DWS ADVISOR FUNDS

                          DWS Lifecycle Long Range Fund
                              (Institutional Class)



                       STATEMENT OF ADDITIONAL INFORMATION


                  August 1, 2009, As Revised September 15, 2009



This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus dated August 1, 2009, for Institutional
Class, as amended from time to time, for DWS Lifecycle Long Range Fund (the
"Fund"), a series of DWS Advisor Funds (the "Trust"), copies of which may be
obtained without charge by calling (800) 730-1313, through the DWS Investments
Web site at www.dws-investments.com or from the firm from which this Statement
of Additional was obtained and are available along with other materials on the
Securities and Exchange Commission's Internet Web site (http://www.sec.gov).

Portions of the Annual Report to Shareholders, dated March 31, 2009, are
incorporated herein by reference and are deemed to be part of this Statement of
Additional Information as specified herein. 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 Institutional Class shares of the Fund.




                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----


INVESTMENT RESTRICTIONS.....................................................2

INVESTMENT POLICIES AND TECHNIQUES..........................................3
       Investment Techniques................................................3
       Portfolio Holdings..................................................43

MANAGEMENT OF THE FUND.....................................................44
       Investment Advisor..................................................44
       Subadvisor..........................................................46
       Administrator.......................................................51

FUND SERVICE PROVIDERS.....................................................54
       Distributor.........................................................54
       Custodian...........................................................54
       Transfer Agent......................................................54
       Legal Counsel.......................................................55
       Independent Registered Public Accounting Firm.......................55

PORTFOLIO TRANSACTIONS.....................................................55

PURCHASE AND REDEMPTION OF SHARES..........................................60

DIVIDENDS..................................................................68

TAXES......................................................................69

NET ASSET VALUE............................................................76

BOARD MEMBERS AND OFFICERS.................................................78

TRUST ORGANIZATION.........................................................86

PROXY VOTING GUIDELINES....................................................87

FINANCIAL STATEMENTS.......................................................87

ADDITIONAL INFORMATION.....................................................87

APPENDIX A -- PROXY VOTING GUIDELINES......................................90

APPENDIX B -- RATINGS OF INVESTMENTS......................................115



                             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.

The Fund has elected to be classified as a diversified series of the Trust, an
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 or mortgage or hypothecate assets of the Fund, except that
         in an amount not to exceed 1/3 of the current value of the Fund's net
         assets, it may borrow money as a temporary measure for extraordinary or
         emergency purposes and enter into reverse repurchase agreements or
         dollar roll transactions, and except that it may pledge, mortgage or
         hypothecate not more than 1/3 of such assets to secure such borrowings
         (it is intended that money would be borrowed only from banks and only
         either to accommodate requests for the withdrawal of beneficial
         interests (redemption of shares) while effecting an orderly liquidation
         of portfolio securities or to maintain liquidity in the event of an
         unanticipated failure to complete a portfolio security transaction or
         other similar situations) or reverse repurchase agreements, provided
         that collateral arrangements with respect to options and futures,
         including deposits of initial deposit and variation margin, are not
         considered a pledge of assets for purposes of this restriction and
         except that assets may be pledged to secure letters of credit solely
         for the purpose of participating in a captive insurance company
         sponsored by the Investment Company Institute; for additional related
         restrictions, see clause (1) under the caption "Additional
         Restrictions";

2.       underwrite securities issued by other persons except insofar as the
         Trust or the Fund may technically be deemed an underwriter under the
         Securities Act of 1933, as amended (the "1933 Act") in selling a
         portfolio security;

3.       make loans to other persons except: (a) through the lending of the
         Fund's portfolio securities and provided that any such loans not exceed
         30% of the Fund's total assets (taken at market value); (b) through the
         use of repurchase agreements or the purchase of short-term obligations;
         or (c) by purchasing a portion of an issue of debt securities of types
         distributed publicly or privately;

4.       purchase or sell real estate (including limited partnership interests
         but excluding securities secured by real estate or interests therein),
         interests in oil, gas or mineral leases, commodities or commodity
         contracts (except futures and option contracts) in the ordinary course
         of business (except that the Trust may hold and sell, for the Fund's
         portfolio, real estate acquired as a result of the Fund's ownership of
         securities);

5.       concentrate its investments in any particular industry (excluding US
         government securities), but if it is deemed appropriate for the
         achievement of the Fund's investment objective(s), up to 25% of its
         total assets may be invested in any one industry;

6.       issue any senior security (as that term is defined in the Investment
         Company Act of 1940, as amended (the "1940 Act")) if such issuance is
         specifically prohibited by the 1940 Act or the rules and regulations
         promulgated thereunder, provided that collateral arrangements with
         respect to options and futures, including deposits of initial deposit
         and variation margin, are not considered to be the issuance of a senior
         security for purposes of this restriction; and

7.       with respect to 75% of the Fund's total assets, invest more than 5% of
         its total assets in the securities of any one issuer (excluding cash
         and cash-equivalents, US government securities and the securities of
         other investment companies) or own more than 10% of the voting
         securities of any issuer.

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

Additional Restrictions. In order to comply with certain statutes and policies
the Fund (or the Trust, on behalf of the Fund) will not as a matter of operating
policy:

1.       borrow money (including through reverse repurchase agreements) for any
         purpose in excess of 5% of the Fund's net assets (taken at market),
         except that the Fund may borrow for temporary or emergency purposes up
         to 1/3 of its net assets;

2.       pledge, mortgage or hypothecate for any purpose in excess of 10% of the
         Fund's total assets (taken at market value), provided that collateral
         arrangements with respect to options and futures, including deposits of
         initial deposit and variation margin, and reverse repurchase agreements
         are not considered a pledge of assets for purposes of this restriction;

3.       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 margin and variation margin may be made in
         connection with the purchase, ownership, holding or sale of futures;

4.       invest for the purpose of exercising control or management;

5.       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 (a) Rule 144A securities that have been determined
         to be liquid by the Board of Trustees; and (b) commercial paper that is
         sold under section 4(2) of the 1933 Act which: (i) is not traded flat
         or in default as to interest or principal; and (ii) is rated in one of
         the two highest categories by at least two NRSROs and the Fund's Board
         of Trustees have determined the commercial paper to be liquid; or (iii)
         is rated in one of the two highest categories by one NRSRO and the
         Fund's Board of Trustees has determined that the commercial paper is of
         equivalent quality and is liquid.

There will be no violation of any investment restriction if that restriction is
complied with at the time the relevant action is taken notwithstanding a later
change in market value of an investment, in net or total assets, in the
securities rating of the investment, or any other later change.

The Fund's investment objective is not a fundamental policy and may be changed
upon Board approval with 30 days prior written 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.

                       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.

Integrated Global Alpha Platform Strategy ("iGAP Strategy"). In addition to the
Fund's main investment strategy, the Advisor seeks to enhance returns by
employing a global tactical asset allocation overlay strategy. The global
tactical asset allocation strategy, which the Advisor calls iGAP, is a total
return strategy designed to add value by benefiting from mispricings within
global equity, bond and currency markets.

The iGAP strategy combines diverse macro investment views from various
investment teams within Deutsche Asset Management. Because a single investment
approach rarely works in all market conditions, the teams are chosen to
diversify investment approaches thereby enhancing the expected return for a
given level of risk. The collective views are then used to determine iGAP's
positions using a disciplined, risk managed process. The result is a collection
of long and short investment positions within global equity, bond and currency
markets designed to generate excess returns. The equity, bond and currency
positions are then implemented by the iGAP portfolio managers using
exchange-traded futures and over-the-counter forward currency transactions. The
iGAP portfolio managers consider factors such as liquidity, cost, margin
requirement and credit quality when selecting the appropriate derivative or
other instrument. When used as a part of the iGAP strategy, derivatives and
other instruments generally will not be used for hedging purposes.

Asset Segregation. Certain investment transactions expose the Fund to an
obligation to make future payments to third parties. Examples of these types of
transactions, include, but are not limited to, reverse repurchase agreements,
short sales, dollar rolls, when-issued, delayed-delivery or forward commitment
transactions and certain derivatives such as swaps, futures, forwards, and
options. To the extent that the Fund engages in such transactions, the Fund will
(to the extent required by applicable law) either (1) segregate cash or liquid
assets in the prescribed amount or (2) otherwise "cover" its future obligations
under the transaction, such as by holding an offsetting investment. If the Fund
segregates sufficient cash or other liquid assets or otherwise "covers" its
obligations under such transactions, the Fund will not consider the transactions
to be borrowings for purposes of its investment restrictions or "senior
securities" under the 1940 Act, and therefore, such transactions will not be
subject to the 300% asset coverage requirement under the 1940 Act otherwise
applicable to borrowings by the Fund.

In some cases (e.g., with respect to futures and forwards that are contractually
required to "cash-settle"), the Fund will segregate cash or other liquid assets
with respect to the amount of the daily net (marked-to-market) obligation
arising from the transaction, rather than the notional amount of the underlying
contract. By segregating assets in an amount equal to the net obligation rather
than the notional amount, the Fund will have the ability to employ leverage to a
greater extent than if it set aside cash or other liquid assets equal to the
notional amount of the contract, which may increase the risk associated with
such transactions.

The Fund may utilize methods of segregating assets or otherwise "covering"
transactions that are currently or in the future permitted under the 1940 Act,
the rules and regulation thereunder, or orders issued by the Securities and
Exchange Commission ("SEC") thereunder. For these purposes, interpretations and
guidance provided by the SEC staff may be taken into account when deemed
appropriate by the Fund.

Assets used as segregation or cover cannot be sold while the position in the
corresponding transaction is open, unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of a Fund's
assets for segregation and cover purposes could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.

Segregating assets or otherwise "covering" for these purposes does not
necessarily limit the percentage of the assets of the Fund that may be at risk
with respect to certain derivative transactions.

Cash Management Vehicles. 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, assets to cover the Fund's open futures and other
derivatives positions, 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. The Fund may use
Uninvested Cash to purchase shares of affiliated money market funds for which
the Advisor may act as investment advisor now or in the future that are
registered under the 1940 Act or that operate in accordance with Rule 2a-7 under
the 1940 Act but are excluded from the definition of "investment company" under
Section 3(c)(1) or 3(c)(7) of the 1940 Act. Investments in such cash management
vehicles may exceed the limits of Section 12(d)(1)(A) of the 1940 Act.

Equity Securities

General. The Fund may invest in equity securities listed on any domestic or
non-US securities exchange or traded in the over-the-counter ("OTC") market as
well as certain restricted or unlisted securities. As used herein, "equity
securities" include 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).

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 Fund, and thus
the value of your investment. Smaller companies are especially sensitive to
these factors.

Warrants. The 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. This 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
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. The 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 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 Fund.

Convertible Securities. The Fund may invest in 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 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, generally higher in yield than in 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). Because a convertible security is a fixed income security, its
market value generally increases when interest rates decline and generally
decreases when interest rates rise; however, the price of a convertible security
also 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, Small-Capitalization and Micro-Capitalization Stocks. The
Fund may invest in lesser known companies with medium-, small- and micro-market
capitalizations. Such companies frequently offer greater growth potential than
larger, more mature, better-known companies. Investments in such 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
and 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 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. 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.

In addition, many medium-, small- and micro-market 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 such companies and the securities of smaller
capitalization companies may not be readily marketable, making it difficult to
dispose of shares when desirable. Also, the securities of smaller capitalization
companies traded on the over-the-counter 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
capitalization companies.

Fixed Income Securities and Money Market Instruments

General. The Fund may invest in a broad range of domestic and foreign fixed
income (debt) securities. 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 held by the Fund's portfolio generally
varies inversely with changes in interest rates. Prices of fixed income
securities with longer effective maturities are more sensitive to interest rate
changes than those with shorter effective maturities.

In periods of declining interest rates, the yield (the income generated over a
stated period of time) of the 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 the 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 portfolio, thereby reducing the
yield of the Fund. In periods of rising interest rates, the opposite can be
true. The net asset value of the Fund investing in fixed income securities can
generally be expected to change as general levels of interest rates fluctuate.

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); (4) prepayment risk or call risk (the
likelihood that, during 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); and (5)
extension risk (the likelihood that as interest rates increase, slower than
expected principal payments may extend the average life of fixed income
securities, which will have the effect of locking in a below-market interest
rate, increasing the security's duration and reducing the value of the
security).

Short-Term Instruments. At the time of the Fund's investment in short-term
instruments, the issuer (or the issuer's parent) must have outstanding debt
rated within the top two rating categories by a nationally recognized
statistical rating organization ("NRSRO") or, if not so rated, must be believed
by the Advisor to be of comparable quality.

When the Fund experiences large cash inflows, for example, through the sale of
securities or of its shares 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, their agencies, instrumentalities,
authorities or political subdivisions; (2) other investment grade short-term
debt securities; (3) investment grade commercial paper; (4) bank obligations,
including negotiable certificates of deposit, time deposits and banker's
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, commercial paper or bank obligations
rated investment grade; 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.

Obligations of Banks and Other Financial Institutions. The Fund may invest in US
dollar-denominated fixed rate or variable rate obligations of US or foreign
financial institutions, including banks. Obligations of domestic and foreign
financial institutions in which the Fund may invest include (but are not limited
to) certificates of deposit, bankers' acceptances, bank time deposits,
commercial paper, and other instruments issued or supported by the credit of US
or foreign financial institutions, including banks.

For purposes of the Fund's investment policies with respect to bank obligations,
the assets of a bank will be deemed to include the assets of its domestic and
foreign branches. Obligations of foreign branches of US banks and foreign banks
may be general obligations of the parent bank in addition to the issuing bank or
may be limited by the terms of a specific obligation and by government
regulation. If the Advisor deems the instruments to present minimal credit risk,
the Fund may invest in obligations of foreign banks or foreign branches of US
banks, which include banks located in the United Kingdom, Grand Cayman Island,
Nassau, Japan and Canada.

Investments in these obligations may entail risks that are different from those
of investments in obligations of US domestic banks because of differences in
political, regulatory and economic systems and conditions. These risks include
future political and economic developments, currency blockage, the possible
imposition of withholding taxes on interest payments, possible seizure or
nationalization of foreign deposits, difficulty or inability of pursuing legal
remedies and obtaining judgments in foreign courts, possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
that might affect adversely the payment of principal and interest on bank
obligations. Foreign branches of US banks and foreign banks may also be subject
to less stringent reserve requirements and to different accounting, auditing,
reporting and record keeping standards than those applicable to domestic
branches of US banks.

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 up to one year)
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. At the
time of the Fund's investment in commercial paper, the issuer (or the issuer's
parent) must have outstanding debt rated within the top two rating categories by
a NRSRO or, if not so rated, must be believed by the Advisor to be of comparable
quality.

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 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.

For a description of commercial paper ratings, see the Appendix to this SAI.

Variable Rate Master Demand Notes. 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. Because variable rate master demand
notes are direct lending arrangements between the Fund and the issuer, they are
not ordinarily traded. Although no active secondary market may exist for these
notes, the Fund will purchase only those notes under which it may demand and
receive payment of principal and accrued interest daily or may resell the note
to a third party. While the notes are not typically rated by credit rating
agencies, issuers of variable rate master demand notes must satisfy the Advisor,
acting under the supervision of the Board of Trustees, that the same criteria as
set forth above for issuers of commercial paper are met. In the event an issuer
of a variable rate master demand note defaulted on its payment obligation, the
Fund might be unable to dispose of the note because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default. The face maturities of variable rate master demand notes
subject to a demand feature may exceed 397 days in certain circumstances.

US Government Securities. The Fund may invest in obligations issued or
guaranteed by the US government and include: (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 US 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 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")).

