  These  instruments  may be
denominated in US dollars or in foreign currencies.

Other US  government  securities  the Fund may  invest in  include  (but are not
limited  to)   securities   issued  or   guaranteed   by  the  Federal   Housing
Administration, Farmers Home Loan Administration,  Export-Import Bank of the US,
Small Business Administration, General Services Administration, Central Bank for
Cooperatives,  Federal Farm Credit  Banks,  Federal  Intermediate  Credit Banks,
Federal  Land  Banks,  Maritime  Administration,   Tennessee  Valley  Authority,
District  of  Columbia  Armory  Board and Student  Loan  Marketing  Association.
Because  the US  government  is not  obligated  by law to provide  support to an
instrumentality it sponsors,  the Fund will invest in obligations issued by such
an  instrumentality  only if the  Advisor  determines  that the credit risk with
respect  to the  instrumentality  does not make its  securities  unsuitable  for
investment by the Fund.

The Fund may also invest in separately traded principal and interest  components
of  securities  guaranteed  or  issued  by the US  government  or its  agencies,
instrumentalities   or   sponsored   enterprises   if  such   components   trade
independently under the Separate Trading of Registered Interest and Principal of
Securities  program  ("STRIPS")  or  any  similar  program  sponsored  by the US
Government.  STRIPS  may be sold as zero  coupon  securities.  See "Zero  Coupon
Securities and Deferred Interest Bonds."

US  Government  Securities.  The  Fund  may  invest  in  obligations  issued  or
guaranteed  by the US government  including:  (1) direct  obligations  of the US
Treasury   and  (2)   obligations   issued  by  US   government   agencies   and
instrumentalities.  Included  among  direct  obligations  of the US are Treasury
Bills,  Treasury  Notes  and  Treasury  Bonds,  which  differ  in terms of their
interest rates, maturities and dates of issuance. Treasury Bills have maturities
of less than one year,  Treasury  Notes have  maturities  of one to 10 years and
Treasury Bonds generally have maturities of greater than 10 years at the date of
issuance.    Included   among   the   obligations   issued   by   agencies   and
instrumentalities  of the United States are:  instruments  that are supported by
the full faith and credit of the United States (such as  certificates  issued by
the  Government  National  Mortgage   Association  ("GNMA"  or  "Ginnie  Mae"));
instruments  that are supported by the right of the issuer to borrow from the US
Treasury (such as securities of Federal Home Loan Banks);  and instruments  that
are  supported  solely by the credit of the agency or  instrumentality


                                       3
<PAGE>

(such as Federal  National  Mortgage  Association  ("FNMA" or "Fannie  Mae") and
Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac")).

Certificates  of  Deposit  and  Bankers'  Acceptances.  The Fund may  invest  in
certificates  of deposit and bankers'  acceptances.  Certificates of deposit are
receipts  issued by a  depository  institution  in  exchange  for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary  market prior to maturity.  Bankers'  acceptances
typically  arise  from  short-term  credit   arrangements   designed  to  enable
businesses to obtain funds to finance  commercial  transactions.  Generally,  an
acceptance  is a time draft  drawn on a bank by an  exporter  or an  importer to
obtain a stated  amount of funds to pay for specific  merchandise.  The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the  instrument on its maturity  date.  The acceptance may then be
held  by the  accepting  bank  as an  earning  asset  or it may be  sold  in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for  acceptances can be as long as 270 days,  most  acceptances  have
maturities of six months or less.

Commercial  Paper. The Fund may invest in commercial  paper. The Fund may invest
in fixed  rate or  variable  rate  commercial  paper,  issued  by US or  foreign
entities.  Commercial paper consists of short-term  (usually from 1 to 270 days)
unsecured  promissory  notes  issued by US or foreign  corporations  in order to
finance  their  current  operations.  Any  commercial  paper issued by a foreign
entity corporation and purchased by the Fund must be US  dollar-denominated  and
must not be subject to foreign withholding tax at the time of purchase.

Commercial  paper,  when  purchased  by the Fund,  must be rated in the  highest
short-term  rating category by any two NRSROs (or one NRSRO if that NRSRO is the
only such NRSRO which rates such security) or, if not so rated, must be believed
by the  Advisor,  acting under the  supervision  of the Board of Trustees of the
Fund,  to be of  comparable  quality.  Investing  in  foreign  commercial  paper
generally   involves  risks  similar  to  those   described  below  relating  to
obligations  of foreign  banks or foreign  branches and  subsidiaries  of US and
foreign banks.

The Fund may also invest in variable rate master  demand notes.  A variable rate
master  demand note (which is a type of  commercial  paper)  represents a direct
borrowing arrangement involving periodically fluctuating rates of interest under
a letter agreement between a commercial paper issuer and an institutional lender
pursuant to which the lender may determine to invest varying amounts.

For a description of commercial paper ratings, see the Appendix to this SAI.

US  Dollar-Denominated  Foreign Fixed Income Securities.  The Fund may invest in
the  dollar-denominated  debt securities of foreign companies.  Investing in the
securities of foreign companies involves more risks than investing in securities
of US companies.  Their value is subject to economic and political  developments
in the countries where the companies  operate and to changes in foreign currency
values.  Values may also be  affected  by foreign  tax laws,  changes in foreign
economic or monetary  policies,  exchange  control  regulations  and regulations
involving prohibitions on the repatriation of foreign currencies.

In addition, the relative performance of various countries' fixed income markets
historically   has   reflected   wide   variations   relating   to  the   unique
characteristics of each country's economy.  Year-to-year fluctuations in certain
markets have been  significant,  and negative  returns have been  experienced in
various markets from time to time.

US Dollar-Denominated  Sovereign and Supranational Fixed Income Securities.  The
Fund may invest in US  dollar-denominated  foreign  government debt  securities,
which  include debt  obligations  issued or  guaranteed  by  national,  state or
provincial  governments or similar political subdivisions and quasi-governmental
and  supranational  entities   (collectively,   "sovereign  debt  obligations").
Sovereign debt obligations may involve a high degree of risk. The issuer of such
an obligation or the governmental  authorities that control the repayment of the
obligation  may be unable or unwilling to repay  principal and interest when due
and may require  renegotiations  or rescheduling of debt payments.  In addition,
prospects  for  repayment of  principal  and interest may depend on political as
well as economic factors.  Quasi-governmental and supranational entities include
international  organizations designated or supported by governmental entities to
promote  economic   reconstruction  or  development  and  international  banking

                                       4
<PAGE>

institutions  and related  government  agencies.  Examples  include (but are not
limited to) the  International  Bank for  Reconstruction  and  Development  (the
"World Bank"), the Japanese Development Bank, the Asian Development Bank and the
Inter-American  Development  Bank.  Foreign  government  securities also include
mortgage-related   securities  issued  or  guaranteed  by  national,   state  or
provincial   governmental   instrumentalities,    including   quasi-governmental
agencies.

Put Bonds.  A put bond (also referred to as a tender option or third party bond)
is a bond created by coupling an  intermediate or long-term fixed rate bond with
an agreement  giving the holder the option of tendering  the bond to receive its
par value. As consideration for providing this tender option, the sponsor of the
bond (usually a bank,  broker-dealer or other financial  intermediary)  receives
periodic fees that equal the difference between the bond's fixed coupon rate and
the rate  (determined  by a remarketing  or similar  agent) that would cause the
bond,  coupled  with the tender  option,  to trade at par.  By paying the tender
offer fees, the Fund in effect holds a demand  obligation that bears interest at
the prevailing short-term rate.

In   selecting   put  bonds,   the   Advisor   takes  into   consideration   the
creditworthiness of the issuers of the underlying bonds and the creditworthiness
of the  providers  of the tender  option  features.  A sponsor may  withdraw the
tender option feature if the issuer of the underlying  bond defaults on interest
or principal payments or the bond's rating is downgraded.

Bank Loans.  The Fund may also invest in bank loans,  which are typically senior
debt  obligations  of borrowers  (issuers) and as such, are considered to hold a
senior  position in the capital  structure  of the  borrower.  These may include
loans which hold the most senior position, that hold an equal ranking with other
senior debt, or loans that are, in the judgment of the Advisor,  in the category
of senior debt of the borrower.  This capital structure position generally gives
the  holders of these  loans a priority  claim on some or all of the  borrower's
assets  in the  event of a  default.  In most  cases,  these  loans  are  either
partially or fully  collateralized by the assets of a corporation,  partnership,
limited  liability  company or other business  entity,  or by cash flow that the
Advisor  believes has a market value at the time of  acquisition  that equals or
exceeds  the  principal  amount of the  loan.  These  loans are often  issued in
connection  with   recapitalizations,   acquisitions,   leveraged  buy-outs  and
refinancings.  It is  important to note that Moody's and S&P may rate bank loans
higher  than high yield  bonds of the same  issuer to reflect  their more senior
position.  The Fund may  invest  in both  fixed-  and  floating-rate  loans.  In
addition,  bank loans can trade either as an  "assignment"  or  "participation."
When the Fund buys an assignment, it is essentially becoming a party to the bank
agreement.  The vast majority of all trades are  assignments and would therefore
generally represent the preponderance of bank loans held by the Fund. In certain
cases, the Fund may buy bank loans on a participation basis, if for example, the
Fund did not want to become party to the bank agreement.  However, in all cases,
the Fund will not purchase  bank loans where  Deutsche  Bank,  or an  affiliate,
serves as an agent bank.

Participations  and  assignments   involve  credit  risk,  interest  rate  risk,
liquidity  risk,  and the  risk of  being a  lender.  If the  Fund  purchases  a
participation, it may only be able to enforce its rights through the lender, and
may assume the credit risk of both the lender and the borrower.

Investments  in loans through  direct  assignment  of a financial  institution's
interests with respect to a loan may involve additional risks. For example, if a
loan is foreclosed, the purchaser could become part owner of any collateral, and
would bear the costs and liabilities associated with owning and disposing of the
collateral.  In addition,  it is at least  conceivable that under emerging legal
theories of lender liability, a purchaser could be held liable as a co-lender.

In the case of loans administered by a bank or other financial  institution that
acts as agent for all holders,  if assets held by the agent for the benefit of a
purchaser  are  determined  to be subject to the claims of the  agent's  general
creditors,  the  purchaser  might incur  certain  costs and delays in  realizing
payment on the loan or loan  participation  and could suffer a loss of principal
or interest.

In the case of loan  participations  where a bank or other  lending  institution
serves as  financial  intermediary  between  the Fund and the  borrower,  if the
participation does not shift to the Fund the direct debtor-creditor relationship
with the borrower,  interpretations  of the Securities  and Exchange  Commission
("SEC") require the Fund, in some


                                       5
<PAGE>

circumstances,  to treat both the lending bank or other lending  institution and
the borrower as issuers for purposes of the Fund's investment policies. Treating
a financial  intermediary as an issuer of  indebtedness  may restrict the Fund's
ability to invest in indebtedness related to a single financial intermediary, or
a group of intermediaries  engaged in the same industry,  even if the underlying
borrowers represent many different companies and industries.

Variable  and  Floating  Rate  Instruments.  The Fund may invest in  variable or
floating  rate  instruments  and  variable  rate demand  instruments,  including
variable amount master demand notes.  These  instruments  will normally  involve
industrial  development  or revenue bonds that provide that the rate of interest
is set as a specific  percentage  of a  designated  base rate (such as the prime
rate) at a major  commercial  bank.  In  addition,  the  interest  rate on these
securities may be reset daily, weekly or on some other reset period and may have
a floor or ceiling on interest rate changes.  The Fund can demand payment of the
obligation at all times or at stipulated dates on short notice (not to exceed 30
days) at par plus accrued  interest.  Generally,  changes in interest rates will
have a  smaller  effect on the  market  value of these  instruments  than on the
market  value  of  fixed  income  securities  and,  thus,  may  allow  for  less
opportunity for capital appreciation or depreciation.

Debt  instruments  purchased by the Fund may be  structured  to have variable or
floating  interest rates.  These  instruments may include variable amount master
demand notes that permit the  indebtedness  to vary in addition to providing for
periodic  adjustments  in the  interest  rates.  The Advisor  will  consider the
earning  power,  cash  flows  and other  liquidity  ratios  of the  issuers  and
guarantors  of such  instruments  and, if the  instrument is subject to a demand
feature,  will  continuously  monitor their financial ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
equivalent  to the  quality  standards  applicable  to the Fund's  fixed  income
investments, the issuer's obligation to pay the principal of the instrument will
be backed  by an  unconditional  bank  letter or line of  credit,  guarantee  or
commitment  to lend.  Any bank  providing  such a bank  letter,  line of credit,
guarantee or loan commitment will meet the Fund's  investment  quality standards
relating to investments in bank obligations.  The Advisor will also continuously
monitor the creditworthiness of issuers of such instruments to determine whether
the Fund should continue to hold the investments.

Other  variable and  floating  rate  instruments  include but are not limited to
corporates, ABS, CMBS, MBS, CMOs, government and agency securities.

The absence of an active secondary market for certain variable and floating rate
notes could make it difficult to dispose of the instruments,  and the Fund could
suffer a loss if the issuer  defaults or during periods in which the Fund is not
entitled to exercise its demand rights.

Variable and floating rate  instruments  held by the Fund will be subject to the
Fund's limitation on investments in illiquid  securities when a reliable trading
market for the instruments does not exist and the Fund may not demand payment of
the principal amount of such instruments within seven days.

Warrants. The Fund may invest in warrants. Warrants generally entitle the holder
to buy a specified number of shares of common stock at a specified price,  which
is often higher than the market  price at the time of issuance,  for a period of
years or in perpetuity. Warrants may be issued in units with other securities or
separately,  and may be freely  transferable and traded on exchanges.  While the
market value of a warrant tends to be more volatile than that of the  securities
underlying the warrant, the market value of a warrant may not necessarily change
with that of the  underlying  security.  A warrant ceases to have value if it is
not exercised prior to any expiration date to which the warrant is subject.  The
purchase of warrants involves a risk that the Fund could lose the purchase value
of a warrant if the right to subscribe  to  additional  shares is not  exercised
prior to the warrant's  expiration.  Also, the purchase of warrants involves the
risk that the  effective  price paid for the warrant  added to the  subscription
price of the related security may exceed the value of the subscribed  security's
market price,  such as when there is no movement in the level of the  underlying
security.

Municipal  Securities.  The Fund may  invest  to a limited  extent in  municipal
securities.  Municipal  securities consist of bonds, notes and other instruments
issued  by or on  behalf  of  states,  territories  and  possessions  of  the US
(including the District of Columbia) and their political subdivisions,  agencies
or  instrumentalities,  the  interest  on which is exempt from  regular  federal
income tax (i.e., excluded from gross income for federal income tax purposes


                                       6
<PAGE>

but not  necessarily  exempt  from the federal  alternative  minimum tax or from
state and local  taxes).  Municipal  securities  may also be issued on a taxable
basis (i.e.,  the interest on such securities is not exempt from regular federal
income tax).

Municipal  securities  are  often  issued to obtain  funds  for  various  public
purposes,  including the construction of a wide range of public  facilities such
as bridges, highways, housing, hospitals, mass transportation,  schools, streets
and water and sewer works. Other public purposes for which municipal  securities
may be issued include  refunding  outstanding  obligations,  obtaining funds for
general  operating  expenses,  and  obtaining  funds  to  lend to  other  public
institutions  and  facilities.   Municipal   securities  also  include  "private
activity" or industrial  development  bonds, which are issued by or on behalf of
public  authorities  to provide  financing  aid to acquire sites or construct or
equip  facilities   within  a  municipality  for  privately  or  publicly  owned
corporations.

The  two  principal   classifications  of  municipal   securities  are  "general
obligations" and "revenue  obligations".  General obligations are secured by the
issuer's  pledge of its full faith and credit for the payment of  principal  and
interest although the characteristics and enforcement of general obligations may
vary  according  to  the  law  applicable  to  the  particular  issuer.  Revenue
obligations,  which  include,  but are not limited to, private  activity  bonds,
resource  recovery bonds,  certificates of participation  and certain  municipal
notes,  are not backed by the credit and taxing  authority of the issuer and are
payable solely from the revenues derived from a particular  facility or class of
facilities  or, in some cases,  from the  proceeds of a special  excise or other
specific revenue source. Nevertheless, the obligations of the issuer may also be
backed by a letter of credit,  guarantee or insurance.  General  obligations and
revenue  obligations may be issued in a variety of forms,  including  commercial
paper,  fixed,  variable and floating  rate  securities,  tender  option  bonds,
auction rate bonds and capital appreciation bonds.

In addition to general obligations and revenue obligations,  there are a variety
of hybrid and special  types of municipal  securities.  There are also  numerous
differences  in the  credit  backing of  municipal  securities  both  within and
between these two principal classifications.

For  the  purpose  of  applying   the  Fund's   investment   restrictions,   the
identification  of the  issuer of a  municipal  security  which is not a general
obligation is made by the Advisor based on the  characteristics of the municipal
security,  the most important of which is the source of funds for the payment of
principal and interest on such securities.

One or a small number of  institutional  investors such as the Fund may purchase
an entire issue of municipal  securities.  Thus, the issue may not be said to be
publicly  offered.  Unlike some  securities  that are not  publicly  offered,  a
secondary  market exists for many  municipal  securities  that were not publicly
offered initially and such securities can be readily marketable.

The obligations of an issuer to pay the principal of and interest on a municipal
security are subject to the provisions of bankruptcy,  insolvency and other laws
affecting the rights and remedies of creditors,  such as the Federal  Bankruptcy
Act,  and laws,  if any,  that may be enacted by Congress or state  legislatures
extending  the time for payment of  principal  or  interest  or  imposing  other
constraints  upon  the  enforcement  of such  obligations.  There  is  also  the
possibility  that,  because  of  litigation  or other  conditions,  the power or
ability of the issuer to pay when due  principal  of or  interest on a municipal
security may be materially affected.

Municipal  Leases,   Certificates  of  Participation  and  other   Participation
Interests.  A  municipal  lease  is an  obligation  in the  form of a  lease  or
installment  purchase  contract that is issued by a state or local government to
acquire  equipment and  facilities.  Income from such  obligations  is generally
exempt from state and local  taxes in the state of issuance  (as well as regular
federal  income tax).  Municipal  leases  frequently  involve  special risks not
normally  associated  with  general  obligation  or  revenue  bonds.  Leases and
installment  purchase or conditional  sale contracts (which normally provide for
title to the leased asset to pass  eventually to the  governmental  issuer) have
evolved as a means for  governmental  issuers to acquire  property and equipment
without meeting the constitutional  and statutory  requirements for the issuance
of debt. The debt issuance  limitations are deemed to be inapplicable because of
the  inclusion in many leases or contracts of  `non-appropriation'  clauses that
relieve the governmental  issuer of any obligation to make future payments under
the lease or  contract  unless  money is  appropriated  for such


                                       7
<PAGE>

purpose by the appropriate legislative body on a yearly or other periodic basis.
Thus, the Fund's  investment in municipal  leases will be subject to the special
risk that the governmental issuer may not appropriate funds for lease payments.

In addition,  such leases or contracts may be subject to the temporary abatement
of payments in the event the issuer is prevented from  maintaining  occupancy of
the leased premises or utilizing the leased equipment.  Although the obligations
may be secured by the leased  equipment or  facilities,  the  disposition of the
property in the event of  nonappropriation or foreclosure might prove difficult,
time consuming and costly, and result in an unsatisfactory or delayed recoupment
of the Fund's original investment.

Certificates of participation represent undivided interests in municipal leases,
installment  purchase  contracts  or other  instruments.  The  certificates  are
typically  issued by a trust or other entity that has received an  assignment of
the payments to be made by the state or political  subdivision under such leases
or installment purchase contracts.

Certain  municipal lease  obligations and certificates of  participation  may be
deemed  illiquid for the purpose of the Fund's  limitations  on  investments  in
illiquid  securities.  Other  municipal lease  obligations  and  certificates of
participation acquired by the Fund may be determined by the Advisor, pursuant to
guidelines adopted by the Trustees of the Trust, to be liquid securities for the
purpose of the Fund's  limitation  on  investments  in illiquid  securities.  In
determining  the liquidity of municipal lease  obligations  and  certificates of
participation, the Advisor will consider a variety of factors including: (1) the
willingness  of  dealers  to bid for the  security;  (2) the  number of  dealers
willing to purchase  or sell the  obligation  and the number of other  potential
buyers;  (3) the frequency of trades or quotes for the  obligation;  and (4) the
nature of the marketplace trades. In addition, the Advisor will consider factors
unique  to  particular  lease  obligations  and  certificates  of  participation
affecting the marketability thereof. These include the general  creditworthiness
of the issuer, the importance to the issuer of the property covered by the lease
and the likelihood that the  marketability  of the obligation will be maintained
throughout  the time the obligation is held by the Fund. The Fund may not invest
more than 5% of its net assets in municipal leases.

The  Fund  may  purchase  participations  in  municipal  securities  held  by  a
commercial bank or other financial institution.  Such participations provide the
Fund with the right to a pro rata undivided interest in the underlying municipal
securities. In addition, such participations generally provide the Fund with the
right to demand payment,  on not more than seven days notice, of all or any part
of the Fund's participation interest in the underlying municipal security,  plus
accrued interest.

Municipal Notes. Municipal securities in the form of notes generally are used to
provide for short-term  capital needs, in anticipation of an issuer's receipt of
other revenues or financing, and typically have maturities of up to three years.
Such instruments may include Tax Anticipation Notes, Revenue Anticipation Notes,
Bond  Anticipation  Notes, Tax and Revenue  Anticipation  Notes and Construction
Loan Notes.  Tax  Anticipation  Notes are issued to finance the working  capital
needs of governments.  Generally, they are issued in anticipation of various tax
revenues,  such as income,  sales,  property,  use and business  taxes,  and are
payable from these specific future taxes.  Revenue Anticipation Notes are issued
in  expectation of receipt of other kinds of revenue,  such as federal  revenues
available under federal revenue sharing programs.  Bond  Anticipation  Notes are
issued to provide  interim  financing  until  long-term  bond  financing  can be
arranged.  In most cases,  the long-term bonds then provide the funds needed for
repayment of the notes. Tax and Revenue  Anticipation  Notes combine the funding
sources  of  both  Tax  Anticipation  Notes  and  Revenue   Anticipation  Notes.
Construction Loan Notes are sold to provide construction financing.  These notes
are secured by mortgage notes insured by the Federal Housing Authority; however,
the proceeds from the insurance may be less than the economic  equivalent of the
payment of  principal  and  interest  on the  mortgage  note if there has been a
default.  The obligations of an issuer of municipal notes are generally  secured
by the anticipated revenues from taxes, grants or bond financing.  An investment
in such instruments, however, presents a risk that the anticipated revenues will
not be  received  or that such  revenues  will be  insufficient  to satisfy  the
issuer's  payment  obligations  under  the  notes  or that  refinancing  will be
otherwise unavailable.

Tax-Exempt  Commercial  Paper.  Issues of tax-exempt  commercial paper typically
represent short-term,  unsecured, negotiable promissory notes. These obligations
are issued by state and local  governments and their agencies to finance working
capital needs of municipalities or to provide interim construction financing and
are  paid


                                       8
<PAGE>

from general revenues of  municipalities  or are refinanced with long-term debt.
In most  cases,  tax-exempt  commercial  paper is backed by  letters  of credit,
lending  agreements,   note  repurchase  agreements  or  other  credit  facility
agreements offered by banks or other institutions.

Pre-Refunded  Municipal  Securities.  The principal of and interest on municipal
securities  that have been  pre-refunded  are no longer  paid from the  original
revenue source for the securities.  Instead,  after  pre-refunding the source of
such payments of the principal of and interest on these securities are typically
paid from an escrow fund  consisting of obligations  issued or guaranteed by the
US  Government.  The assets in the escrow fund are derived  from the proceeds of
refunding  bonds  issued  by  the  same  issuer  as the  pre-refunded  municipal
securities. Issuers of municipal securities use this advance refunding technique
to obtain  more  favorable  terms with  respect to  securities  that are not yet
subject to call or  redemption  by the issuer.  For example,  advance  refunding
enables an issuer to refinance debt at lower market interest rates,  restructure
debt to improve cash flow or eliminate restrictive covenants in the indenture or
other governing instrument for the pre-refunded  municipal securities.  However,
except for a change in the revenue  source  from which  principal  and  interest
payments are made, the pre-refunded  municipal  securities remain outstanding on
their  original  terms  until  they  mature  or  are  redeemed  by  the  issuer.
Pre-refunded  municipal  securities  are  usually  purchased  at a  price  which
represents a premium over their face value.

Tender Option Bonds.  A tender  option bond is a municipal  security  (generally
held pursuant to a custodial  arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing short-term
tax-exempt rates. The bond is typically issued in conjunction with the agreement
of a third party, such as a bank,  broker-dealer or other financial institution,
pursuant to which such institution  grants the security  holders the option,  at
periodic  intervals,  to tender their  securities to the institution and receive
the face value thereof.

As consideration for providing the option,  the financial  institution  receives
periodic fees equal to the  difference  between the bond's fixed coupon rate and
the  rate,  as  determined  by a  remarketing  or  similar  agent at or near the
commencement of such period,  that would cause the securities,  coupled with the
tender option,  to trade at par on the date of such  determination.  Thus, after
payment of this fee, the security holder  effectively  holds a demand obligation
that bears interest at the prevailing short-term tax-exempt rate.

However,  an institution  will not be obligated to accept  tendered bonds in the
event of certain  defaults  or a  significant  downgrade  in the  credit  rating
assigned to the issuer of the bond.  The  liquidity of a tender option bond is a
function  of the  credit  quality  of both the  bond  issuer  and the  financial
institution  providing  liquidity.  Tender  option bonds are deemed to be liquid
unless, in the opinion of the Advisor, the credit quality of the bond issuer and
the  financial  institution  is deemed,  in light of the Fund's  credit  quality
requirements, to be inadequate. The Fund intends to invest only in tender option
bonds the interest on which will,  in the opinion of bond  counsel,  counsel for
the issuer of interests  therein or counsel  selected by the Advisor,  be exempt
from regular federal income tax. However, because there can be no assurance that
the Internal Revenue Service (the "IRS") will agree with such counsel's  opinion
in any particular case, there is a risk that the Fund will not be considered the
owner of such  tender  option  bonds and thus will not be entitled to treat such
interest as exempt from such tax. Additionally, the federal income tax treatment
of  certain  other  aspects  of these  investments,  including  the  proper  tax
treatment of tender option bonds and the associated fees, in relation to various
regulated  investment  company tax  provisions  is unclear.  The Fund intends to
manage its  portfolio in a manner  designed to eliminate or minimize any adverse
impact from the tax rules applicable to these investments.

Auction Rate  Securities.  Auction rate  securities in which the Fund may invest
consist  of  auction  rate  municipal  securities  and  auction  rate  preferred
securities  issued by closed-end  investment  companies that invest primarily in
municipal securities. Provided that the auction mechanism is successful, auction
rate  securities  usually permit the holder to sell the securities in an auction
at par value at specified intervals. The dividend is reset by "Dutch" auction in
which  bids are made by  broker-dealers  and  other  institutions  for a certain
amount of securities at a specified  minimum yield. The dividend rate set by the
auction is the lowest  interest  or  dividend  rate that  covers all  securities
offered  for sale.  While  this  process  is  designed  to permit  auction  rate
securities  to be traded at par value,  there is the risk that an  auction  will
fail due to insufficient demand for the securities.

                                       9
<PAGE>

Dividends on auction rate preferred  securities  issued by a closed-end fund may
be  designated  as  exempt  from  federal  income  tax to the  extent  they  are
attributable to tax-exempt  interest income earned by the fund on the securities
in its  portfolio  and  distributed  to  holders  of the  preferred  securities,
provided  that the preferred  securities  are treated as equity  securities  for
federal  income tax  purposes  and the  closed-end  fund  complies  with certain
requirements under the Internal Revenue Code of 1986, as amended (the "Code").

The Fund's investments in auction rate preferred  securities of closed-end funds
are subject to  limitations  on  investments  in other US registered  investment
companies,  which  limitations  are prescribed by the Investment  Company Act of
1940,  as amended  (the "1940  Act").  These  limitations  include  prohibitions
against  acquiring  more than 3% of the  voting  securities  of any  other  such
investment  company,  and  investing  more  than  5% of  the  Fund's  assets  in
securities of any one such investment  company or more than 10% of its assets in
securities of all such investment companies.

Private  Activity  Bonds.  Certain  types  of  municipal  securities,  generally
referred to as industrial  development  bonds (and referred to under current tax
law as private activity bonds), are issued by or on behalf of public authorities
to obtain funds for privately-operated housing facilities, airport, mass transit
or port  facilities,  sewage  disposal,  solid waste disposal or hazardous waste
treatment or disposal  facilities and certain local facilities for water supply,
gas or electricity. Other types of industrial development bonds, the proceeds of
which  are  used for the  construction,  equipment,  repair  or  improvement  of
privately operated industrial or commercial facilities, may constitute municipal
securities,  although the current federal tax laws place substantial limitations
on the size of such issues.  The payment of the  principal  and interest on such
bonds is generally  dependent  solely on the ability of the  facility's  user to
meet its  financial  obligations  and the pledge,  if any, of real and  personal
property so financed as security for such  payment.  The  interest  from certain
private  activity bonds owned by the Fund  (including  the Fund's  distributions
attributable  to such  interest)  may be a  preference  item for purposes of the
alternative minimum tax.

Fixed Income Security Risk. Fixed income securities generally expose the Fund to
four types of risk:  (1) interest rate risk (the potential for  fluctuations  in
bond prices due to changing interest rates);  (2) income risk (the potential for
a decline in the Fund's income due to falling market interest rates); (3) credit
risk (the  possibility  that a bond issuer will fail to make timely  payments of
either interest or principal to the Fund);  and (4) prepayment risk or call risk
(the likelihood that, during a period of falling interest rates, securities with
high stated  interest  rates will be prepaid,  or  "called"  prior to  maturity,
requiring the Fund to invest the proceeds at generally lower interest rates).

Foreign  Securities  Risk.  The Fund may  invest a portion  of its  assets in US
dollar-denominated  and non-US  dollar-denominated  debt  securities  of foreign
companies.  Investing in the securities of foreign companies involves more risks
than investing in securities of US companies. Their value is subject to economic
and political  developments in the countries where the companies  operate and to
changes in foreign currency  values.  Values may also be affected by foreign tax
laws,  changes  in foreign  economic  or  monetary  policies,  exchange  control
regulations  and  regulations  involving  prohibitions  on the  repatriation  of
foreign currencies.

In general, less information may be available about foreign companies than about
US  companies,  and  foreign  companies  are  generally  not subject to the same
accounting,  auditing and  financial  reporting  standards as are US  companies.
Foreign  securities  markets may be less  liquid and subject to less  regulation
than the US securities markets. The costs of investing outside the United States
frequently  are higher  than those in the United  States.  These  costs  include
relatively higher brokerage commissions and foreign custody expenses.

Mortgage-Backed and Asset-Backed Securities

Mortgage-Backed Securities. The Fund may invest in mortgage-backed securities. A
mortgage-backed  security  consists of a pool of  mortgage  loans  evidenced  by
promissory  notes  secured by first  mortgages  or first deeds of trust or other
similar  security  instruments  creating  a  first  lien on  owner-occupied  and
non-owner-occupied  one-unit to four-unit  residential  properties,  multifamily
(i.e.,  five or more  units)  properties,  agricultural  properties,  commercial
properties and mixed use properties.

The  investment  characteristics  of adjustable  and fixed rate  mortgage-backed
securities differ from those of traditional fixed-income  securities.  The major
differences  include the payment of interest and  principal  on


                                       10
<PAGE>

mortgage-backed  securities on a more frequent (usually monthly)  schedule,  and
the possibility  that principal may be prepaid at any time due to prepayments on
the underlying  mortgage loans or other assets.  These differences can result in
significantly  greater  price  and  yield  volatility  than  is  the  case  with
traditional  fixed-income  securities.  As  a  result,  if  the  Fund  purchases
mortgage-backed securities at a premium, a faster-than-expected  prepayment rate
will  decrease  both the market value and the yield to maturity from those which
were  anticipated.  A prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and market value. Conversely, if
the    Fund    purchases    mortgage-backed    securities    at   a    discount,
faster-than-expected   prepayments  will  increase,  while  slower-than-expected
prepayments  will decrease,  yield to maturity and market values.  To the extent
that the Fund  invests in  mortgage-backed  securities,  the Advisor may seek to
manage  these  potential  risks by  investing  in a variety  of  mortgage-backed
securities and by using certain hedging techniques.

Asset-Backed Securities. The Fund may invest in securities generally referred to
as asset-backed  securities.  Asset-backed securities are secured by and payable
from, or directly or indirectly  represent  undivided  fractional  interests in,
pools  of  corporate,   consumer  and/or  commercial  loans  held  in  a  trust.
Asset-backed  securities may provide periodic  payments that consist of interest
and/or principal payments.  Consequently,  the life of an asset-backed  security
can vary with the  prepayment  and loss  experience  of the  underlying  assets.
Payments of  principal  and  interest  are  typically  supported by some form of
credit enhancement,  such as a letter of credit,  surety bond, limited guarantee
or senior/subordination.  The degree of credit enhancement varies, but generally
amounts  to only a  fraction  of the  asset-backed  security's  par value  until
exhausted.  If the credit  enhancement  is  exhausted,  certificate  holders may
experience losses or delays in payment if the required payments of principal and
interest are not made to the trust with  respect to the  underlying  loans.  The
value of the  securities  also may fluctuate  because of changes in the market's
perception of  creditworthiness  of the servicing  agent for the loan pool,  the
originator  of the  loans or the  financial  institution  providing  the  credit
enhancement.  Asset-backed  securities are ultimately  dependent upon payment of
business,  government,  corporate  and consumer  loans,  leases,  etc.,  and the
certificate  holder generally has no recourse against the entity that originated
the loans.

Asset-backed    securities   have   structural    characteristics   similar   to
mortgage-backed securities.  Asset-backed securities include assets such as (but
not limited to) motor vehicle installment sale contracts, other installment sale
contracts,  home  equity  loans,  leases of various  types of real and  personal
property,  and receivables from revolving credit (credit card) agreements.  Such
assets  are   securitized   through  the  use  of  trusts  or  special   purpose
corporations.   Payments  or   distributions   of  principal   and  interest  on
asset-backed  securities  may be  guaranteed  up to  certain  amounts  and for a
certain time period by a letter of credit or a pool insurance policy issued by a
financial institution unaffiliated with the issuer, or other credit enhancements
may be present.

Asset-backed  securities present certain additional risks that are not presented
by  mortgage-backed  securities.  Primarily,  these  securities  do not have the
benefit of the same type of security interest in the related collateral.  Credit
card  receivables are generally  unsecured,  and the debtors are entitled to the
protection of a number of state and federal  consumer credit laws, many of which
give such  debtors  the right to avoid  payment of certain  amounts  owed on the
credit  cards,  thereby  reducing  the balance due.  Most issuers of  automobile
receivables   permit  the  servicer  to  retain  possession  of  the  underlying
obligations.  If the servicer were to sell these  obligations  to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related automobile receivables.  In addition,  because of the
large  number  of  vehicles   involved  in  a  typical  issuance  and  technical
requirements  under  state laws,  the trustee for the holders of the  automobile
receivables  may not have a proper  security  interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries on
repossessed  collateral may not, in some cases, be available to support payments
on these securities.

The market for  privately  issued  asset-backed  securities  is smaller and less
liquid  than  the  market  for US  government  mortgage-backed  securities.  The
asset-backed  securities in which the Fund may invest are limited to those which
usually are readily  marketable,  dollar-denominated  and rated BBB  category or
higher by S&P or Baa category or higher by Moody's.

The yield characteristics of the mortgage- and asset-backed  securities in which
the Fund may invest differ from those of traditional debt securities.  Among the
major  differences  are that  interest  and  principal  payments  are made  more
frequently on the mortgage- and asset-backed  securities  (usually  monthly) and
that  principal  may be  prepaid  at


                                       11
<PAGE>

any time because the underlying  assets generally may be prepaid at any time. As
a result, if the Fund purchases these securities at a premium, a prepayment rate
that is faster than  expected will reduce their yield,  while a prepayment  rate
that is slower than expected will have the opposite effect of increasing  yield.
Conversely,   if  the  Fund   purchases   these   securities   at  a   discount,
faster-than-expected   prepayments  will  increase,  while  slower-than-expected
prepayments will reduce,  the yield on these  securities.  Amounts available for
reinvestment  by the Fund are likely to be greater  during a period of declining
interest  rates and, as a result,  are likely to be reinvested at lower interest
rates than during a period of rising interest rates.

Mortgage-Backed  Securities  and  Asset-Backed  Securities  -- Types  of  Credit
Support. Mortgage-backed securities and asset-backed securities are often backed
by a pool of  assets  representing  the  obligations  of a number  of  different
parties.  To lessen the effect of failure by  obligors on  underlying  assets to
make payments,  such  securities may contain  elements of credit  support.  Such
credit  support  falls into two  categories:  (1) liquidity  protection  and (2)
protection  against losses  resulting from ultimate default by an obligor on the
underlying  assets.  Liquidity  protection  refers to the provision of advances,
generally  by the entity  administering  the pool of assets,  to ensure that the
pass-through  of payments due on the underlying pool occurs in a timely fashion.
Protection   against  losses   resulting  from  ultimate  default  enhances  the
likelihood of ultimate  payment of the  obligations on at least a portion of the
assets  in the  pool.  Such  protection  may  be  provided  through  guarantees,
insurance  policies or letters of credit  obtained by the issuer or sponsor from
third parties; through various means of structuring the transaction;  or through
a combination of such approaches.  The Fund may pay any additional fees for such
credit support,  although the existence of credit support may increase the price
of a security.

The ratings of mortgage-backed  securities and asset-backed securities for which
third-party  credit  enhancement  provides  liquidity  protection  or protection
against  losses  from  default  are  generally   dependent  upon  the  continued
creditworthiness of the provider of the credit enhancement.  The ratings of such
securities  could be subject to reduction in the event of  deterioration  in the
creditworthiness  of the credit  enhancement  provider  even in cases  where the
delinquency  and loss experience on the underlying pool of assets is better than
expected.

Examples of credit  support  arising  out of the  structure  of the  transaction
include "senior-subordinated  securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne  first by the  holders of the  subordinated  class),  creation of "reserve
funds"  (where  cash or  investments,  sometimes  funded  from a portion  of the
payments on the underlying  assets,  are held in reserve  against future losses)
and "over-collateralization"  (where the scheduled payments on, or the principal
amount of, the  underlying  assets exceed those  required to make payment of the
securities  and pay any servicing or other fees).  The degree of credit  support
provided  for each  issue is  generally  based on  historical  information  with
respect  to the level of credit  risk  associated  with the  underlying  assets.
Delinquency  or loss in  excess of that  which is  anticipated  could  adversely
affect the return on an investment in such a security.

Government  Guaranteed  Mortgage-Backed  Securities.  The Fund's  investments in
mortgage-backed securities may include securities issued or guaranteed by the US
government or one of its agencies,  authorities,  instrumentalities or sponsored
enterprises,  such as Ginnie Mae,  Fannie Mae and Freddie Mac. There are several
types of guaranteed  mortgage-backed  securities currently available,  including
guaranteed  mortgage  pass-through  certificates and multiple class  securities,
which include guaranteed Real Estate Mortgage  Investment  Conduit  Certificates
("REMIC   Certificates"),   collateralized  mortgage  obligations  and  stripped
mortgage-backed  securities.  The Fund is  permitted to invest in other types of
mortgage-backed  securities  that may be  available  in the future to the extent
consistent with its investment policies and objective.

Ginnie Mae Certificates.  Ginnie Mae is a wholly owned corporate instrumentality
of the United States within the Department of Housing and Urban Development. The
National Housing Act of 1934, as amended (the "Housing Act"),  authorizes Ginnie
Mae to  guarantee  the  timely  payment  of the  principal  of and  interest  on
certificates that are based on and backed by a pool of mortgage loans insured by
the Federal  Housing  Administration  under the  Housing  Act, or Title V of the
Housing Act of 1949 ("FHA  Loans"),  or guaranteed by the Department of Veterans
Affairs  under  the  Servicemen's  Readjustment  Act of 1944,  as  amended  ("VA
Loans"),  or by pools of other eligible mortgage loans. The Housing Act provides
that the full faith and credit of the US government is pledged to the


                                       12
<PAGE>

payment  of all  amounts  that may be  required  to be paid under any Ginnie Mae
guaranty.  In order to meet its obligations  under such guaranty,  Ginnie Mae is
authorized to borrow from the US Treasury with no limitations as to amount.

The Ginnie Mae  Certificates in which the Fund invests will represent a pro rata
interest  in one or more pools of the  following  types of mortgage  loans:  (1)
fixed-rate  level payment  mortgage  loans;  (2)  fixed-rate  graduated  payment
mortgage loans;  (3) fixed-rate  growing equity  mortgage loans;  (4) fixed-rate
mortgage loans secured by  manufactured  (mobile)  homes;  (5) mortgage loans on
multifamily  residential  properties under  construction;  (6) mortgage loans on
completed  multifamily  projects;  (7)  fixed-rate  mortgage  loans  as to which
escrowed funds are used to reduce the  borrower's  monthly  payments  during the
early years of the  mortgage  loans ("buy down"  mortgage  loans);  (8) mortgage
loans that  provide for  adjustments  in payments  based on periodic  changes in
interest  rates  or in  other  payment  terms  of the  mortgage  loans;  and (9)
mortgage-backed serial notes.

Fannie Mae Certificates. Fannie Mae is a federally chartered and privately owned
corporation   organized  and  existing  under  the  Federal  National   Mortgage
Association  Charter Act of 1938. The  obligations of Fannie Mae are obligations
solely of Fannie  Mae and are not  backed by the full faith and credit of the US
government.

Each Fannie Mae  Certificate  will  represent a pro rata interest in one or more
pools of FHA Loans,  VA Loans or  conventional  mortgage  loans (i.e.,  mortgage
loans that are not  insured or  guaranteed  by any  governmental  agency) of the
following  types:  (1) fixed-rate  level payment  mortgage loans; (2) fixed-rate
growing equity mortgage loans; (3) fixed-rate  graduated payment mortgage loans;
(4) variable rate mortgage loans;  (5) other adjustable rate mortgage loans; and
(6) fixed-rate and adjustable mortgage loans secured by multifamily projects.