The value of the companies' securities fell sharply in 2008 due to concerns that
the firms did not have sufficient capital to offset losses. In mid-2008, the
U.S. Treasury was authorized to increase the size of home loans that FNMA and
FHLMC could purchase in certain residential areas and, until 2009, to lend FNMA
and FHLMC emergency funds and to purchase the companies' stock. More recently,
in September 2008, the U.S. Treasury announced that FNMA and FHLMC had been
placed in conservatorship by the Federal Housing Finance Agency ("FHFA"), a
newly created independent regulator. In addition to placing the companies in
conservatorship, the U.S. Treasury announced three additional steps that it
intended to take with respect to FNMA and FHLMC. First, the U.S. Treasury has
entered into preferred stock purchase agreements ("PSPAs") under which, if the
FHFA determines that FNMA's or FHLMC's liabilities have exceeded its assets
under generally accepted accounting principles, the U.S. Treasury will
contribute cash capital to the company in an amount equal to the difference
between liabilities and assets. The PSPAs are designed to provide protection to
the senior and subordinated debt and the mortgage-backed securities issued by
FNMA and FHLMC. Second, the U.S. Treasury established a new secured lending
credit facility that is available to FNMA and FHLMC until December 2009. Third,
the U.S. Treasury initiated a temporary program to purchase FNMA and FHLMC
mortgage-backed securities, which is expected to continue until December 2009.
No assurance can be given that the U.S. Treasury initiatives discussed above
with respect to the debt and mortgage-backed securities issued by FNMA and FHLMC
will be successful.

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 component
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."

Custodial Receipts. The Fund may invest in custodial receipts which are
interests in separately traded interest and principal component parts of US
government securities that are issued by banks or brokerage firms and are
created by depositing US government securities into a special account at a
custodian bank. The custodian holds the interest and principal payments for the
benefit of the registered owners of the certificates or receipts. The custodian
arranges for the issuance of the certificates or receipts evidencing ownership
and maintains the register. Custodial receipts include Treasury Receipts
("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and Certificates of
Accrual on Treasury Securities ("CATS"). TIGRs and CATS are interests in private
proprietary accounts while TRs and STRIPS are interests in accounts sponsored by
the US Treasury. Receipts are sold as zero coupon securities. See "Zero Coupon
Securities and Deferred Interest Bonds and Deferred Interest Bonds."

The Fund may acquire US government securities and their unmatured interest
coupons that have been separated ("stripped") by their holder, typically a
custodian bank or investment brokerage firm. Having separated the interest
coupons from the underlying principal of the US government securities, the
holder will resell the stripped securities in custodial receipt programs with a
number of different names, including TIGRs, and CATS. The stripped coupons are
sold separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying US Treasury bonds and notes themselves are
generally held in book-entry form at a Federal Reserve Bank. Counsel to the
underwriters of these certificates or other evidences of ownership of US
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying US government securities for federal tax and securities purposes. In
the case of CATS and TIGRS, the Internal Revenue Service (the "IRS") has reached
this conclusion for the purpose of applying the tax diversification requirements
applicable to regulated investment companies such as the Fund. CATS and TIGRS
are not considered US government securities by the staff of the Securities and
Exchange Commission ("SEC"). Further, the IRS conclusion noted above is
contained only in a general counsel memorandum, which is an internal document of
no precedential value or binding effect, and a private letter ruling, which also
may not be relied upon by the Fund. The Trust is not aware of any binding
legislative, judicial or administrative authority on this issue.

Zero Coupon Securities and Deferred Interest Bonds. The 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 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."

Variable Rate Securities. The Fund may invest in long-term maturity securities
which are subject to frequently available put option or tender option features
under which the holder may put the security back to the issuer or its agent at a
predetermined price (generally par) after giving specified notice. The interest
rate on a variable rate security changes at intervals according to an index or a
formula or other standard measurement as stated in the bond contract. One common
method is to calculate the interest rate as a percentage of the rate paid on
selected issues of Treasury securities on specified dates. The put option or
tender option right is typically available to the investor on a weekly or
monthly basis although on some demand securities the investor has a daily right
to exercise the put option. Variable rate securities with the put option
exercisable on dates on which the variable rate changes are often called
"variable rate demand notes." 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.
See "Illiquid Securities."

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

Yields and Ratings. The yields on certain obligations in which the Fund may
invest (such as commercial paper and bank obligations) are dependent on a
variety of factors, including the ratings of the issue. The ratings of S&P,
Moody's and other recognized rating organizations represent their respective
opinions as to the quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality or value.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.

Lower-Rated Debt Securities ("Junk Bonds" or "High Yield Debt Securities"). No
more than 5% of the Fund's net assets (at the time of investment) may be
invested in lower rated (BB/Ba or lower), high yield bonds. The Fund may retain
any bond whose rating drops below investment grade if it is in the best interest
of the respective Fund's shareholders.

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, 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 are 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
yielding 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.

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

Registered Loans. The Fund may invest in loan obligations issued or guaranteed
by sovereign governments or their agencies and instrumentalities. The ownership
of these loans is registered in the books of an agent bank and/or the borrower,
and transfers of ownership are effected by assignment agreements. Documentation
for these assignments includes a signed notice of assignment, which is sent to
the agent and/or borrower for registration shortly after the execution of the
assignment agreement. Prior to the notice of assignment being registered with
the agent and/or borrower, the borrower or its agent will make any payments of
principal and interest to the last registered owner.

Given the volume of secondary market trading in registered loans, the agent
and/or borrower's books may be out of date, making it difficult for the Fund to
establish independently whether the seller of a registered loan is the owner of
the loan. For this reason, the Fund will require a contractual warranty from the
seller to this effect. In addition, to assure the Fund's ability to receive
principal and interest owed to it but paid to a prior holder because of delays
in registration, the Fund will purchase registered loans only from parties that
agree to pay the amount of such principal and interest to the Fund upon demand
after the borrower's payment of such principal and interest to any prior holder
has been established.

Generally, registered loans trade in the secondary market with interest (i.e.,
the right to accrued but unpaid interest is transferred to purchasers).
Occasionally, however, the Fund may sell a registered loan and retain the right
to such interest ("sell a loan without interest"). To assure the Fund's ability
to receive such interest, the Fund will make such sales only to parties that
agree to pay the amount of such interest to the Fund upon demand after the
borrower's payment of such interest to any subsequent holder of the loan has
been established. In this rare situation, the Fund's ability to receive such
interest (and, therefore, the value of shareholders' investments in the Fund
attributable to such interest) will depend on the creditworthiness of both the
borrower and the party who purchased the loan from the Fund.

To further assure the Fund's ability to receive interest and principal on
registered loans, the Fund will only purchase registered loans from, and sell
loans without interest to, parties determined to be creditworthy by the Advisor.
For purposes of the Fund's issuer diversification and industry concentration
policies, the Fund will treat the underlying borrower of a registered loan as an
issuer of that loan. Where the Fund sells a loan without interest, it will treat
both the borrower and the purchaser of the loan as issuers for purposes of this
policy.

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

Other Debt Obligations. The Fund may invest in deposits, bonds, notes and
debentures and other debt obligations that at the time of purchase have, or are
comparable in priority and security to other securities of such issuer which
have, outstanding short-term obligations meeting the above short-term rating
requirements, or if there are no such short-term ratings, are determined by the
Advisor to be of comparable quality and are rated in the top four highest
long-term rating categories by the NRSROs rating such security.

Municipal Securities

General. The Fund may invest in municipal securities. Municipal securities
consist of bonds, notes and other instruments issued by or on behalf of states,
territories and possessions of the United States (including the District of
Columbia) and their political subdivisions, agencies or instrumentalities, the
interest on which is exempt from regular federal income tax (i.e., excluded from
gross income for federal income tax purposes but not necessarily exempt from the
federal alternative minimum tax or from state and local taxes). Municipal
securities may also be issued on a taxable basis (i.e., the interest on such
securities is not exempt from regular federal income tax).

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

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

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

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

An entire issue of municipal securities may be purchased by one or a small
number of institutional investors such as the Fund. 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 are often readily marketable.

The obligations of an issuer to pay the principal 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, as a result of litigation or other conditions, the power or
ability of the issuer to pay principal or interest when due on a municipal
security may be materially affected.

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. 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 Anticipation Notes. Tax anticipation notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipation of
various seasonal tax revenue, such as income, sales, use and business taxes, and
are payable from these specific future taxes.

Revenue Anticipation Notes. Revenue anticipation notes are issued in expectation
of receipt of other types of revenue, such as federal revenues available under
federal revenue sharing programs.

Bond Anticipation Notes. Bond anticipation notes are issued to provide interim
financing until long-term financing can be arranged. In most cases, the
long-term bonds provide funds for the repayment of these notes.

Tax and Revenue Anticipation Notes. Tax and revenue anticipation notes combine
the funding sources of both tax anticipation notes and revenue anticipation
notes.

Construction Loan Notes. Construction loan notes are secured by mortgage notes
insured by the Federal Housing Authority ("FHA"); 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. Construction loan
notes are sold to provide construction financing. Permanent financing, the
proceeds of which are applied to the payment of construction loan notes, is
sometimes provided by a commitment of GNMA to purchase the loan, accompanied by
a commitment by the FHA to insure mortgage advances thereunder. In other
instances, permanent financing is provided by commitments of banks to purchase
the loan. The Fund will only purchase construction loan notes that are subject
to permanent GNMA or bank purchase commitments.

Miscellaneous, Temporary and Anticipatory Instruments. These instruments may
include notes issued to obtain interim financing pending entering into alternate
financial arrangements, such as receipt of anticipated federal, state or other
grants or aid, passage of increased legislative authority to issue longer-term
instruments or obtaining other refinancing.

Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by agencies
of state and local governments to finance seasonal working capital needs or to
provide interim construction financing and are paid from general revenues of the
municipalities or are refinanced with long-term debt. In most cases, tax-exempt
commercial paper is backed by letters of credit, lending agreements, note
repurchase agreements or other credit facility agreements offered by banks or
other institutions.

Municipal Bonds. Municipal bonds generally fund longer-term capital needs than
municipal notes and have maturities exceeding one year when issued. The Fund may
invest in municipal bonds. Municipal bonds include general obligation bonds,
revenue bonds, private activity bonds and tender option bonds.

General Obligation Bonds. Issuers of general obligation bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.

Revenue Bonds. The principal security for a revenue bond is generally the net
revenues derived from a particular facility, group of facilities or, in some
cases, the proceeds of a special excise tax or other specific revenue source.
Revenue bonds are issued to finance a wide variety of capital projects,
including electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund that may be used
to make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, certificates
of deposit and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.

Private Activity Bonds. Private activity bonds, which are considered municipal
obligations if the interest paid thereon is excluded from gross income for
federal income tax purposes and is not a specific tax preference item for
federal individual and corporate alternative minimum tax purposes, are issued by
or on behalf of public authorities to raise money to finance various privately
operated facilities such as manufacturing facilities, certain hospital and
university facilities and housing projects. These bonds are also used to finance
public facilities such as airports, mass transit systems and ports. The payment
of the principal and interest on these bonds is dependent solely on the ability
of the facility's user to meet its financial obligations and generally the
pledge, if any, of real and personal property so financed as security for
payment.

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.

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 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.

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

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

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

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. See "Illiquid
Securities."

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

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

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

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"). See "Investment Company Securities."

Derivative Securities

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. 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, for speculative purposes, 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.

There is a range of risks associated with those uses. 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. 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 could not be purchased for the Fund. The
use of derivatives for non-hedging purposes may be considered speculative.

The Fund's investment in options, futures or forward contracts, swaps and
similar strategies (collectively, "derivatives") depends on the Advisor's
judgment as to the potential risks and rewards of different types of strategies.
Derivatives 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, derivative strategies may lower the Fund's return. The Fund could
also experience losses if the prices of its derivative 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.

Derivative Securities:  Options

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) 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 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 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 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 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. Where 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.

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 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 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 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 effect 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 recognized foreign exchanges. The Fund may
also purchase and sell options traded on US exchanges and, to the extent
permitted by law, options traded in the OTC market.

The Fund may also engage in options transactions in the OTC market with
broker-dealers who make markets in these options. The Fund will engage in OTC
options only with broker-dealers deemed by the Advisor to be creditworthy. 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 a counter party
approved for these purposes by the Advisor. The Advisor will monitor the
creditworthiness of dealers with whom the Fund enters into such options
transactions.

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, fluctuating 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 Standard & Poor's 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
securities 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 receive upon exercise a cash payment based on the level of the
index on the exercise date. The Fund would ordinarily have a gain if the value
of the index increased above the exercise price sufficiently to cover the
premium and would have a loss if the value of the index remained at or below the
exercise price during the option period.

As discussed in "Options on Securities," the Fund would normally purchase
"protective puts" in anticipation of a decline in the market value of the
relevant index. The purchase of a put option would entitle the Fund, in exchange
for the premium paid, to receive upon exercise a cash payment based on the level
of the index on the exercise date. The purchase of protective puts is generally
designed 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 security, 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 securities prices in the securities
market generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular security.
Accordingly, successful use by the Fund of options on securities indices will be
subject to the Advisor's ability to predict correctly movements in the direction
of the securities market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual securities.

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 may be 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 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.

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.

Options on Non-US Securities Indices. The Fund may purchase and write put and
call options on foreign securities indices listed on domestic and foreign
securities exchanges. The Fund may also purchase and write OTC options on
foreign securities indices.

The Fund may, to the extent allowed by federal and state securities laws, invest
in options on non-US securities indices instead of investing directly in
individual non-US securities. The Fund may also use foreign securities index
options for bona fide hedging and non-hedging purposes.

Yield Curve Options. The Fund may enter into options on the yield spread or
yield differential between two securities. These options are referred to as
yield curve options. In contrast to other types of options, a yield curve option
is based on the difference between the yields of designated securities, rather
than the prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this
differential widens (in the case of a call) or narrows (in the case of a put),
regardless of whether the yields of the underlying securities increase or
decrease.

Spreadlocks. The Fund may enter into spreadlocks. A spreadlock is a form of swap
contract which is an exchange of a one time cash payment between the Fund and
another party which is based on a specific financial index. A spreadlock allows
an interest rate swap user to lock in the forward differential between the
interest rate swap rate and the yield of the government bond underlying the
swap. Essentially, a spreadlock allows the investor to buy or sell the spread
forward by entering into a forward contract on the swap spread (i.e., the spread
between the government yield and the swap rate (or yield)) for a given maturity.
The price of a spreadlock is determined by the yield spread between a forward
starting fixed/floating swap and a forward transaction in a government bond. The
value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation up until the agreement matures at which
time the cash payment, based on the value of the swap on the maturity date, is
exchanged between the two parties.

Derivative Securities:  Futures Contracts and Options on Futures Contracts

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 will engage in futures and related options transactions only for bona
fide hedging or other non-hedging purposes as permitted by CFTC regulations
which permit principals of an investment company registered under the 1940 Act
to engage in such transactions without registering as commodity pool operators.
The Fund may, for example, 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
or as an efficient means of managing allocations between asset classes. All
futures contracts entered into by the Fund are traded on US exchanges or boards
of trade that are licensed and regulated by the CFTC or on foreign exchanges
approved by the CFTC. The Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities or instruments held by
the Fund or securities or instruments which they expect to purchase. Aggregate
initial margin and premiums required to establish positions other than those
considered by the CFTC to be "bona fide hedging" will not exceed 5% of the
Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts.

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 "contract 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 or equity securities, foreign currencies, or financial indices
including any index of US or foreign securities, US government securities,
foreign government securities, corporate debt securities, or municipal
securities. Futures contracts on foreign currencies may be used for speculative
purposes or to hedge the value of securities that are denominated in foreign
currencies.

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 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.

One purpose of the acquisition or sale of a futures contract, in cases where the
Fund holds or intends to acquire fixed-income or equity securities, is to
attempt to protect the Fund from fluctuations in interest or foreign exchange
rates or in securities prices without actually buying or selling fixed-income or
equity 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. The 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 the
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, 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 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 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 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 securities prices, currency
rates, 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 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.

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. Index futures
may be used for speculative purposes, 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 which
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. An index futures contract may also be entered into to
close out or offset an existing futures position.

When used for hedging purposes, each transaction in futures contracts on a
securities index 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 speculative or 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 futures contract
that is deliverable upon exercise of the option on that futures contract. If the
futures price at expiration of the option is below the exercise price specified
in the option, 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 the 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 declining securities values.

The amount of risk the Fund assumes when it purchases an option on an index
futures contract 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.

Derivative Securities:  Swap Agreements

General. The Fund may enter into swaps relating to indices, currencies, interest
rates, equity and debt interests. A swap transaction is an agreement between the
Fund and a counter party to act in accordance with the terms of the swap
contract. Interest rate swaps involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, such as an
exchange of fixed rate payments for floating rate payments. Mortgage swaps are
similar to interest rate swaps in that they represent commitments to pay and
receive interest. The notional principal amount, however, is tied to a reference
pool or pools of mortgages. Index swaps involve the exchange by the Fund with
another party of the respective amounts payable with respect to a notional
principal amount related to one or more indexes. Currency swaps involve the
exchange of cash flows on a notional amount of two or more currencies based on
their relative future values. An equity swap is an agreement to exchange streams
of payments computed by reference to a notional amount based on the performance
of a basket of stocks or a single stock. The purchase of an interest rate cap
entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payment of interest on a notional
principal amount from the party selling such interest rate cap. The purchase of
an interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of interest
on a notional principal amount from the party selling the interest rate floor.
An interest rate collar is the combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates.

The Fund may enter into these transactions to preserve a return or spread on a
particular investment or portion of its assets, 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 may also use such transactions for speculative purposes, such as
to obtain the price performance of a security without actually purchasing the
security in circumstances, for example, where the subject security is illiquid,
is unavailable for direct investment or available only on less attractive terms.
Swaps have special risks associated including possible default by the
counterpart to the transaction, illiquidity and, where swaps are used as hedges,
the risk that the use of a swap could result in losses greater than if the swap
had not been employed. See "Illiquid Securities."

The Fund will usually enter into swaps on a net basis (i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the agreement, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments). Swaps do not involve the delivery
of securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps is limited to the net amount of payments that the
Fund is contractually obligated to make or receive. If the counter party to a
swap defaults, the Fund's risk of loss consists of the net amount of payments
that the Fund is contractually entitled to receive. Where swaps are entered into
for good faith hedging purposes, the Advisor believes such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to the Fund's borrowing restrictions. Where swaps are
entered into for other than hedging purposes, the Fund will segregate an amount
of cash or other liquid securities having a value equal to the accrued excess of
its obligations over entitlements with respect to each swap on a daily basis.

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 counter party.

The Fund will attempt to minimize this risk by entering into agreements that
mark to market no less frequently than quarterly.

In addition, the Fund will enter into swap agreements only with counter parties
that would be eligible for consideration as repurchase agreement counter parties
under the Fund's repurchase agreement guidelines. Certain restrictions imposed
on the Fund by the Code may limit the Fund's ability to use swap agreements. The
swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect the Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.

Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act (the "CEA") and, therefore, are not regulated as futures or
commodity option transactions under the CEA, pursuant to regulations approved by
the CFTC. To qualify for this exemption, a swap agreement must be entered into
by eligible participants, which includes the following, provided the
participant's total assets exceed established levels: a bank or trust company,
savings association or credit union, insurance company, investment company
subject to regulation under the 1940 Act, commodity pool, corporation,
partnership, proprietorship, organization, trust or other entity, employee
benefit plan, governmental entity, broker-dealer, futures commission merchant,
natural person, or regulated foreign person. To be eligible, natural persons and
most other entities must have total assets exceeding $10 million; commodity
pools and employee benefit plans must have asset exceeding $5 million. In
addition, an eligible swap transaction must meet three conditions. First, the
swap agreement may not be part of a fungible class of agreements that are
standardized as to their material economic terms. Second, the creditworthiness
of parties with actual or potential obligations under the swap agreement must be
a material consideration in entering into or determining the terms of the swap
agreement, including pricing, cost or credit enhancement terms. Third, swap
agreements may not be entered into and traded on or through a multilateral
transaction execution facility.

This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a "safe harbor" for swap transactions from regulation as
futures or commodity option transactions under the CEA or its regulations. The
Policy Statement applies to swap transactions settled in cash that: (1) have
individually tailored terms; (2) lack exchange style offset and the use of a
clearing organization or margin system; (3) are undertaken in conjunction with a
line of business; and (4) are not marketed to the public.

The Fund will not enter into any swap, cap or floor transaction unless the
unsecured commercial paper, senior debt or the claims-paying ability of the
other party thereto is considered to be investment grade by the Advisor. If
there is a default by the other party to such a transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with the markets for other similar instruments
which are traded in the interbank market. See "Illiquid Securities."
Restrictions adopted by the CFTC may in the future restrict the Fund's ability
to enter into swap transactions.

Derivative Securities:  Hedging Strategies

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 a desired portfolio duration or to protect against market
risk should the Fund change 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, currency 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.

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 derivative 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 generally 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.

In hedging transactions based on an index, whether the Fund will realize a gain
or loss depends upon movements in the level of securities prices in the
securities market generally or, in the case of certain indexes, in an industry
or market segment, rather than movements in the price of a particular security.
The risk of imperfect correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort to compensate
for imperfect correlation of relative movements in the hedged position and the
hedge, the Fund's hedge positions may be in a greater or lesser dollar amount
than the dollar amount of the hedged position. Such "over hedging" or "under
hedging" may adversely affect the Fund's net investment results if market
movements are not as anticipated when the hedge is established.

Securities index futures transactions may be subject to additional correlation
risks. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which would distort the normal relationship between the securities
index and futures markets. Secondly, from the point of view of speculators, the
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 also may cause temporary price distortions.
Because of the possibility of price distortions in the futures market and the
imperfect correlation between movements in a securities index and movements in
the price of securities index futures, a correct forecast of general market
trends by the Advisor still may not result in a successful hedging transaction.

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 a default by a counterparty to an off-exchange transaction. See
"Illiquid Securities."

Mortgage-Backed and Asset-Backed Securities

General Characteristics. 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) properties, agriculture 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.

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 ("CMOs") 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 may invest 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 corporation
organized and existing under the Federal National Mortgage Association Charter
Act of 1938. The obligations of Fannie Mae 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 corporate instrumentality 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 (CMOs and REMIC Certificates). The
Fund may invest in multiple class mortgage-backed securities including 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. 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"). PCs represent undivided interests in specified level payment,
residential mortgages or participation 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 or 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 absorbs 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.

Privately Issued Mortgage-Backed Securities. The Fund may also invest in
mortgage-backed securities issued by trusts or other entities formed or
sponsored by private originators of and institutional investors in mortgage
loans and other foreign or domestic non-governmental entities (or representing
custodial arrangements administered by such institutions). These private
originators and institutions include domestic and foreign savings and loan
associations, mortgage bankers, commercial banks, insurance companies,
investment banks and special purpose subsidiaries of the foregoing. Privately
issued mortgage-backed securities are generally backed by pools of conventional
(i.e., non-government guaranteed or insured) mortgage loans. Since such
mortgage-backed securities are not guaranteed by an entity having the credit
standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high
quality rating, they normally are structured with one or more types of "credit
enhancement." Such credit enhancements fall generally into two categories; (1)
liquidity protection and (2) protection against losses resulting after default
by a borrower and liquidation of the collateral. Liquidity protection refers to
the providing of cash advances to holders of mortgage-backed securities when a
borrower on an underlying mortgage fails to make its monthly payment on time.

Protection against losses resulting after default and liquidation is designed to
cover losses resulting when, for example, the proceeds of a foreclosure sale are
insufficient to cover the outstanding amount on the mortgage. Such protection
may be provided through guarantees, insurance policies or letters of credit,
through various means of structuring the transaction or through a combination of
such approaches.

Mortgage Pass-Through Securities. The Fund may invest in mortgage pass-through
securities, which are fixed or adjustable rate mortgage-backed securities that
provide for monthly payments that are a "pass-through" of the monthly interest
and principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees or other amounts paid to
any guarantor, administrator and/or servicers of the underlying mortgage loans.

Stripped Mortgage-Backed Securities. The Fund may purchase stripped
mortgage-backed securities ("SMBS"), which are derivative multi-class mortgage
securities. The market value of the class consisting entirely of principal
payments generally is unusually 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. See "Illiquid Securities."

In accordance with a requirement imposed by the staff of the SEC, the Advisor
will consider privately-issued fixed rate interest only classes of SMBS ("IO")
and principal only classes of SMBS ("PO") to be illiquid securities for purposes
of the Fund's limitation on investments in illiquid securities. Unless the
Advisor determines that a particular government-issued fixed rate IO or PO is
liquid, it will also consider these IOs and POs to be illiquid.

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, at any time the Cost of Funds Index may not reflect 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.

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 consumer loans (unrelated to mortgage loans), trade receivables or
other types of 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 varies 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 change
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 loans and receivables by individuals,
businesses and other borrowers, 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. However, the underlying assets are not first lien
mortgage loans or interests therein but 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,
receivables from revolving credit (credit card) agreements and trade
receivables. 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
are readily marketable and rated investment grade by S&P, Moody's or Fitch.

The yield characteristics of the 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
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 will not usually 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.

Impact of Sub-Prime Mortgage Market. The Fund may invest in mortgage-backed,
asset-backed and other fixed-income securities whose value and liquidity may be
adversely affected by the critical downturn in the sub-prime mortgage lending
market in the US. Sub-prime loans, which, have higher interest rates, are made
to borrowers with low credit ratings or other factors that increase the risk of
default. Concerns about widespread defaults on sub-prime loans have also created
heightened volatility and turmoil in the general credit markets. As a result,
the Fund's investments in certain fixed-income securities may decline in value,
their market value may be more difficult to determine, and the Fund may have
more difficulty disposing of them.

Securities of Non-US Issuers

With respect to certain countries in which capital markets are either less
developed or not easily accessed, investments by the Fund may be made through
investment in other investment companies that in turn are authorized to invest
in the securities of such countries. Investment in other investment companies is
generally limited in amount by the 1940 Act, will involve the indirect payment
of a portion of the expenses (including advisory fees) of such other investment
companies and may result in a duplication of fees and expenses. See "Investment
Company Securities."

Investments in American, European, Global and International Depository Receipts.
The Fund may invest in non-US securities in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs") and International Depository Receipts ("IDRs") or other
similar securities representing ownership of securities of non-US issuers held
in trust by a bank or similar financial institution. 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. ADRs, EDRs, GDRs and IDRs are alternatives to
the purchase of the underlying securities in their national markets and
currencies, but are subject to the same risks as the non-US securities to which
they relate.

Foreign Corporate Debt Securities. The Fund may invest in the 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.

Foreign Government Debt Securities. The Fund may invest in 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. Foreign government securities also include mortgage-related
securities issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.

Foreign Fixed Income Securities. Since most foreign fixed income securities are
not rated, the Fund will invest in foreign fixed income securities based on the
Advisor's analysis without relying on published ratings. Since such investments
will be based upon the Advisor's analysis rather than upon published ratings,
achievement of the Fund's goals may depend more upon the abilities of the
Advisor than would otherwise be the case.

The value of the foreign fixed income securities held by the Fund, and thus the
net asset value of the Fund's shares, generally will fluctuate with (a) changes
in the perceived creditworthiness of the issuers of those securities, (b)
movements in interest rates, and (c) changes in the relative values of the
currencies in which the Fund's investments in fixed income securities are
denominated with respect to the US Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of the Fund's
investments in foreign fixed income securities, and the extent to which the Fund
hedges its interest rate, credit and currency exchange rate risks. A longer
average maturity generally is associated with a higher level of volatility in
the market value of such securities in response to changes in market conditions.

Investments in sovereign debt, including Brady Bonds (Brady Bonds are debt
securities issued under a plan implemented to allow debtor nations to
restructure their outstanding commercial bank indebtedness), involve special
risks. Foreign governmental issuers of debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or pay interest when due. In the event of default, there may be limited or no
legal recourse in that, generally, remedies for defaults must be pursued in the
courts of the defaulting party. Political conditions, especially a sovereign
entity's willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and the Fund may be unable to
collect all or any part of its investment in a particular issue. Foreign
investment in certain sovereign debt is restricted or controlled to varying
degrees, including requiring governmental approval for the repatriation of
income, capital or proceed of sales by foreign investors. These restrictions or
controls may at times limit or preclude foreign investment in certain sovereign
debt or increase the costs and expenses of the Fund.

Sovereign debt of emerging market governmental issuers is to be considered
speculative. Emerging market governmental issuers are among the largest debtors
to commercial banks, foreign governments, international financial organizations
and other financial institutions. Certain emerging market governmental issuers
have not been able to make payments of interest on or principal of debt
obligations as those payments have come due. There is a history of defaults with
respect to commercial bank loans by public and private entities issuing
sovereign debt. All or a portion of the interest payments and/or principal
repayment with respect to sovereign debt may be uncollateralized. Obligations
arising from past restructuring agreements may affect the economic performance
and political and social stability of those issuers.

The ability of emerging market country governmental issuers to make timely
payments on their obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance, and its access to
international credits and investments. An emerging market whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities. Increased
protectionism on the part of an emerging market's trading partners could also
adversely affect the country's exports and diminish its trade account surplus,
if any. To the extent that emerging markets receive payment for its exports in
currencies other than dollars or non-emerging market currencies, its ability to
make debt payments denominated in dollars or non-emerging market currencies
could be affected.

Another factor bearing on the ability of emerging market countries to repay debt
obligations is the level of international reserves of the country. Fluctuations
in the level of these reserves affect the amount of foreign exchange readily
available for external debt payments and thus could have a bearing on the
capacity of emerging market countries to make payments on these debt
obligations.

To the extent that an emerging market country cannot generate a trade surplus,
it must depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign governments
and inflows of foreign investment. The access of emerging markets to these forms
of external funding may not be certain, and a withdrawal of external funding
could adversely affect the capacity of emerging market country governmental
issuers to make payments on their obligations. In addition, the cost of
servicing emerging market debt obligations can be affected by a change in
international interest rates since the majority of these obligations carry
interest rates that are adjusted periodically based upon international rates.

Foreign Investments. Foreign securities are normally denominated and traded in
foreign currencies. As a result, the value of the Fund's foreign investments and
the value of its shares may be affected favorably or unfavorably by changes in
currency exchange rates relative to the US dollar. There may be less information
publicly available about a foreign issuer than about a US issuer, and foreign
issuers may not be subject to accounting, auditing and financial reporting
standards and practices comparable to those in the US. The securities of some
foreign issuers are less liquid and at times more volatile than securities of
comparable US issuers. Foreign brokerage commissions and other fees are also
generally higher than in the US. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment or delivery of
securities or in the recovery of the Fund's assets held abroad) and expenses not
present in the settlement of investments in US markets. Payment for securities
without delivery may be required in certain foreign markets.

In addition, foreign securities may be subject to the risk of nationalization or
expropriation of assets, imposition of currency exchange controls or
restrictions on the repatriation of foreign currency, confiscatory taxation,
political or financial instability and diplomatic developments which could
affect the value of the Fund's investments in certain foreign countries.
Governments of many countries have exercised and continue to exercise
substantial influence over many aspects of the private sector through the
ownership or control of many companies, including some of the largest in these
countries. As a result, government actions in the future could have a
significant effect on economic conditions which may adversely affect prices of
certain portfolio securities. There is also generally less government
supervision and regulation of stock exchanges, brokers, and listed companies
than in the US. Dividends or interest on, or proceeds from the sale of, foreign
securities may be subject to foreign withholding taxes, and special US tax
considerations may apply. Moreover, foreign economies may differ favorably or
unfavorably from the US economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.

Legal remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the US or in other
foreign countries. The laws of some foreign countries may limit the Fund's
ability to invest in securities of certain issuers organized under the laws of
those foreign countries.

Of particular importance, many foreign countries are heavily dependent upon
exports, particularly to developed countries, and, accordingly, have been and
may continue to be adversely affected by trade barriers, managed adjustments in
relative currency values, and other protectionist measures imposed or negotiated
by the US and other countries with which they trade. These economies also have
been and may continue to be negatively impacted by economic conditions in the US
and other trading partners, which can lower the demand for goods produced in
those countries.

The risks described above, including the risks of nationalization or
expropriation of assets, typically are increased in connection with investments
in "emerging markets." For example, political and economic structures in these
countries may be in their infancy and developing rapidly, and such countries may
lack the social, political and economic stability characteristic of more
developed countries (including amplified risk of war and terrorism). Certain of
these countries have in the past failed to recognize private property rights and
have at times nationalized and expropriated the assets of private companies.
Investments in emerging markets may be considered speculative.