Freddie Mac  Certificates.  Freddie Mac is a federally  chartered  and privately
owned  corporation of the United States  created  pursuant to the Emergency Home
Finance Act of 1970, as amended (the "FHLMC Act").  The  obligations  of Freddie
Mac are  obligations  solely of Freddie Mac and are not backed by the full faith
and credit of the US government.

Freddie Mac  Certificates  represent a pro rata  interest in a group of mortgage
loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The mortgage
loans  underlying  the Freddie Mac  Certificates  will consist of  fixed-rate or
adjustable  rate mortgage  loans with original  terms to maturity of between ten
and thirty years,  substantially all of which are secured by first liens on one-
to four-family  residential  properties or multifamily  projects.  Each mortgage
loan must meet the  applicable  standards  set forth in the FHLMC Act. A Freddie
Mac Certificate group may include whole loans,  participating interests in whole
loans and  undivided  interests  in whole  loans and  participations  comprising
another Freddie Mac Certificate group.

Multiple Class Mortgage-Backed Securities. The Fund may invest in multiple class
mortgage-backed   securities  including   collateralized   mortgage  obligations
("CMOs") and REMIC Certificates. These securities may be issued by US government
agencies  and  instrumentalities  such as Fannie Mae or Freddie Mac or by trusts
formed by private  originators of, or investors in,  mortgage  loans,  including
savings and loan  associations,  mortgage bankers,  commercial banks,  insurance
companies,  investment banks and special purpose  subsidiaries of the foregoing.
In general,  CMOs are debt obligations of a legal entity that are collateralized
by a pool of mortgage loans or mortgage-backed  securities the payments on which
are  used  to  make  payments  on the  CMOs or  multiple  class  mortgage-backed
securities.  REMIC Certificates  represent  beneficial  ownership interests in a
REMIC trust,  generally  consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage-backed securities (the "Mortgage Assets"). The
obligations of Fannie Mae or Freddie Mac under their respective  guaranty of the
REMIC  Certificates  are  obligations  solely  of  Fannie  Mae or  Freddie  Mac,
respectively.  Although investors may purchase  beneficial  interests in REMICs,
which are known as "regular"  interests or "residual"  interests,  the Fund does
not intend to purchase such residual interests in REMICs.

Fannie  Mae  REMIC   Certificates   are  issued  and  guaranteed  as  to  timely
distribution  of principal and interest by Fannie Mae.  These  certificates  are
obligations solely of Fannie Mae and are not backed by the full faith and credit
of the US  government.  In addition,  Fannie Mae will be obligated to distribute
the principal  balance of each class of REMIC  Certificates in full,  whether or
not sufficient funds are otherwise available.

                                       13
<PAGE>

Freddie  Mac  guarantees  the timely  payment of  interest  on Freddie Mac REMIC
Certificates  and also  guarantees  the payment of  principal  as  payments  are
required  to be  made  on the  underlying  mortgage  participation  certificates
("PCs").  These  certificates are obligations  solely of Freddie Mac and are not
backed  by the  full  faith  and  credit  of the US  government.  PCs  represent
undivided  interests  in  specified  level  payment  residential   mortgages  or
participations  therein  purchased by Freddie Mac and placed in a PC pool.  With
respect to principal payments on PCs, Freddie Mac generally  guarantees ultimate
collection of all  principal of the related  mortgage  loans  without  offset or
deduction.  Freddie Mac also  guarantees  timely payment of principal of certain
PCs.

CMOs and REMIC  Certificates are issued in multiple classes.  Each class of CMOs
or REMIC Certificates, often referred to as a "tranche," is issued at a specific
adjustable  or fixed  interest  rate and must be fully retired no later than its
final distribution date. Principal  prepayments on the underlying mortgage loans
or the Mortgage Assets underlying the CMOs or REMIC  Certificates may cause some
or all of the classes of CMOs or REMIC Certificates to be retired  substantially
earlier  than their final  distribution  dates.  Generally,  interest is paid or
accrues on all classes of CMOs or REMIC Certificates on a monthly basis.

The principal of and interest on the Mortgage  Assets may be allocated among the
several  tranches in various ways. In certain  structures  (known as "sequential
pay" CMOs or REMIC Certificates), payments of principal, including any principal
prepayments, on the Mortgage Assets generally are applied to the classes of CMOs
or REMIC Certificates in the order of their respective final distribution dates.
Thus, no payment of principal  will be made on any class of sequential  pay CMOs
or  REMIC   Certificates  until  all  other  classes  having  an  earlier  final
distribution  date  have been paid in full.  Additional  structures  of CMOs and
REMIC  Certificates  include,  among  others,  "parallel  pay"  CMOs  and  REMIC
Certificates.  Parallel  pay CMOs or REMIC  Certificates  are  those  which  are
structured to apply principal payments and prepayments of the Mortgage Assets to
two or more classes  concurrently on a proportionate or disproportionate  basis.
These  simultaneous  payments  are taken into account in  calculating  the final
distribution date of each class.

A wide variety of REMIC Certificates may be issued in parallel pay or sequential
pay structures.  These securities  include accrual  certificates  (also known as
"Z-Bonds"),  which only  accrue  interest  at a  specified  rate until all other
certificates having an earlier final distribution date have been retired and are
converted  thereafter to an interest-paying  security,  and planned amortization
class  ("PAC")  certificates,  which are  parallel pay REMIC  Certificates  that
generally require that specified amounts of principal be applied on each payment
date to one or more classes or REMIC Certificates (the "PAC Certificates"), even
though all other  principal  payments and prepayments of the Mortgage Assets are
then  required  to  be  applied  to  one  or  more  other  classes  of  the  PAC
Certificates.   The  scheduled  principal  payments  for  the  PAC  Certificates
generally have the highest  priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently.  Shortfalls, if
any,  are  added  to the  amount  payable  on the  next  payment  date.  The PAC
Certificate  payment  schedule is taken into  account in  calculating  the final
distribution date of each class of PAC. In order to create PAC tranches,  one or
more tranches  generally  must be created that absorb most of the  volatility in
the underlying  Mortgage  Assets.  These tranches tend to have market prices and
yields that are much more volatile than other PAC classes.

Stripped   Mortgage-Backed   Securities.   The   Fund  may   purchase   stripped
mortgage-backed  securities ("SMBS"),  which are derivative  multiclass mortgage
securities.  Although the market for such  securities  is  increasingly  liquid,
certain SMBS may not be readily  marketable and will be considered  illiquid for
purposes of the Fund's  limitation on  investments in illiquid  securities.  The
market value of the class consisting entirely of principal payments generally is
highly volatile in response to changes in interest rates.  The yields on a class
of SMBS that receives all or most of the interest  from the Mortgage  Assets are
generally  higher  than  prevailing  market  yields  on  other   mortgage-backed
securities  because  their cash flow  patterns are more  volatile and there is a
greater risk that the initial investment will not be fully recouped.

Adjustable Rate  Mortgages-Interest  Rate Indices.  Adjustable rate mortgages in
which the Fund  invests may be adjusted on the basis of one of several  indices.
The One Year Treasury Index is the figure derived from the average weekly quoted
yield on US Treasury Securities adjusted to a constant maturity of one year. The
Cost of Funds Index  reflects  the  monthly  weighted  average  cost of funds of
savings and loan  associations  and savings banks whose home offices are located
in Arizona, California and Nevada (the "FHLB Eleventh District") that are member

                                       14
<PAGE>

institutions  of the Federal Home Loan Bank of San  Francisco  (the "FHLB of San
Francisco"),  as computed from statistics tabulated and published by the FHLB of
San Francisco.  The FHLB of San Francisco  normally  announces the Cost of Funds
Index on the last working day of the month following the month in which the cost
of funds was incurred.

A number of factors  affect the  performance  of the Cost of Funds Index and may
cause the Cost of Funds Index to move in a manner  different  from indices based
upon specific  interest rates,  such as the One Year Treasury Index.  Because of
the various  origination  dates and maturities of the  liabilities of members of
the FHLB Eleventh  District  upon which the Cost of Funds Index is based,  among
other  things,  the Cost of Funds  Index may not  reflect  at any given time the
average   prevailing  market  interest  rates  on  new  liabilities  of  similar
maturities.  There  can be no  assurance  that  the  Cost of  Funds  Index  will
necessarily  move in the  same  direction  or at the  same  rate  as  prevailing
interest  rates  since as longer  term  deposits  or  borrowings  mature and are
renewed  at market  interest  rates,  the Cost of Funds  Index will rise or fall
depending  upon the  differential  between  the  prior and the new rates on such
deposits and  borrowings.  In addition,  dislocations  in the thrift industry in
recent  years have caused and may  continue to cause the cost of funds of thrift
institutions to change for reasons unrelated to changes in general interest rate
levels.  Furthermore,  any  movement  in the Cost of Funds  Index as compared to
other  indices  based upon  specific  interest  rates may be affected by changes
instituted by the FHLB of San Francisco in the method used to calculate the Cost
of Funds Index. To the extent that the Cost of Funds Index may reflect  interest
changes  on a more  delayed  basis  than  other  indices,  in a period of rising
interest  rates,  any  increase  may produce a higher  yield later than would be
produced by such other indices, and in a period of declining interest rates, the
Cost of Funds Index may remain higher than other market  interest  rates,  which
may result in a higher level of principal  prepayments  on mortgage  loans which
adjust in  accordance  with the Cost of Funds  Index than  mortgage  loans which
adjust in accordance with other indices.

LIBOR,  the London  interbank  offered  rate, is the interest rate that the most
creditworthy  international banks dealing in US dollar-denominated  deposits and
loans  charge  each  other for  large  dollar-denominated  loans.  LIBOR is also
usually the base rate for large  dollar-denominated  loans in the  international
market.  LIBOR is  generally  quoted for loans having rate  adjustments  at one,
three, six or twelve month intervals.

Zero Coupon  Securities and Deferred Interest Bonds. The Fund may invest in zero
coupon  securities  that are  "stripped"  US  Treasury  notes  and  bonds and in
deferred  interest  bonds.  Zero coupon  securities  are the separate  income or
principal  components of a debt  instrument.  Zero coupon and deferred  interest
bonds are debt obligations which are issued at a significant  discount from face
value. The original discount approximates the total amount of interest the bonds
will accrue and compound  over the period until  maturity or the first  interest
accrual date at a rate of interest reflecting the market rate of the security at
the time of issuance. Zero coupon securities are redeemed at face value at their
maturity date without interim cash payments of interest or principal. The amount
of this  discount  is accrued  over the life of the  security,  and the  accrual
constitutes  the  income  earned on the  security  for both  accounting  and tax
purposes. Because of these features, the market prices of zero coupon securities
are generally  more  volatile  than the market  prices of  securities  that have
similar maturity but that pay interest periodically.

While zero  coupon  bonds do not  require  the  periodic  payment  of  interest,
deferred  interest  bonds  generally  provide  for a period of delay  before the
regular payment of interest  begins.  Although this period of delay is different
for each deferred interest bond, a typical period is approximately  one-third of
the bond's term to maturity.  Such investments  benefit the issuer by mitigating
its initial need for cash to meet debt  service,  but some also provide a higher
rate of return to attract  investors  who are  willing to defer  receipt of such
cash.


The Fund will accrue income on such investments for tax and accounting purposes,
as required,  which is distributable to shareholders and which,  because no cash
is generally  received at the time of accrual,  may require the  liquidation  of
other portfolio securities to satisfy the Fund's distribution  obligations.  See
"Taxes."


Illiquid Securities.  Historically, illiquid securities have included securities
subject to  contractual  or legal  restrictions  on resale because they have not
been  registered  under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase  agreements
having a maturity  of longer  than seven  days.  Securities  which have not been
registered  under  the  1933  Act  are  referred  to as  private


                                       15
<PAGE>

placements or restricted  securities and are purchased  directly from the issuer
or in the secondary market.  Non-publicly traded securities (including Rule 144A
Securities)  may involve a high degree of business  and  financial  risk and may
result in substantial losses.  These securities may be less liquid than publicly
traded  securities,  and it may take longer to liquidate  these  positions  than
would be the case for publicly traded securities. Companies whose securities are
not  publicly  traded may not be subject to the  disclosure  and other  investor
protection  requirements  applicable to companies whose  securities are publicly
traded. Limitations on resale may have an adverse effect on the marketability of
portfolio  securities and a mutual fund might be unable to dispose of restricted
or other illiquid  securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. An investment in
illiquid  securities  is subject to the risk that should the Fund desire to sell
any of these  securities  when a ready buyer is not available at a price that is
deemed to be  representative  of their value, the value of the Fund's net assets
could be adversely affected.

Mutual funds do not typically hold a significant  amount of these  restricted or
other  illiquid  securities  because of the  potential  for delays on resale and
uncertainty  in  valuation.  A mutual  fund  might  also have to  register  such
restricted  securities  in order to dispose  of them,  resulting  in  additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

A large  institutional  market has developed for certain securities that are not
registered  under  the  1933  Act,  including  but  not  limited  to  repurchase
agreements,  commercial  paper,  non-US  securities,  municipal  securities  and
corporate  bonds and  notes.  Institutional  investors  depend  on an  efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment.  The fact that there are
contractual or legal  restrictions on resale of such  investments to the general
public or to certain institutions may not be indicative of their liquidity.


The SEC has adopted  Rule 144A,  which  allows a broader  institutional  trading
market for  securities  otherwise  subject to restriction on their resale to the
general  public.  Rule 144A  establishes a "safe  harbor" from the  registration
requirements  of the 1933 Act for  resales of certain  securities  to  qualified
institutional  buyers.  The  Advisor  anticipates  that the market  for  certain
restricted securities such as institutional commercial paper will expand further
as a result of this regulation and the development of automated  systems for the
trading,  clearance and  settlement of  unregistered  securities of domestic and
non-US  issuers,  such as the PORTAL  System  sponsored  by  Financial  Industry
Regulatory Authority ("FINRA").


An investment in Rule 144A Securities will be considered  illiquid and therefore
subject to the Fund's  limit on the purchase of illiquid  securities  unless the
Board or its delegates  determines that the Rule 144A Securities are liquid.  In
reaching liquidity  decisions,  the Board and its delegates may consider,  inter
alia, the following factors:  (i) the unregistered nature of the security;  (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to  purchase  or sell the  security  and the  number of other  potential
purchasers;  (iv) dealer undertakings to make a market in the security;  and (v)
the nature of the security and the nature of the marketplace  trades (e.g.,  the
time needed to dispose of the security,  the method of soliciting offers and the
mechanics of the transfer).

Investing in Rule 144A Securities  could have the effect of increasing the level
of illiquidity in the Fund to the extent that qualified institutional buyers are
unavailable or  uninterested  in purchasing  such  securities from the Fund. The
Board has adopted  guidelines and delegated to the Advisor the daily function of
determining and monitoring the liquidity of Rule 144A  Securities,  although the
Board will retain ultimate responsibility for any liquidity determinations.

TBA  Purchase  Commitments.  The Fund may enter into "To Be  Announced"  ("TBA")
purchase  commitments to purchase securities for a fixed price at a future date,
typically not exceeding  75-90 days. TBA purchase  commitments may be considered
securities  in  themselves,  and  involve  a risk of loss  if the  value  of the
security to be purchased  declines  prior to settlement  date,  which risk is in
addition  to the risk of  decline  in the  value  of the  Fund's  other  assets.
Unsettled TBA purchase commitments are valued at the current market value of the
underlying securities.  To facilitate such acquisitions,  the Fund identifies on
its book cash or liquid assets in an amount at least equal to such  commitments.
It may be expected that the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio  securities to cover such purchase commitments than
when it sets aside cash. On delivery dates


                                       16
<PAGE>

for such  transactions,  the Fund will meet its  obligations  from maturities or
sales of the segregated securities and/or from cash flow. If the Fund chooses to
dispose  of the TBA  security  prior to its  settlement,  it could,  as with the
disposition  of any  other  portfolio  obligation,  incur a gain or loss  due to
market fluctuation.

When-Issued and Delayed Delivery Securities. The Fund may purchase securities on
a  when-issued  or delayed  delivery  basis.  Delivery  of and payment for these
securities  can  take  place a month  or more  after  the  date of the  purchase
commitment.  The payment  obligation and the interest rate that will be received
on when-issued and delayed  delivery  securities are fixed at the time the buyer
enters  into the  commitment.  Due to  fluctuations  in the value of  securities
purchased  or sold on a  when-issued  or  delayed  delivery  basis,  the  yields
obtained on such securities may be higher or lower than the yields  available in
the market on the dates  when the  investments  are  actually  delivered  to the
buyers.  When-issued  securities may include securities purchased on a "when, as
and if issued"  basis,  under which the issuance of the security  depends on the
occurrence  of a  subsequent  event,  such as  approval  of a merger,  corporate
reorganization or debt restructuring. The value of such securities is subject to
market  fluctuation during this period and no interest or income, as applicable,
accrues to the Fund until settlement takes place.

At  the  time  the  Fund  makes  the  commitment  to  purchase  securities  on a
when-issued or delayed delivery basis, it will record the  transaction,  reflect
the value each day of such securities in determining its net asset value and, if
applicable,  calculate  the maturity for the purposes of average  maturity  from
that date.  At the time of  settlement a  when-issued  security may be valued at
less  than  the  purchase  price.  To  facilitate  such  acquisitions,  the Fund
identifies  on its books  cash or liquid  assets in an amount at least  equal to
such  commitments.  It may be expected that the Fund's net assets will fluctuate
to a greater  degree  when it sets  aside  portfolio  securities  to cover  such
purchase  commitments  than when it sets aside cash. On delivery  dates for such
transactions, the Fund will meet its obligations from maturities or sales of the
segregated  securities  and/or from cash flow. If the Fund chooses to dispose of
the right to acquire a when-issued security prior to its acquisition,  it could,
as with the disposition of any other portfolio obligation,  incur a gain or loss
due to market  fluctuation.  It is the  current  policy of the Fund not to enter
into when-issued  commitments exceeding in the aggregate 15% of the market value
of the Fund's total assets,  less liabilities other than the obligations created
by   when-issued   commitments.   When  the  Fund  engages  in   when-issued  or
delayed-delivery  transactions,  it relies on the other party to consummate  the
trade.  Failure of the seller to do so may result in the Fund's incurring a loss
or missing an opportunity to obtain a price considered advantageous.

Additional US Government Obligations.  The Fund may invest in obligations issued
or  guaranteed  by US government  agencies or  instrumentalities.  US government
securities  are  high-quality  debt  securities  issued or  guaranteed by the US
Treasury  or by an  agency  or  instrumentality  of  the  US  government.  These
obligations  may or may not be  backed by the "full  faith  and  credit"  of the
United States. In the case of securities not backed by the full faith and credit
of the United  States,  the Fund must look  principally to the federal agency or
instrumentality  issuing or guaranteeing  the obligation for ultimate  repayment
and may not be able to assert a claim  against the United  States  itself in the
event the agency or instrumentality does not meet its commitments. Securities in
which the Fund may  invest  that are not  backed by the full faith and credit of
the United States include  obligations of the Tennessee Valley Authority and the
US Postal Service, each of which has the right to borrow from the US Treasury to
meet its obligations,  and obligations of the Federal Farm Credit System and the
Federal Home Loan Banks,  both of whose obligations may be satisfied only by the
individual credit of the issuing agency.  Securities that are backed by the full
faith and credit of the United States  include  obligations of GNMA, the Farmers
Home Administration and the Export-Import Bank.

Lower-Rated  Debt  Securities  ("Junk  Bonds").  The  Fund  may  invest  in debt
securities  rated in the fifth and sixth  long-term  rating  categories  by S&P,
Moody's and Fitch Inc.  ("Fitch"),  or comparably  rated by another NRSRO, or if
not rated by a NRSRO, of comparable  quality as determined by the Advisor in its
sole discretion.

These  securities,  often  referred  to as  "junk  bonds"  or "high  yield  debt
securities," are considered  speculative  and, while generally  offering greater
income than  investments in higher quality  securities,  involve greater risk of
loss of principal and income, including the possibility of default or bankruptcy
of the issuers of such securities, and have greater price volatility, especially
during periods of economic uncertainty or change. These lower quality bonds tend
to be  affected  by  economic  changes and  short-term  corporate  and  industry
developments, as well as public


                                       17
<PAGE>

perception of those changes and  developments,  to a greater  extent than higher
quality  securities,  which react primarily to fluctuations in the general level
of interest rates.

In addition,  the market for lower-rated debt securities may be thinner and less
active than that for higher-rated  debt  securities,  which can adversely affect
the prices at which the former are sold. If market quotations are not available,
lower-rated  debt  securities  will be  valued  in  accordance  with  procedures
established  by the Board of Trustees of the Fund,  including the use of outside
pricing services.  Judgment plays a greater role in valuing high yield corporate
debt securities than is the case for securities for which more external  sources
for quotations and last sale  information  is available.  Adverse  publicity and
changing investor perception may also affect the availability of outside pricing
services to value  lower-rated debt securities and the Fund's ability to dispose
of these  securities.  In addition,  such securities  generally present a higher
degree of credit risk.  Issuers of lower-rated  debt securities are often highly
leveraged and may not have more  traditional  methods of financing  available to
them so that their  ability  to service  their  obligations  during an  economic
downturn or during  sustained  periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
below  investment  grade  securities  generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness.

Since the risk of  default  is  higher  for  lower-rated  debt  securities,  the
Advisor's  research and credit  analysis  are an  especially  important  part of
managing  securities of this type held by the Fund. In  considering  investments
for the Fund,  the Advisor will attempt to identify  those issuers of high yield
debt  securities  whose  financial   conditions  are  adequate  to  meet  future
obligations,  have  improved  or are  expected  to  improve in the  future.  The
Advisor's  analysis focuses on relative values based on such factors as interest
on dividend coverage, asset coverage,  earnings prospects and the experience and
managerial strength of the issuer.

While the market for high yield  corporate debt securities has been in existence
for many years and has weathered  previous economic  downturns,  past experience
may not provide an accurate  indication of future  performance of the high yield
bond market, especially during periods of economic recession.

The Fund may choose,  at its expense or in  conjunction  with others,  to pursue
litigation  or  otherwise  exercise  its rights as a security  holder to seek to
protect  the  interest of security  holders if it  determines  this to be in the
interest of the Fund.

The Fund may invest in an affiliated mutual fund to gain exposure to lower rated
debt  securities.  The  affiliated  fund is permitted to invest in securities of
lower credit ratings than the Fund could invest in if it makes direct  purchases
of high yield debt securities.

Inverse Floaters. The Fund may invest in inverse floaters.  Inverse floaters are
debt  instruments  with a  floating  rate of  interest  that  bears  an  inverse
relationship to changes in short-term market interest rates. Investments in this
type of  security  involve  special  risks as compared  to  investments  in, for
example, a fixed rate municipal security.  The Fund could lose money and its NAV
could  decline if  movements  in  interest  rates are  incorrectly  anticipated.
Moreover,  the markets for securities of this type may be less developed and may
have less liquidity than the markets for more traditional municipal securities.

Securities of Foreign Issuers

Investment in Emerging Markets. The Fund may invest to varying degrees in one or
more countries with emerging securities  markets.  These countries are generally
located in Latin America,  Europe,  the Middle East, Africa and Asia.  Political
and economic structures in many of these countries may be undergoing significant
evolution  and rapid  development,  and  these  countries  may lack the  social,
political and economic  stability  characteristic  of more developed  countries.
Certain of these  countries  may have in the past  failed to  recognize  private
property rights and, at times, may have nationalized, or expropriated the assets
of  private  companies.  As  a  result,  these  risks,  including  the  risk  of
nationalization  or  expropriation  of assets,  may be heightened.  In addition,
unanticipated  political  or social  developments  may  affect  the value of the
Fund's investments in these countries, as well as the availability of additional
investments  in  these  countries.  The  small  size  and  inexperience  of  the
securities  markets in  certain of these  countries  and the  limited  volume of
trading in securities  in these  countries  may make the Fund's  investments  in
these  countries  illiquid and more  volatile than  investments  in most Western
European


                                       18
<PAGE>

countries,  and the Fund may be required to establish special custodial or other
arrangements before making certain investments in some of these countries. There
may be little  financial or  accounting  information  available  with respect to
issuers located in certain of these countries,  and may be difficult as a result
to assess the value or prospects of an investment in those  countries.  The laws
of some foreign  countries may limit the Fund's  ability to invest in securities
of certain issuers located in those countries.

Derivatives


General.  The Fund may invest in various  instruments that are commonly known as
"derivatives." Generally, a derivative is a financial arrangement,  the value of
which is based on, or "derived"  from, a traditional  security,  asset or market
index.  There  are,  in  fact,  many  different  types of  derivatives  and many
different  ways to use them.  There are a range of risks  associated  with those
uses. For example,  the Fund may use futures and options as a low-cost method of
gaining exposure to a particular securities market without investing directly in
those securities and for traditional  hedging purposes to attempt to protect the
Fund from exposure to changing  interest  rates,  securities  prices or currency
exchange rates and for cash management or other  investment  purposes.  The Fund
may use derivatives for non-hedging purpose,  such as to enhance return. The use
of derivatives may result in leverage,  which tends to magnify the effects of an
instrument's  price changes as market conditions  change.  Leverage involves the
use of a small amount of money to control a large  amount of  financial  assets,
and can in some  circumstances  lead to significant  losses. The Fund will limit
the  leverage  created by its use of  derivatives  for  investment  purposes  by
"covering"  such  positions  as  required  by  the  SEC.  The  Advisor  may  use
derivatives in circumstances where the Advisor believes they offer an economical
means of gaining  exposure to a particular  asset class.  The use of derivatives
for non-hedging purposes may be considered speculative.


The Fund's  investments  in  options,  futures,  forward  contracts  and similar
strategies  depend  on the  Advisor's  judgment  as to the  potential  risks and
rewards of different  types of  strategies.  Options and futures can be volatile
investments,  and may not perform as expected. If the Advisor applies a hedge at
an inappropriate  time or judges price trends  incorrectly,  options and futures
strategies may lower the Fund's return. The Fund could also experience losses if
the prices of its options and futures  positions were poorly correlated with its
other  investments,  or if it could not close out its  positions  because  of an
illiquid  secondary  market.  Options  and futures  traded on foreign  exchanges
generally are not regulated by US authorities,  and may offer less liquidity and
less  protection  to the Fund in the event of default by the other  party to the
contract.

The  Fund is  operated  by  persons  who  have  claimed  an  exclusion  from the
definition of the term "commodity  pool operator"  under the Commodity  Exchange
Act and, therefore,  who are not subject to registration or regulation under the
Commodity Exchange Act.

Options  on  Securities.  The Fund may  purchase  and write  (sell) put and call
options on securities. A call option gives the purchaser of the option the right
to buy,  and  obligates  the  writer to sell,  the  underlying  security  at the
exercise  price at any time during the option  period.  Similarly,  a put option
gives the purchaser of the option the right to sell, and obligates the writer to
buy, the underlying security at the exercise price at any time during the option
period.

The Fund may write (sell)  covered  call and put options to a limited  extent on
its portfolio  securities  ("covered  options") in an attempt to increase income
through the premiums it receives for writing the option(s).  However,  in return
for the premium,  the Fund may forgo the benefits of  appreciation on securities
sold or may pay more than the market price on  securities  acquired  pursuant to
call and put options written by the Fund.

A call option  written by the Fund is "covered" if the Fund owns the  underlying
security  covered by the call or has an absolute and immediate  right to acquire
that security  without  additional  cash  consideration  (or for additional cash
consideration  held in a segregated account by its custodian) upon conversion or
exchange  of other  securities  held in its  portfolio.  A call  option  is also
covered if the Fund  holds a call  option on the same  security  and in the same
principal amount as the written call option where the exercise price of the call
option so held (a) is equal to or less


                                       19
<PAGE>

than the  exercise  price of the written  call option or (b) is greater than the
exercise price of the written call option if the difference is segregated by the
Fund in cash or liquid securities.

When the Fund writes a covered call option, it gives the purchaser of the option
the right to buy the  underlying  security at the price  specified in the option
(the  "exercise  price") by exercising  the option at any time during the option
period.  If the option expires  unexercised,  the Fund will realize income in an
amount equal to the premium  received  for writing the option.  If the option is
exercised,  a decision over which a Fund has no control,  the Fund must sell the
underlying  security to the option  holder at the exercise  price.  By writing a
covered  call  option,  the Fund  forgoes,  in exchange for the premium less the
commission ("net  premium"),  the opportunity to profit during the option period
from an  increase  in the  market  value of the  underlying  security  above the
exercise  price.  In addition,  the Fund may  continue to hold a security  which
might  otherwise have been sold to protect  against  depreciation  in the market
price of the security.

A put option written by the Fund is "covered" when, among other things,  cash or
liquid securities acceptable to the broker are placed in a segregated account to
fulfill the obligations  undertaken.  When the Fund writes a covered put option,
it gives the purchaser of the option the right to sell the  underlying  security
to the  Fund at the  specified  exercise  price at any time  during  the  option
period. If the option expires  unexercised,  the Fund will realize income in the
amount of the net premium received for writing the option.  If the put option is
exercised, a decision over which the Fund has no control, the Fund must purchase
the underlying security from the option holder at the exercise price. By writing
a covered  put option,  the Fund,  in  exchange  for the net  premium  received,
accepts  the risk of a decline in the market  value of the  underlying  security
below  the  exercise  price.  The Fund will only  write  put  options  involving
securities for which a  determination  is made at the time the option is written
that the Fund wishes to acquire the securities at the exercise price.

The Fund may terminate  its  obligation as the writer of a call or put option by
purchasing an option with the same  exercise  price and  expiration  date as the
option  previously  written.  This  transaction  is called a  "closing  purchase
transaction."  The Fund will  realize  a profit  or loss on a  closing  purchase
transaction  if the amount paid to  purchase  an option is less or more,  as the
case may be,  than the amount  received  from the sale  thereof.  To close out a
position as a purchaser  of an option,  the Fund may enter into a "closing  sale
transaction,"  which  involves  liquidating  the Fund's  position by selling the
option  previously  purchased.  When the Fund cannot  effect a closing  purchase
transaction,  it may be forced to incur brokerage  commissions or dealer spreads
in  selling  securities  it  receives  or it may be  forced  to hold  underlying
securities until an option is exercised or expires.

When the Fund writes an option,  an amount equal to the net premium  received by
the Fund is included in the liability  section of the Fund's Statement of Assets
and Liabilities as a deferred credit.  The amount of the deferred credit will be
subsequently  marked to market to reflect the current market value of the option
written.  The current market value of a traded option is the last sale price or,
in the absence of a sale,  the mean between the closing bid and asked price.  If
an option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction,  the Fund will realize a gain (or loss if the cost
of a closing purchase  transaction  exceeds the premium received when the option
was sold), and the deferred credit related to such option will be eliminated. If
a call option is  exercised,  the Fund will realize a gain or loss from the sale
of the  underlying  security,  and the proceeds of the sale will be increased by
the premium  originally  received.  The writing of covered  call  options may be
deemed to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be identified on
the Fund's books.

The Fund may also  purchase  call and put options on any  securities in which it
may invest. The Fund would normally purchase a call option in anticipation of an
increase in the market value of such  securities.  The purchase of a call option
would entitle the Fund, in exchange for the premium paid, to purchase a security
at a specified price during the option period.  The Fund would ordinarily have a
gain  if  the  value  of the  securities  increased  above  the  exercise  price
sufficiently  to cover the  premium  and  would  have a loss if the value of the
securities remained at or below the exercise price during the option period.

The Fund would normally purchase put options in anticipation of a decline in the
market value of securities in its portfolio ("protective puts") or securities of
the type in which it is permitted to invest.  The purchase of a put option


                                       20
<PAGE>

would  entitle the Fund,  in exchange for the premium  paid, to sell a security,
which may or may not be held by the Fund at a specified  price during the option
period.  The purchase of protective  puts is designed  merely to offset or hedge
against a decline  in the  market  value of the Fund.  Put  options  also may be
purchased by the Fund for the purpose of affirmatively benefiting from a decline
in the price of securities that the Fund does not own. The Fund would ordinarily
recognize a gain if the value of the  securities  decreased  below the  exercise
price  sufficiently to cover the premium and would recognize a loss if the value
of the securities  remained at or above the exercise price.  Gains and losses on
the purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.

The hours of trading for options on securities  and  securities  indices may not
conform to the hours during which the underlying  securities are traded.  To the
extent that the option  markets  close  before the  markets  for the  underlying
securities,  significant  price  and  rate  movements  can  take  place  in  the
underlying securities markets that cannot be reflected in the option markets. It
is  impossible  to predict the volume of trading that may exist in such options,
and there can be no  assurance  that viable  exchange  markets  will  develop or
continue.

The Fund may also engage in options transactions in the over-the-counter ("OTC")
market with  broker-dealers  who make markets in these  options.  The ability to
terminate OTC option positions is more limited than with exchange-traded  option
positions  because the  predominant  market is the issuing broker rather than an
exchange,  and may involve the risk that  broker-dealers  participating  in such
transactions will not fulfill their  obligations.  To reduce this risk, the Fund
will  purchase  such  options  only  from  broker-dealers  who  are  primary  US
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are  expected  to be capable  of)  entering  into  closing
transactions,  although  there can be no guarantee  that any such option will be
liquidated at a favorable  price prior to  expiration.  The Advisor will monitor
the  creditworthiness  of dealers  with whom the Fund enters  into such  options
transactions  under the general  supervision  of the Fund's  Board of  Trustees.
Unless the Trustees  conclude  otherwise,  the Fund intends to treat OTC options
purchased  and the assets  used to "cover"  OTC  options  written as not readily
marketable  and,  therefore,  subject  to the  Fund's  limit on  investments  in
illiquid securities.

Options  on   Securities   Indices.   The  Fund  may  also  purchase  and  write
exchange-listed and OTC put and call options on securities indices. A securities
index  measures  the  movement of a certain  group of  securities  by  assigning
relative  values to the securities  included in the index,  which will fluctuate
with changes in the market values of the securities  included in the index. Some
securities  index  options are based on a broad market  index,  such as the NYSE
Composite  Index, or a narrower market index,  such as the S&P 100.  Indices may
also be based on a particular industry or market segment.

Options on securities  indices are similar to options on securities  except that
(1) the expiration  cycles of securities index options are monthly,  while those
of securities options are currently quarterly, and (2) the delivery requirements
are different.  Instead of giving the right to take or make delivery of stock at
a specified price, an option on a securities index gives the holder the right to
receive a cash "exercise  settlement amount" equal to (a) the amount, if any, by
which the fixed  exercise  price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the  underlying  index
on the date of exercise,  multiplied by (b) a fixed "index multiplier."  Receipt
of this cash amount will depend upon the closing level of the  securities  index
upon which the option is based being  greater  than,  in the case of a call,  or
less  than,  in the  case of a put,  the  exercise  price of the  index  and the
exercise  price of the  option  times a  specified  multiple.  The writer of the
option is  obligated,  in return for the premium  received,  to make delivery of
this amount.  Securities  index  options may be offset by entering  into closing
transactions as described above for securities options.

As discussed in "Options on Securities," the Fund would normally purchase a call
option in anticipation of an increase in the market value of the relevant index.
The  purchase  of a call option  would  entitle  the Fund,  in exchange  for the
premium paid, to purchase the underlying  securities at a specified price during
the option  period.  The Fund would  ordinarily  have a gain if the value of the
underlying  securities  increased above the exercise price sufficiently to cover
the premium and would have a loss if the value of the securities  remained at or
below the exercise price during the option period.

                                       21
<PAGE>

As discussed in "Options on  Securities,"  the Fund would normally  purchase put
options in  anticipation  of a decline in the market value of the relevant index
("protective  puts").  The purchase of a put option would  entitle the Fund,  in
exchange for the premium paid, to sell the underlying  securities at a specified
price  during the option  period.  The purchase of  protective  puts is designed
merely to offset or hedge  against a decline in the  market  value of the index.
The Fund would  ordinarily  recognize a gain if the value of the index decreased
below the exercise price sufficiently to cover the premium and would recognize a
loss if the value of the index  remained at or above the exercise  price.  Gains
and  losses  on the  purchase  of  protective  puts  would  tend to be offset by
countervailing changes in the value of the index.

Because the value of an index option  depends upon movements in the level of the
index rather than the price of a particular stock, whether the Fund will realize
a gain or loss from the purchase or writing of options on an index  depends upon
movements in the level of stock prices in the stock market  generally or, in the
case of certain indices, in an industry or market segment, rather than movements
in the price of a particular stock.  Accordingly,  successful use by the Fund of
options on stock  indices  will be subject to the  Advisor's  ability to predict
correctly  movements  in the  direction  of the stock  market  generally or of a
particular  industry.   This  requires  different  skills  and  techniques  than
predicting changes in the price of individual stocks.

Options on securities  indices  entail risks in addition to the risks of options
on  securities.  The absence of a liquid  secondary  market to close out options
positions  on  securities  indices is more  likely to occur,  although  the Fund
generally will only purchase or write such an option if the Advisor believes the
option can be closed out. Use of options on securities  indices also entails the
risk that  trading  in such  options  may be  interrupted  if trading in certain
securities included in the index is interrupted. The Fund will not purchase such
options unless the Advisor  believes the market is  sufficiently  developed such
that the risk of trading in such  options is no greater than the risk of trading
in options on securities.

Price movements in the Fund's investment  portfolio may not correlate  precisely
with  movements in the level of an index and,  therefore,  the use of options on
indices cannot serve as a complete hedge.  Because options on securities indices
require  settlement  in cash,  the Advisor may be forced to liquidate  portfolio
securities  to meet  settlement  obligations.  The  Fund's  activities  in index
options  may  also  be  restricted  by  the   requirements   of  the  Code,  for
qualification as a regulated investment company.

Hedging  Strategies.  The Fund may use certain strategies designed to adjust the
overall risk of its investment  portfolio.  These "hedging"  strategies  involve
derivative contracts,  including (but not limited to) US Treasury and Eurodollar
futures  contracts  and  exchange-traded  put and call  options on such  futures
contracts.  New financial products and risk management techniques continue to be
developed and may be used if consistent with the Fund's investment objective and
policies.  Among  other  purposes,  these  hedging  strategies  may be  used  to
effectively  maintain  desired  portfolio  duration or to protect against market
risk should the Fund reallocate its  investments  among different types of Fixed
Income Securities.

The Fund might not use any  hedging  strategies,  and there can be no  assurance
that any strategy used will succeed. If the Advisor is incorrect in its judgment
on market values,  interest  rates or other economic  factors in using a hedging
strategy,  the Fund may have lower net income and a net loss on the  investment.
Each of these strategies  involves certain risks, which include:

o        the  fact  that  the  skills  needed  to use  hedging  instruments  are
         different from those needed to select securities for the Fund;

o        the  possibility  of  imperfect  correlation,  or even no  correlation,
         between the price movements of hedging  instruments and price movements
         of the securities or currencies being hedged;

o        possible  constraints  placed on the Fund's ability to purchase or sell
         portfolio  investments  at  advantageous  times due to the need for the
         Fund to maintain "cover" or to segregate securities; and

o        the possibility  that the Fund will be unable to close out or liquidate
         its hedged position.

                                       22
<PAGE>

A hedge is designed to offset a loss in a portfolio  position with a gain in the
hedged position.  At the same time,  however,  a properly  correlated hedge will
result in a gain in the portfolio  position being offset by a loss in the hedged
position.  As a  result,  the use of  options,  futures  and  currency  exchange
transactions  for  hedging  purposes  could  limit  any  potential  gain from an
increase in the value of the position hedged. With respect to futures contracts,
since the value of portfolio securities will far exceed the value of the futures
contracts  sold by the Fund,  an increase in the value of the futures  contracts
could only  mitigate,  but not totally  offset,  the decline in the value of the
Fund's assets.

To the extent that the Fund engages in the strategies  described above, the Fund
may experience losses greater than if these strategies had not been utilized. In
addition to the risks described above,  these instruments may be illiquid and/or
subject  to trading  limits,  and the Fund may be unable to close out a position
without incurring substantial losses, if at all. The Fund is also subject to the
risk of default by a counterparty to an off-exchange transaction.  See "Illiquid
Securities."

Currency  Management  Techniques.  The instruments  involved in currency-related
transactions may be considered derivative  instruments.  The Fund may enter into
currency-related  transactions to attempt to protect against an anticipated rise
in the US dollar price of securities  that it intends to purchase.  In addition,
the Fund may enter  into  currency-related  transactions  to  attempt to protect
against  the  decline in value of its  foreign  currency  denominated  or quoted
portfolio  securities,  or a decline in the value of  anticipated  dividends  or
interest  from such  securities,  due to a decline  in the value of the  foreign
currency against the US dollar.  The forecasting of currency market movements is
extremely  difficult  and  there  can  be no  assurance  that  currency  hedging
strategies  will be  successful.  If the Advisor is incorrect  in its  forecast,
currency hedging  strategies may result in investment  performance worse than if
the  strategies  were  not  attempted.   In  addition,   forward  contracts  and
over-the-counter  currency  options may be illiquid  and are subject to the risk
that the counterparty will default on its obligations.

Forward Foreign Currency Exchange Contracts. The Fund may exchange currencies in
the normal  course of managing its  investments  in foreign  securities  and may
incur costs in doing so because a foreign  exchange  dealer may charge a fee for
conversion.  The Fund may conduct foreign  currency  exchange  transactions on a
"spot" basis (i.e.,  for prompt  delivery and settlement) at the prevailing spot
rate for purchasing or selling currency in the foreign currency exchange market.
The Fund  also may  enter  into  forward  foreign  currency  exchange  contracts
("forward  currency   contracts")  or  other  contracts  to  purchase  and  sell
currencies for settlement at a future date. A foreign exchange  dealer,  in that
situation,  will expect to realize a profit based on the difference  between the
price at which a foreign currency is sold to the Fund and the price at which the
dealer will cover the purchase in the foreign currency market.  Foreign exchange
transactions  are entered into at prices quoted by dealers,  which may include a
mark-up over the price that the dealer must pay for the currency.