The currencies of certain emerging market countries have experienced
devaluations relative to the US dollar, and future devaluations may adversely
affect the value of assets denominated in such currencies. In addition, currency
hedging techniques may be unavailable in certain emerging market countries. Many
emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation or deflation for many years, and future
inflation may adversely affect the economies and securities markets of such
countries.

In addition, unanticipated political or social developments may affect the value
of investments in emerging markets and the availability of additional
investments in these markets. Any change in the leadership or politics of
emerging market countries, or the countries that exercise a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and adversely affect
existing investment opportunities. The small size, limited trading volume and
relative inexperience of the securities markets in these countries may make
investments in securities traded in emerging markets illiquid and more volatile
than investments in securities traded in more developed countries. For example,
limited market size may cause prices to be unduly influenced by traders who
control large positions. In addition, the Fund may be required to establish
special custodial or other arrangements before making investments in securities
traded in emerging markets. There may be little financial or accounting
information available with respect to issuers of emerging market securities, and
it may be difficult as a result to assess the value of prospects of an
investment in such securities.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Fund's securities in such markets may
not be readily available. The Fund may suspend redemption of its shares for any
period during which an emergency exists, as determined by the SEC. Accordingly
if the Fund believes that appropriate circumstances exist, it will promptly
apply to the SEC for a determination that an emergency is present. During the
period commencing from the Fund's identification of such condition until the
date of the SEC action, the Fund's securities in the affected markets will be
valued at fair value determined in good faith by or under the direction of the
Fund's Board.

Certain of the foregoing risks may also apply to some extent to securities of US
issuers that are denominated in foreign currencies or that are traded in foreign
markets, or securities of US issuers having significant foreign operations.

Currency Management

General. In connection with the Fund's investments denominated in foreign
currencies, the Advisor may choose to utilize a variety of currency management
(hedging) strategies. The Advisor seeks to take advantage of different yield,
risk and return characteristics that different currencies, currency
denominations and countries can provide to US investors. In doing so, the
Advisor will consider such factors as the outlook for currency relationships;
current and anticipated interest rates; levels of inflation within various
countries; prospects for relative economic growth; and government policies
influencing currency exchange rates and business conditions. Although the
Advisor may attempt to manage currency exchange rate risks, there is no
assurance that the Advisor will do so, or do so at an appropriate time or that
the Advisor will be able to predict exchange rates accurately.

Currency Exchange Transactions. Because the Fund may buy and sell securities
denominated in currencies other than the US dollar and receives 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 currencies and to convert foreign currencies to and from the
US dollar. The Fund either enters into these transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the currency exchange market or uses
forward currency exchange contracts (discussed below) to purchase or sell
currencies. Neither spot transactions nor forward currency exchange contracts
eliminate fluctuations in the prices of the Fund's securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.

Currency Hedging. The Fund's currency hedging strategies may include hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward currency with respect to specific
receivables or payables of the Fund generally accruing in connection with the
purchase or sale of its portfolio securities. Position hedging is the sale of
forward currency with respect to portfolio security positions.

A decline in the US dollar value of a foreign currency in which the Fund's
securities are denominated will reduce the US dollar value of the securities,
even if their value in the foreign currency remains constant. The use of
currency hedges does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in the
future. For example, in order to protect against diminutions in the US dollar
value of non-dollar denominated securities it holds, the Fund may purchase
foreign currency put options. If the value of the foreign currency does decline,
the Fund will have the right to sell the currency for a fixed amount in dollars
and will thereby offset, in whole or in part, the adverse effect on the US
dollar value of its securities that otherwise would have resulted. Conversely,
if a rise in the US dollar value of a currency in which securities to be
acquired are denominated is projected, thereby potentially increasing the cost
of the securities, the Fund may purchase call options on the particular
currency. The purchase of these options could offset, at least partially, the
effects of the adverse movements in exchange rates. The benefit to the Fund
derived from purchases of currency options, like the benefit derived from other
types of options, will be reduced by premiums and other transaction costs.

Because transactions in currency exchange are generally conducted on a principal
basis, no fees or commissions are generally involved. Currency hedging involves
some of the same risks and considerations as other transactions with similar
instruments. Although currency hedges limit the risk of loss due to a decline in
the value of a hedged currency, at the same time, they also limit any potential
gain that might result should the value of the currency increase. If a
devaluation is generally anticipated, the Fund may not be able to contract to
sell a currency at a price above the devaluation level it anticipates.

Cross Hedging. At the discretion of the Advisor, the Fund may employ the
currency hedging strategy known as "cross-hedging" by using forward currency
contracts, currency options or a combination of both. When engaging in
cross-hedging, the Fund seeks to protect against a decline in the value of a
foreign currency in which certain of its portfolio securities are denominated by
selling that currency forward into a different foreign currency for the purpose
of diversifying the Fund's total currency exposure or gaining exposure to a
foreign currency that is expected to appreciate.

Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation by the 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. The Fund
maintains a segregated account of cash or liquid securities in an amount at
least equal to its obligations under each forward currency exchange contract.

The Fund may enter into forward currency exchange contracts as described in the
prospectus. Additionally, the Fund also 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, the 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, at the same time they
tend 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 the
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 the 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, the 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 contracts to hedge or
cross-hedge its assets. Also, with regard to the 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 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.

The Fund will segregate cash or liquid securities in an amount equal to the
value of the Fund's total assets committed to the consummation of forward
currency contracts requiring the Fund to purchase foreign currencies or forward
contracts entered into for non-hedging purposes. If the value of the segregated
securities declines, additional cash or liquid securities will be segregated on
a daily basis so that the value of the assets will equal the amount of the
Fund's commitments with respect to such contracts.

The Fund may sell US dollars and buy a foreign currency forward in order to gain
exposure to a currency which is expected to appreciate against the US dollar.
This speculative strategy allows the Fund to benefit from currency appreciation
potential without requiring it to purchase a local fixed income instrument, for
which prospects may be relatively unattractive. It is the Advisor's intention
that the Fund's net US dollar currency exposure generally will not fall below
zero (i.e., that net short positions in the US dollar generally will not be
taken).

The Fund may also utilize forward foreign currency contracts to establish a
synthetic investment position designed to change the currency characteristics of
a particular security without the need to sell such security. Synthetic
investment positions will typically involve the purchase of US
dollar-denominated securities together with a forward contract to purchase the
currency to which the Fund seeks exposure and to sell US dollars. This may be
done because the range of highly liquid short-term instruments available in the
US may provide greater liquidity to the Fund than actual purchases of foreign
currency-denominated securities in addition to providing superior returns in
some cases. Depending on (a) the Fund's liquidity needs, (b) the relative yields
of securities denominated in different currencies and (c) spot and forward
currency rates, a significant portion of the Fund's assets may be invested in
synthetic investment positions, subject to compliance with the tax requirements
for qualification as a regulated investment company.

There is a risk in adopting a synthetic investment position. It is impossible to
forecast with absolute precision what the market value of a particular security
will be at any given time. If the value of the US dollar-denominated security is
not exactly matched with the Fund's obligation under a forward currency contract
on the date of maturity, the Fund may be exposed to some risk of loss from
fluctuations in the value of the US dollar. Although the Advisor will attempt to
hold such mismatching to a minimum, there can be no assurance that the Advisor
will be able to do so.

Options on Foreign Currencies. The Fund may write covered put and call options
and purchase put 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 Fund may
also use currency options to achieve a desired currency weighting in a
cost-effective manner. The 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
the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may be used to hedge against fluctuations in exchange
rates although, in the event of exchange rate movements adverse to the Fund's
position, it may forfeit the entire amount of the premium plus related
transaction costs. In addition the Fund may purchase call options on currency
when the Advisor anticipates that the currency will appreciate in value.

The Fund may also write options on foreign currencies for the same types of
hedging or currency management purposes. For example, where the 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 options 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, the 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, the Fund also may be required to forego all or a portion
of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.

The Fund may write covered call options on foreign currencies. A call option
written on a foreign currency by the 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 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 the Fund in cash or liquid securities.

The 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 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 the 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
the Fund is unable to effect a closing sale transaction with respect to options
it has purchased, it would have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of underlying
currency. The Fund pays brokerage commissions or spreads in connection with its
options transactions.

Certain options on foreign currencies are traded OTC and involve liquidity and
credit risks which may not be present in the case of exchange-traded currency
options. In some circumstances, the 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. See "Illiquid Securities."

Additional Limitations and Risk Factors

In addition to the risks discussed above, the Fund's investments may be subject
to the following limitations and risk factors:

Non-US Securities. The value of the Fund's 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
those 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 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 and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. In general, less information is publicly
available with respect to non-US issuers than is available with respect to US
companies. Most foreign companies are also not subject to the uniform accounting
and financial reporting requirements applicable to issuers in the United States.
Any foreign investments made by the Fund must be made in compliance with US and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.

Because non-US securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund may hold various foreign currencies
from time to time, the value of the net assets of the Fund as measured in US
dollars will be affected favorably or unfavorably by changes in exchange rates.
Generally, the Fund's currency exchange transactions will be conducted on a spot
(i.e., cash) basis at the spot rate prevailing in the currency exchange market.
The cost of the Fund's currency exchange transactions will generally be the
difference between the bid and offer spot rate of the currency being purchased
or sold. In order to protect against uncertainty in the level of future foreign
currency exchange rates, the Fund is authorized to enter into certain foreign
currency exchange transactions.

In addition, while the volume of transactions effected on foreign securities
exchanges has increased in recent years, in most cases it remains appreciably
below that of The New York Stock Exchange, Inc. (the "Exchange"). Accordingly,
the Fund's foreign investments may be less liquid and their prices may be more
volatile than comparable investments in securities of US issuers. Moreover, the
settlement periods for non-US securities, which are often longer than those for
securities of US issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, the Fund normally pays fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States.

Rating Services. The ratings of Moody's and S&P 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 Fund investments, the Advisor also makes its own evaluation of
these securities, subject to review by the Board of Trustees. 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 used herein and in the
Prospectus is set forth in Appendix to this SAI.

Other Investments and Investment Practices

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 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. Investments in 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 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 FINRA (as defined below).

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
Advisor determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Advisor 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.

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
or other income and could also increase transaction costs, which may impact the
Fund's expense ratio.

Investment Company Securities. A fund may acquire securities of other investment
companies to the extent consistent with its investment objective and 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.

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, among other things, 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's investing any cash collateral in interest-bearing short-term
investments), and distributions on the loaned securities and any increase in
their market value. The Fund will bear any losses incurred from the investment
of the collateral it receives. 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.

The Fund may pay negotiated fees in connection with loaned securities, pursuant
to written contracts. In addition, voting rights may pass with the loaned
securities, but if a material event occurs affecting an investment on loan, the
loan will 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).

TBA Purchase Commitments. The Fund may enter into TBA purchase commitments to
purchase securities for a fixed price at a future date, typically not exceeding
45 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.

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. 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 to be advantageous.

Repurchase Agreements. The Fund may engage in repurchase agreement transactions
with member banks of the Federal Reserve System, certain non-US banks and
certain non-bank dealers, including governmental securities dealers. 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 by, among other things,
agreeing to sell portfolio securities to financial institutions that meet the
standards described under "Repurchase Agreements" and to repurchase them at a
mutually agreed date and price (a "reverse repurchase agreement"). The Fund may
enter into reverse repurchase agreements with banks and domestic broker-dealers.
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.

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

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 (but not
limited to) 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 $100 million as of the end of their most recent fiscal year;
commercial paper rated at the time of purchase at least A-1/2 by S&P or P-1/2 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.

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

Indexed Securities. The Fund may invest in indexed securities whose value
depends on the price of foreign currencies, securities indices or other
financial values or statistics. Examples 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. These securities may be positively or
negatively indexed; that is, their value may increase or decrease if the
underlying instrument appreciates.

Portfolio Holdings

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

The Fund's procedures permit non-public portfolio holdings information to be
shared with Deutsche Asset Management and its affiliates (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys, officers and trustees/directors and each of their respective
affiliates and advisers who require access to this information to fulfill their
duties to the Fund and are subject to the duties of confidentiality, including
the duty not to trade on non-public information, imposed by law or contract, or
by the Fund's procedures. This non-public information may also be disclosed,
subject to the requirements described below, to certain third parties, such as
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, alpha, beta, tracking
error, default rate, portfolio turnover, and risk and style characteristics so
long as the identity of 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 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

The Trust has retained the services of Deutsche Investment Management Americas
Inc. ("DIMA") as investment advisor. DIMA is located at 345 Park Avenue, New
York, New York 10154. DIMA is registered with the SEC as an investment adviser
and provides a full range of investment advisory services to institutional
clients. DIMA is an indirect wholly owned subsidiary of Deutsche Bank AG
("Deutsche Bank"), an international commercial and investment banking group. 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.

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

Pursuant to the Investment Management Agreement between the Trust and DIMA (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 adopted by the Board of Trustees. The Advisor will
also monitor, to the extent not monitored by the Fund's administrator or other
agent, the Fund's compliance with its investment and tax guidelines and other
compliance policies. For all services provided under the Investment Management
Agreement, the Fund pays the Advisor a fee of 0.60% on the first $250 million in
average daily net assets, which declines to a fee of 0.575% on average daily net
assets in excess of $250 million up to $1 billion, and to 0.55% on average daily
net assets in excess of $1 billion. Prior to June 1, 2006, the Advisor received
a fee from the Fund, computed daily and paid monthly, at the annual rate of
0.65% of the average daily net assets of the Fund.

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 Fund securities or other
instruments of the Fund; and litigation expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business.

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

From time to time, Deutsche Bank or an affiliate (collectively, "DB") may at its
sole discretion invest its own assets in shares of the Fund ("proprietary
investment") for such purposes it deems appropriate, including investments
designed to assist in the management of the Fund's portfolio. Any proprietary
investment may be hedged and, in that event, the return on the proprietary
investment, net of the effect of the hedge, would be expected to differ from the
return of the Fund. DB has no obligation to make any proprietary investments and
the amount of any proprietary investment that is made may or may not be
significant in comparison to the level of assets of the Fund. In the event that
a proprietary investment is made, except as otherwise required under the
Investment Company Act of 1940, DB would be permitted to redeem the investment
at such time that it deems appropriate.

In addition, the Fund has a subadvisor approval policy (the "Sub-advisor
Approval Policy"). The Sub-advisor Approval Policy permits the Advisor, subject
to the approval of the Board, including a majority of its independent board
members, to appoint and replace sub-advisors and to amend sub-advisory contracts
without obtaining shareholder approval. Under the Sub-advisor Approval Policy,
the Board, including its independent board members, will continue to evaluate
and approve all new sub-advisory contracts between the Advisor and any
subadvisor, as well as all changes to any existing sub-advisory contract. The
Fund cannot implement the Sub-advisor Approval Policy without the SEC either
adopting revisions to current rules (as it proposed to do in October 2003) or
granting the Fund exemptive relief from existing rules. The Fund and the Advisor
would be subject to certain conditions imposed by the SEC (and certain
conditions that may be imposed in the future within either exemptive relief or a
rule) to ensure that the interests of the Fund and its shareholders are
adequately protected whenever the Advisor acts under the Sub-advisor Approval
Policy, including any shareholder notice requirements.

The Investment Management Agreement provides that the Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with matters to which the Agreement relates, except a
loss resulting from willful malfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from reckless disregard
by the Advisor of its obligations and duties under the Investment Management
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. The
Investment Management Agreement continues in effect from year to year only if
its continuance is approved annually by the vote of a majority of those Trustees
who are not parties to such Investment Management Agreement or interested
persons of the Advisor or the Trust, cast in person at a meeting called for the
purpose of voting on such approval, and either by a vote of the Trust's Trustees
or of a majority of the outstanding voting securities of the Fund

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

<TABLE>
<CAPTION>
                                              2009              2008             2007
                                              ----              ----             ----

<S>                                        <C>               <C>              <C>
DWS Lifecycle Long Range Fund              $3,171,932        $4,589,629       $4,499,191
</TABLE>

The Fund's Institutional Class Prospectus contains disclosure as to the amount
of the Advisor's investment advisory and the Administrator's administration and
services fees, including waivers thereof. The Advisor and the Administrator may
not recoup any of their waived investment advisory or administration and
services fees.