A forward  currency  contract  involves  an  obligation  to  purchase  or sell a
specific  currency at a future date,  which may be any fixed number of days from
the date of the contract agreed upon by the parties,  at a price set at the time
of the contract.  These contracts are traded in the interbank  market  conducted
directly between  currency  traders  (usually large commercial  banks) and their
customers.  A forward  contract  generally  has no deposit  requirement,  and no
commissions are generally charged at any stage for trades,  but currency dealers
seek to obtain a "spread" or profit on each transaction.

At the  maturity  of a  forward  contract,  the Fund may  either  accept or make
delivery of the currency  specified in the contract or, at or prior to maturity,
enter into a closing purchase  transaction  involving the purchase or sale of an
offsetting contract.

The Fund may use forward  currency  transactions  in an attempt to hedge against
losses,  or where possible,  to add to investment  returns.  For the purposes of
hedging,  when the Fund  enters  into a contract  for the  purchase or sale of a
security  denominated in a foreign  currency,  or when the Fund  anticipates the
receipt  in a foreign  currency  of  dividend  or  interest  payments  on such a
security which it holds, the Fund may desire to "lock in" the US dollar price of
the security or the US dollar  equivalent of such dividend or interest  payment,
as the case may be. By  entering  into a forward  contract  for the  purchase or
sale,  for a fixed  amount of US  dollars,  of the  amount of  foreign  currency
involved in the underlying transactions, the Fund will attempt to protect itself
against  an adverse  change in the


                                       23
<PAGE>

relationship  between the US dollar and the subject foreign  currency during the
period  between the date on which the security is purchased or sold, or on which
the  dividend  or  interest  payment  is  declared,  and the date on which  such
payments are made or received.

Additionally,  when  management  of the Fund  believes  that the  currency  of a
particular  foreign  country  may suffer a  substantial  decline  against the US
dollar,  it may cause the Fund to enter into a forward  contract to sell,  for a
fixed amount of US dollars,  the amount of foreign  currency  approximating  the
value of some or all of the  Fund's  portfolio  securities  denominated  in such
foreign  currency.  The precise matching of the forward contract amounts and the
value of the  securities  involved  will not  generally be possible  because the
future  value  of  such  securities  in  foreign  currencies  will  change  as a
consequence  of market  movements in the value of those  securities  between the
date on which the contract is entered into and the date it matures.

Using  forward  currency  contracts  in an attempt  to protect  the value of the
Fund's  portfolio  securities  against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities. It simply
establishes  a rate of exchange  which the Fund can achieve at some future point
in time. The precise  projection of short-term  currency market movements is not
possible,  and short-term hedging provides a means of fixing the dollar value of
only a portion of the Fund's foreign assets.

The Fund will cover the amount of its commitments to purchase foreign currencies
under forward currency  contracts with liquid  securities.  If the value of such
securities  declines  below the value of the Fund's  commitments  under  forward
currency  contracts,  additional liquid securities will be used as cover so that
the value of such  securities  will equal the amount of the Fund's  commitments.
The securities will be marked-to-market on a daily basis.

The Fund generally will not enter into a forward  currency  contract with a term
of  greater  than one  year.  The  forecasting  of  short-term  currency  market
movements is extremely  difficult and there can be no assurance that  short-term
hedging strategies will be successful.

While the Fund will enter into forward  currency  contracts  to reduce  currency
exchange rate risks, transactions in such contracts involve certain other risks.
Thus,  while the Fund may  benefit  from  currency  transactions,  unanticipated
changes in currency  prices may result in a poorer overall  performance  for the
Fund than if it had not engaged in any such transactions. Moreover, there may be
an imperfect  correlation between the Fund's holdings of securities  denominated
in a particular  currency and forward  contracts  entered into by the Fund. Such
imperfect  correlation  may cause the Fund to sustain  losses which will prevent
the Fund from  achieving a complete  hedge or expose the Fund to risk of foreign
currency exchange loss. Forward currency contracts may be considered  derivative
instruments.

Futures Contracts and Related Options

General.  The Fund may enter into futures  contracts on  securities,  securities
indices,  foreign  currencies and interest rates,  and purchase and write (sell)
options  thereon  which are  traded on  exchanges  designated  by the  Commodity
Futures Trading Commission (the "CFTC") or, if consistent with CFTC regulations,
on foreign exchanges. These futures contracts are standardized contracts for the
future  delivery of, among other  things,  a commodity,  a non-US  currency,  an
interest rate sensitive  security or, in the case of index futures  contracts or
certain other futures contracts, a cash settlement with reference to a specified
multiplier  times the change in the index. An option on a futures contract gives
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract.

The Fund may enter into futures  contracts  and options on futures  contracts on
securities, securities indices and currencies to manage its exposure to changing
interest  rates,  security  prices and currency  exchange rates, as an efficient
means of managing allocations between asset classes and to enhance return.

The  successful  use of futures  contracts  and options  thereon  draws upon the
Advisor's skill and experience with respect to such  instruments and are subject
to special risk  considerations.  A liquid  secondary  market for any futures or
options  contract  may not be  available  when a futures or options  position is
sought to be closed. In addition,  there may be an imperfect correlation between
movements in the  securities or currency in the Fund.  Successful use of


                                       24
<PAGE>

futures or options  contracts is further  dependent on the Advisor's  ability to
predict correctly movements in the securities or foreign currency markets and no
assurance can be given that its judgment will be correct.

Futures  Contracts.  Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future.  US futures  contracts have been designed by exchanges which have
been designated  "contracts markets" by the CFTC, and must be executed through a
futures  commission  merchant,  or  brokerage  firm,  which is a  member  of the
relevant  contract  market.  Futures  contracts  trade on a number  of  exchange
markets,  and,  through their  clearing  corporations,  the exchanges  guarantee
performance  of the  contracts as between the clearing  members of the exchange.
The Fund may enter into  contracts for the purchase or sale for future  delivery
of fixed-income securities,  foreign currencies, or financial indices, including
any  index  of  US  government  securities,  foreign  government  securities  or
corporate debt securities.  The Fund may enter into futures  contracts which are
based on debt  securities that are backed by the full faith and credit of the US
government,  such as long-term US Treasury Bonds, Treasury Notes and US Treasury
Bills.  The Fund may also enter into futures  contracts which are based on bonds
issued by governments other than the US government. Futures contracts on foreign
currencies  may be used to hedge  against  securities  that are  denominated  in
foreign currencies.

At the same time a futures contract is entered into, the Fund must allocate cash
or liquid securities as a deposit payment ("initial margin").  Daily thereafter,
the  futures  contract is valued and the  payment of  "variation  margin" may be
required,  since each day the Fund would  provide or receive cash that  reflects
any decline or increase in the contract's value.

At the time of delivery of securities  pursuant to such a contract,  adjustments
are  made to  recognize  differences  in value  arising  from  the  delivery  of
securities  with a different  interest rate from that specified in the contract.
In some, but not many,  cases,  securities  called for by a futures contract may
not have been issued when the contract was written.

Although futures  contracts (other than those that settle in cash, such as index
futures)  by their  terms call for the actual  delivery  or  acquisition  of the
instrument underlying the contract, in most cases the contractual  obligation is
fulfilled by offset before the date of the contract without the Fund's having to
make or take delivery of the instrument underlying the contract.  The offsetting
of a  contractual  obligation  is  accomplished  by  entering  into an  opposite
position in an identical  futures contract on the commodities  exchange on which
the  futures  contract  was  entered  into (or a linked  exchange)  calling  for
delivery  in the same month.  Such a  transaction,  which is effected  through a
member of an exchange,  cancels the  obligation  to make or take delivery of the
instrument underlying the contract. Since all transactions in the futures market
are  made,  offset or  fulfilled  through a  clearinghouse  associated  with the
exchange on which the contracts are traded,  the Fund will incur  brokerage fees
when it enters into futures contracts.

The purpose of the acquisition or sale of a futures contract, in cases where the
Fund  holds or  intends to  acquire  fixed-income  securities,  is to attempt to
protect the Fund from fluctuations in interest or foreign exchange rates without
actually buying or selling  fixed-income  securities or foreign currencies.  For
example, if interest rates were expected to increase (which thus would cause the
prices of debt  securities  to  decline),  the Fund  might  enter  into  futures
contracts for the sale of debt securities.  Such a sale would have much the same
effect as selling an equivalent  value of the debt securities owned by the Fund.
If interest rates did increase, the value of the debt security in the Fund would
decline,  but the value of the futures  contracts to the Fund would  increase at
approximately  the same rate,  thereby  keeping  the net asset value of the Fund
from declining as much as it otherwise would have.

Similarly,  when it is expected that interest rates may decline (thus increasing
the value of debt securities),  futures contracts may be purchased to attempt to
hedge against anticipated  purchases of debt securities at higher prices.  Since
the fluctuations in the value of futures contracts should be similar to those of
debt  securities,  the Fund could take advantage of the anticipated  rise in the
value of debt  securities  without  actually  buying  them  until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could  then buy  debt  securities  on the cash  market.  The  segregated  assets
maintained  to  cover  the  Fund's  obligations  with  respect  to such  futures
contracts  will consist of cash or liquid  securities  acceptable  to the broker
from its portfolio in an amount equal to the


                                       25
<PAGE>

difference  between the fluctuating  market value of such futures  contracts and
the  aggregate  value of the initial and variation  margin  payments made by the
Fund with respect to such futures contracts.

The  ordinary  spreads  between  prices in the cash and futures  market,  due to
differences in the nature of those markets,  are subject to distortions.  First,
all  participants  in the  futures  market are  subject to initial  deposit  and
variation margin  requirements.  Rather than meeting additional variation margin
requirements,   investors  may  close  futures  contracts   through   offsetting
transactions,  which could distort the normal relationship  between the cash and
futures  markets.  Second,  the liquidity of the futures  market depends on most
participants entering into offsetting  transactions rather than making or taking
delivery.  To the extent that many participants decide to make or take delivery,
liquidity in the futures  market could be reduced,  thus  producing  distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin  requirements  in the securities
market. Therefore,  increased participation by speculators in the futures market
may cause temporary price distortions.  Due to the possibility of distortion,  a
correct forecast of securities price, general interest rate or currency exchange
rate trends by the Advisor may still not result in a successful transaction.

In addition,  futures contracts entail significant  risks.  Although the Advisor
believes  that use of such  contracts  will benefit the Fund,  if the  Advisor's
investment judgment about the general direction of interest rates or an index is
incorrect,  the Fund's  overall  performance  would be poorer than if it had not
entered into any such contract.  For example, if the Fund has hedged against the
possibility  of an increase  in  interest  rates or a decrease in an index which
would  adversely  affect  the  value of  securities  held in its  portfolio  and
interest rates decrease or securities  prices  increase  instead,  the Fund will
lose part or all of the benefit of the increased  value of its securities  which
it has hedged because it will have offsetting  losses in its futures  positions.
In addition, in such situations,  if the Fund has insufficient cash, it may have
to  sell  securities   from  its  portfolio  to  meet  daily  variation   margin
requirements.  Such sales of  securities  may, but will not  necessarily,  be at
increased  prices  which  reflect the rising  market.  The Fund may have to sell
securities at a time when it may be disadvantageous to do so.

Futures  Contracts on Securities  Indices.  The Fund may also enter into futures
contracts  providing for the making and  acceptance of a cash  settlement  based
upon  changes  in  the  value  of an  index  of US or  non-US  securities.  This
investment  technique may be used as a low-cost method of gaining  exposure to a
particular  securities market without investing  directly in those securities or
to hedge  against  anticipated  future  changes in general  market  prices  that
otherwise might either adversely affect the value of securities held by the Fund
or adversely  affect the prices of securities which are intended to be purchased
at a later date for the Fund or as an  efficient  means of  managing  allocation
between asset classes.  A futures contract may also be entered into to close out
or offset an existing futures position.

When used for hedging  purposes,  each futures  contract on a  securities  index
transaction  involves the establishment of a position which the Advisor believes
will move in a direction  opposite to that of the  investment  being hedged.  If
these hedging  transactions are successful,  the futures positions taken for the
Fund will rise in value by an amount which approximately  offsets the decline in
value of the portion of the Fund's  investments  that are being  hedged.  Should
general  market  prices  move in an  unexpected  manner,  the  full  anticipated
benefits of futures contracts may not be achieved or a loss may be realized.

Options  on  Futures  Contracts   (including  Futures  Contracts  on  Securities
Indices).  The Fund may purchase and write (sell)  options on futures  contracts
for hedging purposes.  For example,  as with the purchase of futures  contracts,
when the Fund is not fully invested it may purchase a call option on an interest
rate sensitive  futures  contract to hedge against a potential price increase on
debt securities due to declining interest rates.

The purchase of a call option on a futures  contract is similar in some respects
to the purchase of a call option on an index or individual  security.  Depending
on the  pricing  of the  option  compared  to either  the  price of the  futures
contract upon which it is based or the price of the underlying debt  securities,
it may or may not be less  risky  than  ownership  of the  futures  contract  or
underlying debt securities.

The  writing of a call option on a futures  contract  may  constitute  a partial
hedge against declining prices of the underlying  portfolio securities which are
the  same  as or  correlate  with  the  security  or  foreign  currency  that is

                                       26
<PAGE>

deliverable  upon  exercise of the  futures  contract.  If the futures  price at
expiration  of the option is below the price  specified in the premium  received
for writing the option ("exercise price"),  the Fund will retain the full amount
of the net  premium  (the  premium  received  for  writing  the option  less any
commission),  which  provides a partial  hedge against any decline that may have
occurred in the Fund's holdings.

The  writing of a put  option on an index  futures  contract  may  constitute  a
partial hedge against increasing prices of the underlying  securities or foreign
currency  that are  deliverable  upon exercise of the futures  contract.  If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full  amount of the option net  premium,  which  provides a
partial  hedge  against  any  increase  in the price of  securities  that a Fund
intends to purchase.

If a put or call option the Fund has written is exercised, the Fund will incur a
loss  that  will be  reduced  by the  amount  of the net  premium  it  receives.
Depending  on the  degree of  correlation  between  changes  in the value of its
portfolio  securities  and  changes in the value of its futures  positions,  the
Fund's losses from existing  options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.

The  purchase of a call or put option on a futures  contract  with respect to an
index is similar in some  respects to the purchase of a call or  protective  put
option on an index. For example,  the Fund may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The amount of risk the Fund  assumes  when it  purchases  an option on a futures
contract  with  respect  to an index is the  premium  paid for the  option  plus
related transaction costs. In addition to the correlation risks discussed above,
the  purchase of such an option also  entails the risk that changes in the value
of the underlying  futures  contract will not be fully reflected in the value of
the option purchased.

Swaps.  The Fund may  enter  into  currency  and  other  types of swaps  and the
purchase or sale of related caps, floors and collars.  The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment  or  portion  of  its   portfolio,   to  protect   against   currency
fluctuations,  as a duration  management  technique  or to protect  against  any
increase in the price of securities the Fund  anticipates  purchasing at a later
date.  The Fund will not sell interest rate caps or floors where it does not own
securities  or other  instruments  providing  the income  stream the Fund may be
obligated  to pay.  Interest  rate swaps  involve the  exchange by the Fund with
another party of their respective commitments to pay or receive interest,  e.g.,
an exchange of floating  rate payments for fixed rate payments with respect to a
notional  amount of principal.  A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential  among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference  indices.  The
purchase  of a cap  entitles  the  purchaser  to receive  payments on a notional
principal  amount from the party selling such cap to the extent that a specified
index exceeds a predetermined  interest rate or amount.  The purchase of a floor
entitles the purchaser to receive  payments on a notional  principal amount from
the party selling such floor to the extent that a specified  index falls below a
predetermined  interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a  predetermined  range of interest
rates or values.

Swaps  have  special  risks  associated   including   possible  default  by  the
counterparty  to the  transaction,  illiquidity  and,  where  swaps are used for
hedges,  the risk that the use of a swap could result in losses  greater than if
the swap had not  been  employed.  Whether  the use of swap  agreements  will be
successful in furthering its  investment  objective will depend on the Advisor's
ability to correctly  predict whether certain types of investments are likely to
produce greater returns than other  investments.  Certain swap agreements may be
considered to be illiquid  because they are two party contracts and because they
may have terms of greater than seven days. Moreover,  the Fund bears the risk of
loss of the amount  expected to be received  under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty.

Credit  Default  Swaps.  The Fund may  invest up to 15% of its  total  assets in
credit default swaps. A credit default swap is a contract  between a buyer and a
seller of protection against a pre-defined credit event. The buyer of protection
pays the  seller a fixed  regular  fee  provided  that no event of default on an
underlying reference obligation


                                       27
<PAGE>

has occurred.  If an event of default occurs,  the seller must pay the buyer the
full notional value, or "par value." of the reference obligation in exchange for
the reference  obligation.  Credit default swaps are used as a means of "buying"
credit  protection,  i.e.,  attempting to mitigate the risk of default or credit
quality  deterioration  in some  portion of the Fund's  holdings,  or  "selling"
credit protection,  i.e.,  attempting to gain exposure to an underlying issuer's
credit quality  characteristics  without directly  investing in that issuer.  No
more than 5% of the Fund's  assets may be invested in credit  default  swaps for
purposes of buying credit protection for non-hedging purposes. Where the Fund is
a seller of credit  protection,  it  effectively  adds leverage to its portfolio
because,  in  addition  to its total net  assets,  the Fund  would be subject to
investment  exposure on the notional amount of the swap. The Fund will only sell
credit  protection with respect to securities in which it would be authorized to
invest  directly.  The  Fund  currently  considers  credit  default  swaps to be
illiquid and treats the market value of the contract as illiquid for purposes of
determining  compliance  with the Fund's  restrictions  on investing in illiquid
securities.

If the Fund is a buyer of a credit default swap and no event of default  occurs,
the Fund will lose its investment and recover nothing. However, if the Fund is a
buyer and an event of default  occurs,  the Fund will receive the full  notional
value of the reference obligation that may have little or no value. As a seller,
the Fund  receives  a fixed  rate of  income  through  the term of the  contract
(typically  between  six  months  and three  years),  provided  that there is no
default event. If an event of default occurs,  the seller must pay the buyer the
full notional  value of the reference  obligation.  Credit default swaps involve
greater  risks  than  if the  Fund  had  invested  in the  reference  obligation
directly.

The Fund may use credit default swaps to gain exposure to particular  issuers or
particular  markets  through  investments in portfolios of credit default swaps,
such  as  Dow  Jones  CDX.NA.HY  certificates.   By  investing  in  certificates
representing  interests in a basket of credit default swaps,  the Fund is taking
credit risk with respect to an entity or group of entities and providing  credit
protection  to the swap  counterparties.  For example,  the CDX EM is a tradable
basket of 19 credit  default  swaps on country  credits which seeks to replicate
the returns on the indices of a broad group of emerging markets  countries.  The
credits  are a subset of the  countries  represented  by the  JPMorgan  Emerging
Markets Bond Index Global  Diversified.  By purchasing  interests in CDX EM, the
Fund is gaining emerging markets  exposure through a single  investment.  Unlike
other types of credit  default  swaps which are generally  considered  illiquid,
credit default swap certificates generally can be sold within seven days and are
not subject to the Fund's restrictions on investing in illiquid securities.

Other Considerations. The Fund will determine that the price fluctuations in the
futures  contracts  and options on futures  used by it for hedging  purposes are
substantially related to price fluctuations in securities or instruments held by
the Fund or securities or instruments which it expects to purchase.

The Fund will be required,  in connection with transactions in futures contracts
and the writing of options on futures contracts, to make margin deposits,  which
will be held by its custodian for the benefit of the futures commission merchant
through  whom the Fund engages in such  futures and option  transactions.  These
transactions  involve brokerage costs,  require margin deposits and, in the case
of futures  contracts and options  obligating  the Fund to purchase  securities,
require the Fund to segregate cash or liquid securities in an account maintained
with its custodian to cover such contracts and options.

While  transactions  in futures  contracts  and  options  on futures  may reduce
certain risks,  such transactions  themselves entail certain other risks.  Thus,
unanticipated  changes in interest  rates or  securities  prices may result in a
poorer  overall  performance  for the Fund than if it had not  entered  into any
futures contracts or options  transactions.  The other risks associated with the
use of futures  contracts  and  options  thereon are (i)  imperfect  correlation
between the change in market  value of the  securities  held by the Fund and the
prices of the  futures and  options  and (ii) the  possible  absence of a liquid
secondary market for a futures contract or option and the resulting inability to
close a futures position prior to its maturity date.

In the  event  of an  imperfect  correlation  between  a  futures  position  and
portfolio position which is intended to be protected, the desired protection may
not be  obtained  and the  Fund  may be  exposed  to risk of  loss.  The risk of
imperfect  correlation  may be minimized  by investing in contracts  whose price
behavior is expected to resemble that of the Fund's underlying  securities.  The
Fund  will  attempt  to  minimize  the risk  that it will be unable to close out

                                       28
<PAGE>

futures positions by entering into such transactions on a national exchange with
an active and liquid secondary market.

Limitations and Risks Associated with Transactions in Options, Futures Contracts
and Options on Futures Contracts

Options and futures  transactions  involve (1) liquidity  risk that  contractual
positions  cannot  be  easily  closed  out in the  event of  market  changes  or
generally in the absence of a liquid secondary market, (2) correlation risk that
changes in the value of hedging  positions may not match the  securities  market
fluctuations  intended  to be  hedged,  and (3)  market  risk that an  incorrect
prediction  of  securities  prices by the  Advisor may cause the Fund to perform
worse than if such  positions  had not been  taken.  The  ability  to  terminate
over-the-counter  options is more limited than with exchange  traded options and
may  involve the risk that the  counterparty  to the option will not fulfill its
obligations. In accordance with a position taken by the SEC, the Fund will limit
its investments in illiquid securities to 15% of the Fund's net assets.

Options and futures transactions are highly specialized activities which involve
investment  techniques and risks that are different from those  associated  with
ordinary portfolio transactions.  Gains and losses on investments in options and
futures  depend on the  Advisor's  ability to predict the  direction of interest
rates, security prices, currencies and other economic factors. The loss that may
be incurred by the Fund in entering into futures  contracts and written  options
thereon  is  potentially  unlimited.  There is no  assurance  that  higher  than
anticipated  trading  activity or other  unforeseen  events might not, at times,
render  certain  facilities  of an  options  clearing  entity  or  other  entity
performing the regulatory and liquidity  functions of an options clearing entity
inadequate,  and  thereby  result in the  institution  by an exchange of special
procedures which may interfere with the timely  execution of customers'  orders.
Most futures  exchanges  limit the amount of fluctuation  permitted in a futures
contract's  prices during a single  trading day. Once the limit has been reached
no further  trades may be made that day at a price  beyond the limit.  The price
limit  will not limit  potential  losses,  and may in fact  prevent  the  prompt
liquidation of futures positions, ultimately resulting in further losses.

Global Asset Allocation  Strategy ("GAA  Strategy").  In connection with the GAA
Strategy and in addition to the securities  described above, the Fund may invest
in indexed  securities,  futures  contracts on  securities  indices,  securities
representing  securities of foreign issuers (e.g., ADRs, GDRs and EDRs), options
on stocks, options on futures contracts,  foreign currency exchange transactions
and options on foreign currencies.  These are discussed below, to the extent not
already described above.

Indexed Securities.  The indexed securities in which the Fund may invest include
debt  securities  whose value at  maturity is  determined  by  reference  to the
relative  prices of various  currencies  or to the price of a stock  index.  The
value of such securities depends on the price of foreign currencies,  securities
indices  or other  financial  values  or  statistics.  These  securities  may be
positively or negatively indexed;  that is, their value may increase or decrease
if the underlying instrument appreciates.

Securities Representing Securities of Foreign Issuers. The Fund's investments in
the  securities  of  foreign  issuers  may be made  directly  or in the  form of
American Depositary Receipts ("ADRs"),  Global Depositary Receipts ("GDRs," also
referred to as International Depositary Receipts or "IDRs"), European Depositary
Receipts ("EDRs") or other similar securities representing securities of foreign
issuers.  These  securities  may not  necessarily  be  denominated  in the  same
currency  as the  securities  they  represent,  and  while  designed  for use as
alternatives  to the purchase of the  underlying  securities  in their  national
markets and currencies,  are subject to the same risks as the foreign securities
to which they relate.

ADRs  are  receipts,  typically  issued  by a US bank or  trust  company,  which
evidence  ownership of underlying  securities  issued by a foreign  corporation.
EDRs,  which  are  sometimes  referred  to as  Continental  Depository  Receipts
("CDRs"), are receipts issued in Europe, and GDRs or IDRs are issued outside the
United States.  EDRs (CDRs) and GDRs (IDRs) are typically issued by non-US banks
and trust  companies  and  evidence  ownership  of either  foreign  or  domestic
securities.  Generally,  ADRs in  registered  form  are  designed  for use in US
securities markets,  and EDRs (CDRs) and GDRs (IDRs) in bearer form are designed
for use in European and non-US securities markets, respectively. For purposes of
the Fund's investment policies, depository receipts generally are


                                       29
<PAGE>

deemed  to have  the  same  classification  as the  underlying  securities  they
represent.  Thus, a depository  receipt  representing  ownership of common stock
will be treated as common stock.

ADRs are publicly traded on exchanges or  over-the-counter  in the United States
and are issued through "sponsored" or "unsponsored" arrangements. In a sponsored
ADR arrangement, the foreign issuer assumes the obligation to pay some or all of
the depository's transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligations and the depository's  transaction fees are
paid directly by the ADR holders. In addition,  less information is available in
the United States about an unsponsored ADR than about a sponsored ADR.

Investments  in foreign  securities  incur higher costs than  investments  in US
securities,  including higher costs in making securities transactions as well as
foreign  government taxes which may reduce the investment return of the Fund. In
addition,  foreign  investments  may  include  risks  associated  with  currency
exchange rates,  less complete  information  about  additional  companies,  less
market liquidity and political instability.

Repurchase Agreements.  The Fund may engage in repurchase agreement transactions
with member banks of the Federal  Reserve System and certain  non-bank  dealers,
including  governmental  securities  dealers  approved by the Fund Trust  Board.
Under the terms of a typical  repurchase  agreement,  the Fund would acquire any
underlying  security  for a relatively  short period  (usually not more than one
week),  subject to an  obligation of the seller to  repurchase,  and the Fund to
resell,  the  obligation at an agreed price and time,  thereby  determining  the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market  fluctuations  during the Fund's holding
period.  The value of the  underlying  securities  will be at least equal at all
times to the total amount of the repurchase obligations, including interest. The
Fund bears a risk of loss in the event of default by or  bankruptcy of the other
party to a repurchase agreement.  The Fund may be delayed in, or prevented from,
exercising its rights to dispose of the collateralized securities. To the extent
that, in the meantime,  the value of the securities repurchased had decreased or
the value of the securities had increased, the Fund could experience a loss. The
Advisor reviews the  creditworthiness  of those banks and dealers with which the
Fund enters into  repurchase  agreements  and  monitors on an ongoing  basis the
value of the  securities  subject to repurchase  agreements to ensure that it is
maintained at the required  level. A repurchase  agreement is considered to be a
loan under the 1940 Act.

Reverse  Repurchase  Agreements.  The Fund may  borrow  funds for  temporary  or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for  leverage,  by,  among  other  things,  agreeing  to sell  portfolio
securities to financial institutions such as member banks of the Federal Reserve
System and certain  non-bank dealers and to repurchase them at a mutually agreed
date and price (a "reverse repurchase  agreement").  At the time the Fund enters
into a reverse repurchase  agreement it will segregate cash or liquid securities
having a value equal to the repurchase price,  including  accrued interest.  The
segregated assets will be  marked-to-market  daily and additional assets will be
segregated on any day in which the assets fall below the repurchase  price (plus
accrued  interest).  The Fund's liquidity and ability to manage its assets might
be  affected  when it sets  aside  cash or  portfolio  securities  to cover such
commitments.  Reverse  repurchase  agreements  involve  the risk that the market
value of the securities sold by the Fund may decline below the repurchase  price
of those  securities.  In the  event  the  buyer of  securities  under a reverse
repurchase  agreement files for bankruptcy or becomes  insolvent,  such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's  obligation to repurchase the securities,  and the Fund's use
of  the  proceeds  of  the  reverse  repurchase  agreement  may  effectively  be
restricted pending such decision.  Reverse repurchase  agreements are considered
to be borrowings by the Fund.

Mortgage Dollar Rolls.  The Fund may enter into mortgage "dollar rolls" in which
the Fund sells  securities for delivery in the current month and  simultaneously
contracts to repurchase  substantially  similar (same dealer,  type,  coupon and
maturity), but not identical,  securities on a specified future date. During the
roll period, the Fund forgoes principal and interest paid on the securities. The
Fund is compensated  by the  difference  between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") or
fee income and by the interest  earned on the cash proceeds of the initial sale.
A  "covered  roll" is a  specific  type of  dollar  roll for  which  there is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward  settlement date of the dollar roll transaction.  The Fund
may enter into both  covered and  uncovered  rolls.  At the time the Fund enters
into a dollar roll transaction,  it will segregate,  with an approved custodian,
cash or liquid  securities


                                       30
<PAGE>

having a value not less than the repurchase price (including  accrued  interest)
and will subsequently  monitor the segregated assets to ensure that its value is
maintained.

Borrowing.  The Fund may not borrow  money,  except as permitted  under the 1940
Act, and as interpreted or modified by regulatory authority having jurisdiction,
from  time to time.  'Under  the 1940  Act,  the Fund is  required  to  maintain
continuous  asset  coverage of 300% with respect to such  borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market  fluctuations or otherwise,  even
if such  liquidation  of the  Fund's  holdings  may be  disadvantageous  from an
investment standpoint.

Leveraging  by means of borrowing may  exaggerate  the effect of any increase or
decrease in the value of the Fund's securities and the Fund's NAV per share, and
money  borrowed by the Fund will be subject to interest  and other costs  (which
may include  commitment  fees  and/or the cost of  maintaining  minimum  average
balances) that may exceed the income received from the securities purchased with
the borrowed funds.


Lending of Portfolio Securities.  The Fund may lend its investment securities to
approved  institutional  borrowers  who need to  borrow  securities  in order to
complete certain  transactions,  such as covering short sales, avoiding failures
to deliver  securities  or  completing  arbitrage  operations.  By  lending  its
investment  securities,  the Fund attempts to increase its net investment income
through  the  receipt of  interest  on the loan.  Any gain or loss in the market
price of the  securities  loaned  that might  occur  during the term of the loan
would belong to the Fund. The Fund may lend its investment securities so long as
the terms, structure and the aggregate amount of such loans are not inconsistent
with the 1940 Act or the rules and  regulations  or  interpretations  of the SEC
thereunder,  which  currently  require that (a) the borrower pledge and maintain
with the Fund  collateral  consisting  of liquid,  unencumbered  assets having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral  whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis),  (c) the loan
be made  subject  to  termination  by the  Fund at any  time,  and (d) the  Fund
receives  reasonable  interest on the loan (which may include the Fund investing
any  cash  collateral  in  interest   bearing   short-term   investments),   and
distributions  on the loaned  securities and any increase in their market value.
There may be risks of delay in recovery of the securities or even loss of rights
in the  collateral  should the  borrower  of the  securities  fail  financially.
However,  loans will be made only to borrowers  selected by the Fund's  delegate
after a  commercially  reasonable  review of relevant  facts and  circumstances,
including the creditworthiness of the borrower.

At the  present  time,  the staff of the SEC does not  object  if an  investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such  fees are set  forth in a  written  contract  and  approved  by the
investment company's Board of Trustees. In addition, voting rights may pass with
the loaned securities, but if a material event occurs affecting an investment on
loan, the loan must be called and the securities voted. Pursuant to an exemptive
order granted by the SEC, cash  collateral  received by the Fund may be invested
in a money market fund managed by the Advisor (or one of its affiliates).


Other  Investment  Companies.  Securities of other  investment  companies may be
acquired by the Fund to the extent  permitted  under the 1940 Act,  that is, the
Fund may  invest a maximum  of up to 10% of its total  assets in  securities  of
other investment  companies so long as not more than 3% of the total outstanding
voting stock of any one investment company is held by the Fund. In addition, not
more than 5% of the Fund's total assets may be invested in the securities of any
one investment company. The Fund may be permitted to exceed these limitations by
an exemptive order of the SEC.  Pursuant to exemptive orders granted by the SEC,
the Fund may invest up to 25% of its total  assets in  affiliated  money  market
funds. It should be noted that investment  companies incur certain expenses such
as management, custodian, and transfer agency fees, and therefore any investment
by the Fund in shares of other  investment  companies  would be  subject to such
duplicate expenses. The Fund will indirectly bear its proportionate share of any
management  or other fees paid by investment  companies in which it invests,  in
addition  to its own fees.  No  advisory  fee is charged on assets  invested  in
affiliated money market funds.

Investment of  Uninvested  Cash  Balances.  The Fund may have cash balances that
have not been invested in portfolio securities  ("Uninvested Cash").  Uninvested
Cash may result  from a variety of  sources,  including  dividends  or  interest
received from portfolio securities, unsettled securities transactions,  reserves
held for  investment  strategy


                                       31
<PAGE>

purposes,   scheduled   maturity  of  investments,   liquidation  of  investment
securities to meet anticipated  redemptions and dividend payments,  and new cash
received  from  investors.  Uninvested  Cash may be  invested  directly in money
market  instruments  or  other  short-term  debt  obligations.  Pursuant  to  an
Exemptive  Order issued by the SEC, the Fund may use Uninvested Cash to purchase
shares of affiliated funds,  including money market funds and Cash Management QP
Trust,  or entities  for which the Advisor may act as  investment  advisor  that
operate as cash  management  investment  vehicles and that are excluded from the
definition of "investment company" pursuant to Section 3(c)(1) or 3(c)(7) of the
1940 Act  (collectively,  the "Central  Funds") in excess of the  limitations of
Section  12(d)(1)  of the 1940  Act.  Investment  by the Fund in  shares  of the
Central  Funds  will  comply  with Rule  2a-7  under the 1940 Act and will be in
accordance with the Fund's investment policies and restrictions.

The Fund will invest  Uninvested  Cash in Central  Funds only to the extent that
the Fund's aggregate  investment in the Central Funds does not exceed 25% of its
total  assets.  Purchases  and sales of shares of Central  Funds are made at net
asset value.

Asset Coverage. The Fund will comply with the segregation or coverage guidelines
established by the SEC and other  applicable  regulatory  bodies with respect to
certain  transactions,  including  (but  not  limited  to)  options  written  on
securities  and indexes;  currency,  interest  rate and security  index  futures
contracts  and  options  on  these  futures  contracts;   and  forward  currency
contracts. These guidelines may, in certain instances, require the Fund to cover
the Fund's  obligations  with  respect to these  strategies  with cash or liquid
securities to the extent they are not otherwise covered through ownership of the
underlying security or financial instrument,  by other portfolio positions or by
other means consistent with applicable  regulatory policies.  The assets used as
cover must at all times equal or exceed the Fund's  obligations  with respect to
these  strategies.  Assets used as cover  cannot be sold or  transferred  unless
equivalent  assets  are  substituted  in  their  place  or  cover  is no  longer
necessary.  As a result, there is a possibility that using a large percentage of
the Fund's  assets as cover could  impede the  Advisor or the Fund's  ability to
meet redemption requests or other current obligations.

For example,  a call option  written on securities  may require the Fund to hold
the  securities  subject  to the  call  (or  securities  convertible  into  such
securities  without  additional  consideration)  or to use  assets  as cover (as
described  above)  sufficient to purchase and deliver the securities if the call
is  exercised.  A call  option  written on an index may  require the Fund to own
portfolio securities that correlate with the index or to use assets as cover (as
described  above) equal to the excess of the index value over the exercise price
on a current basis. A put option written by the Fund may require the Fund to use
assets as cover (as described above) equal to the exercise price. The Fund could
purchase a put option if the strike  price of that  option is the same or higher
than the  strike  price of a put  option  sold by the Fund.  If the Fund holds a
futures  contract,  the Fund could  purchase  a put  option on the same  futures
contract  with a strike  price as high or higher than the price of the  contract
held. The Fund may enter into fully or partially offsetting transactions so that
its net position,  coupled with any assets used as cover (equal to any remaining
obligation),  equals its net obligation. Asset coverage may be achieved by other
means when consistent with applicable regulatory policies.

There is no limit on the  percentage  of the  assets  of the Fund that may be at
risk with respect to futures  contracts and related options or forward  currency
contracts.  The  Fund  may not  invest  more  than 15% of its  total  assets  in
purchased  protective put options.  The Fund's transactions in options,  forward
currency  contracts,  futures  contracts and options on futures contracts may be
limited  by the  requirements  for  qualification  of the  Fund  as a  regulated
investment company for tax purposes. See "Taxes." There can be no assurance that
the use of these portfolio strategies will be successful.


Impact of Large  Redemptions  and  Purchases of Fund shares.  From time to time,
shareholders  of the Fund (which may include  affiliated  and/or  non-affiliated
registered  investment  companies  that invest in the Fund) may make  relatively
large redemptions or purchases of Fund shares.  These transactions may cause the
Fund to have to sell securities or invest  additional  cash, as the case may be.
While it is impossible to predict the overall impact of these  transactions over
time,  there could be adverse  effects on the Fund's  performance  to the extent
that the Fund may be required to sell securities or invest cash at times when it
would  not  otherwise  do so.  These  transactions  could  also  accelerate  the
realization of taxable  income if sales of securities  resulted in capital gains
and could also increase transaction costs.


                                       32
<PAGE>

Investment  Objective.  The Fund's  investment  objective  is not a  fundamental
policy and may be changed  upon  notice to, but  without  the  approval  of, the
Fund's  shareholders.  If there is a change in the Fund's investment  objective,
the Fund's  shareholders should consider whether the Fund remains an appropriate
investment in light of their then-current  needs.  Shareholders of the Fund will
receive  30 days'  prior  written  notice  with  respect  to any  change  in the
investment objective of the Fund.

Rating Services

The ratings of rating services represent their opinions as to the quality of the
securities that they undertake to rate. It should be emphasized,  however,  that
ratings are relative and subjective  and are not absolute  standards of quality.
Although  these  ratings are an initial  criterion  for  selection  of portfolio
investments,  the Advisor  also makes its own  evaluation  of these  securities,
subject to review by the Board of Trustees of the Trust.  After  purchase by the
Fund, an obligation may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund.  Neither event would require the Fund
to eliminate the obligation  from its  portfolio,  but the Advisor will consider
such an event in its  determination  of whether the Fund should continue to hold
the  obligation.  A  description  of the  ratings  referred to herein and in the
Prospectus is set forth in the Appendix of this SAI.

The  following  is a chart of the various  types of  securities  and  investment
strategies  employed by the Fund.  Unless otherwise  indicated,  the Fund is not
obligated to pursue any of the following  strategies and does not represent that
these  techniques  are  available  now or will be  available  at any time in the
future.  If the Fund's investment in a particular type of security is limited to
a certain percentage of the Fund's assets, that percentage  limitation is listed
in the chart.  Following the chart,  there is a description  of how each type of
security  and  investment  strategy  may be used by the  Fund.  As a  matter  of
nonfundamental   operating  policy,  the  Fund  may  be  subject  to  additional
restrictions. See the section entitled "Investment Restrictions."


<TABLE>
<CAPTION>
 -------------------------------------------------------- ----------------------------------------------------------
 INVESTMENT PRACTICE                                       DWS Short Duration Plus Fund
 -------------------------------------------------------------------------------------------------------------------
 KEY TO TABLE:
 +   Permitted without stated limit
 o   Permitted  without stated limit, but not expected to be used to a significant extent
 X   Not permitted

 20% Italic type (e.g. 20%) represents an investment limitation as a percentage of net fund assets; does not
 indicate actual use

 20% Roman type (e.g. 20%) represents an investment limitation as a percentage of total fund assets; does not
 indicate actual use
 -------------------------------------------------------------------------------------------------------------------
 EQUITY SECURITIES
 -------------------------------------------------------- ----------------------------------------------------------
<S>                                                                                  <C>
 Common Stock                                                                         X
 -------------------------------------------------------- ----------------------------------------------------------
 Warrants                                                                            20%
 -------------------------------------------------------- ----------------------------------------------------------
 Preferred Stock                                                                      X
 -------------------------------------------------------- ----------------------------------------------------------
 Convertible Securities                                                               X
 -------------------------------------------------------------------------------------------------------------------
 FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
 -------------------------------------------------------- ----------------------------------------------------------
 Short-Term Instruments                                                               +
 -------------------------------------------------------- ----------------------------------------------------------
 Obligations of Banks and Other Financial Institutions                                +
 -------------------------------------------------------- ----------------------------------------------------------
 Certificates of Deposit and Banker's Acceptances                                     +
 -------------------------------------------------------- ----------------------------------------------------------
 Commercial Paper                                                                     +
 -------------------------------------------------------- ----------------------------------------------------------
 Variable Rate Master Demand Notes                                                    +
 -------------------------------------------------------- ----------------------------------------------------------
 US Government Securities                                                             +
 -------------------------------------------------------- ----------------------------------------------------------
 Corporate Debt Securities                                                            +
 -------------------------------------------------------- ----------------------------------------------------------
 Custodial Receipts                                                                   o
 -------------------------------------------------------- ----------------------------------------------------------
 Zero Coupon Securities and Deferred Interest Bonds                                   +
 -------------------------------------------------------- ----------------------------------------------------------
 Variable Rate Securities                                                             +
 -------------------------------------------------------- ----------------------------------------------------------
 Warrants                                                                             +
 -------------------------------------------------------- ----------------------------------------------------------



                                       33
<PAGE>

 -------------------------------------------------------- ----------------------------------------------------------
 INVESTMENT PRACTICE                                       DWS Short Duration Plus Fund
 -------------------------------------------------------------------------------------------------------------------
 Inverse Floating Rate Securities                                                     o
 -------------------------------------------------------- ----------------------------------------------------------
 Lower-Rated Debt Securities                                                         10%
 -------------------------------------------------------- ----------------------------------------------------------
 Registered Loans                                                                     X
 -------------------------------------------------------- ----------------------------------------------------------
 Put Bonds                                                                            +
 -------------------------------------------------------- ----------------------------------------------------------
 Bank Loans                                                                           +
 -------------------------------------------------------- ----------------------------------------------------------
 Other Debt Obligations                                                               +
 -------------------------------------------------------------------------------------------------------------------
 MUNICIPAL SECURITIES
 -------------------------------------------------------- ----------------------------------------------------------
 Municipal Notes                                                                      o
 -------------------------------------------------------- ----------------------------------------------------------
 Tax Anticipation Notes                                                               o
 -------------------------------------------------------- ----------------------------------------------------------
 Revenue Anticipation Notes                                                           o
 -------------------------------------------------------- ----------------------------------------------------------
 Bond Anticipation Notes                                                              o
 -------------------------------------------------------- ----------------------------------------------------------
 Tax and Revenue Anticipation Notes                                                   o
 -------------------------------------------------------- ----------------------------------------------------------
 Construction Loan Notes                                                              o
 -------------------------------------------------------- ----------------------------------------------------------
 Miscellaneous, Temporary and Anticipatory Instruments                                o
 -------------------------------------------------------- ----------------------------------------------------------
 Tax-Exempt Commercial Paper                                                          o
 -------------------------------------------------------- ----------------------------------------------------------
 Municipal Securities                                                                 o
 -------------------------------------------------------- ----------------------------------------------------------
 General Obligation Bonds                                                             o
 -------------------------------------------------------- ----------------------------------------------------------
 Revenue Bonds                                                                        o
 -------------------------------------------------------- ----------------------------------------------------------
 Private Activity Bonds                                                               o
 -------------------------------------------------------- ----------------------------------------------------------
 Tender Option Bonds                                                                  o
 -------------------------------------------------------- ----------------------------------------------------------
 Municipal Leases, Certificates of Participation and
 Other Participation Interests                                                       5%
 -------------------------------------------------------- ----------------------------------------------------------
 Pre-Refunded Securities                                                              o
 -------------------------------------------------------- ----------------------------------------------------------
 Auction Rate Securities                                                              o
 -------------------------------------------------------- ----------------------------------------------------------
 Pay-in-Kind Securities                                                               o
 -------------------------------------------------------------------------------------------------------------------
 DERIVATIVE SECURITIES (OPTIONS)
 -------------------------------------------------------- ----------------------------------------------------------
 Options on Securities                                                                +
 -------------------------------------------------------- ----------------------------------------------------------
 Options on Securities Indices                                                        +
 -------------------------------------------------------- ----------------------------------------------------------
 Options on Non-US Securities Indices                                                 +
 -------------------------------------------------------- ----------------------------------------------------------
 DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
 --------------------------------------------------------- ---------------------------------------------------------
 Futures Contracts                                                                    +
 --------------------------------------------------------- ---------------------------------------------------------
 Futures Contracts on Securities Indices, Foreign
 Currency and Interest Rates                                                          +
 --------------------------------------------------------- ---------------------------------------------------------
 Options on Futures Contracts (including Contracts on
 Securities Indices)                                                                  +
 -------------------------------------------------------------------------------------------------------------------
 DERIVATIVE SECURITIES (HEDGING STRATEGIES)
 -------------------------------------------------------- ----------------------------------------------------------
 Hedging Strategies                                                                   +
 -------------------------------------------------------- ----------------------------------------------------------
 Swap Agreements                                                                      +
 -------------------------------------------------------- ----------------------------------------------------------
 Credit Default Swaps                                                                15%
 -------------------------------------------------------------------------------------------------------------------
 MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
 -------------------------------------------------------- ----------------------------------------------------------
 Government Guaranteed Mortgage-Backed Securities                                     +
 -------------------------------------------------------- ----------------------------------------------------------
 Ginnie Mae Certificates                                                              +
 -------------------------------------------------------- ----------------------------------------------------------
 Fannie Mae Certificates                                                              +
 -------------------------------------------------------- ----------------------------------------------------------
 Freddie Mac Certificates                                                             +
 -------------------------------------------------------- ----------------------------------------------------------
 Multi-Class Mortgage-Backed Securities (CMOs and
 REMICs)                                                                              +
 -------------------------------------------------------- ----------------------------------------------------------
 Privately Issued Commercial Mortgage-Backed Securities                               +
 -------------------------------------------------------- ----------------------------------------------------------
 Agency Commercial Mortgage-Backed Securities                                         +
 -------------------------------------------------------- ----------------------------------------------------------
 Mortgage Pass-Through Securities                                                     +
 -------------------------------------------------------- ----------------------------------------------------------



                                       34
<PAGE>

 -------------------------------------------------------- ----------------------------------------------------------
 INVESTMENT PRACTICE                                       DWS Short Duration Plus Fund
 -------------------------------------------------------------------------------------------------------------------
 Stripped Mortgage-Backed Securities                                                  +
 -------------------------------------------------------- ----------------------------------------------------------
 Adjustable Rate Mortgages                                                            +
 -------------------------------------------------------- ----------------------------------------------------------
 Asset-Backed Securities                                                              +
 -------------------------------------------------------------------------------------------------------------------
 SECURITIES OF NON-US ISSUERS
 -------------------------------------------------------- ----------------------------------------------------------
 Foreign Securities and Depository Receipts (ADRs,                                  +(1)
 EDRs, GDRs and IDRs)
 -------------------------------------------------------- ----------------------------------------------------------
 Foreign Corporate Debt Securities                                                  +(1)
 -------------------------------------------------------- ----------------------------------------------------------
 Foreign Government Debt Securities                                                 +(1)
 -------------------------------------------------------- ----------------------------------------------------------
 Investments in Emerging Markets                                                      +
 -------------------------------------------------------------------------------------------------------------------
 CURRENCY MANAGEMENT
 -------------------------------------------------------- ----------------------------------------------------------
 Currency Exchange Transactions                                                       +
 -------------------------------------------------------- ----------------------------------------------------------
 Currency Hedging Transactions                                                        +
 -------------------------------------------------------- ----------------------------------------------------------
 Cross Hedging                                                                        X
 -------------------------------------------------------- ----------------------------------------------------------
 Forward Currency Exchange Contracts                                                  +
 -------------------------------------------------------- ----------------------------------------------------------
 Options on Foreign Currencies                                                        +
 -------------------------------------------------------------------------------------------------------------------
 OTHER INVESTMENTS AND INVESTMENT PRACTICES
 -------------------------------------------------------- ----------------------------------------------------------
 Illiquid Securities                                                                 15%
 -------------------------------------------------------- ----------------------------------------------------------
 TBA Commitments                                                                      +
 -------------------------------------------------------- ----------------------------------------------------------
 When-Issued and Delayed Delivery Securities                                         15%
 -------------------------------------------------------- ----------------------------------------------------------
 Repurchase Agreements                                                                +
 -------------------------------------------------------- ----------------------------------------------------------
 Reverse Repurchase Agreements                                                       5%
 -------------------------------------------------------- ----------------------------------------------------------
 Mortgage Dollar Rolls                                                               5%
 -------------------------------------------------------- ----------------------------------------------------------

 Lending of Portfolio Securities                                                   33 1/3%

 -------------------------------------------------------- ----------------------------------------------------------
 Borrowing                                                                         33 1/3%
 -------------------------------------------------------- ----------------------------------------------------------
 Short Sales                                                                          +
 -------------------------------------------------------- ----------------------------------------------------------
 Other Investment Companies                                                      limits vary
 -------------------------------------------------------- ----------------------------------------------------------
 Temporary Defensive Investments                                                      +
 -------------------------------------------------------- ----------------------------------------------------------
 Dow Jones CDX.NA.HY.3 and similar products                                           +
 -------------------------------------------------------- ----------------------------------------------------------
 Concentration of Investment in Any One Industry                                     25%
 -------------------------------------------------------- ----------------------------------------------------------
</TABLE>

(1) May be denominated in any currency.

Portfolio Holdings


In addition to the public disclosure of Fund portfolio holdings through required
SEC  quarterly  filings,  the Fund may make its portfolio  holdings  information
publicly  available  on the DWS  Funds'  Web  site as  described  in the  Fund's
prospectus. The Fund does not disseminate non-public information about portfolio
holdings except in accordance with policies and procedures adopted by the Fund.

The Fund's  procedures permit non-public  portfolio  holdings  information to be
shared with Deutsche Asset Management and its affiliates  (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys,   officers  and  trustees/directors  and  each  of  their  respective
affiliates and advisers who require access to this  information to fulfill their
duties to the Fund and are subject to the duties of  confidentiality,  including
the duty not to trade on non-public information,  imposed by law or contract, or
by the Fund's  procedures.  This  non-public  information may also be disclosed,
subject to the  requirements  described  below,  to securities  lending  agents,
financial  printers,  proxy voting  firms,  mutual fund  analysts and rating and
tracking  agencies,  or to shareholders  in connection with in-kind  redemptions
(collectively, "Authorized Third Parties").

Prior to any disclosure of the Fund's non-public  portfolio holdings information
to Authorized  Third Parties,  a person  authorized by the Fund's  Trustees must
make a good faith  determination  in light of the facts then known that the Fund
has a  legitimate  business  purpose for  providing  the  information,  that the
disclosure is in the best interest of the Fund,  and that the recipient  assents
or otherwise has a duty to keep the  information  confidential  and to not trade

                                       35
<PAGE>

based on the information  received while the information remains non-public.  No
compensation is received by the Fund or DeAM for disclosing  non-public holdings
information. Periodic reports regarding these procedures will be provided to the
Fund's Trustees.

Portfolio  holdings  information  distributed  by the trading desks of DeAM or a
subadvisor for the purpose of facilitating  efficient trading of such securities
and receipt of relevant  research is not subject to the foregoing  requirements.
Non-public   portfolio   holding   information   does  not   include   portfolio
characteristics  (other than holdings or subsets of holdings) about the Fund and
information  derived  therefrom,  including,  but not limited to, how the Fund's
investments are divided among various sectors, industries,  countries, value and
growth stocks,  bonds,  currencies and cash,  types of bonds,  bond  maturities,
duration,  bond  coupons and bond credit  quality  ratings so long as the Fund's
holdings could not be derived from such information.




Registered  investment  companies  that are subadvised by DeAM may be subject to
different  portfolio  holdings  disclosure  policies,  and neither  DeAM nor the
Fund's  Trustees  exercise  control over such  policies.  In addition,  separate
account  clients of DeAM have  access to their  portfolio  holdings  and are not
subject  to the Fund's  portfolio  holdings  disclosure  policy.  The  portfolio
holdings  of some of the  funds  subadvised  by DeAM  and  some of the  separate
accounts managed by DeAM may substantially  overlap with the portfolio  holdings
of the Fund.

DeAM also  manages  certain  unregistered  commingled  trusts and creates  model
portfolios,  the portfolio holdings of which may substantially  overlap with the
portfolio holdings of the Fund. To the extent that investors in these commingled
trusts  or  recipients  of model  portfolio  holdings  information  may  receive
portfolio  holdings  information  of their  trust or of a model  portfolio  on a
different basis from that on which Fund portfolio  holdings  information is made
public,  DeAM has implemented  procedures  reasonably designed to encourage such
investors and recipients to


                                       36
<PAGE>

keep such information confidential,  and to prevent those investors from trading
on the basis of non-public holdings information.

There is no assurance that the Fund's  policies and  procedures  with respect to
the disclosure of portfolio holdings  information will protect the Fund from the
potential  misuse of portfolio  holdings  information  by those in possession of
that information.

                             MANAGEMENT OF THE FUND

Investment Advisor


DIMA, which is part of Deutsche Asset Management,  is the investment advisor for
the Fund.  Under the  supervision  of the Board of  Trustees  of the Fund,  with
headquarters at 345 Park Avenue, New York, New York 10154, DIMA makes the Fund's
investment  decisions,  buys and  sells  securities  for the  Fund and  conducts
research that leads to these purchase and sale  decisions.  The Advisor  manages
the Fund's  daily  investment  and  business  affairs  subject  to the  policies
established  by the  Board  of  Trustees  of the  Trust  Corporation's  Board of
Directors.  DIMA and its  predecessors  have  more  than 80 years of  experience
managing  mutual  funds.  DIMA  provides  a full  range of  investment  advisory
services to  institutional  and retail clients.  The Advisor is also responsible
for selecting brokers and dealers and for negotiating  brokerage commissions and
dealer charges. On December 31, 2006,  Deutsche Asset Management,  Inc. ("DAMI")
merged into DIMA. Prior to December 31, 2006 DAMI was the investment  advisor to
the Fund. As a result of the merger,  DIMA is now the investment  advisor to the
Fund.


DeAM is the  marketing  name in the US for the asset  management  activities  of
Deutsche  Bank AG,  DIMA,  Deutsche  Bank Trust  Company  Americas and DWS Trust
Company. DeAM is a global asset management organization that offers a wide range
of investing  expertise and resources,  including hundreds of portfolio managers
and analysts and an office  network  that reaches the world's  major  investment
centers.  This well-resourced  global investment platform brings together a wide
variety of experience and investment insight, across industries,  regions, asset
classes and investing styles.  DIMA is an indirect,  wholly-owned  subsidiary of
Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is
engaged in a wide range of financial services,  including investment management,
mutual fund,  retail,  private and commercial  banking,  investment  banking and
insurance.  The term "DWS Scudder" is the designation  given to the products and
services provided by DIMA and its affiliates to the DWS Mutual Funds.

The Advisor provides  investment  counsel for many individuals and institutions,
including  insurance  companies,  industrial  corporations,  and  financial  and
banking  organizations,  as well as  providing  investment  advice  to open- and
closed-end SEC registered funds.

The Fund is managed by a team of investment professionals, each of whom plays an
important role in the Fund's management  process.  Team members work together to
develop  investment  strategies and select  securities for the Fund's portfolio.
This team works for the Advisor or its  affiliates  and is  supported by a large
staff  of  economists,   research   analysts,   traders  and  other   investment
specialists. The Advisor or its affiliates believe(s) its team approach benefits
fund  investors  by  bringing  together  many  disciplines  and  leveraging  its
extensive resources.  Team members with primary responsibility for management of
the  Fund,  as  well  as  team  members  who  have  other   ongoing   management
responsibilities  for the Fund, are identified in the Fund's  prospectus,  as of
the date of the Fund's prospectus. Composition of the team may change over time,
and fund  shareholders  and  investors  will be  notified  of changes  affecting
individuals with primary fund management responsibility.

Investment Management Agreement


The  Board  and  the  shareholders  of the  Fund  have  approved  an  investment
management  agreement (the "Investment  Management  Agreement") between the Fund
and DIMA. Pursuant to the Investment Management Agreement,  the Advisor provides
continuing  investment  management of the assets of the Fund. In addition to the
investment  management  of the assets of the Fund,  the Advisor  determines  the
investments to be made for the Fund, including


                                       37
<PAGE>

what portion of its assets remain  uninvested in cash or cash  equivalents,  and
with whom the orders for  investments  are  placed,  consistent  with the Fund's
policies as stated in its Prospectuses and this SAI, or as adopted by the Fund's
Board.  The Advisor  also  monitors,  to the extent not  monitored by the Fund's
administrator or other agent, the Fund's  compliance with its investment and tax
guidelines and other compliance policies.




The Advisor  provides  assistance to the Fund's Board in valuing the  securities
and other  instruments  held by the Fund, to the extent  reasonably  required by
valuation policies and procedures that may be adopted by the Fund.


Pursuant to the Investment Management  Agreement,  (unless otherwise provided in
the agreement or as  determined by the Fund's Board and to the extent  permitted
by applicable  law), the Advisor pays the  compensation  and expenses of all the
Board  members,  officers,  and executive  employees of the Fund,  including the
Fund's share of payroll taxes, who are affiliated persons of the Advisor.

The  Investment  Management  Agreement  provides  that  the  Fund  is  generally
responsible  for expenses  that  include:  fees payable to the Advisor;  outside
legal,  accounting  or auditing  expenses,  including  with  respect to expenses
related to negotiation,  acquisition or  distribution of portfolio  investments;
maintenance  of books and records that are  maintained  by the Fund,  the Fund's
custodian,  or other agents of the Fund; taxes and  governmental  fees; fees and
expenses   of  the   Fund's   accounting   agent,   custodian,   sub-custodians,
depositories,  transfer  agents,  dividend  reimbursing  agents and  registrars;
payment  for  portfolio  pricing  or  valuation   services  to  pricing  agents,
accountants,  bankers and other specialists,  if any;  brokerage  commissions or
other costs of  acquiring  or disposing  of any  portfolio  securities  or other
instruments  of the  Fund;  and  litigation  expenses  and  other  extraordinary
expenses not incurred in the ordinary course of the Fund's business.

The Investment  Management  Agreement  allows the Advisor to delegate any of its
duties under the  Agreement to a  subadvisor,  subject to a majority vote of the
Board of the Fund,  including  a  majority  of the Board who are not  interested
persons of the Fund, and, if required by applicable  law,  subject to a majority
vote of the Fund's shareholders.

The  Investment  Management  Agreement  provides  that the Advisor  shall not be
liable for any error of judgment  or mistake of law or for any loss  suffered by
the Fund in  connection  with matters to which the agreement  relates,  except a
loss resulting from willful  malfeasance,  bad faith or gross  negligence on the
part of the Advisor in the performance of its duties or from reckless  disregard
by the Advisor of its obligations and duties under the agreement. The Investment
Management  Agreement may be terminated at any time, without payment of penalty,
by either party or by vote of a majority of the outstanding voting securities of
the Fund on 60 days' written notice.

In addition,  the Board and  shareholders  have  approved a subadvisor  approval
policy for the Fund (the "Subadvisor Approval Policy").  The Subadvisor Approval
Policy  permits the Advisor,  subject to the approval of the Board,  including a
majority of its independent  board members,  to appoint and replace  subadvisors
and to amend  sub-advisory  contracts  without obtaining  shareholder  approval.
Under the Subadvisor Approval Policy, the Board, including its independent board
members,  will continue to evaluate and approve any new  sub-advisory  contracts
between the Advisor and any  subadvisor,  as well as all changes to


                                       38
<PAGE>

any existing  sub-advisory  contract.  The Fund cannot  implement the Subadvisor
Approval  Policy without the SEC either adopting  revisions to certain  existing
rules (as it proposed  to do in October  2003) or  granting  the Fund  exemptive
relief from such existing rules.  In the event that the Fund received  exemptive
relief or the SEC  adopted  revisions  to its  current  rules,  the Fund and the
Advisor would be subject to certain  conditions  imposed by the SEC (and certain
conditions that may be imposed in the future within either exemptive relief or a
rule)  to  ensure  that the  interests  of the  Fund  and its  shareholders  are
adequately  protected  whenever the Advisor acts under the  Subadvisor  Approval
Policy, including any shareholder notice requirements.

Effective  April 23,  2007,  for all  services  provided  under  the  Investment
Management Agreement, the Fund pays the Advisor a fee, calculated daily and paid
monthly, at the annual rates shown below:

Average Daily Net Assets                         Fee Rate
------------------------                         --------

$0 - $1.5 billion                                0.365%
$1.5 billion - $2 billion                        0.340%
$2 billion - $3 billion                          0.315%
$3 billion - $4 billion                          0.300%
$4 billion - $5 billion                          0.285%
$5 billion - $6 billion                          0.270%
Over $6 billion                                  0.255%

Prior to April 23,  2007,  the Fund paid the Advisor a fee,  computed  daily and
paid monthly, at the annual rate as a percentage of net assets shown below:

Average Daily Net Assets                         Fee Rate
------------------------                         --------

$0 - $500 million                                0.500%
$500 million - $1 billion                        0.485%
$1 billion - $2 billion                          0.470%
Over $2 billion                                  0.455%

[Prior to the implementation of the above fee schedule,  the fund's advisory fee
was equal to an annual  rate of 0.70% of the Fund's  average  daily net  assets,
computed and accrued daily and paid monthly.]

The advisory fees paid to the Advisor's  predecessor  by the Fund for the period
January 14, 2006 through September 30, 2006* was equal to $2,452,759.

* Prior to July 1, 2006, these fees included an administrative service fee.





                                       39
<PAGE>




The investment  advisor has  contractually  agreed  through  January 31, 2009 to
waive a  portion  of its  fees  and  reimburse  expenses  so that  total  annual
operating  expenses will not exceed 0.67% for Class S shares,  excluding certain
expenses such as extraordinary expenses, taxes, brokerage and interest.

In addition,  the investment advisor has contractually  agreed through April 22,
2010 to waive a portion of its fees and reimburse  expenses so that total annual
operating  expenses will not exceed 0.73% for Class S shares,  excluding certain
expenses such as extraordinary expenses, taxes, brokerage and interest.





The investment advisor has voluntarily agreed to waive a portion of its fees and
reimburse expenses so that total annual operating expenses will not exceed 0.86%
for Class S shares,  excluding certain expenses such as extraordinary  expenses,
taxes,  brokerage,  interest and  organizational and offering expenses and proxy
expenses.  The investment advisor, at its discretion,  may revise or discontinue
this arrangement at any time.


The advisory  fees paid to the  PreservationPlus  Income  Portfolio,  the master
portfolio in which the Fund previously  invested all of its assets, for its last
three fiscal years ended September 30 are shown in the table below.


               2006*,**                        2005**                 2004**
               --------                        ------                 ------

              $1,517,873                     $9,183,185             $16,152,288


* For the period October 1, 2005 through January 13, 2006.

** Prior to July 1, 2006, these fees included an administrative service fee.


                                       40
<PAGE>


For the the last  three  fiscal  years end  September  30,  the  Advisor or DAMI
reimbursed the following amounts to the Portfolio to cover expenses:

                  2007                        2006*                   2005
                  ----                        -----                   ----

                   $0                       $625,126               $3,508,421


* For the period October 1, 2005 through January 13, 2006.

In reviewing the terms of the Investment Management Agreement and in discussions
with the Advisor  concerning such  Agreement,  the Trustees of the Trust who are
not "interested  persons" of the Advisor are represented by independent  counsel
at the Fund's expense.

Under a separate agreement between Deutsche Bank AG and the Fund,  Deutsche Bank
AG has granted a license to the Fund to utilize the trademark "DWS."

The Advisor may enter into  arrangements with affiliates and third party service
providers to perform  various  administrative,  back-office  and other  services
relating to client accounts.  Such service providers may be located in the US or
in non-US jurisdictions.



Compensation of Portfolio Managers


The  Fund has  been  advised  that the  Advisor  seeks to offer  its  investment
professionals  competitive  short-term  and  long-term  compensation.  Portfolio
managers and research professionals are paid (i) fixed base salaries,  which are
linked to job function,  responsibilities  and financial  services industry peer
comparison  and (ii)  variable  compensation,  which  is  linked  to  investment
performance, individual contributions to the team and DWS Scudder's and Deutsche
Bank's  financial  results.  Variable  compensation  may  include  a cash  bonus
incentive and  participation in a variety of long-term equity programs  (usually
in the form of Deutsche Bank equity).

Bonus  and  long-term   incentives   comprise  a  greater  proportion  of  total
compensation as an investment  professional's  seniority and compensation levels
increase.  Top performing  investment  professionals  earn a total  compensation
package  that is highly  competitive,  including  a bonus that is a multiple  of
their base  salary.  The amount of equity  awarded  under the  long-term  equity
programs is generally based on the individual's total  compensation  package and
may  comprise  from  0%-40%  of  the  total  compensation  award.  As  incentive
compensation increases,  the percentage of compensation awarded in Deutsche Bank
equity also increases. Certain senior investment professionals may be subject to
a mandatory diverting of a portion of their equity compensation into proprietary
mutual funds that they manage.

To  evaluate  its  investment  professionals,  the  Advisor  uses a  Performance
Management  Process.   Objectives  evaluated  by  the  process  are  related  to
investment  performance and generally take into account peer group and benchmark
related data.  The ultimate goal of this process is to link the  performance  of
investment  professionals  with  client  investment  objectives  and to  deliver
investment   performance   that  meets  or  exceeds  clients'  risk  and  return
objectives. When determining total compensation,  the Advisor considers a number
of quantitative and qualitative factors such as:

o        DWS  Scudder   performance   and  the  performance  of  Deutsche  Asset
         Management, quantitative measures which include 1, 3 and 5 year pre-tax
         returns versus benchmark (such as the benchmark used in the prospectus)
         and appropriate  peer group,  taking into  consideration  risk targets.
         Additionally, the portfolio manager's retail/institutional asset mix is
         weighted, as appropriate for evaluation purposes.

                                       41
<PAGE>

o        Qualitative  measures include  adherence to the investment  process and
         individual  contributions  to  the  process,  among  other  things.  In
         addition, the Advisor assesses compliance, risk management and teamwork
         skills.

o        Other factors,  including  contributions made to the investment team as
         well as  adherence  to  compliance,  risk  management,  and "living the
         values" of the Advisor,  are part of a  discretionary  component  which
         gives  management the ability to reward these behaviors on a subjective
         basis through bonus incentives.

In addition,  the Advisor analyzes  competitive  compensation levels through the
use of extensive market data surveys. Portfolio manager compensation is reviewed
and may be modified each year as appropriate  to reflect  changes in the market,
as well as to adjust the  factors  used to  determine  overall  compensation  to
promote good sustained investment performance.

Fund Ownership of Portfolio Managers

The following table shows the dollar range of shares owned  beneficially  and of
record by each  member of the Fund's  portfolio  management  team in the Fund as
well as in all DWS Funds as a group (i.e.  those funds advised by Deutsche Asset
Management or its affiliates),  including  investments by their immediate family
members sharing the same household and amounts invested  through  retirement and
deferred  compensation plans. This information is provided as of the Fund's most
recent fiscal year end.

<TABLE>
<CAPTION>
                                                                                   Dollar Range of All
Name of Portfolio Manager              DWS Short Duration Plus Fund               DWS Fund Shares Owned
-------------------------              ----------------------------               ---------------------
<S>                                                 <C>                              <C>
William Chepolis                             $10,001 - $50,000                     $100,001 - $500,000
Matthew F. MacDonald                                $0                              $10,001 - $50,000
Gary Sullivan                                       $0                              $10,001 - $50,000
Robert Wang                                    $1 - $10,000                        $100,001 - $500,000
Thomas Picciochi                             $10,001 - $50,000                     $100,001 - $500,000

Conflicts of Interest

In addition to managing the assets of the Fund,  the Fund's  portfolio  managers
may have responsibility for managing other client accounts of the Advisor or its
affiliates.  The tables below show, for each portfolio  manager,  the number and
asset size of (1) SEC registered  investment companies (or series thereof) other
than the Fund, (2) pooled investment vehicles that are not registered investment
companies and (3) other  accounts  (e.g.,  accounts  managed for  individuals or
organizations)  managed by each portfolio  manager.  Total assets  attributed to
each portfolio  manager in the tables below include total assets of each account
managed  by them,  although  the  manager  may only  manage  a  portion  of such
account's  assets.  The  tables  also show the number of  performance  based fee
accounts, as well as the total assets of the accounts for which the advisory fee
is based on the performance of the account.  This  information is provided as of
the Fund's most recent fiscal year end.

Other SEC Registered Investment Companies Managed:

                                      Number of         Total Assets of    Number of Investment
                                      Registered          Registered         Company Accounts       Total Assets of
                                      Investment          Investment               with            Performance-Based
Name of Portfolio Manager             Companies            Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------            ---------       ---------------------     ------------

William Chepolis                           15           $8,026,523,474               0                    $0
Matthew F. MacDonald                       15           $8,026,523,474               0                    $0
Gary Sullivan                              11           $6,177,175,664               0                    $0
Robert Wang                                40          $14,038,962,945               0                    $0
Thomas Picciochi                           11           $4,712,462,072               0                    $0


                                       42
<PAGE>

Other Pooled Investment Vehicles Managed:

                                                                              Number of Pooled
                                      Number of                              Investment Vehicle
                                       Pooled          Total Assets of         Accounts with        Total Assets of
                                     Investment       Pooled Investment      Performance-Based     Performance-Based
Name of Portfolio Manager             Vehicles             Vehicles                 Fee              Fee Accounts
-------------------------             --------             --------                 ---              ------------

William Chepolis                            0                        $0              0                         $0
Matthew F. MacDonald                        0                        $0              0                         $0
Gary Sullivan                               0                        $0              0                         $0
Robert Wang                                22              $699,278,407              2               $291,834,605
Thomas Picciochi                            5              $341,411,072              2               $291,834,605

Other Accounts Managed:
                                                                              Number of Other
                                                                               Accounts with      Total Assets of
                                      Number of     Total Assets of Other   Performance-Based   Performance-Based
Name of Portfolio Manager          Other Accounts          Accounts                 Fee             Fee Accounts
-------------------------          --------------          --------                 ---             ------------

William Chepolis                            0                        $0              0                        $0
Matthew F. MacDonald                        0                        $0              0                        $0
Gary Sullivan                               0                        $0              0                        $0
Robert Wang                                43            $8,307,356,074              3              $168,734,012
Thomas Picciochi                           10              $245,332,939              3              $168,734,012
</TABLE>

In  addition  to the  accounts  above,  an  investment  professional  may manage
accounts in a personal  capacity that may include  holdings that are similar to,
or the same as,  those of the Fund.  The  Advisor  has in place a Code of Ethics
that is designed to address  conflicts of interest and that, among other things,
imposes  restrictions  on the ability of portfolio  managers  and other  "access
persons" to invest in securities  that may be recommended or traded in the Funds
and other client accounts.

Real,  potential  or apparent  conflicts  of interest may arise when a portfolio
manager has day-to-day  portfolio  management  responsibilities  with respect to
more than one fund or account, including the following:

o        Certain  investments may be appropriate for the Fund and also for other
         clients advised by the Advisor, including other client accounts managed
         by the Fund's portfolio  management team.  Investment decisions for the
         Fund  and  other  clients  are  made  with a view  to  achieving  their
         respective  investment  objectives  and  after  consideration  of  such
         factors as their current holdings,  availability of cash for investment
         and the size of their investments  generally. A particular security may
         be bought or sold for only one client or in  different  amounts  and at
         different times for more than one but less than all clients.  Likewise,
         because   clients  of  the  Advisor  may  have   differing   investment
         strategies, a particular security may be bought for one or more clients
         when one or more other clients are selling the security. The investment
         results  achieved for the Fund may differ from the results achieved for
         other  clients of the Advisor.  In addition,  purchases or sales of the
         same  security  may be made for two or more clients on the same day. In
         such event,  such transactions will be allocated among the clients in a
         manner  believed by the Advisor to be most  equitable  to each  client,
         generally utilizing a pro rata allocation  methodology.  In some cases,
         the allocation  procedure could  potentially  have an adverse effect or
         positive  effect on the price or amount of the securities  purchased or
         sold by each  Fund.  Purchase  and  sale  orders  for the  Fund  may be
         combined  with those of other clients of the Advisor in the interest of
         achieving  the most  favorable  net  results  to the Fund and the other
         clients.

                                       43
<PAGE>

o        To the  extent  that  a  portfolio  manager  has  responsibilities  for
         managing  multiple client  accounts,  a portfolio  manager will need to
         divide time and attention among relevant accounts. The Advisor attempts
         to minimize these conflicts by aligning its portfolio  management teams
         by  investment  strategy and by  employing  similar  investment  models
         across multiple client accounts.

o        In some cases, an apparent  conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with  respect to other  accounts it manages.  The Advisor  will not
         determine  allocations based on whether it receives a performance-based
         fee from the client. Additionally, the Advisor has in place supervisory
         oversight processes to periodically monitor performance  deviations for
         accounts with like strategies.

o        The Advisor and its affiliates and the investment  team of the Fund may
         manage other mutual funds and separate  accounts on a long-short basis.
         The  simultaneous  management  of long  and  short  portfolios  creates
         potential  conflicts  of  interest  including  the risk that short sale
         activity  could   adversely   affect  the  market  value  of  the  long
         positions(and  vice versa),  the risk arising from sequential orders in
         long and short  positions,  and the  risks  associated  with  receiving
         opposing  orders at the same time.  The Advisor has adopted  procedures
         that it believes are reasonably  designed to mitigate  these  potential
         conflicts  of  interest.  Included  in these  procedures  are  specific
         guidelines  developed to ensure fair and  equitable  treatment  for all
         clients whose accounts are managed by each Fund's portfolio  management
         team. The Advisor and the portfolio  management  team have  established
         monitoring  procedures,  a protocol for supervisory reviews, as well as
         compliance  oversight  to ensure that  potential  conflicts of interest
         relating to this type of activity are properly addressed.

The Advisor is owned by Deutsche Bank AG, a  multi-national  financial  services
company.  Therefore,  the Advisor is affiliated  with a variety of entities that
provide, and/or engage in commercial banking, insurance,  brokerage,  investment
banking,  financial  advisory,  broker-dealer  activities  (including  sales and
trading),  hedge funds, real estate and private equity investing, in addition to
the provision of investment  management services to institutional and individual
investors.  Since  Deutsche  Bank AG, its  affiliates,  directors,  officers and
employees (the "Firm") are engaged in businesses  and have interests  other than
managing  asset  management  accounts,   such  other  activities  involve  real,
potential or apparent  conflicts of interest.  These  interests  and  activities
include potential  advisory,  transactional  and financial  activities and other
interests  in  securities  and  companies  that may be  directly  or  indirectly
purchased  or sold by the Firm for its  clients'  advisory  accounts.  These are
considerations  of which  advisory  clients  should be aware and which may cause
conflicts that could be to the disadvantage of the Advisor's  advisory  clients.
The Advisor has  instituted  business and  compliance  policies,  procedures and
disclosures  that are  designed to identify,  monitor and mitigate  conflicts of
interest and, as appropriate, to report them to the Fund's Board.





                                       44
<PAGE>




                                       45
<PAGE>




                                       46
<PAGE>



Codes of Ethics

The Fund,  the Advisor and the Fund's  principal  underwriter  have each adopted
codes of ethics under rule 17j-1 under the 1940 Act. Board members,  officers of
the Trust and employees of the Advisor and principal  underwriter  are permitted
to make personal securities  transactions,  including transactions in securities
that  may be  purchased  or


                                       47
<PAGE>

held by the Fund,  subject to  requirements  and  restrictions  set forth in the
applicable Code of Ethics. The Advisor's Code of Ethics contains  provisions and
requirements  designed to identify  and address  certain  conflicts  of interest
between  personal  investment  activities  and the interests of the Fund.  Among
other  things,   the  Advisor's  Code  of  Ethics  prohibits  certain  types  of
transactions  absent prior approval,  imposes time periods during which personal
transactions may not be made in certain securities,  and requires the submission
of  duplicate  broker   confirmations  and  quarterly  reporting  of  securities
transactions.  Additional  restrictions  apply to portfolio  managers,  traders,
research  analysts  and others  involved  in the  investment  advisory  process.
Exceptions to these and other  provisions of the Advisor's Code of Ethics may be
granted in particular circumstances after review by appropriate personnel.


Regulatory Matters and Legal Proceedings

On December 21, 2006,  Deutsche Asset Management  ("DeAM")  settled  proceedings
with the  Securities and Exchange  Commission  ("SEC") and the New York Attorney
General on behalf of Deutsche  Asset  Management,  Inc.  ("DAMI") and DIMA,  the
investment advisors to many of the DWS Scudder funds,  regarding  allegations of
improper  trading of fund  shares at DeAM and at the legacy  Scudder  and Kemper
organizations prior to their acquisition by DeAM in April 2002. These regulators
alleged that although the prospectuses for certain funds in the regulators' view
indicated  that the funds did not permit market  timing,  DAMI and DIMA breached
their  fiduciary  duty to those  funds in that their  efforts  to limit  trading
activity in the funds were not effective at certain times.  The regulators  also
alleged that DAMI and DIMA  breached  their  fiduciary  duty to certain funds by
entering into certain market timing  arrangements with investors.  These trading
arrangements  originated  in  businesses  that  existed  prior to the  currently
constituted  DeAM  organization,  which  came  together  as a result of  various
mergers of the legacy Scudder,  Kemper and Deutsche fund groups,  and all of the
arrangements were terminated prior to the start of the regulatory investigations
that  began in the summer of 2003.  No  current  DeAM  employee  approved  these
trading arrangements.  Under the terms of the settlements, DAMI and DIMA neither
admitted nor denied any wrongdoing.

The terms of the SEC settlement, which identified improper trading in the legacy
Deutsche and Kemper mutual funds only,  provide for payment of  disgorgement  in
the  amount  of $17.2  million.  The terms of the  settlement  with the New York
Attorney  General  provide for payment of  disgorgement  in the amount of $102.3
million, which is inclusive of the amount payable under the SEC settlement, plus
a civil penalty in the amount of $20 million.  The total amount payable by DeAM,
approximately  $122.3  million,  will  be  distributed  to  shareholders  of the
affected  funds in  accordance  with a  distribution  plan to be  developed by a
distribution  consultant.  The funds'  investment  advisors do not believe these
amounts  will have a material  adverse  financial  impact on them or  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.  The  above-described  amounts are not  material to Deutsche
Bank, and have already been reserved.

Among the terms of the settled orders,  DeAM is subject to certain  undertakings
regarding  the conduct of its business in the future,  including  formation of a
Code of Ethics  Oversight  Committee  to oversee all matters  relating to issues
arising  under  the  advisors'  Code of  Ethics;  establishment  of an  Internal
Compliance Controls Committee having overall compliance oversight responsibility
of the advisors; engagement of an Independent Compliance Consultant to conduct a
comprehensive review of the advisors' supervisory  compliance and other policies
and  procedures  designed to prevent  and detect  breaches  of  fiduciary  duty,
breaches  of the Code of Ethics and federal  securities  law  violations  by the
advisors and their employees; and commencing in 2008, the advisors shall undergo
a compliance review by an independent third party.

In addition,  DeAM is subject to certain  further  undertakings  relating to the
governance  of the mutual funds,  including  that at least 75% of the members of
the  Boards  of  Trustees/Directors  overseeing  the DWS  Funds  continue  to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be  independent  of DeAM;  DeAM  maintain  existing  management  fee
reductions  for  certain  funds  for a period  of five  years  and not  increase
management  fees for these certain funds during this period;  the funds retain a
senior  officer (or  independent  consultants,  as applicable)  responsible  for
assisting in the review of fee  arrangements  and  monitoring  compliance by the
funds and the investment advisors with securities laws,  fiduciary duties, codes
of ethics and other compliance policies,  the expense of which shall be borne by
DeAM; and periodic account  statements,  fund prospectuses and the mutual funds'
web site contain  additional  disclosure  and/or tools that assist


                                       48
<PAGE>

investors in  understanding  the fees and costs associated with an investment in
the funds and the impact of fees and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State regarding
market timing matters. The terms of the Illinois settlement provide for investor
education  contributions  totaling approximately $4 million and a payment in the
amount of $2 million to the Securities Audit and Enforcement Fund.

On  September  28,  2006,  the SEC and the National  Association  of  Securities
Dealers  ("NASD")  (now  known as FINRA)  announced  final  agreements  in which
Deutsche   Investment   Management   Americas  Inc.  ("DIMA"),   Deutsche  Asset
Management, Inc. ("DAMI") and Scudder Distributors,  Inc. ("DWS-SDI") (now known
as DWS Scudder Distributors,  Inc.) settled administrative proceedings regarding
disclosure of brokerage  allocation  practices in  connection  with sales of the
Scudder Funds' (now known as the DWS Scudder Funds) shares during 2001-2003. The
agreements  with the SEC and NASD are  reflected in orders  which  state,  among
other  things,  that DIMA and DAMI failed to  disclose  potential  conflicts  of
interest to the funds' Boards and to  shareholders  relating to DWS-SDI's use of
certain  funds'  brokerage  commissions  to  reduce  revenue  sharing  costs  to
broker-dealer  firms  with whom it had  arrangements  to market  and  distribute
Scudder Fund shares.  These directed  brokerage  practices were  discontinued in
October 2003.

Under the terms of the  settlements,  in which DIMA,  DAMI and  DWS-SDI  neither
admitted  nor denied any of the  regulators'  findings,  DIMA,  DAMI and DWS-SDI
agreed to pay  disgorgement,  prejudgment  interest  and civil  penalties in the
total amount of $19.3 million. The portion of the settlements distributed to the
funds was approximately $17.8 million and was paid to the funds as prescribed by
the settlement  orders based upon the amount of brokerage  commissions from each
fund used to satisfy revenue sharing  agreements  with  broker-dealers  who sold
fund shares.

As part of the  settlements,  DIMA,  DAMI and DWS-SDI  also agreed to  implement
certain measures and undertakings relating to revenue sharing payments including
making  additional  disclosures  in the funds'  Prospectuses  or  Statements  of
Additional  Information,  adopting or modifying relevant policies and procedures
and providing regular reporting to the fund Boards.

Additional  information announced by DeAM regarding the terms of the settlements
is available at www.dws-scudder.com/regulatory_settlements.

The matters alleged in the regulatory  settlements described above also serve as
the general basis of a number of private class action lawsuits involving the DWS
funds. These lawsuits name as defendants various persons,  including certain DWS
funds,  the  funds'  investment  advisors  and  their  affiliates,  and  certain
individuals,  including  in some cases fund  Trustees/Directors,  officers,  and
other parties.  Each DWS fund's  investment  advisor has agreed to indemnify the
applicable  DWS funds in connection  with these  lawsuits,  or other lawsuits or
regulatory actions that may be filed making similar allegations.

Based on currently available information, the funds' investment advisors believe
the likelihood that the pending lawsuits will have a material adverse  financial
impact on a DWS fund is remote and such  actions  are not  likely to  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.





                                       49
<PAGE>



                             FUND SERVICE PROVIDERS

Administrator


Pursuant to an administrative  services agreement (the "Administrative  Services
Agreement") with DIMA, 345 Park Avenue,  New York, New York 10154, DIMA provides
most administrative services to the Fund including,  among others, providing the
Fund with  personnel,  preparing  and making  required  filings on behalf of the
Fund,  maintaining  books and records for the Fund, and monitoring the valuation
of Fund securities.  For all services provided under the Administrative Services
Agreement,  the Fund pays DIMA a fee of 0.10% of the  Fund's  average  daily net
assets. DIMA pays the accounting agency fees out of such Administrative Services
Agreement fee.