The Advisor has voluntarily agreed to waive a portion of its fees and reimburse
expenses so that total annual operating expenses of the fund will not exceed
0.55% for Institutional Class shares, excluding certain expenses such as
extraordinary expenses, taxes, brokerage and interest expenses. The Advisor, at
its discretion, may revise or discontinue this arrangement at any time.

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

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

Subadvisor

Aberdeen Asset Management Inc. As of December 2, 2005, the Fund's Advisor,
entered into an investment subadvisory agreement with Aberdeen Asset Management
Inc. ("AAMI"), a US registered investment advisor. AAMI acts as a subadvisor for
the Fund with respect to the core bond and active fixed income portions of the
Fund only. AAMI makes the investment decisions, buys and sells securities, and
conducts the research that leads to these purchase and sale decisions. AAMI is
also responsible for selecting brokers and dealers to negotiate portfolio
transactions and for negotiating brokerage commissions and dealer charges. AAMI
provides a full range of international investment advisory services to
institutional and retail clients.

AAMI is paid for its services by DIMA from its fee as investment advisor to the
Fund. DIMA pays AAMI a fee at the annual rate of 0.18% of the average daily net
assets of the fund, computed daily and paid monthly.

The subadvisory fee paid by the Advisor to AAMI for the fiscal years ended March
31, 2009, March 31, 2008 and March 31, 2007 was $320,085, $488,295 and $477,083,
respectively.

AAMI is a direct wholly owned subsidiary of Aberdeen Asset Management PLC, the
parent company of an asset management group formed in 1983. AAMI's principal
business address is 1735 Market Street, Philadelphia, PA 19103.

Compensation of Portfolio Managers

Portfolio managers are eligible for total compensation comprised of base salary
and variable compensation.

Base Salary - Base salary is linked to job functions, responsibilities and
financial services industry peer comparison through the use of extensive market
data surveys.

Variable Compensation - Generally, variable compensation comprises a greater
proportion of total compensation as a portfolio manager's seniority and
compensation levels increase. Variable Compensation may include a cash bonus
incentive, and potential participation in long-term incentive programs including
but not limited to, Deutsche Bank equity, equity linked vehicle, and restricted
cash. Variable compensation is determined based on an analysis of a number of
factors, including among other things, the performance of Deutsche Bank, the
performance of the Asset Management division, and the portfolio manager's
individual contribution. In evaluating individual contribution, management will
consider a combination of quantitative and qualitative factors. Top performing
investment professionals earn a total compensation package that is highly
competitive. As variable compensation increases, the percentage awarded in
long-term incentives also increases. Long-term incentives are subject to a
clawback provision for unvested portions only during the three-year life of the
plan should the individual engage in any conduct that is a significant breach of
DB policies and procedures.

o        The quantitative analysis of a portfolio manager's individual
         performance is based on, among other factors, performance of all of the
         accounts managed by the portfolio manager (which includes the fund and
         any other accounts managed by the portfolio manager) over a one-,
         three-, and five-year period relative to the appropriate Morningstar
         and Lipper peer group universes and/or benchmark index(es) with respect
         to each account. Additionally, the portfolio manager's
         retail/institutional asset mix is weighted, as appropriate for
         evaluation purposes. Generally the benchmark index used is a benchmark
         index set forth in the fund's prospectus to which the fund's
         performance is compared. Additional or different appropriate peer group
         or benchmark indices may also be used. Primary weight is given to
         pre-tax portfolio performance over three-year and five-year time
         periods (adjusted as appropriate if the portfolio manager has served
         for less than five years) with lesser consideration given to portfolio
         performance over a one-year period. The increase or decrease in a
         fund's assets due to the purchase or sale of fund shares is not
         considered a material factor.

o        The qualitative analysis of a portfolio manager's individual
         performance is based on, among other things, the results of an annual
         management and internal peer review process, and management's
         assessment of overall portfolio manager contributions to investor
         relations, the investment process and overall performance (distinct
         from fund and other account performance). Other factors, including
         contributions made to the investment team, as well as adherence to
         Compliance Policies and Procedures, Risk Management procedures, the
         firm's Code of Ethics and "living the values" of the Advisor are also
         factors.

The quantitative analysis of a portfolio manager's performance is given more
weight in determining variable compensation than the qualitative portion.

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                 Dollar Range of All DWS
Name of Portfolio Manager                          Fund Shares Owned                   Fund Shares Owned
-------------------------                          -----------------                   -----------------

<S>                                                       <C>                                 <C>
J. Christopher Gagnier                                    $0                                  N/A
Inna Okounkova                                       $1 - $10,000                    $100,001 - $500,0000
Jim Francis                                               $0                           $10,001 - $50,000
Robert Wang                                          $1 - $10,000                     $50,001 - $100,000
Thomas Picciochi                                     $1 - $10,000                     $50,001 - $100,000
</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 as of the Fund's
most recent fiscal year end.

Other SEC Registered Investment Companies Managed:

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

<S>                                       <C>             <C>                        <C>                  <C>
J. Christopher Gagnier                    3               $328,161,612               0                    $0
Inna Okounkova                           15             $2,103,093,916               0                    $0
Jim Francis                              22             $5,312,499,493               0                    $0
Robert Wang                              46            $10,935,712,019               0                    $0
Thomas Picciochi                         14             $6,264,111,655               0                    $0

Other Pooled Investment Vehicles Managed:

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

J. Christopher Gagnier                      8            $2,811,830,892              0                          $0
Inna Okounkova                              3               $52,658,030              0                          $0
Jim Francis                                18              $212,029,437              0                          $0
Robert Wang                                38            $1,391,850,020              1                     $31,529
Thomas Picciochi                           14              $516,286,364              1                     $31,529

Other Accounts Managed:

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

J. Christopher Gagnier                    144           $18,553,709,447              4                   $414,858,112
Inna Okounkova                              0                        $0              0                             $0
Jim Francis                                 4              $198,259,166              0                             $0
Robert Wang                                41            $5,930,855,648              5                   $109,222,687
Thomas Picciochi                           10              $957,829,788              5                   $109,222,687
</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 the Fund. Purchase and sale orders for the Fund may be combined
         with those of other clients of the Advisor in the interest of achieving
         the most favorable net results to the Fund and the other clients.

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

o        In some cases, an apparent conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with respect to other accounts it manages. The Advisor will not
         determine allocations based on whether it receives a performance-based
         fee from the client. 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 Funds may
         manage other mutual funds and separate accounts on a long-short basis.
         The simultaneous management of long and short portfolios creates
         potential conflicts of interest including the risk that short sale
         activity could adversely affect the market value of the long
         positions(and vice versa), the risk arising from sequential orders in
         long and short positions, and the risks associated with receiving
         opposing orders at the same time. The Advisor has adopted procedures
         that it believes are reasonably designed to mitigate these potential
         conflicts of interest. Included in these procedures are specific
         guidelines developed to ensure fair and equitable treatment for all
         clients whose accounts are managed by each Fund's portfolio management
         team. The Advisor and the portfolio management team have established
         monitoring procedures, a protocol for supervisory reviews, as well as
         compliance oversight to ensure that potential conflicts of interest
         relating to this type of activity are properly addressed.

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

Compensation of Portfolio Managers -- Subadvisor

Remuneration of Personnel

AAMI's remuneration policy ("Policy") is designed to reflect the importance of
recruiting, retaining and motivating senior executives and portfolio managers of
the caliber necessary to maintain and improve AAMI's position in the asset
management industry. The Policy seeks to reward performance in a manner which
aligns the interests of clients, shareholders and executives. The elements of
the Policy as it relates to the Fund's portfolio managers are as follows:

Basic salary. The salaries of all employees are reviewed annually and are
determined by reference to external market research. AAMI's Policy is to pay
salaries which, when taken together with other benefits, will provide a
remuneration package that is reasonable and competitive in the asset management
industry. AAMI participates in compensation surveys which provide salary
comparisons for a range of employees across AAMI. AAMI also considers
information included in other publicly available research and survey results.
Staff performance is reviewed formally once a year with mid-term reviews.

The review process looks at all of the ways in which an individual has
contributed to the organization, and specifically, in the case of portfolio
managers, to the investment team.

Annual bonus. The Policy is to recognize corporate and individual achievements
each year through an appropriate annual bonus plan. The aggregate amount of a
cash bonus available in any year is dependent on AAMI's overall performance and
profitability. Consideration will also be given to the levels of bonuses paid in
the marketplace. Individual awards, payable to all members of staff, are
determined by a rigorous assessment of achievement against defined objectives,
and are reviewed and approved by AAMI's Remuneration Committee.

Portfolio managers' bonuses are based on a combination of the investment team's
overall performance, the individual's performance and the overall performance of
AAMI. In calculating a portfolio manager's bonus, AAMI takes into consideration
the performance of funds managed by the team as well as more subjective issues
that benefit AAMI. Portfolio manager performance on investment matters is judged
over all funds to which the fund manager contributes. Performance is measured
against appropriate market indices as well as peer universes over various time
periods.

Deferred bonus. A deferred bonus plan exists and is designed to encourage the
retention of certain key employees identified as critical to AAMI's achievement
of its long-term goals. Deferred bonuses may be in the form of deferred equity
in Aberdeen PLC.

Retention and incentives for former Deutsche Asset Management employees. In
addition to the Policy, appropriate retention and incentive arrangements have
been put into place for certain employees of the former Deutsche Asset
Management businesses, including in some cases participation in the Long Term
Incentive Plan. The costs of these arrangements are being borne by both Deutsche
Asset Management and AAMI.

Potential Conflicts of Interest -- Subadvisor

In addition, 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. AAMI 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 AAMI, including other client accounts managed by the
         Portfolio'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 AAMI 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 Portfolio may differ from the results achieved for
         other clients of AAMI. 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 AAMI to be most equitable to each client, generally
         utilizing a pro rata allocation methodology. In some cases, the
         allocation procedure could potentially have an adverse effect or
         positive effect on the price or amount of the securities purchased or
         sold by the Fund. Purchase and sale orders for the Portfolio may be
         combined with those of other clients of AAMI in the interest of
         achieving the most favorable net results to the Portfolio 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.

In some cases, an apparent conflict may arise where AAMI 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, AAMI
has in place supervisory oversight processes to periodically monitor performance
deviations for accounts with like strategies.

Administrator

Pursuant to an administrative services agreement with the Advisor (or the
"Administrator") (the "Administrative Services Agreement"), 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 the DIMA a fee of 0.10% of the Fund's 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 the Fund
reasonably deems necessary for the proper administration of the Fund. DIMA
provides the Fund with personnel; arranges for the preparation and filing of the
Fund's tax returns; prepares and submits reports and meeting materials to the
Board and the shareholders; prepares and files updates to the Fund's Prospectus
and SAI 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.

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.

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

<TABLE>
<CAPTION>
                                                                   2009               2008              2007
                                                                   ----               ----              ----

<S>                                                               <C>               <C>               <C>
DWS Lifecycle Long Range Fund -- Institutional Class              $540,771*         $787,327*         $265,004**
</TABLE>

*        Administration fee paid to Administrator for all classes of the Fund.

**       Administration fee paid to administrator for Institutional Class shares
         of the Fund.

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

Waivers and Reimbursements

The following table sets forth the amounts waived and/or reimbursed by the
Advisor and/or Administrator for the fiscal years ended March 31:

<TABLE>
<CAPTION>
                                                 2009                2008               2007
                                                 ----                ----               ----

<S>                                         <C>                  <C>                 <C>
DWS Lifecycle Long Range Fund               $1,404,379***        $1,355,984**        $1,167,730*
</TABLE>

*        The 2007 fee waivers by the Advisor and Administrator are $1,364,070
         and $253,660, respectively.

**       The 2008 fee waivers by the Advisor and Administrator are $1,355,984
         and $0, respectively.

***      The 2009 fee waivers by the Advisor and Administrator are $1,404,379
         and $0, respectively.

Code of Ethics

The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule
17j-1 under the 1940 Act. The Trust's Code of Ethics permits Fund personnel to
invest in securities for their own accounts, but requires compliance with the
Code's pre-clearance requirements (with certain exceptions). In addition, the
Trust's Code of Ethics provides for trading "blackout periods" that prohibit
trading by personnel within periods of trading by each Trust in the same
security. The Trust's Code of Ethics also prohibits short-term trading profits
and personal investment in initial public offerings. The Code of Ethics requires
prior approval with respect to purchases of securities in private placements.

The Trust's advisor and its affiliates (including the Fund's Distributor, DIDI)
have each adopted a Code of Ethics pursuant to Rule 17j-1 under the 1940 Act
("Consolidated Code"). The Consolidated Code permits access persons to trade in
securities that may be purchased or held by the Funds for their own accounts,
subject to compliance with the Consolidated Code's preclearance requirements. In
addition, the Consolidated Code also provides for trading "blackout periods"
that prohibit trading by personnel within periods of trading by the Funds in the
same security. The Consolidated Code also prohibits short-term trading profits
and personal investment in initial public offerings and requires prior approval
with respect to purchases of securities in private placements.

Regulatory Matters 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 Investments 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 overseeing the DWS Funds continue to be independent of
DeAM; the Chairmen of the DWS Funds' Boards of Trustees 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 the Financial Industry Regulatory Authority, or
"FINRA") announced final agreements in which Deutsche Investment Management
Americas Inc. ("DIMA"), Deutsche Asset Management, Inc. ("DAMI") and DWS Scudder
Distributors, Inc. (now known as DWS Investments Distributors, Inc. ("DIDI"))
settled administrative proceedings regarding disclosure of brokerage allocation
practices in connection with sales of the DWS Funds' (now known as the DWS
Investments 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 DIDI'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 DWS Fund shares. These directed brokerage
practices were discontinued in October 2003.

Under the terms of the settlements, in which DIMA, DAMI and DIDI neither
admitted nor denied any of the regulators' findings, DIMA, DAMI and DIDI 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 DIDI 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-investments.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, 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

Distributor

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

Custodian

The Fund employs State Street Bank and Trust Company ("SSB") Lafayette Corporate
Center, 2 Avenue De Lafayette,, Boston, Massachusetts 02111as 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 Investments Service Company ("DISC" or the "Transfer Agent"), 210 West 10th
Street, Kansas City, Missouri 64105-1614, an affiliate of the Advisor, is the
transfer agent, dividend-paying agent and shareholder service agent for all
classes of 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 $20.99 to $24.09 per account, for open wholesale
money funds the fee is $35.55 per account, while for certain retirement accounts
serviced on the recordkeeping system of ExpertPlan, Inc., the fee is a flat fee
up to $3.91 per account (as of February 2009, 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
fees in excess of 0.25%, and processing of proxy statements, may only be
reimbursed by the Fund with the prior approval of the Fund's Board.

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

Legal Counsel

Vedder Price P.C., 222 North LaSalle Street, Chicago, Illinois 60601, serves as
legal counsel to the Fund.

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

Independent Registered Public Accounting Firm

The financial highlights of the Fund included in the Fund's prospectus and the
Financial Statements incorporated by reference in this Statement of Additional
Information have been so included or incorporated by reference in reliance on
the report of PricewaterhouseCoopers LLP, Independent Registered Public
Accounting Firm, 125 High Street, Boston, MA 02110-2624, given on the authority
of said firm as experts in auditing and accounting. PricewaterhouseCoopers
audits the financial statements of the Fund and provides other audit, tax and
related services. Shareholders will receive annual audited financial statements
and semiannual unaudited financial statements.

                             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.

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. Provided a
Subadvisor is acting in accordance with any instructions and directions of the
Advisor or the Board, the Subadvisor is authorized to pay to a broker or dealer
who provides third party brokerage and research services a commission for
executing a portfolio transaction for the Fund, if the Subadvisor determines in
good faith that such commission was reasonable in relation to the value of the
third party brokerage and research services provided by such broker or dealer.

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 transaction, the affiliated broker charges the Funds a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions.

The Fund did not pay any affiliated brokerage commissions for the fiscal years
ended March 31, 2009, 2008 and 2007.

Affiliated Brokers do not knowingly participate in commissions paid by the Fund
to other brokers or dealers and do not seek or knowingly receive any reciprocal
business as the result of the payment of such commissions. In the event that an
Affiliated Broker learns at any time that it has knowingly received reciprocal
business, it will so inform the Board.

The following table sets forth the brokerage commissions paid by the Fund during
the periods indicated:

<TABLE>
<CAPTION>
                                                          For the fiscal year ended March 31,
                                                          -----------------------------------
                                                      2009              2008                2007
                                                      ----              ----                ----

<S>                                                 <C>                <C>                   <C>
DWS Lifecycle Long Range Fund                       $778,000           $856,000              $0
</TABLE>

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 March 31, 2009, the Fund held the
following securities of its regular brokers or dealers.

<TABLE>
<CAPTION>
                                                                              Value of Securities Owned as of March
Name of Regular Broker or Dealer or Parent (Issuer)                                          31, 2009
---------------------------------------------------                                          --------

<S>                                                                                             <C>
Buffalo Thunder Development Authority                                                           $1,000
Kerry Properties Ltd.                                                                           $2,000
Legal & General Group LPC                                                                       $2,000
Lend Lease Corp., Ltd.                                                                          $2,000
Aviva PLC                                                                                       $3,000
Great West Lifeco, Inc.                                                                         $3,000
Hannover Rueckversicherung AG (Registered)                                                      $3,000
Irish Life & Permanent PLC                                                                      $3,000
ASX Limited                                                                                     $4,000
Bank of Yokohama Ltd.                                                                           $4,000
Banca Cariage SpA                                                                               $4,000
Banco de Sabadell SA                                                                            $4,000
CNP Assurances                                                                                  $4,000
Criteria Caixacorp                                                                              $4,000
Daiwa Securities Group, Inc.                                                                    $4,000
Insurance Australia Group Ltd.                                                                  $4,000
Julius Baer Holdings AG-B                                                                       $4,000
Local TV Finance LLC                                                                            $4,000
Allied Irish Banks PLC                                                                          $5,000
AMP Limited NPV                                                                                 $5,000
Anglo Irish Bank Corp. Plc                                                                      $5,000
Bank of East Asia                                                                               $5,000
Banco Popular Espanol SA                                                                        $5,000
Hopewell Holdings                                                                               $5,000
IGM Financial, Inc.                                                                             $5,000
Immoeast AG                                                                                     $5,000
Lloyds Banking Group Plc                                                                        $5,000
Macquarie Group Ltd.                                                                            $5,000
Brookfield Asset Management, Inc.                                                               $6,000
Chuo Mitsui Trust Holdings, Inc.                                                                $6,000
Alleanza Assicurazioni SpA                                                                      $7,000
Atrium European Real Estate Ltd.                                                                $7,000
Balois Holdings PLC                                                                             $7,000
BOC Hong Kong (Holdings) Ltd.                                                                   $7,000
Eurazeo                                                                                         $7,000
Hang Lung Properties, Ltd.                                                                      $7,000
Capitaland Ltd.                                                                                 $8,000
Henderson Land Development Co.                                                                  $8,000
Intesa Sanpaolo (RSP)                                                                           $8,000
Governor & Co. of the Bank of Ireland                                                           $9,000
Banco Popolare Societa Cooperativa                                                             $10,000
Bank of Montreal                                                                               $10,000
Barclays PLC                                                                                   $11,000
Canadian Imperial Bank of Commerce                                                             $11,000
Jyske Bank A/S                                                                                 $11,000
Banca Popolare di Milano                                                                       $12,000
Commerzbank AG                                                                                 $12,000
Fraser & Neave Ltd.                                                                            $12,000
Hong Kong Exchange & Clearing Ltd                                                              $13,000
Australia & New Zealand Banking Group, PLC                                                     $14,000
Credit Agricole SA                                                                             $14,000
DEXIA SA                                                                                       $15,000
Deutsche Boerse AG                                                                             $16,000
Ashton Woods USA LLC                                                                           $19,000
Deutsche Post AG (Registered)                                                                  $19,000
Bank of Novia Scotia                                                                           $20,000
KBC Groep NV                                                                                   $20,000
Commonwealth Bank of Australia                                                                 $22,000
ARGO Group International Holding                                                               $24,000
Cheung Kong (Holdings) LTD                                                                     $25,000
Investor AB                                                                                    $25,000
AEGON NV                                                                                       $28,000
DBS Group Holdings Ltd.                                                                        $28,000
Banco Bilbao Vizcaya Argenta                                                                   $31,000
Assicurazioni Generali SpA                                                                     $35,000
Intesa Sanpaolo SpA                                                                            $40,000
Danske Bank A/S                                                                                $47,000
Doral Financial Corp.                                                                          $49,000
ING Groep NV                                                                                   $55,000
Frontier Financial Corp.                                                                       $57,000
Banco Espirito Santo SA                                                                        $60,000
Fortis                                                                                         $82,000
Banco Comercial Portugues SA                                                                   $94,000
Labranche & Co., Inc.                                                                         $122,000
Erste Group Bank AG                                                                           $129,000
Hellas Telecom                                                                                $129,000
HBOS PLC                                                                                      $143,000
Banco Latinoamericano de Exportaciones                                                        $184,000
CVB Financial Corp.                                                                           $192,000
Hang Seng Bank Ltd.                                                                           $194,000
Knight Capital Group, Inc.                                                                    $199,000
Arch Capital Group Ltd.                                                                       $259,000
AXA SA                                                                                        $276,000
BNP Paribas                                                                                   $287,000
DNB NOR Bank ASA                                                                              $354,000
Industrial & Commercial Bank of China                                                         $356,000
Allianz SE                                                                                    $359,000
HSBC Holdings PLC                                                                             $367,000
ANZ National International Ltd.                                                               $386,000
Banco Santander, S.A.                                                                         $458,000
Bank of New York Mellon Corp.                                                                 $494,000
China Life Insurance Co., Ltd.                                                                $510,000
Credit Suisse Group (Registered)                                                              $582,000
GMAC LLC                                                                                      $734,000
CME Group, Inc.                                                                             $1,429,000
Bear Stearns Adjustable Rate Mortgage Trust                                                 $1,930,000
Citigroup Inc.                                                                              $2,739,000
Bank of America Corp.                                                                       $3,277,000
JPMorgan Chase                                                                              $8,537,000
</TABLE>

Portfolio Turnover

The Fund's annual portfolio turnover rate (the lesser of the value of the
purchases or sales for the year divided by the average monthly market value of
the portfolio during the year, excluding US government securities and securities
with maturities of one year or less) may vary from year to year, as well as
within a year, depending on market conditions. For the fiscal years ended March
31, 2009 and March 31, 2008, the Fund's portfolio turnover rate was 242% and
264%, respectively.

A higher rate involves greater brokerage and transaction expenses to the Fund
and may result in the realization of net capital gains, which would be taxable
to shareholders when distributed. Purchases and sales are made for the Fund's
portfolio whenever necessary, in management's opinion, to meet the Fund's
investment objective.

                        PURCHASE AND REDEMPTION OF SHARES

General Information

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

DIDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents ("DWS Investments Wholesalers"). Generally, DWS
Investments 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 Investments Wholesalers
will receive a monetary monthly incentive based on the amount of sales generated
from their marketing of the funds, and that incentive will differ depending on
the product category of the fund. Each fund is assigned to one of three product
categories -- "Focus list funds," "Extended list funds" or "Index funds" --
taking into consideration, among other things, the following criteria, where
applicable:

o        The Fund's consistency with DWS Investments' branding and long-term
         strategy.

o        The Fund's competitive performance;

o        The Fund's Morningstar rating;

o        The length of time the Fund's Portfolio Managers have managed the
         Fund/Strategy

o        Market size for the fund category;

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

This information and other factors are presented to a committee comprised of
representatives from various groups within DWS Investments, 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 on the Focus
list and Extended list 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-investments.com, approximately one month after the end of each
quarter. DWS Investments Wholesalers receive the highest compensation for Focus
list funds, less for Extended list funds and the lowest for Index funds. The
level of compensation among these categories may differ significantly.

In the normal course of business, DWS Investments will from time to time
introduce new funds into the DWS family of funds. As a general rule, new funds
will be assigned to the Focus list compensation category. As described above,
the fund category assignments are reviewed periodically and are subject to
change.

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

Telephone and Electronic Transaction Procedures. Shareholders have various
telephone, Internet, wire and other electronic privileges available. The Fund or
its agents will not be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized instructions pursuant to these privileges if the Fund
or its agents reasonably believe, based upon reasonable verification procedures,
that the instructions were genuine. Verification procedures include recording
instructions, requiring certain identifying information before acting upon
instructions and sending written confirmations. During periods when it is
difficult to contact 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 DIDI 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 minimum initial investment for the Institutional Class shares is $1,000,000,
and there is no minimum subsequent investment. These minimum amounts may be
changed at any time in management's discretion.

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

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

Fees generally charged to IRA accounts will be charged to accounts of employees
and directors.

It is our policy to offer purchase privileges to current or former directors or
trustees of the Deutsche or DWS 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. The Fund also reserves the right to waive the minimum account balance
requirement for employee and director accounts.

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 each
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 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 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 each Fund with "shelf space" or access to a
third party platform or fund offering list, or other marketing programs
including, without limitation, inclusion of each 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 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, .05% to
..25% of sales of the Fund attributable to the financial advisor, a flat fee of
$13,350 up to $500,000, or any combination thereof. These amounts are annual
figures typically paid on a quarterly basis and 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 Investments 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, each 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
----------------------------------------------
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)
Deutsche Bank Group
Ensemble Financial Services
First Allied Securities
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Advisors Network
John Hancock Distributors LLC
LPL Financial
M.L. Stern & Co.
Meridien Financial Group
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
PlanMember Services
Prime Capital Inc.
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
------------------------------
Allegheny Investments LTD
Bank of America
Bank of New York (Hare & Co.)
BMO Capital Markets
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange
D.A. Davidson & Company
Deutsche Bank Group
Emmett A. Larkin Company
Fiduciary Trust Co. - International
First Southwest Company
J.P. Morgan Clearing Corp.
Legent Clearing LLC
Lincoln Investment Planning
LPL Financial
Mellon Financial Markets LLC
Mesirow Financial, Inc.
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Ridge Clearing & Outsourcing Solutions
Robert W. Baird & Co.
Romano Brothers and Company
SAMCO Capital Markets
Smith Moore & Company
Sungard Institutional Brokerage Inc.
Treasury Curve LLC
US Bancorp
UBS Financial Services
William Blair & Company

Channel: Third Party Insurance Platforms
----------------------------------------
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
EquiTrust Life Insurance Company
Farm Bureau Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
First Great West Life and Annuity 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
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
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 Group
Symetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

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

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

The prospect of receiving, or the receipt of additional compensation or
promotional incentives described above by financial advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS funds or a particular DWS fund over sales of shares of mutual
funds (or non-mutual fund investments) with respect to which the financial
advisor does not receive additional compensation or promotional incentives, or
receives lower levels of additional compensation or promotional incentives.
Similarly, financial advisors may receive different compensation or incentives
that may influence their recommendation of any particular share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that 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.

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

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 DIDI may
pay them a transaction fee up to the level of the discount or commission
allowable or payable to dealers.

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

The Fund will be deemed to have received a purchase or redemption order when an
authorized broker, service organization or, if applicable, an authorized
designee, accepts the order. Shares of the Fund may be purchased or redeemed on
any business day at the net asset value next determined after receipt of the
order, in good order, by DWS Investments Service Company. 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.

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. To sell shares by bank
wire you will need to sign up for these services in advance when completing your
account application.

Automatic Investment Plan. A shareholder may purchase shares of the Fund through
an automatic investment plan. Investments are made automatically (minimum $500
and maximum $250,000 for initial investments and a minimum of $50 and maximum
$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 automatic investment plan in the event that any item
is unpaid by the shareholder's financial institution.

Institutional Class Purchases. 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 may be waived in certain circumstances. The minimum amounts
may be changed at any time in management's discretion.

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

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

Redemptions

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

The Fund may suspend or postpone redemptions as permitted pursuant to Section
22(e) of the 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
nonroutine 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 DIDI, 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 (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 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.

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 readily
marketable securities. These securities will be chosen by the Fund and valued as
they are for purposes of computing the Fund's net asset value. A shareholder may
incur transaction expenses in converting these securities to cash. The Trust, on
behalf of the Fund, has elected, however, to be governed by Rule 18f-1 under the
1940 Act, as a result of which the Fund is obligated to redeem shares or
beneficial interests, as the case may be, with respect to any one investor
during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund, at the beginning of the period.

Exchanges

Shareholders may request a taxable exchange of their shares for shares of the
corresponding class of certain 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.

Shareholders who exchange their shares out of a DWS money market fund (not
including shares acquired by dividend reinvestment or by exchange from Class A
shares of another DWS fund) into Class A shares of certain other DWS funds, will
generally be subject to the applicable sales charge.

Certain DWS funds may not be available to shareholders on an exchange. To learn
more about which DWS funds may be available on exchange, please contact your
financial services firm or visit our Web site at: www.dws-investments.com or
call (800) 730-1313.

Shareholders may obtain prospectus(es) of the DWS fund they are exchanging into
from dealers, other firms or DIDI.

                                    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. In such a case, shareholders would also
have to include in their income their pro rata portion of the amount of such
gain. 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
amount necessary to avoid excise taxes.

The Fund distributes income dividends quarterly. The 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.

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 dividends in cash and
         long-term capital gain dividends in shares of the same class at net
         asset value; or

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

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

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

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

                                      TAXES

The following is intended to be a general summary of certain federal income tax
consequences of investing in the Fund. It is not intended as a complete
discussion of all such consequences, nor does it purport to deal with all
categories of investors. Investors are therefore advised to consult with their
tax advisors before making an investment in the Fund. The summary is based on
the laws in effect on the date of this statement of additional information and
existing judicial and administrative interpretations thereof, all of which are
subject to change, possibly with retroactive effect.

The Fund has elected to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and
has qualified as such since inception. The Fund intends to continue to so
qualify in each taxable year as required under the Code in order to avoid
payment of federal income tax at the Fund level. In order to qualify as a
regulated investment company, the Fund must meet certain requirements regarding
the source of its income, the diversification of its assets and the distribution
of its income. The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities and foreign currencies, other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies and net income derived from interests in "qualified publicly traded
partnerships" (i.e., partnerships that are traded on an established security
market or tradable on a secondary market, other than partnerships that derive
90% of their income from interest, dividends, capital gains, and other
traditionally permitted mutual fund income). The Fund must diversify its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash and cash
items, US government securities, securities of other regulated investment
companies, and other securities limited in respect of any one issuer of such
other securities to a value not greater than 5% of the value of the Fund's total
assets and to not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities (other than those of the US Government or other regulated investment
companies) of any one issuer, of two or more issuers of which 20% or more of the
voting stock is held by the Fund and which are engaged in the same, similar, or
related trades or businesses or in the securities of one or more qualified
publicly traded partnerships. The Fund is required to distribute to its
shareholders at least 90% of its taxable and tax-exempt net investment income
(including the excess of net short-term capital gains over net long-term capital
losses) and generally is not subject to federal income tax to the extent that it
distributes annually its net investment income and net realized capital gain in
the manner required under the Code.

Although in general the passive loss rules of the Code do not apply to regulated
investment companies, such rules do apply to a regulated investment company with
respect to items attributable to an interest in a qualified publicly traded
partnership. Fund investments in partnerships, including in qualified publicly
traded partnerships, may result in the Fund's being subject to state, local or
foreign income, franchise or withholding tax liabilities.

If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders), and all distributions from
earnings and profits, including any distributions of net tax-exempt income and
net long-term capital gains, will be taxable to shareholders as ordinary income.
Such distributions will be eligible (i) to be treated as qualified dividend
income in the case of shareholders taxed as individuals and (ii) for the
dividends received deduction in the case of corporate shareholders. In addition,
the Fund could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying as a
regulated investment company that is accorded special tax treatment.