Under  the  Administrative  Services  Agreement,  DIMA,  as  administrator,   is
obligated on a continuous basis to provide such  administrative  services as the
Board of the Fund reasonably  deems necessary for the proper  administration  of
the Fund.  DIMA provides the Fund with  personnel;  arranges for the preparation
and filing of the Fund's tax returns;  prepares and submits  reports and meeting
materials to the Board and the  shareholders;  prepares and files updates to the
Fund's  Prospectuses  and Statement of Additional  Information  as well as other
reports required to be filed by the SEC; maintains the Fund's records;  provides
the Fund with office space, equipment and services;  supervises,  negotiates the
contracts of and monitors the performance of third parties contractors; oversees
the  tabulation of proxies;  monitors the valuation of portfolio  securities and
monitors  compliance  with  Board-approved  valuation  procedures;   assists  in
establishing  the  accounting  and tax  policies  of the  Fund;  assists  in the
resolution  of  accounting  issues  that may  arise  with  respect  to the Fund;
establishes  and  monitors the Fund's  operating  expense  budgets;  reviews and
processes the Fund's bills;  assists in determining  the amount of dividends and
distributions  available to be paid by the Fund,  prepares and arranges dividend
notifications  and provides  information to agents to effect  payments  thereof;
provides to the Board periodic and special  reports;  provides  assistance  with
investor and public relations  matters;  and monitors the registration of shares
under  applicable  federal and state law. The Advisor also performs certain fund
accounting   services  under  the   Administrative   Services   Agreement.   The
Administrative  Services  Agreement provides that the Advisor will not be liable
under the Administrative Services Agreement except for willful misfeasance,  bad
faith or  negligence  in the  performance  of its  duties  or from the  reckless
disregard by it of its duties and obligations thereunder.


For the period ending September 30, 2007, DIMA received $803,530 as compensation
for adminstrative services, of which $107,884 was unpaid.

                                       50
<PAGE>

For the period from July 1, 2006 through  September  30, 2006,  DIMA received an
Administration Fee of $122,624, of which $39,098 is unpaid.


Prior to July 1, 2006,  ICCC received a fee of 0.35% of the Fund's average daily
net  assets  for  serving  as  administrator  of the Fund.  For the years  ended
September 30, 2004,  September  30, 2005 and  September  30, 2006*,  ICCC earned
$7,192,789,  $3,660,465  and  $1,672,070,   respectively,  as  compensation  for
administrative and other services provided to the Fund. During the same periods,
ICCC waived  $6,208,838,  $453,691 and  $680,008,  respectively,  to the Fund to
cover expenses.  For the years ended September 30, 2004,  September 30, 2005 and
September  30,   2006**,   ICCC  earned   $1,319,427,   $661,100  and  $108,420,
respectively, for administrative and other services provided to the Portfolio.

*  For the period October 1, 2005 through June 30, 2006.

** For the period October 1, 2005 through January 13, 2006.

Pursuant to an  agreement  between the  Administrator  and State Street Bank and
Trust Company ("SSB"),  the Administrator  has delegated certain  administrative
functions  to SSB. The costs and  expenses of such  delegation  are borne by the
Administrator, not by the Fund.

Various third-party service providers (the "Service  Providers"),  some of which
are affiliated with the Advisor,  provide certain  services to the Fund pursuant
to separate agreements with the Fund.

The  fees  paid by the  Fund to DIMA  pursuant  to the  Administrative  Services
Agreement  are  reduced by the amount of any  credits  received  from the Fund's
custodian for cash balances.


Pursuant to DeAM  procedures  approved by the Boards on behalf of the DWS funds,
proof of claim forms are  routinely  filed on behalf of the DWS funds by a third
party service provider,  with certain limited exceptions.  The Boards of the DWS
funds receive periodic reports regarding the implementation of these procedures.




Distributor


Pursuant to a Distribution Agreement  ("Distribution  Agreement"),  DWS-SDI, 222
South Riverside Plaza, Chicago,  Illinois 60606, an affiliate of the Advisor, is
the principal underwriter and distributor for the Class S shares of the Fund and
acts as  agent  of the  Fund in the  continuous  offering  of Fund  shares.  The
Distribution  Agreement  continues  in  effect  from  year to  year  only if its
continuance  is approved at least annually by a vote of the Board members of the
Fund,  including the Trustees who are not interested persons of the Fund and who
have no direct or indirect financial interest in the Distribution Agreement.

The  Distribution  Agreement  provides  that  the  Distributor  shall:  (i)  use
reasonable  efforts to sell shares upon the terms and  conditions  contained  in
Distribution  Agreement and the Fund's then-current  Prospectuses;  (ii) use its
best  efforts to conform  with the  requirements  of all  federal and state laws
relating to the sale of the shares;  (iii) adopt and follow procedures as may be
necessary  to comply  with the  requirements  of FINRA and any other  applicable
self-regulatory  organization;  (iv) perform its duties under the supervision of
and in  accordance  with the  directives of the Fund's Board of Trustees and the
Fund's  Declaration  of Trust and  By-Laws;  and (v) provide the Fund's Board of
Trustees with a written  report of the amounts  expended in connection  with the
Distribution Agreement.  The Distributor shall devote reasonable time and effort
to effect sales of shares but shall not be obligated to sell any specific number
of shares. The services of the Distributor are not exclusive and the Distributor
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any


                                       51
<PAGE>

investment,  or for any action or inaction of the  Distributor in the absence of
bad faith,  willful  misfeasance,  or gross negligence in the performance of its
duties or  obligations  under  the  Distribution  Agreement  or by reason of the
reckless  disregard  of  its  duties  and  obligations  under  the  Distribution
Agreement.  The  Distribution  Agreement  further provides that the Fund and the
Distributor   will  mutually   indemnify  each  other  for  losses  relating  to
disclosures in the Fund's registration statement.

The  Distribution  Agreement may be terminated at any time upon 60 days' written
notice by the Fund,  without penalty,  by the vote of a majority of the Trustees
of the  Fund  who  are  not  interested  persons  of the  Fund or by a vote of a
majority of the Fund's  outstanding shares of the related class or upon 60 days'
written notice by the Distributor and shall automatically terminate in the event
of an assignment.

DWS-SDI and certain broker-dealers  ("Participating  Dealers") have entered into
sub-distribution  agreements under which such Participating  Dealers have agreed
to process investor purchase and redemption orders and respond to inquiries from
shareholders  concerning  the status of their accounts and the operations of the
Fund.  Any  sub-distribution  agreement  may be terminated or assigned by either
party,  without penalty, by the vote of a majority of the Fund's  non-interested
Trustees or by a vote of a majority of the outstanding  voting securities of the
Fund in the same manner as the Distribution Agreement.

Note: Although Class S shares do not have a 12b-1 Plan, and the Trustees have no
current  intention  of  adopting  one,  the Fund will  also pay  those  fees and
expenses  permitted to be paid or assumed by the Trust pursuant to a 12b-1 Plan,
if any,  adopted  by the  Trust,  notwithstanding  any  other  provision  to the
contrary in the Distribution Agreement.

The  Distributor  currently  offers shares of the Fund on a continuous  basis to
investors  in all  states  in which  shares of the Fund may from time to time be
registered or where  permitted by  applicable  law. The  Distribution  Agreement
provides that the Distributor accepts orders for shares at net asset value as no
sales commission or load is charged to the investor. The Distributor has made no
firm commitment to acquire shares of the Fund.





                                       52
<PAGE>



Custodian

The Fund  employs  SSB,  225 Franklin  Street,  Boston,  Massachusetts  02110 as
custodian.  SSB has entered into agreements with foreign subcustodians  approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank AG, an affiliate of the Advisor,  as subcustodian  ("DB  Subcustodian")  in
certain countries.  To the extent the Fund holds any securities in the countries
in which SSB uses DB Subcustodian as a  subcustodian,  those  securities will be
held by DB  Subcustodian  as part of a larger omnibus account in the name of SSB
(the "Omnibus  Account").  For its  services,  DB  Subcustodian  receives (1) an
annual fee based on a percentage  of the average daily net assets of the Omnibus
Account and (2)  transaction  charges  with respect to  transactions  that occur
within the Omnibus Account.

Transfer Agent

DWS-SISC serves as the Fund's  Transfer Agent.  DWS-SISC is located at 222 South
Riverside  Plaza,  Chicago,  IL 60606-5808.  Under its transfer agency agreement
with the Trust, DWS-SISC maintains the shareholder account records for the Fund,
handles certain  communications between shareholders and the Trust and causes to
be distributed any dividends and  distributions  payable by the Trust.  DWS-SISC
may be reimbursed by the Fund for its out-of-pocket expenses.

Pursuant to a sub-transfer  agency  agreement  between DWS-SISC and DST Systems,
Inc. ("DST"),  DWS-SISC has delegated certain transfer agent and dividend paying
agent  functions to DST. The costs and expenses of such  delegation  are born by
DWS-SISC, not by the Fund.


The Transfer  Agent receives an annual service fee for each account of the Fund,
based on the type of account.  For open retail  accounts,  the fee is a flat fee
ranging from $20.00 to $27.50 per account,  for open  wholesale  money funds the
fee is $32.50 per account, while for certain retirement accounts serviced on the
recordkeeping system of ADP, Inc., the fee is a flat fee up to $3.46 per account
(as of October  2006,  indexed to  inflation)  plus an asset  based fee of up to
0.25% of  average  net  assets.  1/12th of the  annual  service  charge for each
account is  charged  and  payable to the  Transfer  Agent each  month.  A fee is
charged for any account  which at any time during the month had a share  balance
in the  Fund.  Smaller  fees are also  charged  for  closed  accounts  for which
information  must be retained on the Transfer Agent's system for up to 18 months
after closing for tax reporting purposes.

Certain  out-of-pocket  expenses  incurred  by  the  Transfer  Agent,  including
expenses of printing and mailing  routine fund  disclosure  documents,  costs of
record retention and transaction  processing costs are reimbursed by the Fund or
are paid  directly  by the  Fund.  Certain  additional  out-of-pocket  expenses,
including costs of computer  hardware and software,  third party  record-keeping
and processing of proxy statements,  may only be reimbursed by the Fund with the
prior approval of the Fund's Board.

Effective  April 1, 2007,  DWS-SISC is the Transfer Agent for all classes of all
DWS funds.


Service Plan

The Fund may enter into  Shareholder  Servicing  Agreements  with respect to its
Class S Shares  pursuant to which the  Advisor or its  affiliates  will  provide
compensation  out of their  own  resources  for  ongoing  shareholder  services.
Currently,  banking laws and  regulations  do not  prohibit a financial  holding
company  affiliate from acting as


                                       53
<PAGE>

distributor or Shareholder Servicing Agent or in other capacities for investment
companies. Should future legislative, judicial or administrative action prohibit
or restrict the  activities of the  Shareholder  Servicing  Agents in connection
with the Shareholder  Servicing  Agreements,  the Trust may be required to alter
materially  or  discontinue  its  arrangements  with the  Shareholder  Servicing
Agents. Such financial  institutions may impose separate fees in connection with
these  services  and  investors  should  review the  Prospectus  and this SAI in
conjunction with any such institution's fee schedule.

Prior to the Fund renaming  Investment Class shares to Class S shares,  the Fund
had adopted a service plan for its Investment Class shares, under which the Fund
paid  Investment  Company  Capital Corp.  ("ICCC")  service fees at an aggregate
annual  rate of up to  0.25% of the  class's  average  daily  net  assets.  ICCC
provided  information and administrative  services to the Fund. ICCC in turn had
various  agreements with financial  services firms to provide personal  services
and/or account maintenance services to their customers and paid these fees based
upon the assets of shareholder accounts the firms serviced. For the fiscal years
ended  September 30, 2006,  September 30, 2005 and September 30, 2004,  the Fund
incurred $696,348,  $1,221,644 and $3,859,730,  respectively, of which $621,888,
$1,221,644 and $1,101,950,  respectively,  was waived, in shareholder  servicing
fees for Class S (former Investment Class) shares.

Legal Counsel

Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019-6099,
serves as counsel to the Trust.

Ropes & Gray LLP, One International  Place,  Boston,  Massachusetts  02110-2624,
serves as counsel to the Independent Trustees of the Trust.

Independent Registered Public Accounting
Firm


PricewaterhouseCoopers   LLP,  125  High  Street,  Boston,  MA  02110,  acts  as
Independent  Registered  Public  Accounting Firm of the Fund for the fiscal year
ended September 30, 2007.


                             PORTFOLIO TRANSACTIONS


The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio securities, including the allocation of brokerage.

The  policy of the  Advisor  in  placing  orders  for the  purchase  and sale of
securities  for the Funds is to seek best  execution,  taking into  account such
factors,   among  others,   as  price;   commission  (where   applicable);   the
broker-dealer's   ability  to  ensure  that  securities  will  be  delivered  on
settlement date; the willingness of the  broker-dealer to commit its capital and
purchase  a  thinly  traded   security  for  its  own  inventory;   whether  the
broker-dealer   specializes  in  block  orders  or  large  program  trades;  the
broker-dealer's  knowledge of the market and the security;  the  broker-dealer's
ability to  maintain  confidentiality;  the  broker-dealer's  ability to provide
access to new  issues;  the  broker-dealer's  ability  to provide  support  when
placing a difficult trade;  the financial  condition of the  broker-dealer;  and
whether the broker-dealer has the infrastructure and operational capabilities to
execute  and  settle  the trade.  The  Advisor  seeks to  evaluate  the  overall
reasonableness of brokerage  commissions with commissions  charged on comparable
transactions  and compares the brokerage  commissions (if any) paid by the Funds
to reported commissions paid by others. The Advisor routinely reviews commission
rates,  execution  and  settlement  services  performed  and makes  internal and
external comparisons.

Commission  rates  on  transactions  in  equity  securities  on U.S.  securities
exchanges are subject to negotiation. Commission rates on transactions in equity
securities on foreign  securities  exchanges are generally fixed.  Purchases and
sales of  fixed-income  securities and certain  over-the-counter  securities are
effected  on  a  net  basis,  without  the  payment  of  brokerage  commissions.
Transactions  in  fixed  income  and  certain  over-the-counter  securities  are

                                       54
<PAGE>

generally  placed by the  Advisor  with the  principal  market  makers for these
securities  unless the Advisor  reasonably  believes more favorable  results are
available elsewhere.  Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices.  Purchases of  underwritten  issues
will  include  an  underwriting  fee  paid  to  the  underwriter.  Money  market
instruments are normally purchased in principal  transactions  directly from the
issuer or from an underwriter or market maker.

It is  likely  that the  broker-dealers  selected  based  on the  considerations
described in this section will include  firms that also sell shares of the Funds
to their  customers.  However,  the Advisor does not consider sales of shares of
the Funds as a factor in the selection of  broker-dealers  to execute  portfolio
transactions  for the Funds  and,  accordingly,  has  implemented  policies  and
procedures  reasonably designed to prevent its traders from considering sales of
shares of the Funds as a factor in the  selection of  broker-dealers  to execute
portfolio transactions for the Funds.

The Advisor is  permitted  by Section  28(e) of the  Securities  Exchange Act of
1934, as amended ("1934 Act"), when placing  portfolio  transactions for a Fund,
to cause the Fund to pay brokerage  commissions  in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage  services if the Advisor determines that such commissions
are  reasonable in relation to the overall  services  provided.  The Advisor may
from  time to time,  in  reliance  on  Section  28(e) of the 1934  Act,  execute
portfolio  transactions with  broker-dealers that provide research and brokerage
services to the Advisor.  Consistent  with the Advisor's  policy  regarding best
execution,  where more than one broker is  believed  to be capable of  providing
best execution for a particular  trade, the Advisor may take into  consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute  the trade.  Although  certain  research  and  brokerage  services  from
broker-dealers may be useful to a Fund and to the Advisor,  it is the opinion of
the Advisor that such information only supplements its own research effort since
the  information  must still be analyzed,  weighed and reviewed by the Advisor's
staff. To the extent that research and brokerage  services of value are received
by the Advisor,  the Advisor may avoid expenses that it might  otherwise  incur.
Research and brokerage  services  received from a broker-dealer may be useful to
the Advisor and its affiliates in providing  investment  management  services to
all or some of its  clients,  which  includes  a Fund.  Services  received  from
broker-dealers  that executed  securities  transactions for a Portfolio will not
necessarily be used by the Advisor specifically to service such Fund.

Research and brokerage services provided by broker-dealers may include,  but are
not limited to,  information on the economy,  industries,  groups of securities,
individual   companies,   statistical   information,   accounting  and  tax  law
interpretations,  political developments, legal developments affecting portfolio
securities,  technical  market action,  pricing and appraisal  services,  credit
analysis,  risk measurement  analysis,  performance analysis and measurement and
analysis of corporate responsibility issues. Research and brokerage services are
typically  received  in the form of written  or  electronic  reports,  access to
specialized  financial  publications,  telephone  contacts and personal meetings
with  security  analysts,  but may also be  provided  in the form of  access  to
various  computer  software and meetings  arranged  with  corporate and industry
representatives.

The Advisor may also select  broker-dealers  and obtain from them  research  and
brokerage  services that are used in connection  with executing  trades provided
that such services are consistent  with  interpretations  under Section 28(e) of
the 1934 Act.  Typically,  these  services  take the form of  computer  software
and/or  electronic  communication  services  used by the  Advisor to  facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations thereunder.

The Advisor may use brokerage  commissions to obtain certain brokerage  products
or services that have a mixed use (i.e., it also serves a function that does not
relate to the investment  decision-making process). In those circumstances,  the
Advisor  will make a good faith  judgment to evaluate  the various  benefits and
uses to which it

                                       55
<PAGE>

intends to put the mixed use product or service and will pay for that portion of
the mixed use product or service that it reasonably believes does not constitute
research and brokerage services with its own resources.

DIMA will  monitor  regulatory  developments  and market  practice in the use of
client  commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment  decisions for each Fund and for other investment accounts managed by
the  Advisor  are  made  independently  of each  other  in  light  of  differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases,  simultaneous  transactions are inevitable. To the
extent  permitted by law, the Advisor may aggregate the securities to be sold or
purchased  for a Fund with those to be sold or purchased  for other  accounts in
executing  transactions.  Purchases  or sales are then  averaged as to price and
commission  and  allocated  as to amount in a manner  deemed  equitable  to each
account.  While in some cases this practice  could have a detrimental  effect on
the price  paid or  received  by,  or on the size of the  position  obtained  or
disposed of for,  the Fund,  in other  cases it is believed  that the ability to
engage in volume transactions will be beneficial to the Fund.

DIMA and its affiliates and the Funds' management team manage other mutual funds
and separate accounts,  some of which use short sales of securities as a part of
its  investment  strategy.  The  simultaneous   management  of  long  and  short
portfolios creates potential conflicts of interest including the risk that short
sale activity could adversely affect the market value of the long positions (and
vice  versa),  the  risk  arising  from  sequential  orders  in long  and  short
positions,  and the risks associated with receiving  opposing orders at the same
time.

DIMA has adopted procedures that it believes are reasonably designed to mitigate
these  potential  conflicts  of interest.  Incorporated  in the  procedures  are
specific  guidelines  developed to ensure fair and  equitable  treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory  reviews,  as well as compliance  oversight to ensure
that  potential  conflicts  of interest  relating  to this type of activity  are
properly addressed.

Deutsche Bank AG or one of its  affiliates may act as a broker for the Funds and
receive brokerage commissions or other transaction-related compensation from the
Funds in the purchase and sale of securities, options or futures contracts when,
in the judgment of the Advisor,  and in accordance with  procedures  approved by
the Funds'  Boards,  the  affiliated  broker  will be able to obtain a price and
execution at least as favorable as those obtained from other  qualified  brokers
and if, in the  transaction,  the  affiliated  broker  charges  the Funds a rate
consistent  with that charged to  comparable  unaffiliated  customers in similar
transactions.




                                       56
<PAGE>




                                       57
<PAGE>





For  the  fiscal  year  ended  September  30,  2007,  the  Fund  paid  brokerage
commissions in the amount of $106,407.

For the fiscal years ended  September 30, 2005 and September 30, 2006,  the Fund
paid brokerage commissions in the amount of $0 and $91,836, respectively.

The Fund did not pay any affiliated  brokerage  commissions  for its most recent
fiscal year end.

Securities  of Regular  Broker-Dealers.  The Fund is required  to  identify  any
securities  of its "regular  brokers or dealers" (as such term is defined in the
1940 Act) that the Fund has acquired  during the most recent  fiscal year. As of
September  30,  2007,  the Fund held the  following  securities  of its  regular
brokers or dealers:

<TABLE>
<CAPTION>
Name of Regular Broker or Dealer or Parent (Issuer)          Value of Securities Owned as of September 30, 2007
---------------------------------------------------          --------------------------------------------------
<S>                                                                                 <C>
Eaton Vance Corp.                                                                   $12,663,000
Affiliated Managers Group, Inc.                                                     $57,188,000
T. Rowe Price Group, Inc. $28,937,000
FCStone Group Inc.                                                                   $4,173,000
Bank of New York                                                                     $3,495,000
Bank One Corp.                                                                       $3,016,000
Bear Stearns & Co., Inc.                                                            $23,940,000
Wachovia Bank  NA                                                                   $25,219,000
E*Trade Financial Corp.                                                            $194,000,000
JP Morgan Chase & Co.                                                               $53,530,000
DLJ Commercial Mortgage Corp.                                                       $ 5,074,000
</TABLE>




Portfolio Turnover

Portfolio  turnover  rate is  defined  by the SEC as the ratio of the  lesser of
sales or purchases to the monthly average value of such securities  owned during
the year,  excluding all securities  whose  remaining  maturities at the time of
acquisition were one year or less.

Higher levels of activity by the Fund result in higher transaction costs and may
also  result  in  taxes on  realized  capital  gains  to be borne by the  Fund's
shareholders.  Purchases and sales are made whenever necessary, in the Advisor's
discretion, to meet the Fund's objective.


Portfolio  turnover rate measures the frequency that the Fund sells and replaces
the value of its securities  within a given period.  A 100% annual turnover rate
would occur,  for example,  if all portfolio  securities  (excluding  short-term
obligations)  were  replaced  once in a  period  of one  year,  or if 10% of the
portfolio  securities were replaced ten times in one year. The rate of portfolio
turnover of the Fund may exceed that of certain other mutual funds with the same
investment objectives.  High turnover can increase the Fund's transaction costs,
thereby lowering its returns.  For the fiscal years ended September 30, 2006 and
September 30, 2007, the Fund


                                       58
<PAGE>

and/or the Portfolio's turnover rates were 129% and 57%, respectively.


                        PURCHASE AND REDEMPTION OF SHARES

General Information

Policies and procedures affecting  transactions in Fund shares can be changed at
any  time  without  notice,  subject  to  applicable  law.  Transactions  may be
contingent  upon proper  completion of application  forms and other documents by
shareholders  and their  receipt by the  Fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the Fund and its  agents  may  occur.  Shareholders  (or  their
financial  service firms) are responsible for all losses and fees resulting from
bad checks,  cancelled orders or the failure to consummate transactions effected
pursuant to instructions reasonably believed to be genuine.

A  distribution  will be  reinvested in shares of the same Fund and class if the
distribution check is returned as undeliverable.

Orders  will be  confirmed  at a price  based on the net asset value of the Fund
(including any applicable  sales charge) next  determined  after receipt in good
order by DWS Scudder Distributors Inc., the Fund's distributor ("DWS-SDI" or the
"Distributor") of the order  accompanied by payment.  Orders received by dealers
or other financial  services firms prior to the determination of net asset value
and received in good order by DWS-SDI  prior to the  determination  of net asset
value will be confirmed at a price based on the net asset value next  determined
after receipt by DWS-SDI ("trade date").

Certificates. Share certificates will not be issued. Share certificates now in a
shareholder's  possession may be sent to the transfer agent for cancellation and
book-entry  credit to such  shareholder's  account.  Certain telephone and other
procedures   require   book-entry   holdings.   Shareholders   with  outstanding
certificates bear the risk of loss.


Additional  Minimum Balance Policies.  For fiduciary  accounts such as IRAs, and
custodial  accounts such as Uniform Gifts to Minor Act and Uniform  Transfers to
Minor Act accounts, the minimum balance is $1,000 for Class S. A shareholder may
open an account with at least $1,000 ($500 for fiduciary/custodial accounts), if
an automatic  investment  plan (AIP) of $50/month  is  established.  DWS Scudder
group  retirement plans and certain other accounts have similar or lower minimum
share balance requirements.

Shareholders  with a combined  household account balance in any of the DWS Funds
of $100,000 or more, as well as group  retirement  and certain  other  accounts,
will not be subject to an automatic redemption.

Fiduciary  (e.g., IRA or Roth IRA) and custodial  accounts (e.g.,  UGMA or UTMA)
with  balances  below  $1,000 are subject to automatic  redemption  following 60
days' written notice to applicable shareholders.





                                       59
<PAGE>

Use of Financial  Services  Firms.  Investment  dealers and other firms  provide
varying arrangements for their clients to purchase and redeem the Fund's shares,
including higher minimum investments,  and may assess transaction or other fees.
Firms may arrange  with their  clients for other  investment  or  administrative
services.  Such firms may independently  establish and charge additional amounts
to their  clients for such  services.  Firms also may hold the Fund's  shares in
nominee or street  name as agent for and on behalf of their  customers.  In such
instances,  the Fund's transfer agent, DWS Scudder  Investments  Service Company
(the "Transfer  Agent" or "DWS-SISC"),  will have no information with respect to
or control over the accounts of specific  shareholders.  Such  shareholders  may
obtain access to their accounts and  information  about their accounts only from
their  firm.  Certain  of these  firms may  receive  compensation  from the Fund
through the  Shareholder  Service Agent for  record-keeping  and other  expenses
relating to these nominee accounts. In addition, certain privileges with respect
to the purchase and  redemption of shares or the  reinvestment  of dividends may
not be available  through such firms.  Some firms may  participate  in a program
allowing  them  access to their  clients'  accounts  for  servicing,  including,
without  limitation,  transfers of registration and dividend payee changes,  and
may  perform  functions  such  as  generation  of  confirmation  statements  and
disbursement of cash dividends. Such firms, including affiliates of DWS-SDI, may
receive  compensation  from the Fund through the  Shareholder  Service Agent for
these services.


The Fund has authorized one or more financial  service  institutions,  including
certain members of FINRA other than the Distributor ("financial  institutions"),
to accept purchase and redemption  orders for the Fund's shares.  Such financial
institutions  may also  designate  other parties,  including plan  administrator
intermediaries,  to accept purchase and redemption  orders on the Fund's behalf.
Orders for purchases or redemptions  will be deemed to have been received by the
Fund when  such  financial  institutions  or, if  applicable,  their  authorized
designees  accept the orders.  Subject to the terms of the contract  between the
Fund and the  financial  institution,  ordinarily  orders  will be priced at the
Fund's  net  asset  value  next  computed  after  acceptance  by such  financial
institution or its authorized  designees and accepted by the Fund.  Further,  if
purchases or  redemptions  of the Fund's  shares are arranged and  settlement is
made  at  an  investor's   election  through  any  other  authorized   financial
institution, that financial institution may, at its discretion, charge a fee for
that  service.  The  Board of  Trustees  and the  Distributor,  also the  Fund's
principal  underwriter,  each has the right to limit the amount of purchases by,
and to refuse to sell to, any  person.  The  Trustees  and the  Distributor  may
suspend  or  terminate  the  offering  of shares of the Fund at any time for any
reason.





                                       60
<PAGE>




DWS-SDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents  ("DWS Scudder  Wholesalers").  Generally,  DWS Scudder
Wholesalers  market shares of the DWS funds to financial  advisors,  who in turn
may recommend  that  investsors  purchase  shares of a DWS fund.  The Plan is an
incentive program that combines a monthly  incentive  component with a quarterly
strategic bonus component.  Under the Plan, DWS Scudder Wholesalers will receive
a monetary  monthly  incentive based on the amount of sales generated from their
marketing of the funds,  and that incentive will differ depending on the product
category  of  the  fund.   Each  fund  is  assigned  to  one  of  four   product
categories--"Core,"    "Strategic,"   "Satellite"   or   "Non-CSS"-taking   into
consideration, among other things, the following criteria, where applicable:

o        The Fund's 3-year performance;
o        The Fund's Morningstar rating;
o        Market size for the fund category;
o        The Fund's size, including sales and redemptions of the Fund's shares;
o        The length of time the Fund's Portfolio Managers have managed the Fund;
         and
o        The Fund's consistency with DWS Scudder's branding.

This  information  and other factors are  presented to a committee  comprised of
representatives  from  various  groups  within  DWS  Scudder,  who  review  on a
quarterly basis the funds assigned to each product category described above, and
make any  changes to those  assignments  at that time.  No one  factor,  whether
positive or negative,  determines a fund's  placement in a given  category;  all
these factors together are considered, and the designation of funds in the Core,
Strategic and Satellite categories represents management's judgment based on the
above criteria.  In addition,  management may consider a fund's profile over the
course  of  several  review  periods  before  making  a change  to its  category
assignment.  These  category  assignments  will be posted  quarterly  to the DWS
funds' Web site at www.dws-scudder.com, approximately one month after the end of
each quarter.  DWS Scudder Wholesalers will receive the highest compensation for
Core and Strategic  funds,  less for Satellite  funds and the lowest for Non-CSS
funds.   The  level  of   compensation   among  these   categories   may  differ
significantly.

In the normal course of business,  DWS Scudder will from time to time  introduce
new funds into the DWS family of funds. As a general rule, all new funds will be
placed in the  Strategic  compensation  category  for a  minimum  period of four
consecutive quarters, and DWS Scudder Wholesalers will be paid at a rate that is
equivalent to that of the Core Fund  category.  After that four quarter  period,
each new fund in the  Strategic  category  will be reviewed by the committee and
either  assigned to one of the four  categories or continued as a Strategic fund
at that time.

The prospect of receiving,  or the receipt of, additional  compensation by a DWS
Scudder  Wholesaler  under the Plan may provide an incentive to favor  marketing
the Core,  Strategic  or  Satellite  funds  over the  Non-CSS  funds.  The Plan,
however,  will not change  the price that you pay for shares of a fund.  The DWS
Scudder  Compliance  Department  monitors DWS Scudder Wholesaler sales and other
activity  in an  effort  to  detect  unusual  activity  in  the


                                       61
<PAGE>

context of the  compensation  structure under the Plan.  However,  investors may
wish to take the Plan and the  product  category of the fund into  account  when
considering purchasing a fund or evaluating any recommendations relating to fund
shares.


Telephone  and  Electronic  Transaction  Procedures.  Shareholders  have various
telephone, Internet, wire and other electronic privileges available. The Fund or
its  agents may be liable  for any  losses,  expenses  or costs  arising  out of
fraudulent or unauthorized  instructions pursuant to these privileges unless the
Fund or its  agents  reasonably  believe,  based  upon  reasonable  verification
procedures, that the instructions were genuine.  Verification procedures include
recording instructions,  requiring certain identifying information before acting
upon instructions and sending written  confirmations.  During periods when it is
difficult to contact the  Shareholder  Service Agent, it may be difficult to use
telephone, wire and other privileges.


QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via
the Automated  Clearing House System (minimum $50 and maximum  $250,000) from or
to a shareholder's bank, savings and loan, or credit union account in connection
with the purchase or  redemption  of Fund shares.  Shares  purchased by check or
through  QuickBuy and QuickSell or Direct Deposit may not be redeemed under this
privilege  until  such  Shares  have been owned for at least 10  calendar  days.
QuickBuy and  QuickSell  cannot be used with  passbook  savings  accounts or for
certain tax-deferred plans.





Share  Pricing.  Purchases  will be filled at the net asset value per share next
computed  after  receipt  of the  application  in good  order.  Net asset  value
normally  will be computed for each class as of the close of regular  trading on
the Exchange on each day during  which the Exchange is open for trading.  Orders
received after the close of regular  trading on the Exchange will be executed at
the next  business  day's net  asset  value.  If the order has been  placed by a
member of FINRA,  other than the Distributor,  it is the  responsibility  of the
member  broker,  rather than the Fund, to forward the purchase order to DWS-SISC
in Kansas City by the close of regular trading on the Exchange.


Dividend  Payment  Option.   Investors  may  have  dividends  and  distributions
automatically   deposited  to  their  predesignated  bank  account  through  DWS
Scudder's Dividend Payment Option request form. Shareholders whose predesignated
checking  account of record is with a member bank of  Automated  Clearing  House
Network  (ACH) can have  income and  capital  gain  distributions  automatically
deposited to their  personal  bank account  usually  within three  business days
after a Fund pays its  distribution.  A Dividend Payment Option request form can
be obtained by visiting our Web site at:  www.dws-scudder.com  or calling  (800)
728-3337. Confirmation Statements will be mailed to shareholders as notification
that distributions have been deposited.

Tax-Sheltered   Retirement   Plans.  The  Shareholder   Service  Agent  provides
retirement  plan  services  and  documents  and DWS-SDI can  establish  investor
accounts in any of the following types of retirement plans:

o        Traditional,  Roth and Education IRAs. This includes Savings  Incentive
         Match Plan for  Employees  of Small  Employers  ("SIMPLE"),  Simplified
         Employee Pension Plan ("SEP") IRA accounts and prototype documents.

o        403(b)(7)  Custodial  Accounts.  This  type  of plan  is  available  to
         employees of most non-profit organizations.

o        Prototype  money  purchase  pension  and  profit-sharing  plans  may be
         adopted by employers.

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<PAGE>

Brochures  describing these plans as well as model defined benefit plans, target
benefit plans,  457 plans,  401(k) plans,  simple 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
Additional fees and transaction policies and procedures may apply to such plans.
Investors  should  consult with their own tax  advisors  before  establishing  a
retirement plan.

Purchases

The Fund  reserves the right to withdraw all or any part of the offering made by
its prospectus and to reject purchase orders for any reason.  Also, from time to
time, the Fund may  temporarily  suspend the offering of any class of its shares
to new investors. During the period of such suspension,  persons who are already
shareholders  of such class of the Fund may be permitted to continue to purchase
additional shares of such class and to have dividends reinvested.

To help the  government  fight the  funding of  terrorism  and money  laundering
activities,  federal law requires all financial  institutions to obtain,  verify
and record  information  that identifies  each person who opens an account.  For
more  information,  please see  "Policies  You Should  Know About" in the Fund's
Prospectuses.


Eligible Class S Investors

A.        The  following  investors  may  purchase  Class S shares  of DWS Funds
          either (i) directly from DWS Scudder  Distributors,  Inc. ("DWS-SDI"),
          the Fund's  principal  underwriter;  or (ii)  through an  intermediary
          relationship  with a financial  services firm established with respect
          to the DWS Funds as of December 31, 2004.

          1.      Existing  shareholders of Class S shares of any DWS Fund as of
                  December 31, 2004, and household  members residing at the same
                  address.

          2.      Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection  with the  consolidation  of Class
                  AARP  and  Class S on July  17,  2006  and  household  members
                  residing at the same address.

          3.      Shareholders who have owned Class S shares  continuously since
                  December 31, 2004 and household  members  residing at the same
                  address  may open new  accounts  for Class S shares of any DWS
                  Fund.

          4.      Any  participant  who has owned Class S shares of any DWS Fund
                  through an  employee  sponsored  retirement,  employee  stock,
                  bonus,  pension  or profit  sharing  plan  continuously  since
                  December 31, 2004 may open a new individual  account for Class
                  S shares of any DWS Fund.

          5.      Any  participant  who  owns  Class S  shares  of any DWS  Fund
                  through a retirement, employee stock, bonus, pension or profit
                  sharing plan may complete a direct  rollover to an IRA account
                  that will hold Class S shares. This applies to individuals who
                  begin their retirement plan investments with a DWS Fund at any
                  time, including after December 31, 2004.

          6.      Officers, Fund Trustees and Directors, and full-time employees
                  and their family members, of the Advisor and its affiliates.

          7.      Class S shares are  available to any  accounts  managed by the
                  Advisor,  any  advisory  products  offered  by the  Advisor or
                  DWS-SDI  and to the  Funds of DWS  Allocation  Series or other
                  fund of funds managed by the Advisor or its affiliates.

          8.      Shareholders  of Class S of DWS Emerging  Markets  Equity Fund
                  who became  shareholders  of the fund in  connection  with the
                  fund's acquisition of Scudder New Asia Fund, Inc. on April 17,
                  2006.

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<PAGE>

          9.      Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders in connection with the  consolidation  of Class M
                  and Class S on August 18, 2006 and household  members residing
                  at the same address.

          10.     Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection with the renaming or conversion of
                  Investment Class to Class S on October 23, 2006.

B. The following additional investors may purchase Class S shares of DWS Funds.

          1.      Broker-dealers,   banks  and  registered  investment  advisors
                  ("RIAs")  may  purchase  Class S shares in  connection  with a
                  comprehensive  or  "wrap"  fee  program  or  other  fee  based
                  program.

          2.      Any  group  retirement,  employee  stock,  bonus,  pension  or
                  profit-sharing plans.

          3.      Persons  who  purchase  shares as part of an  investment  only
                  placement in a 529 College Savings Plan.

          4.      Persons who purchase  shares through a Health Savings  Account
                  or a Voluntary Employees' Benefit Association ("VEBA") Trust.

DWS-SDI may, at its discretion,  require appropriate documentation that shows an
investor is eligible to purchase Class S shares.





                                       64
<PAGE>




Clients  having a regular  investment  counsel  account  with the Advisor or its
affiliates and members of their  immediate  families,  officers and employees of
the Advisor or of any  affiliated  organization  and members of their  immediate
families,  members of FINRA and banks may, if they prefer,  subscribe  initially
for at least  $2,500  for Class S through  DWS  Scudder  Distributors,  Inc.  by
letter, fax, or telephone.


It is our policy to offer purchase  privileges to current or former directors or
trustees of the Deutsche or DWS Scudder mutual funds,  employees,  their spouses
or life partners and children or stepchildren age 21 or younger of Deutsche Bank
or its  affiliates  or a subadvisor  to any fund in the DWS family of funds or a
broker-dealer authorized to sell shares of the funds. Qualified individuals will
generally  be allowed to  purchase  shares in the class with the lowest  expense
ratio,  usually  the  Institutional  Class  shares.  If a fund  does  not  offer
Institutional  Class shares,  these  individuals  will be allowed to buy Class A
shares at NAV.  The Fund also  reserves  the right to waive the minimum  account
balance requirement for employees and director accounts.  Fees generally charged
to IRA accounts will be charged to accounts of employees and directors.


Automatic Investment Plan. A shareholder may purchase shares of the Fund through
an automatic investment program.  With the Direct Deposit Purchase Plan ("Direct
Deposit"),  investments  are made  automatically  (minimum  $1,000  and  maximum
$250,000 for initial  investments and a minimum of $50 and a maximum of $250,000
for subsequent  investments) from the shareholder's  account at a bank,  savings
and loan or credit union into the shareholder's  Fund account.  Termination by a
shareholder  will become  effective  within  thirty  days after the  Shareholder
Service  Agent has received the request.  The Fund may  immediately  terminate a
shareholder's  Direct  Deposit  in the  event  that  any item is  unpaid  by the
shareholder's financial institution.

Minimum Subsequent Investment Policies.  For current shareholders there is a $50
minimum investment  requirement for subsequent investments in the fund. There is
no  minimum  subsequent  investment  requirement  for  investments  on behalf of
participants in certain  fee-based and wrap programs  offered through  financial
intermediaries approved by the Advisor.


Payroll  Investment  Plans. A shareholder  may purchase  shares through  Payroll
Direct Deposit or Government  Direct  Deposit.  Under these  programs,  all or a
portion of a shareholder's  net pay or government check is invested each payment
period.  A shareholder may terminate  participation  in these programs by giving
written  notice  to  the  shareholder's   employer  or  government   agency,  as
appropriate. (A reasonable time to act is required.) The Fund is not responsible
for the  efficiency of the employer or  government  agency making the payment or
any financial institutions transmitting payments.

                                       65
<PAGE>


Expedited Purchase Procedures for Existing  Shareholders.  Shareholders of other
DWS funds who have  submitted an account  application  and have  certified a tax
identification  number, clients having a regular investment counsel account with
the Advisor or its affiliates and members of their immediate families,  officers
and  employees  of the  Advisor  or of any  affiliated  organization  and  their
immediate  families,  members of FINRA, and banks may open an account by wire by
calling (800) 728-3337 for instructions. The investor must send a duly completed
and signed application to the Fund promptly.  A subsequent purchase order may be
placed by telephone,  etc. by  established  shareholders  (except by DWS Scudder
Individual  Retirement  Account  (IRA),  DWS Scudder  Horizon Plan,  DWS Scudder
Profit  Sharing and Money  Purchase  Pension  Plans,  DWS Scudder 401(k) and DWS
Scudder 403(b) Plan holders), members of FINRA, and banks.





Revenue Sharing

In light of recent  regulatory  developments,  the Advisor,  the Distributor and
their affiliates have undertaken to furnish certain additional information below
regarding  the  level  of  payments  made  by them to  selected  affiliated  and
unaffiliated  brokers,  dealers,  participating  insurance  companies  or  other
financial  intermediaries  ("financial  advisors") in  connection  with the sale
and/or  distribution  of  Fund  shares  or the  retention  and/or  servicing  of
investors and Fund shares ("revenue sharing").

The  Advisor,  the  Distributor  and/or  their  affiliates  may  pay  additional
compensation,  out of their own  assets and not as an  additional  charge to the
Fund, to financial  advisors in connection with the sale and/or  distribution of
Fund shares or the retention and/or servicing of Fund investors and Fund shares.
Such revenue  sharing  payments are in addition to any  distribution  or service
fees  payable  under any Rule  12b-1 or  service  plan of any fund,  any  record
keeping/sub-transfer  agency/networking  fees  payable  by the  Fund  (generally
through the  Distributor  or an  affiliate)  and/or the  Distributor  to certain
financial   advisors  for  performing  such  services  and  any  sales  charges,
commissions,   non-cash  compensation  arrangements  expressly  permitted  under
applicable  rules of FINRA or other  concessions  described  in the fee table or
elsewhere in the  Prospectuses or the SAI as payable to all financial  advisors.
For example, the Advisor, the Distributor and/or their affiliates may compensate
financial  advisors  for  providing  the Fund with "shelf  space" or access to a
third  party  platform  or fund  offering  list,  or  other  marketing  programs
including, without limitation, inclusion of the Fund on preferred or recommended
sales  lists,  mutual  fund  "supermarket"  platforms  and  other  formal  sales
programs;  granting the  Distributor  access to the  financial  advisor's  sales
force;  granting the Distributor access to the financial  advisor's  conferences
and meetings;  assistance  in training and  educating  the  financial  advisor's
personnel; and, obtaining other forms of marketing support. The level of revenue
sharing payments made to financial advisors may be a fixed fee or based upon one
or more of the following factors:  gross sales,  current assets and/or number of
accounts of the Fund attributable to the financial advisor,  the particular fund
or fund type or other  measures  as agreed to by the  Advisor,  the  Distributor
and/or their affiliates and the financial  advisors or any combination  thereof.
The amount of these payments is determined at the discretion of the Advisor, the
Distributor  and/or their affiliates from time to time, may be substantial,  and
may be different for different  financial  advisors  based on, for example,  the
nature of the services provided by the financial advisor.

The Advisor,  the  Distributor  and/or their  affiliates  currently make revenue
sharing  payments  from  their own  assets in  connection  with the sale  and/or
distribution of DWS Fund shares, or the retention and/or servicing of investors,
to financial  advisors in amounts that  generally  range from .01% up to .50% of
assets of the Fund serviced and


                                       66
<PAGE>

maintained  by the  financial  advisor,  .10%  to  .25%  of  sales  of the  Fund
attributable to the financial advisor, a flat fee of $12,500 up to $500,000,  or
any combination  thereof.  These amounts are subject to change at the discretion
of the Advisor,  the  Distributor  and/or their  affiliates.  Receipt of, or the
prospect  of  receiving,  this  additional  compensation,   may  influence  your
financial advisor's recommendation of this Fund or of any particular share class
of the Fund. You should review your financial advisor's compensation  disclosure
and/or talk to your  financial  advisor to obtain more  information  on how this
compensation may have influenced your financial advisor's recommendation of this
Fund.

The Advisor,  the Distributor and/or their affiliates may also make such revenue
sharing  payments  to  financial  advisors  under the terms  discussed  above in
connection  with  the  distribution  of both  DWS  funds  and  non-DWS  funds by
financial  advisors to retirement plans that obtain record keeping services from
ADP, Inc. on the DWS Scudder branded  retirement plan platform (the  "Platform")
with the level of revenue  sharing  payments  being based upon sales of both the
DWS funds and the  non-DWS  funds by the  financial  advisor on the  Platform or
current  assets  of both  the DWS  funds  and the  non-DWS  funds  serviced  and
maintained by the financial advisor on the Platform.

As of the  date  hereof,  the  Fund  has been  advised  that  the  Advisor,  the
Distributor  and their  affiliates  expect that the following firms will receive
revenue sharing payments at different points during the coming year as described
above:

Channel: Broker-Dealers and Financial Advisors

A G Edwards & Sons Inc.
AIG Advisors Group
Ameriprise
Cadaret, Grant & Co. Inc.
Capital Analyst, Incorporated
Citigroup Global Markets, Inc. (dba Smith Barney)
Commonwealth Equity Services, LLP (dba Commonwealth Financial Network)
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Group
LaSalle Financial Services, Inc. (dba ABN Amro)
Linsco/Private Ledger Corp.
Marsh Insurance and Investment Company
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
Pacific Select Distributors Group
Raymond James & Associates
Raymond James Financial Services
RBC Dain Rauscher, Inc
Securities America, Inc.
UBS Financial Services
Wells Fargo Investments, LLC

Channel: Cash Product Platform

ADP Clearing & Outsourcing
Allegheny Investments LTD
Bank of New York (Hare & Co.)
Bear, Stearns Securities Corp.
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange

                                       67
<PAGE>

Citibank NA
D.A. Davidson & Company
Deutsche Bank Securities Inc.
Deutsche Bank Trust Company Americas
Emmett A. Larkin Company
Fiduciary Trust Co. - International
H.C. Denison Co.
Huntleigh Securities
Investors Bank & Trust
JPMorgan Chase
Lincoln Investment Planning
Linsco Private Ledger Financial Services
Mellon Financial Markets LLC
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Romano Brothers and Company
SAMCO Capital Markets (Fund Services, Inc.)
Smith Moore & Company
State Street Bank & Trust Co.
Sungard Institutional Brokerage Inc.
US Bancorp
UBS Financial Services Inc.
William Blair & Company

Channel: Third Party Insurance Platforms

Acacia National Life Insurance
Allmerica Financial Life Insurance Company
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
American General Life Insurance Company
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
Genworth Life Insurance Company of New York
Genworth Life and Annuity Insurance Company
Great West Life and Annuity Insurance Company
Hartford Life Insurance Company
ICMG Registered Variable Life
Integrity Life Insurance Company
John Hancock Life Insurance companies
Kemper Investors Life Insurance Company
Lincoln Benefit Life Insurance Company
Lincoln Life & Annuity Company of New York
Lincoln National Life Insurance Company
Massachusetts Mutual Life Insurance Group
MetLife Group
Minnesota Life Insurance Company
Mutual of America Life Insurance Company

                                       68
<PAGE>

National Life Insurance Company
National Integrity Life Insurance Company
Nationwide Group
New York Life Insurance and Annuity Corporation
Phoenix Life Insurance Company
Protective Life Insurance
Provident Mutual Life Insurance
Prudential Insurance Company of America
Sun Life GroupSymetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

Any additions,  modifications or deletions to the financial advisors  identified
above that have occurred since the date hereof are not reflected.

The Advisor,  the  Distributor  or their  affiliates  may enter into  additional
revenue sharing arrangements or change or discontinue existing arrangements with
financial advisors at any time without notice.

The  prospect  of  receiving,  or the  receipt  of  additional  compensation  or
promotional  incentives  described above by financial  advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS Funds or a particular  DWS Fund over sales of shares of mutual
funds (or  non-mutual  fund  investments)  with  respect to which the  financial
advisor does not receive additional compensation or promotional  incentives,  or
receives  lower levels of additional  compensation  or  promotional  incentives.
Similarly,  financial advisors may receive different  compensation or incentives
that may influence  their  recommendation  of any particular  share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that the Fund receives
to invest on behalf of an investor and will not increase Fund expenses.  You may
wish to take  such  payment  arrangements  into  account  when  considering  and
evaluating  any  recommendations  relating to Fund shares and you should discuss
this matter with your  financial  advisor  and review your  financial  advisor's
disclosures.





                                       69
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                                       70
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                                       71
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                                       72
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                                       73
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Redemptions

Redemption fee. The Fund imposes a redemption fee of 2% of the total  redemption
amount  (calculated at net asset value) on all Fund shares redeemed or exchanged
within 15 days of buying them (either by purchase or exchange).  The  redemption
fee is paid  directly  to the  Fund,  and is  designed  to  encourage  long-term
investment and to offset  transaction and other costs associated with short-term
or excessive  trading.  For purposes of  determining  whether the redemption fee
applies,  shares held the longest time will be treated as being  redeemed  first
and shares held the shortest time will be treated as being  redeemed  last.  The
redemption fee is applicable to fund shares purchased either directly or through
a  financial  intermediary,  such  as  a  broker-dealer.   Transactions  through
financial  intermediaries typically are placed with the Fund on an omnibus basis
and include  both  purchase and sale  transactions  placed on behalf of multiple
investors. These purchase and sale transactions are generally netted against one
another and placed on an aggregate  basis;  consequently  the  identities of the
individuals on whose behalf the  transactions are placed generally are not known
to the Fund.  For this  reason,  the Fund has  undertaken  to  notify  financial
intermediaries  of their  obligation  to assess the  redemption  fee on customer
accounts  and to collect  and remit the  proceeds to the Fund.  However,  due to
operational   requirements,   the  intermediaries'   methods  for  tracking  and
calculating  the fee may be  inadequate  or  differ  in some  respects  from the
Fund's.

General.  Policies and procedures  affecting  transactions in fund shares can be
changed at any time without notice,  subject to applicable law. Transactions may
be contingent upon proper completion of application forms and other documents by
shareholders  and their  receipt by the  Fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the Fund and its  agents  may  occur.  Shareholders  (or  their
financial  service firms) are responsible for all losses and fees resulting from
bad checks,


                                       74
<PAGE>

cancelled orders or the failure to consummate  transactions effected pursuant to
instructions reasonably believed to be genuine.

In addition,  the fund reserves the right to suspend or postpone  redemptions as
permitted  pursuant  to Section  22(e) of the  Investment  Company  Act of 1940.
Generally, those circumstances are when 1) the New York Stock Exchange is closed
other than  customary  weekend or holiday  closings;  2) trading on the New York
Stock Exchange is restricted; 3) an emergency exists which makes the disposal of
securities owned by a fund or the fair  determination of the value of the fund's
net assets not  reasonably  practicable;  or 4) the SEC,  by order,  permits the
suspension of the right of redemption.  Redemption  payments by wire may also be
delayed  in the event of a  non-routine  closure  of the  Federal  Reserve  wire
payment system.

Redemption  requests  must be  unconditional.  Redemption  requests (and a stock
power for certificated  shares) must be duly endorsed by the account holder.  As
specified  in  the  Prospectus,  signatures  may  need  to  be  guaranteed  by a
commercial bank, trust company,  savings and loan  association,  federal savings
bank,  member  firm  of  a  national  securities  exchange  or  other  financial
institution  permitted by SEC rule.  Additional  documentation  may be required,
particularly  from   institutional  and  fiduciary  account  holders,   such  as
corporations,  custodians  (e.g.,  under the Uniform  Transfers  to Minors Act),
executors, administrators, trustees or guardians.

A  request  for  repurchase  (confirmed  redemption)  may be  communicated  by a
shareholder  through a  financial  services  firm to  DWS-SDI,  which firms must
promptly submit orders to be effective.

If the proceeds of the  redemption  (prior to the  imposition of any  contingent
deferred  sales charge) are $100,000 or less and the proceeds are payable to the
shareholder of record at the address of record,  normally a telephone request or
a written  request by any one account  holder  without a signature  guarantee is
sufficient  for  redemptions  by individual or joint account  holders and trust,
executor  and  guardian  account  holders,  provided  the  trustee,  executor or
guardian  is named in the  account  registration.  Other  institutional  account
holders may  exercise  this special  privilege of redeeming  shares by telephone
request or  written  request  without  signature  guarantee  subject to the same
conditions as individual account holders,  provided that this privilege has been
pre-authorized by the institutional account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed.  This privilege may not be
used to  redeem  shares  held in  certificated  form  and may not be used if the
shareholder's account has had an address change within 15 days of the redemption
request.

Wires.  Delivery of the proceeds of a wire redemption of $250,000 or more may be
delayed by the Fund for up to seven days if the Fund or the Shareholder  Service
Agent deems it appropriate under then-current market conditions.  The ability to
send wires is limited by the business hours and holidays of the firms  involved.
The Fund is not responsible for the efficiency of the federal wire system or the
account  holder's  financial  services  firm or  bank.  The  account  holder  is
responsible  for any charges  imposed by the account  holder's  firm or bank. To
change the  designated  account  to receive  wire  redemption  proceeds,  send a
written request to the Shareholder  Service Agent with signatures  guaranteed as
described above or contact the firm through which Fund shares were purchased.

Automatic  Withdrawal Plan. The owner of $5,000 or more of a class of the Fund's
shares at the  offering  price may  provide  for the  payment  from the  owner's
account of any  requested  dollar amount to be paid to the owner or a designated
payee monthly,  quarterly,  semiannually or annually. The $5,000 minimum account
size is not applicable to IRAs. The minimum  periodic payment is $50. Shares are
redeemed so that the payee should receive payment approximately the first of the
month. Investors using this Plan must reinvest Fund distributions.

Non-retirement plan shareholders may establish an Automatic Withdrawal Plan (the
"Plan") to receive  monthly,  quarterly or periodic  redemptions from his or her
account for any  designated  amount of $50 or more.  Shareholders  may designate
which day they want the automatic withdrawal to be processed.  The check amounts
may be based on the  redemption  of a fixed dollar  amount,  fixed share amount,
percent of account  value or  declining  balance.  The Plan  provides for income
dividends  and  capital  gains  distributions,  if  any,  to  be  reinvested  in
additional  shares.  Shares are then  liquidated  as  necessary  to provide  for
withdrawal  payments.  Since the  withdrawals  are in  amounts  selected  by the
investor and have no relationship to yield or income,  payments  received cannot
be  considered  as  yield  or  income  on  the   investment  and  the  resulting
liquidations may deplete or possibly  extinguish the initial


                                       75
<PAGE>

investment and any  reinvested  dividends and capital gains  distributions.  Any
such  requests must be received by the Fund's  transfer  agent ten days prior to
the date of the first automatic withdrawal.  An Automatic Withdrawal Plan may be
terminated  at any time by the  shareholder,  the Trust or its agent on  written
notice,  and will be terminated  when all shares of the Fund under the Plan have
been  liquidated  or upon  receipt  by the  Trust  of  notice  of  death  of the
shareholder.

In-kind  Redemptions.  The Fund  reserves  the  right to honor any  request  for
redemption or repurchase  by making  payment in whole or in part in  securities.
These  securities will be chosen by the Fund and valued as they are for purposes
of computing  the Fund's net asset value.  A shareholder  may incur  transaction
expenses in converting these securities to cash.

Sale or Redemption of Shares. The sale,  exchange or redemption of shares of the
Fund may give rise to a gain or loss equal to the difference  between the amount
realized and the basis in such  shares.  In general,  any gain or loss  realized
upon a taxable  disposition of shares will be treated as long-term  capital gain
or loss if the shares have been held for more than one year. Otherwise, the gain
or loss on the  taxable  disposition  of shares of the Fund will be  treated  as
short-term  capital  gain or loss.  However,  any loss  realized  upon a taxable
disposition  of shares held for six months or less will be treated as long-term,
rather  than   short-term,   to  the  extent  of  any  long-term   capital  gain
distributions  received (or deemed  received) by the shareholder with respect to
the shares. All or a portion of any loss realized upon a taxable  disposition of
shares of the Fund will be disallowed if other substantially identical shares of
the Fund are purchased within 30 days before or after the disposition. In such a
case,  the basis of the newly  purchased  shares will be adjusted to reflect the
disallowed loss.

Exchanges

Shareholders  may request a taxable  exchange of their  shares for shares of the
corresponding  class of other DWS Funds  without  imposition  of a sales charge,
subject to the provisions below.


Shares of money  market  funds that were  acquired  by purchase  (not  including
shares acquired by dividend  reinvestment)  are subject to the applicable  sales
charge on exchange.  Certain series of DWS Target Fund are available on exchange
only during the offering  period for such series as described in the  applicable
prospectus.  Tax Free Money Fund --  Investment  Class,  NY Tax-Free  Money Fund
--Investment Class, Treasury Money Fund --Investment Class, Money Market Fund --
Investment  Class,  Cash  Management  Fund  Institutional,  Cash  Reserves  Fund
Institutional,  Treasury Money Fund -- Institutional  Class,  Cash Reserve Fund,
Inc. Prime Series,  Tax-Exempt  California Money Market Fund, Cash Account Trust
and Investors  Cash Trust are available on exchange but only through a financial
services  firm having a services  agreement  with DWS-SDI.  All exchanges  among
money  funds  must  meet   applicable   investor   eligibility   and  investment
requirements.  Exchanges  may only be made for funds that are available for sale
in the shareholder's state of residence.  Currently, Tax-Exempt California Money
Market Fund is available for sale only in California.




Shareholders  must obtain a Prospectus of the Fund they are exchanging into from
dealers, other firms or DWS-SDI.  Exchanges are taxable transactions for federal
income tax purposes.

                                       76
<PAGE>

Automatic Exchange Plan. The owner of $1,000 or more of any class of shares of a
DWS Fund may  authorize  the  automatic  exchange  of a  specified  amount  ($50
minimum) of such  shares for shares of the same class of another  such DWS Fund.
Exchanges will be made automatically  until the shareholder or a Fund terminates
the  privilege.  Exchanges  are  subject to the terms and  conditions  described
above.

                                    DIVIDENDS

The Fund intends to follow the practice of distributing substantially all of its
investment  company  taxable  income,  which includes any excess of net realized
short-term  capital gains over net realized  long-term capital losses.  The Fund
may follow the  practice  of  distributing  the  entire  excess of net  realized
long-term capital gains over net realized  short-term  capital losses.  However,
the Fund may retain all or part of such gain for reinvestment,  after paying the
related federal taxes for which  shareholders may then be able to claim a credit
against their federal tax liability.  If the Fund does not distribute the amount
of capital gain and/or  ordinary  income required to be distributed by an excise
tax  provision  of the Code,  the Fund may be subject  to that  excise  tax.  In
certain  circumstances,  the Fund may  determine  that it is in the  interest of
shareholders to distribute less than the required amount.

Any dividends or capital gains  distributions  declared in October,  November or
December  with a record  date in such a month  and  paid  during  the  following
January will be treated by  shareholders  for federal  income tax purposes as if
received on December 31 of the calendar  year  declared and to have been paid by
the Fund not later than such December 31.

Prior to August 28, 2006, net investment income was declared as a daily dividend
and  distributed  to  shareholders  monthly.  Effective  August  28,  2006,  net
investment income is declared and distributed to shareholders monthly.

Income and  capital  gain  dividends,  if any,  of the Fund will be  credited to
shareholder accounts in full and fractional Shares of the same class of the Fund
at net asset value on the reinvestment  date,  except that, upon written request
to the Shareholder  Service Agent, a shareholder may select one of the following
options:

1.       To receive income and short-term capital gain distributions in cash and
         long-term capital gain distributions in shares of the same class at net
         asset value; or

2.       To receive income and capital gain distributions in cash.

Dividends  will be  reinvested  in shares of the same  class of the Fund  unless
shareholders  indicate in writing  that they wish to receive  them in cash.  The
Fund will reinvest dividend checks (and future dividends) in shares of that same
Fund and class if checks are  returned  as  undeliverable.  Dividends  and other
distributions  of  the  Fund  in  the  aggregate  amount  of  $10  or  less  are
automatically  reinvested in shares of the Fund unless the shareholder  requests
that such policy not be applied to the shareholder's account.

If  a  shareholder   has  elected  to  reinvest  any   dividends   and/or  other
distributions,  such  distributions  will be  made in  shares  of the  Fund  and
confirmations will be mailed to each shareholder. If a shareholder has chosen to
receive cash, a check will be sent.  Distributions of investment company taxable
income and net realized  capital  gains are  taxable,  whether made in shares or
cash.

Each  distribution  is  accompanied  by a  brief  explanation  of the  form  and
character of the  distribution.  The  characterization  of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund  issues to each  shareholder  a  statement  of the
federal income tax status of all distributions in the prior calendar year.

The Fund may at any time vary its foregoing dividend  practices and,  therefore,
reserves  the  right  from  time to time to  either  distribute  or  retain  for
reinvestment  such of its net investment income and net short-term and long-term
capital  gains as its  Board  determines  appropriate  under  the  then  current
circumstances.  In particular,  and without limiting the foregoing, the Fund may
make additional distributions of net investment income or capital gains in order
to satisfy the minimum distribution requirements contained in the Code.

                                       77
<PAGE>

Dividends received deduction.  Dividends from domestic corporations may comprise
a part of the Fund's gross income. If any such dividends constitute a portion of
the Fund's gross income,  a portion of the income  distributions of the Fund may
be eligible  for the 70%  deduction  for  dividends  received  by  corporations.
Shareholders will be informed of the portion of dividends which so qualify.  The
dividends-received  deduction  is  reduced  to the extent the shares of the Fund
with respect to which the  dividends  are received are treated as  debt-financed
under  federal  income tax law and is  eliminated  if either those shares or the
shares of the Fund are deemed to have been held by the Fund or the  shareholder,
as the case may be, for less than 46 days during the 91-day period  beginning 45
days before the shares become ex-dividend.

                                      TAXES

The following is intended to be a general  summary of certain federal income tax
consequences  of  investing  in the  Fund.  It is  not  intended  as a  complete
discussion  of all such  consequences,  nor  does it  purport  to deal  with all
categories  of  investors,  some of which may be subject  to special  tax rules.
Investors are therefore advised to consult with their tax advisors before making
an  investment  in the Fund.  The  summary is based on the laws in effect on the
date of this  SAI  and  existing  judicial  and  administrative  interpretations
thereof, all of which are subject to change, possibly with retroactive effect.

Taxation of the Fund

The Fund intends to continue to qualify to be treated as a regulated  investment
company  under  Subchapter M of the Code in each taxable year as required  under
the Code in order to avoid payment of federal  income tax at the Fund level.  In
order to qualify as a regulated  investment company,  the Fund must meet certain
requirements  regarding  the source of its income,  the  diversification  of its
assets, and the distribution of its income:

(a)      The Fund must  derive  at least 90% of its  annual  gross  income  from
         dividends, interest, payments with respect to certain securities loans,
         and gains from the sale of stock,  securities  and foreign  currencies,
         other income (including but not limited to gains from options, futures,
         or forward contracts) derived with respect to its business of investing
         in such stock,  securities,  or currencies  or net income  derived from
         interests  in   "qualified   publicly   traded   partnerships"   (i.e.,
         partnerships  that are traded on an  established  securities  market or
         tradable on a secondary market, other than partnerships that derive 90%
         of their income from  interest,  dividends,  capital  gains,  and other
         traditional permitted mutual fund income);

(b)      The Fund  must  diversify  its  holdings  so  that,  at the end of each
         quarter of its taxable  year,  (i) at least 50% of the market  value of
         the Fund's assets is represented by cash and cash items,  US government
         securities,  securities of other regulated  investment  companies,  and
         other  securities  limited  in  respect of any one issuer of such other
         securities  to a value not  greater  than 5% of the value of the Fund's
         total  assets  and to not  more  than  10%  of the  outstanding  voting
         securities  of such issuer,  and (ii) not more than 25% of the value of
         its assets is  invested in the  securities  (other than those of the US
         Government or other regulated investment  companies) of any one issuer,
         of two or more issuers of which the Fund owns 20% or more of the voting
         securities  and which are  engaged  in the same,  similar,  or  related
         trades or  businesses  or in the  securities  of one or more  qualified
         publicly traded partnerships.

(c)      The Fund is required to distribute to its  shareholders at least 90% of
         its  investment  company  taxable  income  and  net  tax-exempt  income
         (including the excess of net short-term capital gain over net long-term
         capital  losses) and generally is not subject to federal  income tax to
         the extent that it distributes  annually such net investment income and
         net realized capital gains in the manner required under the Code.

Fund  investments  in  partnerships,  including  in  qualified  publicly  traded
partnerships,  may result in the Fund's being subject to state, local or foreign
income, franchise or withholding tax liabilities.

If the Fund  retains for  investment  an amount equal to all or a portion of its
net  long-term  capital  gains in excess of its net  short-term  capital  losses
(including  any capital loss  carryovers),  it will be subject to tax at regular
corporate rates,  currently at a maximum rate of 35%, on the amount retained. In
that event,  the Fund will  designate  such  retained  amounts as  undistributed
capital  gains in a notice  to its  shareholders  who (a)  will be  required  to
include in


                                       78
<PAGE>

income for US federal income tax purposes,  as long-term  capital  gains,  their
proportionate shares of the undistributed amount, (b) will be entitled to credit
their proportionate  shares of the 35% tax paid by the Fund on the undistributed
amount  against their US federal  income tax  liabilities,  if any, and to claim
refunds to the extent their credits  exceed their  liabilities,  if any, and (c)
will be  entitled  to  increase  their tax  basis,  for US  federal  income  tax
purposes,  in  their  shares  by an  amount  equal  to  65%  of  the  amount  of
undistributed capital gains included in the shareholder's income.  Organizations
or persons not subject to US federal  income tax on such  capital  gains will be
entitled to a refund of their pro rata share of such taxes paid by the Fund upon
filing appropriate returns or claims for refund with the IRS.

The Code imposes a 4% nondeductible excise tax on the Fund to the extent it does
not  distribute  by the end of any  calendar  year at least 98% of its  ordinary
income  for that  year and at least 98% of its  capital  gain net  income  (both
long-term and short-term) for the one-year period ending,  as a general rule, on
October 31 of that year.  For this  purpose,  however,  any  ordinary  income or
capital gain net income retained by the Fund that is subject to corporate income
tax will be considered to have been  distributed by year-end.  In addition,  the
minimum  amounts  that must be  distributed  in any year to avoid the excise tax
will  be   increased  or   decreased   to  reflect  any   underdistribution   or
overdistribution,  as the case may be,  from the  previous  year.  Although  the
Fund's distribution policies should enable it to avoid excise tax liability, the
Fund may  retain,  and be  subject  to income or excise tax on, a portion of its
capital gains or other income if it appears to be in the interest of the Fund.

If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal  income tax at regular  corporate  rates (without any
deduction for distributions to its  shareholders),  and all  distributions  from
earnings and profits,  including any  distributions of net tax-exempt income and
net  long-term  capital  gains,  would be taxable to  shareholders  as  ordinary
income.  Such  distributions  would be eligible  (i) to be treated as  qualified
dividend  income in the case of  shareholders  taxed as individuals and (ii) for
the  dividends  received  deduction  in the case of corporate  shareholders.  In
addition,  the  Fund  could be  required  to  recognize  unrealized  gains,  pay
substantial  taxes  and  interest  and  make  substantial  distributions  before
requalifying  as a regulated  investment  company  that is accorded  special tax
treatment.

Taxation of Fund Distributions

Distributions  from  the Fund  generally  will be  taxable  to  shareholders  as
ordinary income to the extent derived from investment  income and net short-term
capital  gains.  Distributions  of net capital gains (that is, the excess of net
gains  from the sale of capital  assets  held more than one year over net losses
from the sale of  capital  assets  held for not  more  than one  year)  properly
designated  as  capital  gain  dividends  will be  taxable  to  shareholders  as
long-term capital gain, regardless of how long a shareholder has held the shares
in the Fund.

Long-term  capital gain rates  applicable to individuals  have been  temporarily
reduced -- in general, to 15% with a lower rate applying to taxpayers in the 10%
and 15% rate brackets -- for taxable years beginning before January 1, 2011

For taxable years beginning before January 1, 2011,  "qualified dividend income"
received by an  individual  will be taxed at the rates  applicable  to long-term
capital gain assuming certain holding period and other requirements are met. For
this purpose,  "qualified dividend income" generally means income from dividends
received by the Fund from US corporations  and qualified  foreign  corporations,
provided that the Fund satisfies certain holding period  requirements in respect
of the stock of such  corporations  and has not hedged its position in the stock
in certain  ways.  However,  qualified  dividend  income  does not  include  any
dividends received from tax exempt corporations. Also, dividends received by the
Fund from a real estate investment trust or another regulated investment company
generally  are  qualified  dividend  income  only  to the  extent  the  dividend
distributions  are made out of qualified  dividend  income received by such real
estate investment trust or other regulated  investment  company.  In the case of
securities lending transactions, payments in lieu of dividends are not qualified
dividend income.  If a shareholder  elects to treat Fund dividends as investment
income  for  purposes  of the  limitation  on the  deductibility  of  investment
interest, such dividends would not be a qualified dividend income. The Fund does
not expect to generate substantial amounts of qualified dividend income.

                                       79
<PAGE>

Capital gains  distributions  may be reduced if Fund capital loss  carryforwards
are  available.  Any  capital  loss  carryforwards  and  any  post-October  loss
deferrals to which the Fund is entitled are  disclosed in the Fund's  annual and
semiannual reports to shareholders.

All  distributions  by the Fund result in a reduction  in the net asset value of
the Fund's  shares.  Should a  distribution  reduce the net asset  value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above,  even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular,  investors  should be careful to consider  the tax  implications  of
buying  shares just prior to a  distribution.  The price of shares  purchased at
that time includes the amount of the forthcoming distribution.  Those purchasing
just prior to a  distribution  will receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.

The Fund is permitted to pay "exempt-interest  dividends" to its shareholders in
any year that,  at the close of each  quarter,  at least 50% of the value of the
Fund's  assets  consists  of  obligations  the  interest on which is exempt from
federal  income  tax.   Distributions  that  the  Fund  properly  designates  as
exempt-interest  dividends are generally treated as interest excludable from the
shareholders'  gross  income for federal  income tax  purposes;  exempt-interest
dividends may, however, be taxable for alternative minimum tax purposes.  If the
Fund were to qualify to pay exempt-interest  dividends,  it would be required to
inform its shareholders of the percentage of its  distributions  that qualify as
exempt-interest  dividends  within 60 days of its fiscal year end. The Fund does
not expect to pay any exempt-interest dividends.

Sale or  redemption of shares.  The sale,  exchange or redemption of Fund shares
may give rise to a gain or loss.  In general,  any gain or loss  realized upon a
taxable  disposition of shares will be treated as long-term capital gain or loss
if the shares have been held for more than one year. Otherwise, the gain or loss
on the taxable  disposition of Fund shares will be treated as short-term capital
gain or loss.  However,  any loss realized upon a taxable  disposition of shares
held  for six  months  or  less  will  be  treated  as  long-term,  rather  than
short-term,  to the extent of any long-term capital gain distributions  received
(or deemed  received) by the  shareholder  with respect to the shares.  All or a
portion of any loss realized upon a taxable  disposition  of Fund shares will be
disallowed  if other  substantially  identical  shares of the Fund are purchased
within 30 days before or after the disposition. In such a case, the basis of the
newly purchased shares will be adjusted to reflect the disallowed loss.

If any dividends from domestic  corporations  constitute a portion of the Fund's
gross income, a portion of the income  distributions of the Fund may be eligible
for the 70% deduction for dividends  received by corporations  assuming  certain
holding period and other  requirements are met. The Fund does not expect to earn
a substantial amount of dividend income.

Foreign  Taxation.  Foreign  withholding  or other foreign taxes with respect to
income  (possibly  including,  in some cases,  capital gains) on certain foreign
securities may occur.  These taxes may be reduced or eliminated  under the terms
of an applicable US income tax treaty.  As it is not expected that more than 50%
of the value of the Fund's  total assets will  consist of  securities  issued by
foreign corporations,  the Fund will not be eligible to pass through to the Fund
and its shareholders their  proportionate  share of any foreign taxes paid, with
the result that shareholders will not be able to include in income, and will not
be entitled to take any credits or deductions for such foreign taxes.

Tax Effects of Certain Transactions

The Fund's use of  options,  futures  contracts  and forward  contracts  (to the
extent   permitted)   will  be   subject  to   special   tax  rules   (including
mark-to-market,  constructive  sale,  straddle,  wash sale, short sale and other
rules),  the effect of which may be to accelerate  income,  defer losses,  cause
adjustments  in the holding  periods of portfolio  securities,  convert  capital
gains into ordinary income and convert  short-term capital losses into long-term
capital  losses.  These rules  could  therefore  affect the  amount,  timing and
character of distributions  to investors.  These rules also (a) will require the
Fund to  mark-to-market  certain types of the positions in its portfolio  (i.e.,
treat them as if they were closed out at the end of each year) and (b) may cause
the Fund to recognize income without  receiving cash with which to pay dividends
or  make   distributions  in  amounts  necessary  to  satisfy  the  distribution
requirements  for avoiding  income and excise  taxes.  The Fund will monitor its
transactions,  make the  appropriate  tax  elections  and


                                       80
<PAGE>

make the  appropriate  entries in its books and records in order to mitigate the
effect of these  rules and prevent  disqualification  of the Fund as a regulated
investment company.

Transactions in foreign currencies, foreign investment currency-denominated debt
securities and certain foreign  currency  options,  futures  contracts,  forward
contracts and similar  instruments  (to the extent  permitted)  may give rise to
ordinary  income  or  loss to the  extent  such  income  or  loss  results  from
fluctuations in the value of the foreign currency concerned.

The Fund's  investment in so-called  "section 1256 contracts," such as regulated
futures  contracts,  most  foreign  currency  forward  contracts  traded  in the
interbank  market and options on most stock indices,  are subject to special tax
rules.  All section  1256  contracts  held by the Fund at the end of its taxable
year are required to be marked to their market value, and any unrealized gain or
loss on  those  positions  will be  included  in the  Fund's  income  as if each
position had been sold for its fair market value at the end of the taxable year.
The  resulting  gain or loss will be combined  with any gain or loss realized by
the Fund from  positions in section  1256  contracts  closed  during the taxable
year. Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as  short-term  capital gain or loss,  regardless of the
period of time the positions were actually held by the Fund.

As a result  of  entering  into  swap  contracts,  the Fund may make or  receive
periodic net  payments.  The Fund may also make or receive a payment when a swap
is  terminated  prior to  maturity  through an  assignment  of the swap or other
closing  transaction.  Periodic net payments will generally  constitute ordinary
income or  deductions,  while  termination  of a swap will  generally  result in
capital gain or loss (which will be a long-term capital gain or loss if the Fund
has been a party to the swap for more than one year).  The tax treatment of many
types of credit default swaps is uncertain.

The Fund's  investment  in zero coupon bonds and other debt  obligations  having
original issue  discount may cause the Fund to recognize  recognition of taxable
income in excess of any cash received from the investment.

Certain types of income received by the Fund from real estate investment trusts,
REMICs,  taxable  mortgage  pools or other  investments  may  cause  the Fund to
designate some or all of its distributions as "excess inclusion income." To Fund
shareholders such excess inclusion income may (1) constitute  taxable income, as
UBTI for those shareholders who would otherwise be tax-exempt such as individual
retirement  accounts,  401(k) accounts,  Keogh plans,  pension plans and certain
charitable  entities;  (2) not be offset  against net  operating  losses for tax
purposes; (3) not be eligible for reduced US withholding for non-US shareholders
even from tax treaty  countries;  and (4) cause the Fund to be subject to tax if
certain   "disqualified   organizations"   as  defined  by  the  Code  are  Fund
shareholders.

In  addition,  a  tax-exempt  shareholder  could  realize  UBTI by virtue of its
investment in the Fund if shares in the Fund constitute  debt-financed  property
in the hands of the tax-exempt  shareholder within the meaning of Section 514(b)
of the Code. If a charitable  remainder  trust (as defined in Section 664 of the
Code) realizes any UBTI for a taxable year, it will lose its  tax-exempt  status
for the year.

Other Tax Considerations

Under the backup withholding provisions of the Code, redemption proceeds as well
as  distributions  may be subject to federal income tax  withholding for certain
shareholders,  including  those who fail to furnish the Fund with their taxpayer
identification  numbers  and  certifications  as to their  tax  status.  Certain
shareholders are exempt from backup  withholding.  Backup  withholding is not an
additional tax and any amount  withheld may be credited  against a shareholder's
US Federal income tax liability.

Shareholders   of  the  Fund  may  be  subject  to  state  and  local  taxes  on
distributions received from the Fund and on redemptions of the Fund's shares.

                                       81
<PAGE>

Special tax rules apply to investments  through defined  contribution  plans and
other  tax-qualified  plans.  Shareholders  should consult their tax advisers to
determine the  suitability  of shares of the Fund as an investment  through such
plans and the precise effect of an investment on their particular tax situation.

If a  shareholder  recognizes  a loss with  respect to the  Fund's  shares of $2
million  or more for an  individual  shareholder  or $10  million  or more for a
corporate  shareholder,  the  shareholder  must file  with the IRS a  disclosure
statement on Form 8886. Direct shareholders of portfolio  securities are in many
cases  excepted from this  reporting  requirement,  but under current  guidance,
shareholders of a regulated investment company are not excepted. The fact that a
loss  is  reportable   under  these   regulations  does  not  affect  the  legal
determination  of  whether  the  taxpayer's  treatment  of the  loss is  proper.
Shareholders should consult their tax advisors to determine the applicability of
these regulations in light of their individual circumstances.

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor the Fund will be liable for any income or franchise tax in
the Commonwealth of  Massachusetts,  provided that the Fund continues to qualify
as a regulated  investment  company under  Subchapter M of the Code (and, in the
case of the Trust,  provided that each of its other series  continues to qualify
as a regulated investment company under Subchapter M of the Code).

Non-US Shareholders

Taxation of  dividends  paid by the Fund to non-US  shareholders  are  generally
subject  to  withholding  tax at a 30% rate or a reduced  rate  specified  by an
applicable  income tax treaty to the extent derived from  investment  income and
short-term  capital gains. In order to obtain a reduced rate of  withholding,  a
non-US shareholder will be required to provide an IRS Form W-8BEN certifying its
entitlement to benefits under a treaty.  The  withholding  tax does not apply to
regular  dividends  paid to a non-US  shareholder  who  provides a Form  W-8ECI,
certifying  that  the  dividends  are  effectively  connected  with  the  non-US
shareholder's conduct of a trade or business within the United States.  Instead,
the effectively  connected dividends will be subject to regular US income tax as
if the non-US shareholder were a US shareholder.  A non-US corporation receiving
effectively  connected  dividends  may also be  subject  to  additional  "branch
profits  tax"  imposed  at a rate of 30%  (or a lower  treaty  rate).  A  non-US
shareholder who fails to provide an IRS Form W-8BEN or other applicable form may
be subject to backup withholding at the appropriate rate.

In general,  United States federal withholding tax will not apply to any gain or
income realized by a non-US  shareholder in respect of any  distributions of net
long-term  capital gains over net  short-term  capital  losses,  exempt-interest
dividends, or upon the sale or other disposition of shares of the Fund.

For  taxable  years  beginning  before  January  1,  2008,   properly-designated
dividends are generally exempt from United States federal  withholding tax where
they (i) are paid in respect  of the  Fund's  "qualified  net  interest  income"
(generally,  the Fund's US source interest income, other than certain contingent
interest and interest from  obligations of a corporation or partnership in which
the Fund is at least a 10%  shareholder,  reduced by expenses that are allocable
to such income) or (ii) are paid in respect of the Fund's "qualified  short-term
capital gains" (generally,  the excess of the Fund's net short-term capital gain
over  the  Fund's  long-term  capital  loss  for such  taxable  year).  However,
depending on its circumstances,  the Fund may designate all, some or none of its
potentially  eligible  dividends as such  qualified  net  interest  income or as
qualified short-term capital gains, and/or treat such dividends,  in whole or in
part, as ineligible for this exemption from withholding. In order to qualify for
this exemption from withholding,  a non-US  shareholder will need to comply with
applicable certification  requirements relating to its non-US status (including,
in general,  furnishing an IRS Form W-8BEN or substitute  Form).  In the case of
shares held through an  intermediary,  the intermediary may withhold even if the
Fund  designates  the payment as  qualified  net  interest  income or  qualified
short-term capital gain. Non-US shareholders should contact their intermediaries
with respect to the application of these rules to their accounts.

Every non-US shareholder is urged to consult his own tax advisor with respect to
the application of this legislation to his own circumstances.

                                       82
<PAGE>

The  foregoing  is  only a  summary  of  certain  material  federal  income  tax
consequences affecting the Fund. Prospective shareholders are advised to consult
their Plan  documents and their own tax advisers with respect to the  particular
tax consequences to them of an investment in the Fund.

                                 NET ASSET VALUE

The net asset value of Shares of the Fund is computed as of the close of regular
trading on the New York Stock Exchange ("the Exchange") on each day the Exchange
is open for trading (the "Value  Time").  The Exchange is scheduled to be closed
on the following  holidays:  New Year's Day, Dr.  Martin  Luther King,  Jr. Day,
Presidents'  Day,  Good  Friday,  Memorial  Day,  Independence  Day,  Labor Day,
Thanksgiving  and Christmas,  and on the preceding  Friday or subsequent  Monday
when one of these  holidays  falls on a Saturday  or Sunday,  respectively.  Net
asset  value  per share is  determined  separately  for each  class of shares by
dividing the value of the total assets of the Fund attributable to the shares of
that class, less all liabilities attributable to that class, by the total number
of shares of that class outstanding.  The per share net asset value may be lower
for  certain  classes  of the Fund  because  of higher  expenses  borne by these
classes.

An equity  security is valued at its most  recent  sale price on the  security's
primary  exchange  or  over-the-counter  ("OTC")  market as of the  Value  Time.
Lacking any sales,  the  security is valued at the  calculated  mean between the
most recent bid quotation and the most recent asked  quotation (the  "Calculated
Mean")  on such  exchange  or OTC  market  as of the  Value  Time.  If it is not
possible to determine the  Calculated  Mean,  the security is valued at the most
recent bid quotation on such exchange or OTC market as of the Value Time. In the
case of certain foreign exchanges or OTC markets,  the closing price reported by
the exchange or OTC market  (which may sometimes be referred to as the "official
close" or the "official closing price" or other similar term) will be considered
the most recent sale price.

Debt securities are valued as follows.  Money market instruments  purchased with
an  original or  remaining  maturity  of 60 days or less,  maturing at par,  are
valued at amortized  cost.  Other money market  instruments  are valued based on
information  obtained from an approved  pricing agent or, if such information is
not readily  available,  by using  matrix  pricing  techniques  (formula  driven
calculations based primarily on current market yields). Bank loans are valued at
prices supplied by an approved  pricing agent (which are intended to reflect the
mean between the bid and asked prices), if available,  and otherwise at the mean
of the most recent bid and asked quotations or evaluated  prices, as applicable,
based  on   quotations   or  evaluated   prices   obtained   from  one  or  more
broker-dealers.  Privately  placed  debt  securities,  other than Rule 144A debt
securities,  initially are valued at cost and  thereafter  based on all relevant
factors  including  type  of  security,  size of  holding  and  restrictions  on
disposition.  Municipal  debt  securities  are valued at prices  supplied  by an
approved  pricing  agent (which are intended to reflect the mean between the bid
and asked  prices),  if available,  and otherwise at the mean of the most recent
bid and asked quotations or evaluated price obtained from a broker-dealer. Other
debt securities not addressed above are valued at prices supplied by an approved
pricing agent,  if available,  and otherwise at the most recent bid quotation or
evaluated price, as applicable, obtained from one or more broker-dealers.  If it
is not  possible  to value a  particular  debt  security  pursuant  to the above
methods,  the  security  is valued on the basis of  factors  including  (but not
limited to) maturity, coupon,  creditworthiness,  currency denomination, and the
movement of the market in which the security is normally traded.