The Fund is subject to a 4% nondeductible excise tax on amounts required to be
but not distributed under a prescribed formula. The formula requires payment to
shareholders during a calendar year of distributions representing at least 98%
of the Fund's 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 by, nor taxed to, the Fund during any prior calendar
year. Although the Fund's distribution policies should enable it to avoid excise
tax liability, the Fund may retain (and be subject to income or excise tax on) a
portion of its capital gains or other income if it appears to be in the interest
of the Fund.

Dividends or other income (including, in some cases, capital gains) received by
the Fund from investments in foreign securities may be subject to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes in some
cases. Foreign taxes paid by the Fund will reduce the return from the Fund's
investments. 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 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.

For federal income tax purposes, distributions of investment income are
generally taxable as ordinary income. For taxable years beginning before January
1, 2011, distributions of investment income designated by the Fund as derived
from "qualified dividend income" will be taxed in the hands of individuals at
the rates applicable to long-term capital gain, provided holding period and
other requirements are met at both the shareholder and fund level.

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

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

Dividends from domestic corporations may comprise a substantial 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
fewer than 46 days during the 91-day period beginning 45 days before the shares
become ex-dividend.

Taxes on distributions of capital gains are determined by how long the Fund
owned the investments that generated them, rather than how long a shareholder
has owned his or her shares. Distributions of net capital gains that are
properly designated by the Fund as capital gain dividends will be taxable as
long-term capital gains. "Net capital gains" for this purpose are the Fund's (x)
net long-term capital gains for the taxable year less (y) the sum of the Fund's
(i) net short-term capital losses for the taxable year and (ii) available
capital loss carryforwards. Distributions of net short-term capital gains, which
are gains attributable to the sales of investments that the Fund owned for one
year or less, will be taxable as ordinary income. If the Fund retains for
investment an amount equal to all or a portion of its net capital gains, it will
be subject to tax at the highest rate of tax imposed on corporations (currently
a 35% rate) 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 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 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 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 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.

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

Long-term capital gain rates applicable to individuals have been reduced -- in
general, to 15% with a 0% rate applying to taxpayers in the 10% and 15% ordinary
income rate brackets -- for taxable years beginning before January 1, 2011.

Dividends and other distributions by the Fund are generally treated under the
Code as received by the shareholders at the time the dividend or distribution is
made. However, any dividend or distribution declared by the Fund in October,
November or December of any calendar year and payable to shareholders of record
on a specified date in such a month shall be deemed to have been received by
each shareholder on December 31 of such calendar year and to have been paid by
the Fund not later than such December 31, provided such dividend is actually
paid by the Fund during January of the following calendar year.

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

The sale, exchange or redemption of Fund shares may give rise to a gain or loss.
In general, any gain or loss realized on 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 the redemption of shares held for six months or less at the time
of redemption will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period. Furthermore, any loss from the sale or redemption of shares held six
months or less generally will be disallowed to the extent that tax-exempt
interest dividends were paid on such shares. In addition, any loss realized on a
sale or exchange will be disallowed to the extent the shares disposed of are
replaced with a 61-day period beginning 30 days before and ending 30 days after
the disposition of the shares. In such a case, the basis of the shares acquired
will be increased to reflect the disallowed loss.

Under current law, the Fund serves to block unrelated business taxable income
("UBTI") from being realized by its tax-exempt shareholders. Notwithstanding the
foregoing, a tax-exempt shareholder could realize UBTI by virtue of its
investment in the Fund if shares in the Fund constitute debt-financed property
in the hands of the tax-exempt shareholder within the meaning of Code Section
514(b). Certain types of income received by the Fund from real estate investment
trusts ("REITs"), real estate mortgage investment conduits ("REMICs"), taxable
mortgage pools or other investments may cause the Fund to designate some or all
of its distributions as "excess inclusion income." To Fund shareholders such
excess inclusion income may (1) constitute taxable income, as UBTI for those
shareholders who would otherwise be tax-exempt such as individual retirement
accounts, 401(k) accounts, Keogh plans, pension plans and certain charitable
entities; (2) as UBTI cause a charitable remainder trust to become subject to an
excise tax of 100% of its UBTI; (3) not be offset by otherwise allowable
deductions for tax purposes; (4) not be eligible for reduced US withholding for
non-US shareholders even from tax treaty countries; and (5) cause the Fund to be
subject to tax if certain "disqualified organizations" as defined by the Code
are Fund shareholders.

The Fund's use of options, futures contracts, forward contracts (to the extent
permitted) and certain other investments 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.

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). With respect to certain
types of swaps, the Fund may be required to currently recognize income or loss
with respect to future payments on such swaps or may elect under certain
circumstances to mark such swaps to market annually for tax purposes as ordinary
income or loss. The tax treatment of many types of credit default swaps is
uncertain.

The Fund may be required to treat amounts as taxable income or gain, subject to
the distribution requirements referred to above, even though no corresponding
amounts of cash are received concurrently, as a result of (1) mark-to-market or
constructive sale rules or rules applicable to PFICs (as defined below) or
partnerships or trusts in which the Fund invests or to certain options, futures
or forward contracts, or "appreciated financial positions" or (2) the inability
to obtain cash distributions or other amounts due to currency controls or
restrictions on repatriation imposed by a foreign country with respect to the
Fund's investments (including through depositary receipts) in issuers in such
country or (3) tax rules applicable to debt obligations acquired with "original
issue discount," including zero-coupon or deferred payment bonds and pay-in-kind
debt obligations, or to market discount if an election is made with respect to
such market discount. The Fund may therefore be required to obtain cash to be
used to satisfy these distribution requirements by selling securities at times
that it might not otherwise be desirable to do so or borrowing the necessary
cash, thereby incurring interest expenses. In certain situations, the Fund may,
for a taxable year, defer all or a portion of its capital losses and currency
losses realized after October until the next taxable year in computing its
investment company taxable income and net capital gain, which will defer the
recognition of such realized losses. Such deferrals and other rules regarding
gains and losses realized after October may affect the tax character of
shareholder distributions.

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.

Foreign Investments. Dividends or other income (including, in some cases,
capital gains) received by the Fund from investments in foreign securities may
be subject to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes in some cases. The Fund will not be eligible to elect to
treat any foreign taxes it pays as paid by its shareholders, who therefore will
not be entitled to credits or deductions for such taxes on their own tax
returns. Foreign taxes paid by the Fund will reduce the return from the Fund's
investments.

Under Section 988 of the Code, gains or losses attributable to fluctuations in
exchange rates between the time the Fund accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such income or pays such liabilities are generally
treated as ordinary income or ordinary loss. In general, gains (and losses)
realized on debt instruments will be treated as Section 988 gain (or loss) to
the extent attributable to changes in exchange rates between the US dollar and
the currencies in which the instruments are denominated. Similarly, gains or
losses on foreign currency, foreign currency forward contracts and certain
foreign currency options or futures contracts, to the extent attributable to
fluctuations in exchange rates between the acquisition and disposition dates,
are also treated as ordinary income or loss unless the Fund were to elect
otherwise.

Passive Foreign Investment Companies. If the Fund purchases shares in certain
foreign investment entities, called "passive foreign investment companies"
("PFICs"), it may be subject to US federal income tax on a portion of any
"excess distribution" or gain from the disposition of such shares even if such
income is distributed as a taxable dividend by the Fund to its shareholders.
Additional charges in the nature of interest may be imposed on the Fund in
respect of deferred taxes arising from such distributions or gains.

If the Fund were to invest in a PFIC and elect to treat the PFIC as a "qualified
electing fund" under the Code, in lieu of the foregoing requirements, the Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if not
distributed to the Fund, and such amounts would be subject to the 90% and excise
tax distribution requirements described above. In order to make this election,
the Fund would be required to obtain certain annual information from the PFICs
in which it invests, which may be difficult or impossible to obtain.

Alternatively, the Fund may make a mark-to-market election that will result in
the Fund being treated as if it had sold and repurchased its PFIC stock at the
end of each year. In such case, the Fund would report any such gains as ordinary
income and would deduct any such losses as ordinary losses to the extent of
previously recognized gains. The election must be made separately for each PFIC
owned by the Fund and, once made, would be effective for all subsequent taxable
years, unless revoked with the consent of the Internal Revenue Service (the
"IRS"). By making the election, the Fund could potentially ameliorate the
adverse tax consequences with respect to its ownership of shares in a PFIC, but
in any particular year may be required to recognize income in excess of the
distributions it receives from PFICs and its proceeds from dispositions of PFIC
stock. The Fund may have to distribute this "phantom" income and gain to satisfy
the 90% distribution requirement and to avoid imposition of the 4% excise tax.

The Fund will make the appropriate tax elections, if possible, and take any
additional steps that are necessary to mitigate the effect of these rules.

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.

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

All distributions by the Fund result in a reduction in the net asset value of
Fund 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.

Shareholders will receive, if appropriate, various written notices after the
close of the Fund's taxable year regarding the federal income tax status of
certain dividends, distributions and deemed distributions that were paid (or
that are treated as having been paid) by the Fund to its shareholders during the
preceding taxable year.

Under Treasury regulations, if a shareholder recognizes a loss with respect to
the Fund's shares of $2 million or more for an individual shareholder or $10
million or more for a corporate shareholder, the shareholder must file with the
Internal Revenue Service a disclosure statement on Form 8886. Direct
shareholders of portfolio securities are in many cases excepted from this
reporting requirement, but under current guidance, shareholders of a regulated
investment company are not excepted. 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.

Other Taxation

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.
Rules of state and local taxation of dividend and capital gains distributions
from regulated investment companies often differ from rules for federal income
taxation described above. In particular, dividends or portions of dividends
attributable to US government and/or federal agency debt obligations, if any,
held by the regulated investment company may not be taxable at the state or
local level depending upon state or local tax requirements. You are urged to
consult your tax advisor as to the consequences and applicability of these and
other state and local tax rules affecting an investment in the Fund.

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor the Fund is 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.

Taxation of Non-US Shareholders

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

A non-US shareholder who fails to provide an IRS Form W-8BEN or other applicable
form may be subject to backup withholding at the appropriate rate.

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

A distribution from the Fund to foreign shareholders who have held more than 5%
of the Fund at any time during the one-year period ending on the date of
distribution is treated as real property gain subject to 35% withholding tax and
treated as income effectively connected to a US trade or business with certain
tax filing requirements applicable, if such distribution is attributable to a
distribution of real property gain received by the Fund from a REIT and if 50%
or more of the value of the Fund's assets are invested in REITs and other US
real property holding corporations.

Shares of the Fund held by a non-US shareholder at death will be considered
situated in the United States and subject to the US estate tax.

The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders should consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.

The foregoing is only a summary of certain material US federal income tax
consequences affecting the Fund 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 the 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 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 by the exchange or
one or more pricing agents 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 prices 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 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 pm 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
the Fund asset as determined in accordance with Board-approved procedures does
not represent the fair market value of the Fund asset, the value of the Fund
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 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 Fund's Board and overseen
primarily by the Fund's Pricing Committee.

Redemptions and Purchases In Kind

The Trust, on behalf of the Fund, reserves the right, if conditions exist which
make cash payments undesirable, to honor any request for redemption or
repurchase order by making payment in whole or in part in readily marketable
securities chosen by the Trust, or the Fund, as the case may be, and valued as
they are for purposes of computing the Fund's net asset value, as the case may
be (a redemption in kind). If payment is made to the Fund shareholder in
securities, the shareholder may incur transaction expenses in converting these
securities into cash. The Trust, on behalf of the Fund, has elected, however, to
be governed by Rule 18f-1 under the 1940 Act as a result of which the Fund is
obligated to redeem shares or beneficial interests, as the case may be, with
respect to any one investor during any 90-day period, solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund, as the case may be,
at the beginning of the period.

Each investor in the Fund, may add to or reduce its investment in the Fund on
each day the Fund determines its net asset value. At the close of each such
business day, the value of each investor's beneficial interest in the Fund will
be determined by multiplying the net asset value of the Fund by the percentage,
effective for that day, which represents that investor's share of the aggregate
beneficial interests in the Fund. Any additions or withdrawals which are to be
effected as of the close of business on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the Fund will
then be recomputed as the percentage equal to the fraction (i) the numerator of
which is the value of such investor's investment in the Fund as of the close of
business on such day plus or minus, as the case may be, the amount of net
additions to or withdrawals from the investor's investment in the Fund effected
as of the close of business on such day, and (ii) the denominator of which is
the aggregate net asset value of the Fund as of the close of business on such
day plus or minus, as the case may be, the amount of net additions to or
withdrawals from the aggregate investments in the Fund by all investors in the
Fund. The percentage so determined will then be applied to determine the value
of the investor's interest in the Fund as the close of business on the following
business day.

The 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 is
a taxable transaction to the shareholder. Securities may be accepted in payment
for shares only if they are, in the judgment of the Advisor, appropriate
investments for the Fund. In addition, securities accepted in payment for shares
must: (i) be acquired by the Fund for investment and not for resale; (ii) be
liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (iii) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. The Fund reserves the right to accept or reject at its own option
any and all securities offered in payment for its shares.

Trading in Foreign Securities

Trading in foreign markets may be completed at times which vary from the closing
of the Exchange. In computing the net asset value, 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 Exchange. Similarly, 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 they are determined and the closing of the Exchange. If such
events materially affect the value of the portfolio securities, these securities
may be valued at their fair value as determined in good faith by the Trustees,
although the actual calculation may be done by others.

                           BOARD MEMBERS 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.