An exchange-traded option contract on securities, currencies and other financial
instruments  is valued at its most recent sale price on the  relevant  exchange.
Lacking any sales,  the option contract is valued at the Calculated  Mean. If it
is not possible to determine the Calculated  Mean, the option contract is valued
at the most recent bid quotation in the case of a purchased  option  contract or
the most recent asked  quotation in the case of a written  option  contract,  in
each case as of the Value Time. An option contract on securities, currencies and
other financial instruments traded in the OTC market is valued on the Value Date
at the evaluated price provided by the  broker-dealer  with which it was traded.
Futures contracts (and options thereon) are valued at the most recent settlement
price, if available,  on the exchange on which they are traded most extensively.
With the exception of stock index futures  contracts  which trade on the Chicago
Mercantile Exchange,  closing settlement times are prior to the close of trading
on the  Exchange.  For stock index futures  contracts  that trade on the Chicago
Mercantile  Exchange,  closing  settlement  prices  are  normally  available  at
approximately  4:20 p.m. Eastern time. If no settlement price is available,  the
last traded price on such  exchange  will be used.  If market  quotations  for a
portfolio  asset are not readily


                                       83
<PAGE>

available or the value of a portfolio  asset as determined  in  accordance  with
Board-approved  procedures  does  not  represent  the fair  market  value of the
portfolio  asset,  the  value of the  portfolio  asset is taken to be an  amount
which,  in the opinion of the Fund's Pricing  Committee (or, in some cases,  the
Board's Valuation  Committee),  represents fair market value. The value of other
portfolio holdings owned by the Fund is determined in a manner which is intended
to fairly  reflect the fair  market  value of the asset on the  valuation  date,
based on valuation procedures adopted by the Fund's Board and overseen primarily
by the Fund's Pricing Committee.

                              TRUSTEES AND OFFICERS


The following table presents certain information  regarding the Board Members of
the Trust.  Each Board Member's year of birth is set forth in parentheses  after
his or her name.  Unless  otherwise  noted, (i) each Board Member has engaged in
the principal occupation(s) noted in the table for at least the most recent five
years,  although not  necessarily in the same capacity,  and (ii) the address of
each Board  Member  that is not an  "interested  person" (as defined in the 1940
Act) of the Trust or the Advisor (each, an "Independent  Board Member"),  is c/o
Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for
each Board  Member is until the election and  qualification  of a successor,  or
until  such Board  Member  sooner  dies,  resigns,  is  removed or as  otherwise
provided in the governing documents of the Trust. Because the Fund does not hold
an annual  meeting of  shareholders,  each Board  Member will hold office for an
indeterminate  period.  The Board  Members may also serve in similar  capacities
with other funds in the DWS fund complex.  The Length of Time Served  represents
the year in which the Board Member joined the board of one or more DWS funds now
overseen by the Board.

Independent Board Members


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
<S>                              <C>                                                                    <C>
Dawn-Marie Driscoll (1946) President, Driscoll Associates (consulting firm); Executive Fellow,          76
Chairperson since 2006     Center for Business Ethics, Bentley College; formerly, Partner,
Board Member since         Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and
1987                       General Counsel, Filene's (1978-1988). Directorships: Trustee of 8
                           open-end mutual funds managed by Sun Capital Advisers, Inc. (since
                           2007); Director of ICI Mutual Insurance Company (since 2007);
                           Advisory Board, Center for Business Ethics, Bentley College;
                           Trustee, Southwest Florida Community Foundation (charitable
                           organization); Former Directorships: Investment Company Institute
                           (audit, executive, nominating committees) and Independent Directors
                           Council (governance, executive committees)
-------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr.      Vice Chair, WGBH Educational Foundation. Directorships: Association          76
 (1943)                    of Public Television Stations; Becton Dickinson and Company (1)
 Board Member since        (medical technology company); Belo Corporation (1) (media company);
 1990                      Boston Museum of Science; Public Radio International. Former
                           Directorships: American Public Television; Concord Academy; New
                           England Aquarium; Mass. Corporation for Educational
                           Telecommunications; Committee for Economic Development; Public
                           Broadcasting Service
-------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)        Managing General Partner, Exeter Capital Partners (a series of               76
Board Member since         private equity funds). Directorships: Progressive Holding
1996                       Corporation (kitchen goods importer and distributor); Natural
                           History, Inc. (magazine publisher); Box Top Media Inc.
                           (advertising); The Kennel Shop (retailer)
-------------------------------------------------------------------------------------------------------------------



                                       84
<PAGE>

-------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss        Clinical Professor of Finance, NYU Stern School of Business                  76
(1945)                     (1997-present); Member, Finance Committee, Association for Asian
Board Member since         Studies (2002-present); Director, Mitsui Sumitomo Insurance Group
2001                       (US) (2004-present); prior thereto, Managing Director, J.P. Morgan
                           (investment banking firm) (until 1996)
-------------------------------------------------------------------------------------------------------------------
Martin J. Gruber           Nomura Professor of Finance, Leonard N. Stern School of Business,            76
(1937)                     New York University (since September 1965); Director, Japan Equity
Board Member since         Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since
1999                       January 2000), Singapore Fund, Inc. (since January 2000), National
                           Bureau of Economic Research (since January 2006). Formerly, Trustee,
                           TIAA (pension funds) (January 1996-January 2000); Trustee, CREF and
                           CREF Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF
                           Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen
                           Mutual Funds (January 1985-January 2001)
-------------------------------------------------------------------------------------------------------------------
Richard J. Herring         Jacob Safra Professor of International Banking and Professor,                76
(1946)                     Finance Department, The Wharton School, University of Pennsylvania
Board Member since         (since July 1972); Co-Director, Wharton Financial Institutions
1999                       Center (since July 2000); Director, Japan Equity Fund, Inc. (since
                           September 2007), Thai Capital Fund, Inc. (since September 2007),
                           Singapore Fund, Inc. (since September 2007). Formerly, Vice Dean and
                           Director, Wharton Undergraduate Division (July 1995-June 2000);
                           Director, Lauder Institute of International Management Studies (July
                           2000-June 2006)
-------------------------------------------------------------------------------------------------------------------
Graham E. Jones            Senior Vice President, BGK Realty, Inc. (commercial real estate)             76
(1933)                     (since 1995). Formerly, Trustee of various investment companies
Board Member since         managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley
2002                       Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005)
-------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel           President and Chief Executive Officer, The Pew Charitable Trusts             76
(1951)                     (charitable organization) (1994 to present); Trustee, Thomas
Board Member since         Jefferson Foundation (charitable organization) (1994 to present);
2002                       Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001
                           to present). Formerly, Executive Vice President, The Glenmede Trust
                           Company (investment trust and wealth management) (1983 to 2004);
                           Board Member, Investor Education (charitable organization)
                           (2004-2005); Director, Viasys Health Care(1) (January 2007-June 2007)
-------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.     Private investor since October 2003; Trustee of 8 open-end mutual            76
(1946)                     funds managed by Sun Capital Advisers, Inc. (since October 1998).
Board Member since         Formerly, Pension & Savings Trust Officer, Sprint Corporation((1))
2002                       (telecommunications) (November 1989-September 2003)
-------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg     Retired. Formerly, Consultant (1997-2001); Director, US Government           76
(1943)                     Accountability Office (1996-1997); Partner, Fulbright & Jaworski,
Board Member since         L.L.P. (law firm) (1978-1996). Directorships: The William and Flora
1997                       Hewlett Foundation; Service Source, Inc. Former Directorships:
                           Mutual Fund Directors Forum (2002-2004), American Bar Retirement
                           Association (funding vehicle for retirement plans) (1987-1990 and
                           1994-1996)
-------------------------------------------------------------------------------------------------------------------



                                       85
<PAGE>

-------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
Carl W. Vogt               Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm);             74
(1936)                     formerly, President (interim) of Williams College (1999-2000);
Board Member since         formerly, President of certain funds in the Deutsche Asset
2006                       Management family of funds (formerly, Flag Investors family of
                           funds) (registered investment companies) (1999-2000). Directorships:
                           Yellow Corporation (trucking); American Science & Engineering (x-ray
                           detection equipment). Former Directorships: ISI Family of Funds
                           (registered investment companies, 4 funds overseen); National
                           Railroad Passenger Corporation (Amtrak) Waste Management, Inc.
                           (solid waste disposal); formerly, Chairman and Member, National
                           Transportation Safety Board
-------------------------------------------------------------------------------------------------------------------

Interested Board Member


-------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(2)         Managing Director(4), Deutsche Asset Management; Head of Deutsche            82
 (1958)                    Asset Management Americas; CEO of DWS Scudder; formerly board member
 Board Member since        of DWS Investments, Germany (1999-2005); formerly, Head of Sales and
 2006                      Product Management for the Retail and Private Banking Division of
                           Deutsche Bank in Germany (1997-1999); formerly, various strategic
                           and operational positions for Deutsche Bank Germany Retail and
                           Private Banking Division in the field of investment funds, tax
                           driven instruments and asset management for corporates (1989-1996)
-------------------------------------------------------------------------------------------------------------------

Officers(3)

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(5)        Managing Director(4), Deutsche Asset Management (2006-present); President of DWS
 (1965)                     family of funds; Director, ICI Mutual Insurance Company (since October 2007);
 President, 2006-present    formerly, Director of Fund Board Relations (2004-2006) and Director of Product
                            Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President
                            Operations, Merrill Lynch Asset Management (1999-2000)
--------------------------------------------------------------------------------------------------------------------
 John Millette(6) (1962)    Director(4), Deutsche Asset Management
 Vice President and
 Secretary, 2003-present
--------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(5)        Managing Director(4), Deutsche Asset Management (since July 2004); formerly,
 (1963)                     Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of
 Chief Financial Officer,   Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global
 2004-present               Asset Management (1994-1998)
 Treasurer, 2005-present
--------------------------------------------------------------------------------------------------------------------



                                       86
<PAGE>

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Patricia DeFilippis(5)     Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New
 (1963)                     York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co.
 Assistant Secretary,       LLC (1998-2003)
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Elisa D. Metzger(5)        Director(4), Deutsche Asset Management (since September 2005); formerly, Counsel,
 (1962)                     Morrison and Foerster LLP (1999-2005)
 Assistant Secretary,
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(6)        Managing Director(4), Deutsche Asset Management
 (1962)
 Assistant Secretary,
 2002-present
--------------------------------------------------------------------------------------------------------------------
 Paul Antosca(6)            Director(4), Deutsche Asset Management (since 2006); formerly, Vice President, The
 (1957)                     Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jack Clark (6)             Director(4), Deutsche Asset Management (since 2007); formerly, Vice President, State
 (1967)                     Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Kathleen Sullivan          Director(4), Deutsche Asset Management
 D'Eramo(6)
 (1957)
 Assistant Treasurer,
 2003-present
--------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(6)         Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(5) (1972)    Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
 Anti-Money Laundering      Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations
 Compliance Officer,        Manager for AXA Financial (1999-2004)
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(5) (1962)     Managing Director(4), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance           Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The
 Officer, 2006-present      Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company
                            (1984-1988)
--------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(5)  Director(4), Deutsche Asset Management (2006-present); formerly, Director, Senior
 (1951)                     Vice President, General Counsel, and Assistant Secretary, Hansberger Global
 Chief Legal Officer,       Investors, Inc. (1996-2006); Director, National Society of Compliance Professionals
 2006-present               (2002-2005)(2006-2009)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      A publicly held company with securities  registered pursuant to Section
         12 of the Securities Exchange Act of 1934.

(2)      The  mailing  address  of Axel  Schwarzer  is c/o  Deutsche  Investment
         Management  Americas Inc.,  345 Park Avenue,  New York, New York 10154.
         Mr.  Schwarzer is an interested Board Member by virtue of his positions
         with Deutsche Asset Management.  As an interested person, Mr. Schwarzer
         receives no compensation from the Funds.

                                       87
<PAGE>

(3)      As a result of their respective positions held with the Advisor,  these
         individuals are considered  "interested  persons" of the Advisor within
         the meaning of the 1940 Act. Interested persons receive no compensation
         from the Funds.

(4)      Executive title, not a board directorship.

(5)      Address:  345 Park Avenue, New York, New York 10154.

(6)      Address: Two International Place, Boston, Massachusetts 02110.

Each Officer also holds  similar  positions for other  investment  companies for
which DIMA or an affiliate serves as the advisor.

Officer's Role with Principal Underwriter:  DWS Scudder Distributors, Inc.

 Paul H. Schubert:                         Vice President
 Caroline Pearson:                         Secretary

Information Concerning Committees and Meetings of Board Members

The  Board of the  Trust met ten (10)  times  during  the  calendar  year  ended
December 31, 2007 and each Board Member attended at least 80% of the meetings of
the Board and meetings of the committees of the Board on which such Board Member
served.

Board  Committees.  Ms.  Driscoll  has served as Chair of the Board of the Funds
since May 2006.

The Board has established the following  standing  committees:  Audit Committee,
Nominating/Corporate Governance Committee, Valuation Committee, Equity Oversight
Committee, Fixed Income Oversight Committee,  Marketing/Distribution/Shareholder
Service Committee,  Legal/Regulatory/Compliance Committee and Expense/Operations
Committee.

The Audit  Committee  assists the Board in  fulfilling  its  responsibility  for
oversight of the quality and integrity of the accounting, auditing and financial
reporting  practices  of the  applicable  Fund.  It also  makes  recommendations
regarding the selection of an independent  registered public accounting firm for
a Fund,  reviews the  independence of such firm,  reviews the scope of audit and
internal  controls,  considers and reports to the Board on matters relating to a
Fund's  accounting and financial  reporting  practices,  and performs such other
tasks as the full Board deems  necessary  or  appropriate.  The Audit  Committee
receives  annual   representations   from  the  independent   registered  public
accounting firm as to its  independence.  The members of the Audit Committee are
Keith R. Fox (Chair and Audit Committee Financial Expert),  Kenneth C. Froewiss,
Richard J. Herring, William N. Searcy, Jr. and Jean Gleason Stromberg. The Audit
Committee held nine (9) meetings during the calendar year 2007.

The  Nominating/Corporate  Governance  Committee  (i)  recommends  to the  Board
candidates  to serve as Board  Members and (ii)  oversees  and, as  appropriate,
makes  recommendations  to the Board  regarding  other  fund  governance-related
matters,  including but not limited to Board compensation practices,  retirement
policies,  self-evaluations  of effectiveness,  review of possible  conflicts of
interest  and  independence  issues  involving  Board  Members,  allocations  of
assignments  and  functions  of  committees  of the Board,  and share  ownership
policies. The members of the Nominating/Corporate Governance Committee are Henry
P.  Becton,  Jr.  (Chair),  Graham E. Jones,  Rebecca W. Rimel and Jean  Gleason
Stromberg.  The  Nominating/Corporate  Governance Committee (previously known as
the  Committee on  Independent  Directors)  held three (3)  meetings  during the
calendar year 2007.

The Valuation  Committee  oversees Fund  valuation  matters,  reviews  valuation
procedures  adopted  by the  Board,  determines  the fair  value  of the  Fund's
securities as needed in accordance  with the valuation  procedures  and performs
such other tasks as the full Board deems necessary or  appropriate.  The members
of the Valuation


                                       88
<PAGE>

Committee are Keith R. Fox,  Kenneth C. Froewiss  (Chair),  Martin J. Gruber and
Richard J. Herring.  The Valuation  Committee held [number of meetings varies by
fund -- minimum 6] meetings during the calendar year 2007.

The Board has established two Investment Oversight  Committees,  one focusing on
Funds  primarily   investing  in  equity   securities  (the  "Equity   Oversight
Committee")  and one  focusing  on Funds  primarily  investing  in fixed  income
securities  (the "Fixed Income  Oversight  Committee").  These  Committees  meet
regularly with Fund portfolio managers and other investment  personnel to review
the relevant  Funds'  investment  strategies  and  investment  performance.  The
members of the Equity  Oversight  Committee are Henry P. Becton,  Jr., Martin J.
Gruber  (Chair),  Richard J.  Herring,  Rebecca  W. Rimel and Carl W. Vogt.  The
members of the Fixed Income Oversight Committee are Dawn-Marie  Driscoll,  Keith
R. Fox, Kenneth C. Froewiss, Graham E. Jones, William N. Searcy, Jr. (Chair) and
Jean  Gleason  Stromberg.  Each  Investment  Oversight  Committee  held  six (6)
meetings during the calendar year 2007.

The  Marketing/Distribution/Shareholder   Service  Committee  oversees  (i)  the
quality, costs and types of shareholder services provided to the Funds and their
shareholders,  and (ii) the distribution-related  services provided to the Funds
and their  shareholders.  The members of the  Marketing/Distribution/Shareholder
Service Committee are Martin J. Gruber,  Richard J. Herring (Chair),  Rebecca W.
Rimel,     Jean     Gleason     Stromberg     and    Carl    W.    Vogt.     The
Marketing/Distribution/Shareholder  Service  Committee  held seven (7)  meetings
during the calendar year 2007.

The  Legal/Regulatory/Compliance  Committee  oversees (i) the significant  legal
affairs of the Funds, including the handling of pending or threatened litigation
or  regulatory  action  involving  the Funds,  (ii) general  compliance  matters
relating   to  the  Funds  and  (iii)   proxy   voting.   The   members  of  the
Legal/Regulatory/Compliance  Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie
Driscoll,  Rebecca W. Rimel,  William N. Searcy, Jr., Jean Gleason Stromberg and
Carl W. Vogt (Chair).  The  Legal/Regulatory/Compliance  Committee  held six (6)
meetings during the calendar year 2007.

The Expense/Operations Committee (i) monitors the Fund's total operating expense
levels,  (ii)  oversees the  provision of  administrative  services to the Fund,
including the Fund's custody,  fund accounting and insurance  arrangements,  and
(iii) reviews the Fund's investment advisers' brokerage practices, including the
implementation  of  related  policies.  The  members  of the  Expense/Operations
Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie  Driscoll,  Keith R. Fox and
William  N.  Searcy,  Jr.  This  committee  held seven (7)  meetings  during the
calendar year 2007.

Ad Hoc Committees.  In addition to the standing committees described above, from
time to time the Board also forms ad hoc committees to consider specific issues.

Remuneration.  Each Independent Board Member receives compensation from the Fund
for his or her services, which includes an annual retainer and an attendance fee
for each meeting attended. No additional compensation is paid to any Independent
Board Member for travel time to meetings,  attendance at directors'  educational
seminars  or  conferences,   service  on  industry  or  association  committees,
participation  as speakers at directors'  conferences or service on special fund
industry director task forces or subcommittees. Independent Board Members do not
receive any employee  benefits such as pension or retirement  benefits or health
insurance from the Fund or any fund in the DWS fund complex.

Members of the Board who are officers,  directors,  employees or stockholders of
Deutsche Asset Management or its affiliates receive no direct  compensation from
a Fund, although they are compensated as employees of Deutsche Asset Management,
or its affiliates,  and as a result may be deemed to participate in fees paid by
the Funds.  The following tables show  compensation  from the Fund and aggregate
compensation  from all of the  funds in the DWS fund  complex  received  by each
Board Member during the calendar year 2007. Mr. Schwarzer became a member of the
Board on May 5,  2006,  is an  interested  person of the Funds and  received  no
compensation  from the  Funds or any fund in the DWS  fund  complex  during  the
relevant periods.

                                       89
<PAGE>

<TABLE>
<CAPTION>
                                      Aggregate Compensation         Total Compensation
                                     from DWS Short Duration           from Fund and
Name of Board Member                        Plus Fund                DWS Fund Complex(1)
--------------------                        ---------                -------------------
<S>                                           <C>                         <C>
Henry P. Becton, Jr.(3)(4)                    $2,008                      $200,000
Dawn-Marie Driscoll(2)(3)(4)                  $2,517                      $253,000
Keith R. Fox(3)(4)                            $2,029                      $203,000
Kenneth C. Froewiss(3)(4)                     $2,000                      $200,000
Martin J. Gruber(3)(4)                        $1,918                      $198,000
Richard J. Herring(3)(4)                      $1,933                      $195,000
Graham E. Jones(3)                            $2,079                      $207,000
Rebecca W. Rimel(3)(4)                        $1,884                      $194,000
William N. Searcy, Jr.(3)(4)                  $2,000                      $199,000
Jean Gleason Stromberg(3)(4)                  $1,870                      $200,000
Carl W. Vogt(3)(4)                            $1,946                      $194,000

(1)      The DWS Fund Complex is composed of 138 funds as of December 31, 2007.

(2)      Includes  $50,000 in annual  retainer  fees in Ms.  Driscoll's  role as
         Chairperson of the Board.

(3)      For each Board Member, except Mr. Vogt, total compensation for calendar
         year 2007 includes  compensation,  as of December 31, 2007, for service
         on   the   boards   of   30   trusts/corporations   comprised   of   76
         funds/portfolios.  For Mr. Vogt total  compensation  for calendar  year
         2007   includes   compensation   for   service  on  the  boards  of  28
         trusts/corporations comprised of 74 funds/portfolios.

(4)      Aggregate  compensation  includes amounts paid to the Board Members for
         special  meetings of ad hoc committees of the board in connection  with
         the  possible  consolidation  of the various DWS Fund boards and funds,
         meetings for considering fund expense simplification  initiatives,  and
         consideration  of issues  specific  to the Funds'  direct  shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $1,000 for Mr. Becton, $1,000 for
         Ms. Driscoll,  $1,000 for Mr. Fox, $1,000 for Mr. Froewiss,  $5,000 for
         Mr. Gruber,  $1,000 for Dr. Herring,  $5,000 for Ms. Rimel,  $1,000 for
         Mr.  Searcy,  $1,000 for Ms.  Stromberg and $1,000 for Mr. Vogt.  These
         meeting fees were borne by the Advisor.

Board Member Ownership in the Fund

The  following  table shows the dollar range of equity  securities  beneficially
owned by each Board  Member in the Fund and DWS Fund  Complex as of December 31,
2007.

                                          Dollar Range of Beneficial           Aggregate Dollar Range of
                                                   Ownership              Ownership in all Funds Overseen by
                                             in DWS Short Duration                   Board Member
Board Member                                       Plus Fund                 in the DWS Fund Complex(1)
------------                                       ---------                 --------------------------

Independent Board Member:
-------------------------

Henry P. Becton, Jr.                           $10,001-$50,000                    Over $100,000
Dawn-Marie Driscoll                               $1-$10,000                      Over $100,000
Keith R. Fox                                         None                         Over $100,000
Kenneth C. Froewiss                            $10,001-$50,000                    Over $100,000
Martin J. Gruber                                     None                         Over $100,000
Richard J. Herring                                   None                         Over $100,000
Graham E. Jones                                      None                         Over $100,000



                                       90
<PAGE>


                                          Dollar Range of Beneficial           Aggregate Dollar Range of
                                                   Ownership              Ownership in all Funds Overseen by
                                             in DWS Short Duration                   Board Member
Board Member                                       Plus Fund                 in the DWS Fund Complex(1)
------------                                       ---------                 --------------------------

Rebecca W. Rimel                                     None                         Over $100,000
William N. Searcy, Jr.                               None                         Over $100,000
Jean Gleason Stromberg                               None                         Over $100,000
Carl W. Vogt                                         None                         Over $100,000

Interested Board Member:
------------------------

Axel Schwarzer                                       None                           Over $100,000

(1)      Securities  beneficially  owned as defined  under the 1934 Act  include
         direct and/or indirect ownership of securities where the Board Member's
         economic interest is tied to the securities,  employment  ownership and
         securities  when the Board  Member can exert  voting power and when the
         Board Member has  authority to sell the  securities.  The dollar ranges
         are:  None,   $1-$10,000,   $10,001-$50,000,   $50,001-$100,000,   over
         $100,000.

Ownership in Securities of the Advisor and Related Companies

As  reported  to the Fund,  the  information  in the  following  table  reflects
ownership by the Independent Board Members and their immediate family members of
certain  securities as of December 31, 2007. An immediate family member can be a
spouse,  children  residing in the same  household  including  step and adoptive
children and any dependents.  The securities  represent ownership in the Advisor
or principal  underwriter  of the Fund and any persons  (other than a registered
investment company) directly or indirectly controlling,  controlled by, or under
common control with the Advisor or principal  underwriter of the Fund (including
Deutsche Bank AG).


                                                                                   Value of        Percent of
                                   Owner and                                     Securities on     Class on an
Independent                     Relationship to                     Title of     an Aggregate       Aggregate
Board Member                      Board Member         Company        Class          Basis            Basis
------------                      ------------         -------        -----          -----            -----

Henry P. Becton, Jr.                                   None
Dawn-Marie Driscoll                                    None
Keith R. Fox                                           None
Kenneth C. Froewiss                                    None
Martin J. Gruber                                       None
Richard J. Herring                                     None
Graham E. Jones                                        None
Rebecca W. Rimel                                       None
William N. Searcy, Jr.                                 None
Jean Gleason Stromberg                                 None
Carl W. Vogt                                           None
</TABLE>





                                       91
<PAGE>




                                       92
<PAGE>




                                       93
<PAGE>




                                       94
<PAGE>




                                       95
<PAGE>




                                       96
<PAGE>




                                       97
<PAGE>




                                       98
<PAGE>



Securities Beneficially Owned


As of January 8, 2008,  the Board Members and officers of the Trust owned,  as a
group, less than 1% of the outstanding shares of the Fund.

To the best of the Fund's  knowledge,  as of January 8, 2008, no person owned of
record or beneficially 5% or more of any class of the Fund's outstanding shares,
except as noted below.

<TABLE>
<CAPTION>
Name and Address of Investor Ownership                   Shares                                 % of Total Shares
-------------------------------------                    ------                                 -----------------

<S>                                                          <C>                            <C>
CHARLES SCHWAB & CO                                          13,308,955.94                  30.33% of Class A
MUTUAL FUNDS DEPT
SAN FRANCISCOCA  94104-4151

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   40,106.25                    6.24% of Class B
ATTN FUND ADMINISTRATION #97D64
JACKSONVILLE FL  32246-6484


                                       99
<PAGE>
Name and Address of Investor Ownership                   Shares                                 % of Total Shares
-------------------------------------                    ------                                 -----------------

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                 2,328,948.13                   15.59% of Class C
ATTN FUND ADMINISTRATION 9K551
JACKSONVILLE FL  32246-6484

MORGAN STANLEY & CO.                                         1,935,663.49                   12.96% of Class C
HARBORSIDE FINANCIAL CENTER PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311

CHARLES SCHWAB & CO                                          10,231,767.91                  11.19% of Class S
OMNIBUS ACCOUNT REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA  94104-4151
</TABLE>





Agreement to Indemnify Independent Trustees for Certain Expenses

In connection with litigation or regulatory  action related to possible improper
market timing or other improper trading activity or possible improper  marketing
and sales  activity  in the Funds,  each Fund's  investment  advisor has agreed,
subject to  applicable  law and  regulation,  to indemnify and hold harmless the
applicable  Funds  against  any and all loss,  damage,  liability  and  expense,
arising  from  market  timing or  marketing  and sales  matters  alleged  in any
enforcement actions brought by governmental authorities involving or potentially
affecting the Funds or the investment  advisor  ("Enforcement  Actions") or that
are the basis for private  actions  brought by shareholders of the Funds against
the Funds,  their directors and officers,  the Funds' investment  advisor and/or
certain other parties ("Private Litigation"), or any proceedings or actions that
may  be  threatened  or  commenced  in  the  future  by  any  person  (including
governmental authorities), arising from or similar to the matters alleged in the
Enforcement Actions or Private Litigation.  In recognition of its undertaking to
indemnify  the  applicable  Funds  and in  light of the  rebuttable  presumption
generally  afforded to independent  directors/trustees  of investment  companies
that they have not engaged in disabling conduct,  each Fund's investment advisor
has also agreed,  subject to  applicable  law and  regulation,  to indemnify the
applicable  Funds'   Independent   Trustees  against  certain   liabilities  the
Independent  Trustees  may incur from the  matters  alleged  in any  Enforcement
Actions or Private  Litigation or arising from or similar to the matters alleged
in the Enforcement Actions or Private Litigation,  and advance expenses that may
be  incurred by the  Independent  Trustees in  connection  with any  Enforcement
Actions  or  Private  Litigation.  The  applicable  investment  advisor  is not,
however,  required to provide  indemnification and advancement of expenses:  (1)
with respect to any  proceeding  or action with respect to which the  applicable
Fund's Board  determines that the Independent  Trustee  ultimately  would not be
entitled to indemnification or (2) for any liability of the Independent  Trustee
to the  Funds or their  shareholders  to which  the  Independent  Trustee  would
otherwise  be  subject  by reason  of  willful  misfeasance,  bad  faith,  gross
negligence  or  reckless  disregard  of the  Independent  Trustee's  duties as a
director or trustee of the Funds as determined in a final  adjudication  in such
action or proceeding.  The estimated


                                      100
<PAGE>

amount of any  expenses  that may be  advanced  to the  Independent  Trustees or
indemnity  that may be  payable  under the  indemnity  agreements  is  currently
unknown.  These  agreements by each Fund's  investment  advisor will survive the
termination  of the  investment  management  agreements  between the  applicable
investment advisor and the Funds.




                               TRUST ORGANIZATION

The Fund is a series of DWS Advisor Funds (the "Trust"),  an open-end management
investment company. The Trust is a Massachusetts  business trust organized under
the laws of  Massachusetts  on July 21, 1986,  and is governed by an Amended and
Restated  Declaration of Trust that was approved by  shareholders  in the second
quarter of 2006, as may be further  amended from time to time (the  "Declaration
of Trust").  The Trust was organized under the name BT Tax-Free Investment Trust
and assumed its former name of BT Investment  Funds on May 16, 1988. The Trust's
name was  changed to Scudder  Advisor  Funds  effective  May 16, 2003 and to DWS
Advisor  Funds as of February 6, 2006.  All shares  issued and  outstanding  are
fully paid and non-assessable,  transferable,  have no pre-emptive or conversion
rights (except as may be determined by the Board of Trustees) and are redeemable
as described in the SAI and the Fund's  Prospectus.  Each share has equal rights
with each other  share of the same  class of the Fund as to  voting,  dividends,
exchanges, conversion features and liquidation. Shareholders are entitled to one
vote for each full share held and fractional votes for fractional shares held.

The Fund generally is not required to hold meetings of its  shareholders.  Under
the  Declaration  of  Trust,  however,  shareholder  meetings  will  be  held in
connection  with the  following  matters to the extent  and as  provided  in the
Declaration  of Trust and as required by  applicable  law:  (a) the  election or
removal of trustees if a meeting is called for such purpose; (b) the termination
of the Trust or the Fund; (c) an amendment of the Declaration of Trust;  and (d)
such  additional  matters  as may be  required  by  law or as the  Trustees  may
determine to be necessary or desirable.  Shareholders  also vote upon changes in
fundamental policies or restrictions.

The Declaration of Trust provides that shareholder  meeting quorum  requirements
shall be established  in the Trust's  By-laws.  The By-laws  currently in effect
provide that the presence in person or by proxy of the holders of thirty


                                      101
<PAGE>

percent of the shares entitled to vote at a meeting (or of an individual  series
or class if  required  to vote  separately)  shall  constitute  a quorum for the
transaction of business at meetings of shareholders of the Trust.

On any  matter  submitted  to a vote of  shareholders,  all  shares of the Trust
entitled to vote shall,  except as otherwise provided in the Trust's By-Laws, be
voted in the aggregate as a single class without  regard to series or classes of
shares,  except (a) when required by applicable  law or when the Trustees  shall
have  determined that the matter affects one or more series or classes of shares
materially differently, shares shall be voted by individual series or class; and
(b) when the Trustees have determined that the matter affects only the interests
of one or more series or classes,  only  shareholders  of such series or classes
shall be entitled to vote thereon.

The  Declaration  of Trust  provides  that the  Board of  Trustees  may,  in its
discretion,  establish  minimum  investment  amounts for  shareholder  accounts,
impose  fees on  accounts  that do not  exceed a minimum  investment  amount and
involuntarily  redeem  shares in any such  account in payment of such fees.  The
Board of Trustees,  in its sole  discretion,  also may cause the Trust to redeem
all of the  shares of the Trust or one or more  series  or  classes  held by any
shareholder for any reason, to the extent permissible by the 1940 Act, including
(a) if the  shareholder  owns shares having an aggregate net asset value of less
than a specified minimum amount, (b) if a particular  shareholder's ownership of
shares would disqualify a series from being a regulated  investment company, (c)
upon a shareholder's failure to provide sufficient  identification to permit the
Trust to verify the shareholder's  identity, (d) upon a shareholder's failure to
pay for  shares  or meet or  maintain  the  qualifications  for  ownership  of a
particular  class or series of shares,  (e) if the Board of Trustees  determines
(or pursuant to policies  established by the Board it is determined)  that share
ownership by a particular  shareholder is not in the best interests of remaining
shareholders,  (f)  when  the  Fund  is  requested  or  compelled  to  do  so by
governmental authority or applicable law and (g) upon a shareholder's failure to
comply with a request  for  information  with  respect to the direct or indirect
ownership of shares of the Trust.  The  Declaration of Trust also authorizes the
Board  of  Trustees  to  terminate  the Fund or any  class  of the Fund  without
shareholder  approval,  and the Trust may suspend the right of  shareholders  to
require the Trust to redeem shares to the extent permissible under the 1940 Act.

Upon the  termination  of the Trust or any series,  after  paying or  adequately
providing for the payment of all liabilities which may include the establishment
of a liquidating  trust or similar  vehicle,  and upon receipt of such releases,
indemnities   and  refunding   agreements  as  they  deem  necessary  for  their
protection, the Trustees may distribute the remaining Trust property or property
of the series,  in cash or in kind or partly each,  to the  shareholders  of the
Trust or the series involved,  ratably  according to the number of shares of the
Trust or such  series  held by the  several  shareholders  of the  Trust or such
series on the date of termination,  except to the extent  otherwise  required or
permitted by the  preferences  and special or relative  rights and privileges of
any classes of shares of a series  involved,  provided that any  distribution to
the  shareholders  of a  particular  class  of  shares  shall  be  made  to such
shareholders  pro rata in  proportion to the number of shares of such class held
by  each  of  them.  The  composition  of any  such  distribution  (e.g.,  cash,
securities  or  other  assets)  shall  be  determined  by the  Trust in its sole
discretion, and may be different among shareholders (including differences among
shareholders in the same series or class).

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Fund. The Declaration of Trust,  however,  disclaims  shareholder  liability for
acts or obligations  of the Fund and requires that notice of such  disclaimer be
given in each agreement,  obligation,  or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification  out of  Fund  property  for  all  losses  and  expenses  of any
shareholder held personally  liable for the obligations of the Fund and the Fund
may be  covered by  insurance  which the  Trustees  consider  adequate  to cover
foreseeable  tort claims.  Thus, the risk of a shareholder  incurring  financial
loss on account of shareholder liability is considered by the Advisor remote and
not  material,  since it is limited to  circumstances  in which a disclaimer  is
inoperative and the Fund itself is unable to meet its obligations.

                             PROXY VOTING GUIDELINES

The Fund has delegated proxy voting  responsibilities to its investment advisor,
subject to the Board's general oversight. The Fund has delegated proxy voting to
the Advisor with the direction that proxies should be voted  consistent with the
Fund's best  economic  interests.  The Advisor has adopted its own Proxy  Voting
Policies and


                                      102
<PAGE>

Procedures  ("Policies")  and Proxy Voting  Guidelines  ("Guidelines")  for this
purpose.  The Policies address,  among other things,  conflicts of interest that
may arise between the interests of the Fund and the interests of the Advisor and
its affiliates,  including the Fund's principal underwriter.  The Guidelines set
forth the Advisor's general position on various proposals, such as:

o        Shareholder  Rights -- The Advisor  generally  votes against  proposals
         that restrict shareholder rights.

o        Corporate  Governance -- The Advisor  generally votes for  confidential
         and cumulative voting and against supermajority voting requirements for
         charter and bylaw amendments. The Advisor generally votes for proposals
         to restrict a chief  executive  officer from serving on more than three
         outside  boards of  directors.  The  Advisor  generally  votes  against
         proposals  that  require a company  to  appoint  a  Chairman  who is an
         independent director.

o        Anti-Takeover Matters -- The Advisor generally votes for proposals that
         require shareholder ratification of poison pills or that request boards
         to redeem poison pills,  and votes against the adoption of poison pills
         if  they  are  submitted  for  shareholder  ratification.  The  Advisor
         generally votes for fair price proposals.

o        Compensation  Matters -- The Advisor generally votes for executive cash
         compensation  proposals,  unless they are unreasonably  excessive.  The
         Advisor generally votes against stock option plans that do not meet the
         Advisor's criteria.

o        Routine Matters -- The Advisor  generally votes for the ratification of
         auditors,  procedural matters related to the annual meeting and changes
         in company name, and against bundled proposals and adjournment.

The general provisions described above do not apply to investment companies. The
Advisor generally votes proxies solicited by investment  companies in accordance
with the  recommendations  of an  independent  third  party,  except for proxies
solicited by or with respect to investment companies for which the Advisor or an
affiliate  serves as investment  advisor or principal  underwriter  ("affiliated
investment companies").  The Advisor votes affiliated investment company proxies
in  the  same  proportion  as  the  vote  of  the  investment   company's  other
shareholders  (sometimes called "mirror" or "echo" voting).  Master fund proxies
solicited from feeder funds are voted in accordance with applicable requirements
of the 1940 Act.

Although the  Guidelines  set forth the Advisor's  general  voting  positions on
various proposals,  the Advisor may,  consistent with the Fund's best interests,
determine under some circumstances to vote contrary to those positions.

The  Guidelines  on a  particular  issue  may or may  not  reflect  the  view of
individual members of the Board or of a majority of the Board. In addition,  the
Guidelines may reflect a voting position that differs from the actual  practices
of  the  public  companies  within  the  Deutsche  Bank  organization  or of the
investment  companies for which the Advisor or an affiliate serves as investment
advisor or sponsor.

The  Advisor  may  consider  the views of a portfolio  company's  management  in
deciding how to vote a proxy or in establishing general voting positions for the
Guidelines, but management's views are not determinative.

As mentioned above, the Policies  describe the way in which the Advisor resolves
conflicts  of  interest.  To  resolve  conflicts,   the  advisor,  under  normal
circumstances,  votes proxies in accordance with its Guidelines.  If the Advisor
departs  from  the  Guidelines  with  respect  to a  particular  proxy or if the
Guidelines do not specifically  address a certain proxy proposal, a proxy voting
committee established by the advisor will vote the proxy. Before voting any such
proxy,  however,  the  Advisor's  conflicts  review  committee  will  conduct an
investigation to determine whether any potential  conflicts of interest exist in
connection with the particular proxy proposal. If the conflicts review committee
determines  that the Advisor has a material  conflict  of  interest,  or certain
individuals on the proxy voting committee  should be recused from  participating
in a  particular  proxy vote,  it will  inform the proxy  voting  committee.  If
notified  that the Advisor has a material  conflict,  or fewer than three voting
members are eligible to  participate  in the proxy vote,  typically  the Advisor
will  engage an  independent  third  party to vote the proxy or follow the proxy
voting recommendations of an independent third party.

                                      103
<PAGE>

Under certain circumstances,  the Advisor may not be able to vote proxies or the
Advisor  may find that the  expected  economic  costs from voting  outweigh  the
benefits  associated with voting. For example,  the Advisor may not vote proxies
on certain foreign securities due to local restrictions or customs.  The Advisor
generally  does  not vote  proxies  on  securities  subject  to  share  blocking
restrictions.

You may  obtain  information  about how the Fund  voted  proxies  related to its
portfolio  securities  during the 12-month  period ended June 30 by visiting the
SEC's Web site at www.sec.gov or by visiting our Web site at www.dws-scudder.com
(click on "proxy voting" at the bottom of the page).

                              FINANCIAL STATEMENTS


The financial  statements  for the Fund for the fiscal year ended  September 30,
2007 are  incorporated  herein by reference to the Annual Report to shareholders
of the Fund  dated  September  30,  2007.  A copy of the  Annual  Report  may be
obtained without charge by contacting the Fund.




                             ADDITIONAL INFORMATION


The CUSIP numbers for this class of the Fund is:


Class S:  23336Y755


The Fund has a fiscal year ending September 30.


Many of the investment changes in the Fund will be made at prices different from
those  prevailing  at the time  they may be  reflected  in a  regular  report to
shareholders of the Fund. These transactions will reflect  investment  decisions
made by the Advisor in light of the Fund's  investment  objective  and policies,
its other portfolio holdings and tax considerations, and should not be construed
as recommendations for similar action by other investors.

The Fund's  prospectuses  and this  Statement  of  Additional  Information  omit
certain information  contained in the Registration  Statement and its amendments
which the Fund has  filed  with the SEC  under  the  Securities  Act of 1933 and
reference is hereby made to the Registration  Statement for further  information
with  respect to a Fund and the  securities  offered  hereby.  The  Registration
Statement and its  amendments  are available for inspection by the public at the
offices of the SEC in Washington, D.C.


                                      104
<PAGE>

                                    APPENDIX

Description of Moody's Corporate Bond Ratings

Aaa -- Bonds  rated Aaa are  judged to be of the best  quality.  They  carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally  stable margin
and  principal is secure.  While the various  protective  elements are likely to
change,  such  changes  as can be  visualized  are most  unlikely  to impair the
fundamentally strong position of such issues.

Aa -- Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally  known as high-grade  bonds.
They are rated lower than the best bonds because  margins of protection  may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater  amplitude  or  there  may be  other  elements  present  which  make the
long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds rated A possess many  favorable  investment  attributes and are to be
considered  as  upper-medium-grade  obligations.   Factors  giving  security  to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly  protected nor poorly  secured.  Interest  payments and principal
security appear adequate for the present but certain protective  elements may be
lacking or may be  characteristically  unreliable over any great length of time.
Such  bonds  lack  outstanding  investment  characteristics  and  in  fact  have
speculative characteristics as well.

Ba -- Bonds  rated Ba are  judged to have  speculative  elements.  Their  future
cannot be  considered  as well  assured.  Often the  protection  of interest and
principal  payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future.  Uncertainty of position  characterizes
bonds in this class.

B -- Bonds rated B generally  lack  characteristics  of a desirable  investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa -- Bonds  rated Caa are of poor  standing.  Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca -- Bonds  rated Ca  represent  obligations  which are  speculative  in a high
degree. Such issues are often in default or have other marked shortcomings.

C -- Bonds rated C are the  lowest-rated  class of bonds and issued so rated can
be  regarded as having  extremely  poor  prospects  of ever  attaining  any real
investment standing.

Moody's  applies  numerical  modifiers,  1, 2,  and 3, in  each  generic  rating
classification  from Aa through B in its corporate  bond system.  The modifier 1
indicates  that the  security  ranks in the  higher  end of its  generic  rating
category;  the  modifier 2  indicates a mid-range  ranking;  and the  modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Description of S&P's Corporate Bond Ratings


AAA  --  Debt  rated  AAA  has  the  highest  rating  assigned  by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.


AA -- Debt  rated  AA has a very  strong  capacity  to pay  interest  and  repay
principal and differs from the higher-rated issues only in small degree.

                                      105
<PAGE>

A -- Debt rated A has a strong  capacity to pay  interest  and repay  principal,
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and  repay  principal.   Whereas  it  normally  exhibits   adequate   protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB -- Debt  rate BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate capacity to meet timely interest and principal payments.

B -- Debt rated B has a greater  vulnerability  to default but currently has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay  principal.  The B rating  category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC -- Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely  payment of interest and repayment of principal.  In the event of adverse
business,  financial,  or  economic  conditions,  it is not  likely  to have the
capacity to pay interest and repay principal.

CC -- Debt rated CC is  typically  applied to debt  subordinated  to senior debt
which is assigned an actual or implied CCC debt rating.

C -- The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation  where a  bankruptcy  petition has been filed but debt service
payments are continued.

CI -- The rating CI is reserved  for income  bonds on which no interest is being
paid.

D -- Debt  rated D is in payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless S&P believes that such payments
will be made during such grace  period.  The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or minus (-):  The  ratings  from "AA" to "CCC" may be  modified by the
addition  of a plus or minus  sign to show  relative  standing  within the major
rating categories.

Fitch's Long-Term Debt Ratings
Investment Grade

AAA
Highest credit  quality.  "AAA" ratings denote the lowest  expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment  of  financial  commitments.  This  capacity  is highly  unlikely  to be
adversely affected by foreseeable events.

AA
Very high credit  quality.  "AA" ratings denote a very low expectation of credit
risk.  They  indicate  very  strong  capacity  for timely  payment of  financial
commitments.  This  capacity  is not  significantly  vulnerable  to  foreseeable
events.

                                      106
<PAGE>

A
High credit  quality.  "A" ratings denote a low  expectation of credit risk. The
capacity for timely payment of financial  commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB
Good  credit  quality.  "BBB"  ratings  indicate  that there is  currently a low
expectation  of credit  risk.  The  capacity  for timely  payment  of  financial
commitments is considered adequate,  but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity.  This is the lowest
investment-grade category.

Speculative Grade

BB
Speculative.  "BB" ratings  indicate that there is a possibility  of credit risk
developing,  particularly  as the result of adverse  economic  change over time;
however,  business or financial alternatives may be available to allow financial
commitments  to be met.  Securities  rated in this  category are not  investment
grade.

B
Highly  speculative.  "B"  ratings  indicate  that  significant  credit  risk is
present,  but a limited  margin of safety  remains.  Financial  commitments  are
currently being met; however,  capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC, CC, C
High default risk. Default is a real possibility. Capacity for meeting financial
commitments is solely  reliant upon  sustained,  favorable  business or economic
developments.  A "CC"  rating  indicates  that  default  of  some  kind  appears
probable. "C" ratings signal imminent default.

DDD, DD, D
Default.  The  ratings  of  obligations  in this  category  are  based  on their
prospects  for  achieving  partial  or  full  recovery  in a  reorganization  or
liquidation  of  the  obligor.   While  expected   recovery  values  are  highly
speculative  and cannot be estimated with any precision,  the following serve as
general  guidelines.  "DDD" obligations have the highest potential for recovery,
around  90%-100% of  outstanding  amounts and accrued  interest.  "DD" indicates
potential  recoveries  in the  range  of  50%-90%  and "D" the  lowest  recovery
potential, i.e., below 50%.

Entities  rated  in  this  category  have  defaulted  on  some  or all of  their
obligations.  Entities  rated "DDD" have the highest  prospect for resumption of
performance  or  continued  operation  with or  without a formal  reorganization
process.  Entities  rated  "DD"  and  "D"  are  generally  undergoing  a  formal
reorganization or liquidation process;  those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect of repaying all obligations.

Notes:

"+" or "-" may be appended to a rating to denote  relative  status  within major
rating  categories.  Such  suffixes  are not added to the "AAA"  category  or to
categories below "CCC".

"NR"  indicates that Fitch Ratings does not publicly rate the issuer or issue in
question.

"Withdrawn":  A rating is  withdrawn  when  Fitch  Ratings  deems the  amount of
information  available  to  be  inadequate  for  rating  purposes,  or  when  an
obligation matures, is called, or refinanced.

Rating Watch:  Ratings are placed on Rating Watch to notify investors that there
is a reasonable  probability of a rating change and the likely direction of such
change.  These are  designated as  "Positive,"  indicating a potential  upgrade,
"Negative," for a potential downgrade,  or "Evolving," if ratings may be raised,
lowered or  maintained.  Rating  Watch is typically  resolved  over a relatively
short period.


                                      107
<PAGE>
A Rating  Outlook  indicates the direction a rating is likely to move over a one
to two-year period. Outlooks may be positive, stable, or negative. A positive or
negative Rating Outlook does not imply a rating change is inevitable. Similarly,
ratings for which outlooks are "stable"  could be upgraded or downgraded  before
an outlook  moves to  positive  or negative  if  circumstances  warrant  such an
action. Occasionally,  Fitch may be unable to identify the fundamental trend and
in these cases, the Rating Outlook may be described as "evolving."

Description of Moody's Short-Term Debt Ratings

Issuers  rated  Prime-1 (or  related  supporting  institutions)  have a superior
capacity for repayment of short-term promissory  obligations.  Prime-1 repayment
capacity will normally be evidenced by the  following  characteristics:  leading
market positions in well-established  industries;  high rates of return on funds
employed;  conservative capitalization structures with moderate reliance on debt
and  ample  asset  protection;  broad  margins  in  earnings  coverage  of fixed
financial charges and high internal cash generation;  well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers  rated  Prime-2  (or  related  supporting  institutions)  have a  strong
capacity for repayment of short-term promissory obligations.  This will normally
be evidenced by many of the characteristics  cited above but to a lesser degree.
Earnings  trends and  coverage  ratios,  while  sound,  will be more  subject to
variation. Capitalization characteristics,  while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rates Prime-3 (or related  supporting  institutions)  have an acceptable
capacity  for  repayment of  short-term  promissory  obligations.  The effect of
industry   characteristics  and  market  composition  may  be  more  pronounced.
Variability in earnings and  profitability may result in changes in the level of
debt protection  measurements  and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Description of S&P Short-Term Issuer Credit Ratings

A-1  An  obligor  rated  "A-1"  has  STRONG   capacity  to  meet  its  financial
commitments.  It is rated in the highest  category by Standard & Poor's.  Within
this  category,  certain  obligors  are  designated  with a plus sign (+).  This
indicates  that the  obligor's  capacity to meet its  financial  commitments  is
EXTREMELY STRONG.

A-2 An obligor  rated  "A-2" has  SATISFACTORY  capacity  to meet its  financial
commitments.  However, it is somewhat more susceptible to the adverse effects of
changes in  circumstances  and economic  conditions than obligors in the highest
rating category.

A-3 An  obligor  rated  "A-3"  has  ADEQUATE  capacity  to  meet  its  financial
obligations.  However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened  capacity of the obligor to meet its financial
commitments.

Description of Fitch's Commercial Paper Ratings

F1
Highest credit quality.  Indicates the strongest  capacity for timely payment of
financial commitments;  may have an added "+" to denote any exceptionally strong
credit feature.

F2
Good credit  quality.  A  satisfactory  capacity for timely payment of financial
commitments,  but the  margin  of  safety  is not as great as in the case of the
higher ratings.

F3
Fair credit quality. The capacity for timely payment of financial commitments is
adequate;  however,  near-term  adverse  changes  could result in a reduction to
non-investment grade.

                                      108
<PAGE>

B
Speculative.  Minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

C
High default risk. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained,  favorable business and economic
environment.

D
Default. Denotes actual or imminent payment default.

Notes

"+" or "-" may be  appended to an "F1" rating  class to denote  relative  status
within the category.

"NR"  indicates that Fitch Ratings does not publicly rate the issuer or issue in
question.

"Withdrawn":  A rating is  withdrawn  when  Fitch  Ratings  deems the  amount of
information  available  to  be  inadequate  for  rating  purposes,  or  when  an
obligation matures, is called, or refinanced.Rating Watch: Ratings are placed on
Rating

Watch to notify  investors  that there is a reasonable  probability  of a rating
change  and the  likely  direction  of such  change.  These  are  designated  as
"Positive,"  indicating  a  potential  upgrade,   "Negative,"  for  a  potential
downgrade,  or  "Evolving,"  if ratings  may be raised,  lowered or  maintained.
Rating Watch is typically resolved over a relatively short period.



                                      109
<PAGE>

                                             STATEMENT OF ADDITIONAL INFORMATION


                                                                February 1, 2008



Investment Advisor
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY 10154


Administrator
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY  10154

Transfer Agent
DWS SCUDDER INVESTMENTS SERVICE COMPANY
222 South Riverside Plaza
Chicago, IL 60606-5808

Custodian
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110

Distributor
DWS SCUDDER DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606-5808

Independent Registered Public Accounting Firm
PRICEWATERHOUSECOOPERS LLP
125 High Street
Boston, MA 02110

Legal Counsel
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, NY  10019-6099

No  person  has  been  authorized  to  give  any  information  or  to  make  any
representations other than those contained in the Fund's Prospectus,  its SAI or
the Fund's  official  sales  literature in  connection  with the offering of the
Fund's shares and, if given or made, such other  information or  representations
must not be  relied on as having  been  authorized  by the  Trust.  Neither  the
Prospectus  nor this SAI  constitute  an offer in any state in which,  or to any
person to whom, such offer may not lawfully be made.






                                      110

<PAGE>

                            PART C. OTHER INFORMATION

<TABLE>
<CAPTION>
Item 23.          Exhibits
--------          --------
                  <S>      <C>        <C>
                  (a)      (1)       Amended and Restated Declaration of Trust dated June 27, 2006; (17)

                           (2)       Amended and Restated Designation of Series and Classes of Shares of Beneficial
                                     Interest dated June 27, 2006; (13)

                           (3)       Amended and Restated Designation of Series and Classes of Shares of Beneficial
                                     Interest dated September 21, 2006; (14)

                           (4)       Amended and Restated Designation of Series and Classes of Shares of Beneficial
                                     Interest dated November 17, 2006; (14)

                           (5)       Amended and Restated Designation of Series and Classes of Shares of Beneficial
                                     Interest dated December 21, 2006; (14)

                           (6)       Secretary's Certificate regarding the Establishment and Designation of Class B
                                     shares for DWS Short Duration Fund, dated February 20, 2007; (1)(5)

                  (b)                By-Laws of DWS Advisor Funds, dated June 27, 2006; (1)(2)

                  (c)                Incorporated by reference to Exhibit (a)(1) above;


                  (d)      (1)       Amended and Restated Investment Management Agreement dated July 3, 2006, between
                                     the Registrant and Deutsche Investment Management Americas Inc. on behalf of Cash
                                     Management Fund Investment, Tax Free Money Fund Investment, NY Tax Fee Money
                                     Fund, Treasury Money Fund Investment, DWS Mid Cap Growth Fund, DWS Small Cap
                                     Growth Fund, DWS Short Duration Plus Fund, DWS Core Fixed Income Fund, DWS High
                                     Income Plus Fund, DWS International Select Equity Fund, DWS Lifecycle Long Range
                                     Fund, DWS Micro Cap Fund, DWS RREEF Real Estate Securities Fund, DWS RREEF Global
                                     Real Estate Securities Fund, DWS Short-Term Municipal Bond Fund, Money Market
                                     Fund Investment and DWS Short Duration Fund; (17)

                           (2)       Sub-advisory Agreement between Deutsche Investment Management Americas Inc., in
                                     regards to DWS RREEF Global Real Estate Securities Fund, and RREEF America
                                     L.L.C., dated July 3, 2006; (17)

                           (3)       Sub-Subadvisory Agreement between RREEF America L.L.C., in regards to DWS RREEF
                                     Global Real Estate Securities Fund, and Deutsche Asset Management International
                                     GmbH, dated July 3, 2006; (17)

                           (4)       Sub-Sub-Subadvisory Agreement between Deutsche Asset Management International
                                     GmbH, in regards to DWS RREEF Global Real Estate Securities Fund, and RREEF
                                     Global Advisors Limited, dated June 27, 2006; (17)

                           (5)       Sub-Subadvisory Agreement between RREEF America L.L.C., in regards to DWS RREEF
                                     Global Real Estate Securities Fund, and Deutsche Asset Management (Hong Kong),
                                     Limited, dated July 3, 2006; (17)


                                       3
<PAGE>

                           (6)       Sub-Subadvisory Agreement between RREEF America L.L.C., in regards to DWS RREEF
                                     Global Real Estate Securities Fund, and Deutsche Investments Australia Limited,
                                     dated July 3, 2006; (17)

                           (7)       Sub-advisory Agreement between Deutsche Asset Management, Inc., in regards to DWS
                                     RREEF Real Estate Securities Fund, and RREEF America L.L.C.; (17)

                           (8)       Sub-advisory Agreement between Deutsche Investment Management Americas Inc., in
                                     regards to DWS Lifecycle Long Range Fund, and Northern Trust Investments, N.A.,
                                     dated July 7, 2006 as revised January 1, 2007, (18)

                           (9)       Sub-advisory Agreement between Deutsche Investment Management Americas Inc., in
                                     regards to DWS Lifecycle Long Range Fund, DWS Core Fixed Income Fund and DWS
                                     Short Duration Fund, and Aberdeen Asset Management Inc., dated December 2, 2005
                                     as revised January 1, 2007, filed herein.

                  (e)                Distribution Agreement dated August 19, 2002; (1)

                  (f)      (1)       Form of Retirement Agreement between the Registrant and each of Martin J. Gruber,
                                     Graham E. Jones and Carl W. Vogt dated November 14, 2007, is filed herein;

                           (2)       Indemnification and Reimbursement Agreement between the Registrant and DIMA dated
                                     November 14, 2007, is filed herein;

                  (g)      (1)       Master Custodian Agreement between the Registrant and State Street Bank and Trust
                                     Company dated March 22, 2007; (18)

                           (2)       Master Custodian Agreement between the Registrant and Brown Brothers Harriman &
                                     Co. on behalf of DWS RREEF Global Real Estate Securities Fund and DWS
                                     International Select Equity Fund, dated February 1, 2007, is filed herein;

                  (h)      (1)       Form of Administrative Services Agreement between the Registrant and Deutsche
                                     Investment Management Americas Inc., is filed herein;

                           (2)       Agency Agreement between Scudder Investments Service Company and DST Systems,
                                     Inc., dated January 15, 2003; (2)

                           (3)       Transfer Agency and Services Agreement, dated June 1, 2006, between Registrant
                                     and DWS Scudder Investments Service Company; (14)

                           (4)       Letters of Indemnity to the Scudder Funds and Independent Directors/Trustees
                                     dated October 8, 2004; (6)

                           (5)       Amendment dated November 17, 2004 to Exhibit A of the Expense Limitation
                                     Agreement dated April 25, 2003; (7)

                           (6)       Form of Mutual Fund Rule 22c-2 Information Sharing Agreement between DWS Scudder
                                     Distributors, Inc. and certain financial intermediaries; (17)

                           (7)       Transfer Agency Fee Schedule dated October 1, 2006; (17)

                           (8)       Form of Expense Limitation Agreement, is filed herein;

                                       4
<PAGE>

                  (i)      (1)       Opinion and Consent of Willkie Farr & Gallagher LLP relating to Scudder
                                     PreservationPlus Fund - Classes A, C and Investment, Scudder Mid Cap Fund -
                                     Classes A, B, C, R, Institutional and Investment;(3), (11)

                           (2)       Opinion and Consent of Bingham McCutchen LLP relating to Scudder PreservationPlus
                                     Fund - Classes A, C and Investment, Scudder Mid Cap Fund - Classes A, B, C, R,
                                     Institutional and Investment; (3), (11)

                           (3)       Opinion and Consent of Willkie Farr & Gallagher LLP relating to Cash Management
                                     Fund Investment, Treasury Money Fund Investment, Tax Free Money Fund Investment,
                                     N.Y. Tax Free Money Fund;(4)

                           (4)       Opinion and Consent of Willkie Farr & Gallagher LLP relating to Scudder Small Cap
                                     Growth Fund - Class S and AARP shares;(5)

                           (5)       Opinion and Consent of Bingham McCutchen LLP relating to Scudder Small Cap Growth
                                     Fund - Class S and AARP shares;(5)

                           (6)       Opinion and Consent of Willkie Farr & Gallagher relating to DWS Lifecycle Long
                                     Range Fund, Classes Investment and Institutional;(9)

                           (7)       Opinion and Consent of Bingham McCutchen LLP relating to DWS Lifecycle Long Range
                                     Fund, Classes Investment and Institutional;(9)

                           (8)       Opinion and Consent of Willkie Farr & Gallagher relating to DWS RREEF Global Real
                                     Estate Securities Fund, Classes A, C, Institutional and S;(10)

                           (9)       Opinion and Consent of Bingham McCutcheon LLP relating to DWS RREEF Global Real
                                     Estate Securities Fund, Classes A, C, Institutional and S; (10)

                           (10)      Opinion and Consent of Willkie Farr & Gallagher LLP relating to DWS Core Fixed
                                     Income Fund - Classes A, B, C, R, S, Institutional and Investment, DWS High
                                     Income Plus Fund - Classes A, B, C, S, AARP, Premier, Institutional and
                                     Investment, DWS Micro Cap Fund - Classes A, B, C, S, Institutional and
                                     Investment, DWS Short-Term Municipal Bond Fund - Classes A, B, C, S,
                                     Institutional and Investment, DWS International Select Equity Fund - Classes A,
                                     B, C, R, S, Premier, Institutional and Investment, Money Market Fund Investment,
                                     DWS RREEF Real Estate Securities Fund - Classes A, B, C, R, S and
                                     Institutional;(11)

                           (11)      Opinion and Consent of Bingham McCutchen LLP relating to DWS Core Fixed Income
                                     Fund - Classes A, B, C, R, S, Institutional and Investment, DWS High Income Plus
                                     Fund - Classes A, B, C, S, AARP, Premier, Institutional and Investment, DWS Micro
                                     Cap Fund - Classes A, B, C, S, Institutional and Investment, DWS Short-Term
                                     Municipal Bond Fund - Classes A, B, C, S, Institutional and Investment, DWS
                                     International Select Equity Fund - Classes A, B, C, R, S, Premier, Institutional
                                     and Investment, Money Market Fund Investment, DWS RREEF Real Estate Securities
                                     Fund - Classes A, B, C, R, S and Institutional;(11)

                           (12)      Opinion and Consent of Willkie Farr & Gallagher LLP relating to NY Tax Free Money
                                     Fund, Tax-Exempt New York Money Market Fund shares; (12)

                           (13)      Opinion and Consent of Bingham McCutchen LLP relating to NY Tax Free Money Fund,
                                     Tax-Exempt New York Money Market Fund shares; (12)


                                       5
<PAGE>

                           (14)      Opinion and Consent of Willkie Farr & Gallagher LLP relating to DWS Short
                                     Duration Fund; (13)

                           (15)      Opinion and Consent of Bingham McCutchen LLP relating to DWS Short Duration Fund;
                                     (13)

                           (16)      Opinion and Consent of Willkie Farr & Gallagher LLP relating to DWS Short
                                     Duration Plus Fund - Class B shares; (15)

                           (17)      Opinion and Consent of Bingham McCutchen LLP relating to DWS Short Duration Plus
                                     Fund - Class B shares; (15)

                  (j)                Consent of Independent Registered Public Accounting Firm, is filed herein;

                  (k)                Not applicable;

                  (1)                Not applicable;

                  (m)      (1)       Rule 12b-1 Plan for DWS Micro Cap Fund - Class A shares, dated June 27, 2006;
                                     (14)

                           (2)       Rule 12b-1 Plan for DWS Micro Cap Fund - Class B shares, dated July 7, 2006;
                                     (14)

                           (3)       Rule 12b-1 Plan for DWS Micro Cap Fund - Class C shares, dated July 7, 2006;
                                     (14)

                           (4)       Rule 12b-1 Plan for DWS Mid Cap Growth Fund - Class A shares, dated June 27,
                                     2006; (14)

                           (5)       Rule 12b-1 Plan for DWS Mid Cap Growth Fund - Class B shares, dated June 1, 2006;
                                     (14)

                           (6)       Rule 12b-1 Plan for DWS Mid Cap Growth Fund - Class C shares, dated June 1, 2006;
                                     (14)

                           (7)       Rule 12b-1 Plan for DWS Short Duration Plus Fund - Class A shares, dated June 27,
                                     2006; (14)

                           (8)       Rule 12b-1 Plan for DWS Short Duration Plus Fund - Class C shares, dated June 27,
                                     2006; (14)

                           (9)       Rule 12b-1 Plan for DWS Small Cap Growth Fund - Class A shares, dated June 27,
                                     2006; (14)

                           (10)      Rule 12b-1 Plan for DWS Small Cap Growth Fund - Class B shares, dated July 1,
                                     2006; (14)

                           (11)      Rule 12b-1 Plan for DWS Small Cap Growth Fund - Class C shares, dated July 1,
                                     2006; (14)

                           (12)      Rule 12b-1 Plan for DWS RREEF Global Real Estate Securities Fund - Class A
                                     shares, dated July 5, 2006; (17)

                           (13)      Rule 12b-1 Plan for DWS RREEF Global Real Estate Securities Fund - Class C
                                     shares, dated July 5, 2006; (17)


                                       6
<PAGE>

                           (14)      Rule 12b-1 Plan for DWS Short Duration Plus Fund - Class B shares, dated April
                                     23, 2006; (17)

                           (15)      Rule 12b-1 Plan for DWS International Select Equity Fund - Class B, dated August
                                     1, 2006; (16)


                  (n)                Amended and Restated Multi-Distribution System Plan with respect to DWS Advisor
                                     Funds, pursuant to Rule 18f-3, (18)

                  (p)      (1)       Code of Ethics for Deutsche Asset Management -- U.S., dated January 1, 2008, is
                                     filed herein;

                           (2)       Consolidated Fund Code of Ethics dated March 14, 2006; (8)

                           (3)       Code of Ethics for Deutsche Asset Management (Asia) Limited and Deutsche Asset
                                     Management (Hong Kong) Limited, dated December 3, 2007, is filed herein;

                  (q)                Power of Attorney, dated June 27, 2006; (10)
--------------------
</TABLE>

(1)      Incorporated by reference to Post-Effective Amendment No. 95 to
         Registrant's Registration Statement as filed with the Commission on
         November 27, 2002.

(2)      Incorporated by reference to Post-Effective Amendment No. 100 to
         Registrant's Registration Statement as filed with the Commission on
         April 30, 2003.

(3)      Incorporated by reference to Post-Effective Amendment No. 105 to
         Registrant's Registration Statement as filed with the Commission on
         January 30, 2004.

(4)      Incorporated by reference to Post-Effective Amendment No. 107 to
         Registrant's Registration Statement as filed with the Commission on
         April 29, 2004.

(5)      Incorporated by reference to Post-Effective Amendment No. 113 to
         Registrant's Registration Statement as filed with the Commission on
         August 31, 2004.

(6)      Incorporated by reference to Post-Effective Amendment No. 114 to
         Registrant's Registration Statement as filed with the Commission on
         December 3, 2004.

(7)      Incorporated by reference to Post-Effective Amendment No. 116 to
         Registrant's Registration Statement as filed with the Commission on
         February 1, 2005.

(8)      Incorporated by reference to Post-Effective Amendment No. 133 to
         Registrant's Registration Statement as filed with the Commission on
         April 28, 2006.

(9)      Incorporated by reference to Post-Effective Amendment No. 138 to
         Registrant's Registration Statement as filed with the Commission on
         June 13, 2006.

(10)     Incorporated by reference to Post-Effective Amendment No. 141 to
         Registrant's Registration Statement as filed with the Commission on
         June 30, 2006.

(11)     Incorporated by reference to Post-Effective Amendment No. 142 to
         Registrant's Registration Statement as filed with the Commission on
         June 30, 2006.

(12)     Incorporated by reference to Post-Effective Amendment No. 145 to
         Registrant's Registration Statement as filed with the Commission on
         August 14, 2006.

                                       7
<PAGE>

(13)     Incorporated by reference to Post-Effective Amendment No. 146 to
         Registrant's Registration Statement as filed with the Commission on
         August 18, 2006.

(14)     Incorporated by reference to Post-Effective Amendment No. 149 to
         Registrant's Registration Statement as filed with the Commission on
         January 26, 2007.

(15)     Incorporated by reference to Post-Effective Amendment No. 150 to
         Registrant's Registration Statement as filed with the Commission on
         February 20, 2007.

(16)     Incorporated by reference to Post-Effective Amendment No. 151 to
         Registrant's Registration Statement as filed with the Commission on
         February 28, 2007.

(17)     Incorporated by reference to Post-Effective Amendment No. 153 to
         Registrant's Registration Statement as filed with the Commission on
         April 30, 2007.

(18)     Incorporated by reference to Post-Effective Amendment No. 155 to
         Registrant's Registration Statement as filed with the Commission on
         August 1, 2007.

Item 24.          Persons Controlled by or Under Common Control with Registrant
--------          -------------------------------------------------------------

                  Information pertaining to persons controlled by or under
                  common control with Registrant is incorporated by reference
                  from the Statement of Additional Information contained in Part
                  B of this Registration Statement.

Item 25.          Indemnification
--------          ---------------

Article IV of the Registrant's Agreement and Declaration of Trust (Exhibit
(a)(1) hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which such Trustee would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his or her office.

The Registrant has purchased insurance policies insuring its officers and
trustees against certain liabilities which such officers and trustees may incur
while acting in such capacities and providing reimbursement to the Registrant
for sums which it may be permitted or required to pay to its officers and
trustees by way of indemnification against such liabilities, subject to certain
deductibles.

On April 5, 2002, Zurich Scudder Investments, Inc. ("Scudder"), the investment
adviser, now known as Deutsche Investment Management Americas Inc., was acquired
by Deutsche Bank AG, not including certain U.K. Operations (the "Transaction").
In connection with the Trustees' evaluation of the Transaction, Deutsche Bank
agreed to indemnify, defend and hold harmless Registrant and the trustees who
were not "interested persons" of Scudder, Deutsche Bank or Registrant (the
"Independent Trustees") for and against any liability and claims and expenses
based upon or arising from, whether in whole or in part, or directly or
indirectly, any untrue statement or alleged untrue statement of a material fact
made to the Independent Trustees by Deutsche Bank in connection with the
Independent Trustees' consideration of the Transaction, or any omission or
alleged omission of a material fact necessary in order to make statements made,
in light of the circumstances under which they were made, not misleading.

Deutsche Investment Management Americas Inc. (hereafter, "DIMA"), the investment
advisor, has agreed, subject to applicable law and regulation, to indemnify and
hold harmless the Registrant against any loss, damage, liability and expense,
including, without limitation, the advancement and payment, as incurred, of
reasonable fees and expenses of counsel (including counsel to the Registrant and
counsel to the Independent Trustees) and consultants, whether retained by the
Registrant or the Independent Trustees, and other customary costs and expenses
incurred by


                                       8
<PAGE>

the Registrant in connection with any litigation or regulatory action related to
possible improper market timing or other improper trading activity or possible
improper marketing and sales activity in the Registrant ("Private Litigation and
Enforcement Actions"). In the event that this indemnification is unavailable to
the Registrant for any reason, then DIMA has agreed to contribute to the amount
paid or payable by the Registrant as a result of any loss, damage, liability or
expense in such proportion as is appropriate to reflect the relative fault of
DIMA and the Registrant with respect to the matters which resulted in such loss,
damage, liability or expense, as well as any other relevant equitable
considerations; provided, that if no final determination is made in such action
or proceeding as to the relative fault of DIMA and the Registrant, then DIMA
shall pay the entire amount of such loss, damage, liability or expense.

In recognition of its undertaking to indemnify the Registrant, and in light of
the rebuttable presumption generally afforded to non-interested board members of
an investment company that they have not engaged in disabling conduct, DIMA has
also agreed, subject to applicable law and regulation, to indemnify and hold
harmless each of the Independent Trustees against any and all loss, damage,
liability and expense, including without limitation the advancement and payment
as incurred of reasonable fees and expenses of counsel and consultants, and
other customary costs and expenses incurred by the Independent Trustees, arising
from the matters alleged in any Private Litigation and Enforcement Actions or
matters arising from or similar in subject matter to the matters alleged in the
Private Litigation and Enforcement Actions (collectively, "Covered Matters"),
including without limitation:

                  1. all reasonable legal and other expenses incurred by the
                  Independent Trustees in connection with the Private Litigation
                  and Enforcement Actions, and any actions that may be
                  threatened or commenced in the future by any person (including
                  any governmental authority), arising from or similar to the
                  matters alleged in the Private Litigation and Enforcement
                  Actions, including without limitation expenses related to the
                  defense of, service as a witness in, or monitoring of such
                  proceedings or actions;

                  2. all liabilities and reasonable legal and other expenses
                  incurred by any Independent Trustee in connection with any
                  judgment resulting from, or settlement of, any such
                  proceeding, action or matter;

                  3. any loss or reasonable legal and other expenses incurred by
                  any Independent Trustee as a result of the denial of, or
                  dispute about, any insurance claim under, or actual or
                  purported rescission or termination of, any policy of
                  insurance arranged by DIMA (or by a representative of DIMA
                  acting as such, acting as a representative of the Registrant
                  or of the Independent Trustees or acting otherwise) for the
                  benefit of the Independent Trustee, to the extent that such
                  denial, dispute or rescission is based in whole or in part
                  upon any alleged misrepresentation made in the application for
                  such policy or any other alleged improper conduct on the part
                  of DIMA, any of its corporate affiliates, or any of their
                  directors, officers or employees;

                  4. any loss or reasonable legal and other expenses incurred by
                  any Independent Trustee, whether or not such loss or expense
                  is incurred with respect to a Covered Matter, which is
                  otherwise covered under the terms of any specified policy of
                  insurance, but for which the Independent Trustee is unable to
                  obtain advancement of expenses or indemnification under that
                  policy of insurance, due to the exhaustion of policy limits
                  which is due in whole or in part to DIMA or any affiliate
                  thereof having received advancement of expenses or
                  indemnification under that policy for or with respect to any
                  Covered Matter; provided, that the total amount that DIMA will
                  be obligated to pay under this provision for all loss or
                  expense shall not exceed the amount that DIMA and any of its
                  affiliates actually receive under that policy of insurance for
                  or with respect to any and all Covered Matters; and

                  5. all liabilities and reasonable legal and other expenses
                  incurred by any Independent Trustee in connection with any
                  proceeding or action to enforce his or her rights under the
                  agreement, unless DIMA prevails on the merits of any such
                  dispute in a final, nonappealable court order.

                                       9
<PAGE>

DIMA is not required to pay costs or expenses or provide indemnification to or
for any individual Independent Trustee (i) with respect to any particular
proceeding or action as to which the Board of the Registrant has determined that
such Independent Trustee ultimately would not be entitled to indemnification
with respect thereto, or (ii) for any liability of the Independent Trustee to
the Registrant or its shareholders to which such Independent Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the Independent Trustee's duties as a
Trustee of the Registrant as determined in a final adjudication in such
proceeding or action. In addition, to the extent that DIMA has paid costs or
expenses under the agreement to any individual Independent Trustee with respect
to a particular proceeding or action, and there is a final adjudication in such
proceeding or action of the Independent Trustee's liability to the Registrant or
its shareholders by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the Independent Trustee's duties as a Trustee of the
Registrant, such Independent Trustee has undertaken to repay such costs or
expenses to DIMA.

On November 14, 2007, the Registrant and DIMA entered into an agreement that
provides certain retiring Non-interested Trustees certain assurances regarding
continuation of insurance and indemnification rights. More specifically, the
agreement provides that the Registrant shall take all actions reasonably
necessary to assure that the retirement of certain Non-interested Trustees
and/or the election or appointment of members of the consolidated Board shall
not reduce or impair any rights of those Non-interested Trustees to
indemnification, defense, advancement of expenses, or other rights, for or with
respect to actual or threatened claims, liability, or expense that those
Non-interested Trustees may incur or suffer arising from or with respect to
those Non-interested Trustees' service in such capacity, except to the extent
that the consolidated Board determines in the exercise of its duties to modify
the rights of all Board members, past and present, without distinction. It is
understood that any such modification of rights shall not, without the written
consent of the Non-interested Trustees, serve to modify any contractual rights
that the Non-interested Trustees may have under any agreement to which the
Non-interested Trustees and the Registrant are parties.

For the six-year period following the election or appointment of members of the
consolidated Board, the Registrant currently expect to maintain, D&O/E&O
Insurance and IDL Insurance that is substantially equivalent in scope to the
current coverage, and in amounts providing aggregate coverage with respect to
the Registrant and all funds overseen by the consolidated Board of at least $100
million for D&O/E&O Insurance and at least $25 million for IDL Insurance;
subject however to the right of the consolidated Board in the exercise of its
duties to determine that a lower level of insurance coverage is in the best
interests of the Registrant provided that any such reduction in coverage apply
equally to their present and former Trustees.

Pursuant to the agreement, DIMA has agreed that the retirement of the
Non-interested Trustees under the terms of the retirement agreements shall in no
way affect or diminish the contractual rights of indemnification that the
Non-interested Trustees may have under any agreement of indemnification between
an Non-interested Trustees and DIMA, including without limitation agreements of
indemnification currently in effect with respect to matters related to market
timing and matters related to merged or liquidated funds. Upon request made by
any Non-interested Trustees, DIMA has agreed to execute a separate instrument
confirming the existence and continuation of any such agreement of
indemnification.

In addition, pursuant to the agreement, in the event that the consolidated Board
determines to reduce insurance coverage below the minimum levels stated above,
then DIMA at its expense will purchase excess insurance coverage for the benefit
of the Non-interested Trustees sufficient to maintain such minimum coverage
levels in place for the duration of the period specified in the retirement
agreements, provided that in the event that such excess coverage is not
available in the marketplace on commercially reasonable terms from a
conventional third-party insurer, DIMA (or an affiliate of DIMA) may, at DIMA's
discretion and in lieu of purchasing such excess insurance coverage, elect
instead to provide the Non-interested Trustees substantially equivalent
protection in the form of a written indemnity or financial guaranty reasonably
acceptable to each such Non-interested Trustee.


Item 26.          Business and Other Connections of Investment Advisor
--------          ----------------------------------------------------

During the last two fiscal years, no director or officer of Deutsche Investment
Management Americas Inc., the investment advisor, has engaged in any other
business, profession, vocation or employment of a substantial nature other than
that of the business of investment management and, through affiliates,
investment banking.

                                       10
<PAGE>

Item 27.          Principal Underwriters
--------          ----------------------

         (a)

DWS Scudder Distributors, Inc. acts as principal underwriter of the Registrant's
shares and acts as principal underwriter for registered open-end management
investment companies other funds managed by Deutsche Investment Management
Americas Inc.

         (b)

Information on the officers and directors of DWS Scudder Distributors, Inc.,
principal underwriter for the Registrant, is set forth below. The principal
business address is 222 South Riverside Plaza, Chicago, Illinois 60606.

<TABLE>
<CAPTION>
                      (1)                             (2)                                  (3)
          DWS Scudder Distributors, Inc.
          Name and Principal             Positions and Offices with               Positions and
          Business Address               DWS Scudder Distributors, Inc.           Offices with Registrant
          ----------------               ------------------------------           -----------------------
                <S>                              <C>                                        <C>
         Philipp Hensler                Director, Chairman of the Board and CEO   None
         345 Park Avenue
         New York, NY 10154

         Michael Colon                  Director and Chief Operating Officer      None
         345 Park Avenue
         New York, NY 10154

         Thomas Winnick                 Director and President                    None
         345 Park Avenue
         New York, NY 10154

         Cliff Goldstein                Chief Financial Officer and Treasurer     None
         60 Wall Street
         New York, NY 10005

         Robert Froehlich               Vice President                            None
         222 South Riverside Plaza
         Chicago, IL 60606

         Paul Schubert                  Vice President                            Chief Financial Officer
         345 Park Avenue                                                          and Treasurer
         New York, NY 10154

         Mark Perrelli                  Vice President                            None
         222 South Riverside Plaza
         Chicago, IL 60606

         Donna White                    Chief Compliance Officer                  None
         345 Park Avenue
         New York, NY 10154

         Jason Vazquez                  Vice President and AML Compliance         Anti-Money Laundering
         345 Park Avenue                Officer                                   Compliance Officer
         New York, NY 10154


                                       11
<PAGE>
                      (1)                             (2)                                  (3)
          DWS Scudder Distributors, Inc.
          Name and Principal             Positions and Offices with               Positions and
          Business Address               DWS Scudder Distributors, Inc.           Offices with Registrant
          ----------------               ------------------------------           -----------------------

         Caroline Pearson               Secretary                                 Assistant Secretary
         Two International Place
         Boston, MA 02110

         Philip J. Collora              Assistant Secretary                       None
         222 South Riverside Plaza
         Chicago, IL 60606

         Anjie LaRocca                  Assistant Secretary                       None
         345 Park Avenue
         New York, NY 10154
</TABLE>

         (c)      Not applicable

Item 28.          Location of Accounts and Records
--------          --------------------------------

DWS Advisor Funds:                                   345 Park Avenue
(Registrant)                                         New York, New York  10154

Deutsche Investment Management Americas Inc.         345 Park Avenue
(Investment Advisor)                                 New York, NY 10154

Deutsche Investment Management Americas Inc.         345 Park Avenue
 (Administrator)                                     New York, NY 10154

                                                     Two International Place
                                                     Boston, MA 02110

DWS Scudder Investments Service Company              222 South Riverside Plaza
(Transfer Agent)                                     Chicago, IL 60606

DWS Scudder Distributors, Inc.                       222 South Riverside Plaza
(Distributor)                                        Chicago, IL 60606

State Street Bank and Trust Company                  225 Franklin Street
(Custodian)                                          Boston, MA 02110

Brown Brothers Harriman                              40 Water Street
(Custodian)                                          Boston, MA 02110

DST Systems, Inc.                                    127 West 10th Street
(Sub-Transfer Agent and                              Kansas City, MO 64105
Sub-Dividend Distribution Agent)

Item 29.          Management Services
--------          -------------------

                  See Exhibit (h)(1)

                                       12
<PAGE>

Item 30.          Undertakings
--------          ------------

                  Not applicable

                                       13
<PAGE>

                                   SIGNATURES
                                   ----------


         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and the State of New York on
the 22nd day of January 2008.

                                                  DWS ADVISOR FUNDS

                                                  By:  /s/ Michael G. Clark
                                                       --------------------
                                                       Michael G. Clark

         Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>

 SIGNATURE                                  TITLE                                        DATE
 ---------                                  -----                                        ----
<S>                                         <C>                                          <C>

 /s/ Michael G. Clark
 -------------------------------------
 Michael G. Clark                           President                                    January 22, 2008

 /s/ Paul H. Schubert
 -------------------------------------
 Paul H. Schubert                           Chief Financial Officer and Treasurer        January 22, 2008

 /s/Henry P. Becton, Jr.
 -------------------------------------
 Henry P. Becton, Jr.*                      Trustee                                      January 22, 2008

 /s/Dawn-Marie Driscoll
 -------------------------------------
 Dawn-Marie Driscoll*                       Trustee                                      January 22, 2008

 /s/Keith R. Fox
 -------------------------------------
 Keith R. Fox*                              Trustee                                      January 22, 2008

 /s/Kenneth C. Froewiss
 -------------------------------------
 Kenneth C. Froewiss*                       Trustee                                      January 22, 2008

 /s/Martin J. Gruber
 -------------------------------------
 Martin J. Gruber*                          Trustee                                      January 22, 2008

 /s/Richard J. Herring
 -------------------------------------
 Richard J. Herring*                        Trustee                                      January 22, 2008

 /s/Graham E. Jones
 -------------------------------------
 Graham E. Jones*                           Trustee                                      January 22, 2008

 /s/Rebecca W. Rimel
 -------------------------------------
 Rebecca W. Rimel*                          Trustee                                      January 22, 2008

 /s/William N. Searcy, Jr.
 -------------------------------------
 William N. Searcy, Jr.*                    Trustee                                      January 22, 2008

 /s/Jean Gleason Stromberg
 -------------------------------------
 Jean Gleason Stromberg*                    Trustee                                      January 22, 2008
<PAGE>

 SIGNATURE                                  TITLE                                        DATE
 ---------                                  -----                                        ----

 /s/Carl W. Vogt
 -------------------------------------
 Carl W. Vogt*                              Trustee                                      January 22, 2008

 /s/Axel Schwarzer
 -------------------------------------
 Axel Schwarzer*                            Trustee                                      January 22, 2008
</TABLE>


*By:
         /s/ Caroline Pearson
         --------------------
         Caroline Pearson**
         Assistant Secretary

**       Attorney-in-fact pursuant to the powers of attorney as contained in
         and incorporated by reference to Post-Effective Amendment No. 141 to
         the Registration Statement, as filed on June 30, 2006.


<PAGE>


                                                      1933 Act File No. 33-07404
                                                     1940 Act File No. 811-04760




                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    EXHIBITS

                                       TO

                                    FORM N-1A


                        POST-EFFECTIVE AMENDMENT NO. 156
                            TO REGISTRATION STATEMENT

                                      UNDER

                           THE SECURITIES ACT OF 1933

                                       AND

                                AMENDMENT NO. 156
                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940



                                DWS ADVISOR FUNDS


                                       14
<PAGE>


                                DWS ADVISOR FUNDS

                                  EXHIBIT INDEX
                                  -------------


                                     (d)(9)
                                     (f)(1)
                                     (f)(2)
                                     (g)(2)
                                     (h)(1)
                                     (h)(8)
                                       (j)
                                     (p)(1)
                                     (p)(3)





                                       15