Independent Board Members

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position                                                                   Number of Funds
 with the Trust and Length of     Business Experience and                                        in DWS Fund
 Time Served(1)                   Directorships During the Past 5 Years                          Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                               <C>                                                                   <C>
Paul K. Freeman                   Consultant, World Bank/Inter-American Development Bank;               125
(1950)                            Governing Council of the Independent Directors Council
Chairperson since 2009, and       (governance, executive committees); formerly: Project Leader,
Board Member since 1993           International Institute for Applied Systems Analysis
                                  (1998-2001); Chief Executive Officer, The Eric Group, Inc.
                                  (environmental insurance) (1986-1998)
--------------------------------------------------------------------------------------------------------------------
John W. Ballantine (1946)         Retired; formerly: Executive Vice President and Chief Risk            125
Board Member since 1999           Management Officer, First Chicago NBD Corporation/The First
                                  National Bank of Chicago (1996-1998); Executive Vice
                                  President and Head of International Banking (1995-1996);
                                  Directorships: Healthways Inc. (provider of disease and care
                                  management services); Portland General Electric (utility
                                  company); Stockwell Capital Investments PLC (private equity);
                                  former Directorships: First Oak Brook Bancshares, Inc. and
                                  Oak Brook Bank
--------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr. (1943)      Vice Chair, WGBH Educational Foundation; Directorships:               125
 Board Member since               Association of Public Television Stations; Becton Dickinson
 1990                             and Company(2) (medical technology company); Belo
                                  Corporation(2) (media company); Boston Museum of Science;
                                  Public Radio International; PRX, The Public Radio Exchange;
                                  The PBS Foundation; former Directorships: American Public
                                  Television; Concord Academy; New England Aquarium; Mass.
                                  Corporation for Educational Telecommunications; Committee for
                                  Economic Development; Public Broadcasting Service
--------------------------------------------------------------------------------------------------------------------
Dawn-Marie Driscoll (1946)        President, Driscoll Associates (consulting firm); Executive           125
Board Member since 1987           Fellow, Center for Business Ethics, Bentley University;
                                  formerly: Partner, Palmer & Dodge (1988-1990); Vice President
                                  of Corporate Affairs and General Counsel, Filene's
                                  (1978-1988); Directorships: Trustee of 20 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
                                  University; Trustee, Southwest Florida Community Foundation
                                  (charitable organization); former Directorships: Investment
                                  Company Institute (audit, executive, nominating committees)
                                  and Independent Directors Council (governance, executive
                                  committees)
--------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)               Managing General Partner, Exeter Capital Partners (a series           125
Board Member since                of 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           125
(1945)                            (1997-present); Member, Finance Committee, Association for
Board Member since                Asian Studies (2002-present); Director, Mitsui Sumitomo
2001                              Insurance Group (US) (2004-present); prior thereto, Managing
                                  Director, J.P. Morgan (investment banking firm) (until 1996)
--------------------------------------------------------------------------------------------------------------------
Richard J. Herring                Jacob Safra Professor of International Banking and Professor,         125
(1946)                            Finance Department, The Wharton School, University of
Board Member since                Pennsylvania (since July 1972); Co-Director, Wharton
1990                              Financial Institutions 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)
--------------------------------------------------------------------------------------------------------------------
William McClayton (1944)          Managing Director, Diamond Management & Technology                    125
Board Member since 2004           Consultants, Inc. (global management consulting firm)
                                  (2001-present); Directorship: Board of Managers, YMCA of
                                  Metropolitan Chicago; formerly: Senior Partner, Arthur
                                  Andersen LLP (accounting) (1966-2001); Trustee, Ravinia
                                  Festival
--------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel                  President and Chief Executive Officer, The Pew Charitable             125
(1951)                            Trusts (charitable organization) (1994 to present); Trustee,
Board Member since                Thomas Jefferson Foundation (charitable organization) (1994
1995                              to present); Trustee, Executive Committee, Philadelphia
                                  Chamber of Commerce (2001 to 2007); Trustee, Pro Publica
                                  (2007-present) (charitable organization); Director,
                                  CardioNet, Inc.(2) (2009-present) (health care); 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(2) (January
                                  2007-June 2007)
--------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.            Private investor since October 2003; Trustee of 20 open-end           125
(1946)                            mutual funds managed by Sun Capital Advisers, Inc. (since
Board Member since                October 1998); formerly: Pension & Savings Trust Officer,
1993                              Sprint Corporation(2) (telecommunications) (November
                                  1989-September 2003)
--------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg            Retired; formerly: Consultant (1997-2001); Director, US               125
(1943)                            Government Accountability Office (1996-1997); Partner,
Board Member since                Fulbright & Jaworski, L.L.P. (law firm) (1978-1996);
1997                              Directorships: The William and Flora Hewlett Foundation;
                                  Business Leadership Council, Wellesley College; former
                                  Directorships: Service Source, Inc., Mutual Fund Directors
                                  Forum (2002-2004), American Bar Retirement Association
                                  (funding vehicle for retirement plans) (1987-1990 and
                                  1994-1996)
--------------------------------------------------------------------------------------------------------------------
Robert H. Wadsworth (1940)        President, Robert H. Wadsworth & Associates, Inc. (consulting         128
Board Member since 1999           firm) (1983 to present); Director, The Phoenix Boys Choir
                                  Association
--------------------------------------------------------------------------------------------------------------------

Interested Board Member

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position                                                                   Number of Funds
 with the Trust and Length of     Business Experience and                                        in DWS Fund
 Time Served(1)                   Directorships During the Past 5 Years                          Complex Overseen
--------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(3)                Managing Director(4), Deutsche Asset Management; Head of              125
 (1958)                           Deutsche Asset Management Americas; CEO of DWS Investments;
 Board Member since               relocated to Germany in July 2009 as Vice Chairman(4) of
 2006                             Deutsche Asset Management and Member of the Management Board
                                  of DWS Investments, responsible for Global Relationship
                                  Management; formerly: board member of DWS Investments,
                                  Germany (1999-2005); Head of Sales and Product Management for
                                  the Retail and Private Banking Division of Deutsche Bank in
                                  Germany (1997-1999); 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(5)

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position    Business Experience and
 with the Trust and Length of
 Time Served(6)                   Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(7) (1965)       Managing Director(4), Deutsche Asset Management (2006-present); President of
 President, 2006-present          DWS family of funds; Director, ICI Mutual Insurance Company (since
                                  October 2007); 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(8) (1962)          Director(4), Deutsche Asset Management
 Vice President and Secretary,
 1999-present
--------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(7) (1963)       Managing Director(4), Deutsche Asset Management (since July 2004); formerly:
 Chief Financial Officer,         Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family
 2004-present                     of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS
 Treasurer, 2005-present          Global Asset Management (1994-1998)
--------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(8) (1962)       Managing Director(4), Deutsche Asset Management
 Assistant Secretary,
 1997-present
--------------------------------------------------------------------------------------------------------------------
 Rita Rubin(9) (1970)             Vice President and Counsel, Deutsche Asset Management (since October 2007);
 Assistant Secretary,             formerly, Vice President, Morgan Stanley Investment Management (2004-2007);
 2009-present                     Attorney, Shearman & Sterling LLP (2004); Vice President and Associate General
                                  Counsel, UBS Global Asset Management (2001-2004)
--------------------------------------------------------------------------------------------------------------------
 Paul Antosca(8)                  Director(4), Deutsche Asset Management (since 2006); formerly: Vice President,
 (1957)                           The Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jack Clark (8)                   Director(4), Deutsche Asset Management (since 2007); formerly: Vice President,
 (1967)                           State Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(8)               Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(9) (1972)          Vice President, Deutsche Asset Management (since 2006); formerly: AML
 Anti-Money Laundering            Operations Manager for Bear Stearns (2004-2006); Supervising Compliance
 Compliance Officer,              Principal and Operations Manager for AXA Financial (1999-2004)
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(9) (1962)           Managing Director(4), Deutsche Asset Management (2004-present); formerly: Chief
 Chief Compliance Officer,        Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President,
 2006-present                     The Prudential Insurance Company of America (1988-2000); E.F. Hutton and
                                  Company (1984-1988)
--------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(9)        Director(4), Deutsche Asset Management (2006-present); formerly: Director,
 (1951)                           Senior Vice President, General Counsel, and Assistant Secretary, Hansberger
 Chief Legal Officer,             Global Investors, Inc. (1996-2006); Director, National Society of Compliance
 2006-present                     Professionals (2002-2005) (2006-2009)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      The length of time served represents the year in which the Board Member
         joined the board of one or more DWS funds currently overseen by the
         Board.

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

(3)      The mailing address of Axel Schwarzer is DWS Investment GmbH, Mainzer
         Landstr. 178-190, Floor 5C, 60327 Frankfurt am Main, Germany. 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 Fund.

(4)      Executive title, not a board directorship.

(5)      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 Fund.

(6)      The length of time served represents the year in which the officer was
         first elected in such capacity for one or more DWS funds.

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

(8)      Address: One Beacon Street, Boston, Massachusetts 02108.

(9)      Address:  280 Park Avenue, New York, New York 10017.

Certain officers hold similar positions for other investment companies for which
DIMA or an affiliate serves as the Advisor.

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

 Paul H. Schubert:                Vice President
 Jason Vazquez:                   Vice President and AML Compliance Officer
 Caroline Pearson:                Secretary

Board Members' Responsibilities. The officers of the Trust manage its day-to-day
operations under the direction of the Board. The primary responsibility of the
Board is to represent the interests of the Fund and to provide oversight of the
management of the Fund.

Board Committees. The Board has established the following standing committees:
Audit Committee, Nominating and Governance Committee, Contract Committee, Equity
Oversight Committee, Fixed-Income and Quant Oversight Committee, Marketing and
Shareholder Services Committee, and Operations Committee. For each committee,
the Board has adopted a written charter setting forth each committee's
responsibilities. Each committee was reconstituted effective April 1, 2008.

Audit Committee: The Audit Committee, which consists entirely of Independent
Board Members, assists the Board in fulfilling its responsibility for oversight
of (1) the integrity of the financial statements, (2) the Fund's accounting and
financial reporting policies and procedures, (3) the Fund's compliance with
legal and regulatory requirements related to accounting and financial reporting
and (4) the qualifications, independence and performance of the independent
registered public accounting firm for the Fund. It also approves and recommends
to the Board the appointment, retention or termination of the independent
registered public accounting firm for the Fund, reviews the scope of audit and
internal controls, considers and reports to the Board on matters relating to the
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
William McClayton (Chair), Kenneth C. Froewiss (Vice Chair), John W. Ballantine,
Henry P. Becton, Jr., Keith R. Fox and William N. Searcy, Jr. During the
calendar year 2008, the Audit Committee of the Fund's Board held six (6)
meetings.

Nominating and Governance Committee: The Nominating and Governance Committee,
which consists entirely of Independent Board Members, recommends individuals for
membership on the Board, nominates officers, Board and committee chairs, vice
chairs and committee members, and oversees the operations of the Board. The
Nominating and Governance Committee also reviews recommendations by shareholders
for candidates for Board positions. Shareholders may recommend candidates for
Board positions by forwarding their correspondence by US mail or courier service
to Dawn-Marie Driscoll, P.O. Box 100176, Cape Coral, FL 33904. The members of
the Nominating and Governance Committee are Henry P. Becton, Jr. (Chair),
Rebecca W. Rimel (Vice Chair), Paul K. Freeman and William McClayton. During the
calendar year 2008, the Nominating and Governance Committee of the Fund's Board
held four (4) meetings.

Contract Committee: The Contract Committee, which consists entirely of
Independent Board Members, reviews at least annually, (a) the Fund's financial
arrangements with DIMA and its affiliates, and (b) the Fund's expense ratios.
The members of the Contract Committee are Robert H. Wadsworth (Chair), Keith R.
Fox (Vice Chair), Henry P. Becton, Jr., Richard J. Herring, William McClayton
and Jean Gleason Stromberg. During the calendar year 2008, the Contract Review
Committee of the Fund's Board held seven (7) meetings.

Equity Oversight Committee: The Equity Oversight Committee reviews the
investment operations of those funds that primarily invest in equity securities
(except for those funds managed by a quantitative investment team). The members
of the Equity Oversight Committee are John W. Ballantine (Chair), William
McClayton (Vice Chair), Henry P. Becton, Jr., Keith R. Fox, Richard J. Herring
and Rebecca W. Rimel. During the calendar year 2008, the Equity Oversight
Committee of the Fund's Board held five (5) meetings.

Fixed-Income and Quant Oversight Committee: The Fixed-Income and Quant Oversight
Committee reviews the investment operations of those funds that primarily invest
in fixed-income securities or are managed by a quantitative investment team. The
members of the Fixed-Income and Quant Oversight Committee are William N. Searcy,
Jr. (Chair), Jean Gleason Stromberg (Vice Chair), Dawn-Marie Driscoll, Kenneth
C. Froewiss and Robert H. Wadsworth. During the calendar year 2008, the
Fixed-Income Oversight Committee of the Fund's Board held five (5) meetings.

Marketing and Shareholder Services Committee: The Marketing and Shareholder
Services Committee reviews the Fund's marketing program, sales practices and
literature and shareholder services. The Marketing and Shareholder Services
Committee also considers matters relating to fund mergers and liquidations and
the organization of new funds. The members of the Marketing and Shareholder
Services Committee are Richard J. Herring (Chair), Dawn-Marie Driscoll (Vice
Chair), Rebecca W. Rimel, Jean Gleason Stromberg and Robert H. Wadsworth. During
the calendar year 2008, the Marketing/Distribution/Shareholder Service Committee
of the Fund's Board held four (4) meetings.

The Operations Committee: The Operations Committee reviews the administrative
operations, legal affairs and general compliance matters of the Fund. The
Operations Committee reviews administrative matters related to the operations of
the Fund, policies and procedures relating to portfolio transactions, custody
arrangements, fidelity bond and insurance arrangements, valuation of Fund assets
and securities and such other tasks as the full Board deems necessary or
appropriate. The Operations Committee also oversees the valuation of the Fund's
securities and other assets and determines, as needed, the fair value of Fund
securities or other assets under certain circumstances as described in the
Fund's Valuation Procedures. The Operations Committee has appointed a Valuation
Sub-Committee, which may make determinations of fair value required when the
Operations Committee is not in session. The members of the Operations Committee
are Dawn-Marie Driscoll (Chair), John W. Ballantine (Vice Chair), Kenneth C.
Froewiss, Rebecca W. Rimel and William N. Searcy, Jr. The members of the
Valuation Sub-Committee are Kenneth C. Froewiss (Chair), John W. Ballantine,
Dawn-Marie Driscoll (Alternate), Rebecca W. Rimel (Alternate) and William N.
Searcy, Jr. (Alternate). During the calendar year 2008, the Operations Committee
held four (4) meetings and the Valuation Sub-Committee held no meetings.

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

Remuneration. Each Independent Board Member receives compensation from the Fund
for his or her services, which includes retainer fees and specified amounts for
various committee services and for the Board Chairperson. 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.

Board Members who are officers, directors, employees or stockholders of Deutsche
Asset Management or its affiliates receive no direct compensation from the 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
Fund. The following tables show compensation from the Fund and aggregate
compensation from all of the funds in the DWS fund complex received by each
Independent Board Member during the calendar year 2008. Mr. Schwarzer is an
interested person of the Fund and received no compensation from the Fund or any
fund in the DWS fund complex during the relevant periods.

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

<S>                                             <C>                             <C>
  John W. Ballantine                            $1,008                          $237,500
  Henry P. Becton, Jr.(2)                         $929                          $246,000
  Dawn-Marie Driscoll(2)(3)                     $1,081                          $292,500
  Keith R. Fox(2)                                 $869                          $229,500
  Paul K. Freeman                               $1,073                          $255,000
  Kenneth C. Froewiss                             $855                          $226,750
  Richard J. Herring(2)                           $900                          $240,000
  William McClayton(4)                          $1,048                          $257,500
  Rebecca W. Rimel(2)                             $888                          $233,500
  William N. Searcy, Jr.                          $890                          $238,000
  Jean Gleason Stromberg                          $849                          $225,500
  Robert H. Wadsworth                           $1,048                          $273,500
</TABLE>

(1)      The DWS fund complex is composed of 136 funds as of December 31, 2008.

(2)      Aggregate compensation includes amounts paid to the Board Members for
         special meetings of ad hoc committees of the Board in connection with
         the consolidation of the DWS fund boards and various funds, meetings
         for considering fund expense simplification initiatives, and
         consideration of issues specific to the Fund's direct shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $8,000 for Mr. Becton, $2,000 for
         Ms. Driscoll, $2,000 for Mr. Fox, $2,000 for Dr. Herring and $8,000 for
         Ms. Rimel. These meeting fees were borne by the funds.

(3)      Includes $70,000 in annual retainer fees received by Ms. Driscoll as
         Chairperson of DWS funds.

(4)      Includes $15,000 paid to Mr. McClayton for numerous special meetings of
         an ad hoc committee of the former Chicago Board in connection with
         board consolidation initiatives.

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,
2008.

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

Independent Board Member:
-------------------------

<S>                                                    <C>                                 <C>
John W. Ballantine                                     None                                Over $100,000
Henry P. Becton, Jr.                               $1 - $10,000                            Over $100,000
Dawn-Marie Driscoll                                    None                                Over $100,000
Keith R. Fox                                           None                                Over $100,000
Paul K. Freeman                                        None                                Over $100,000
Kenneth C. Froewiss                                    None                                Over $100,000
Richard J. Herring                                     None                                Over $100,000
William McClayton                                      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
Robert H. Wadsworth                                    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 and 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, 2008. Immediate family members 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>
                                   Owner and                                      Value of         Percent of Class
Independent                     Relationship to                   Title of    Securities on an     on an Aggregate
Board Member                      Board Member        Company      Class       Aggregate Basis          Basis
------------                      ------------        -------      -----       ---------------          -----

<S>     <C>    <C>    <C>    <C>    <C>    <C>
John W. Ballantine                                     None
Henry P. Becton, Jr.                                   None
Dawn-Marie Driscoll                                    None
Keith R. Fox                                           None
Paul K. Freeman                                        None
Kenneth C. Froewiss                                    None
Richard J. Herring                                     None
William McClayton                                      None
Rebecca W. Rimel                                       None
William N. Searcy, Jr.                                 None
Jean Gleason Stromberg                                 None
Robert H. Wadsworth                                    None
</TABLE>

Securities Beneficially Owned

As of July 7, 2009, 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 July 7, 2009, no person owned of
record or beneficially 5% or more of any class of the Fund's outstanding shares,
except as noted below.

DWS Lifecycle Long Range Fund

<TABLE>
<CAPTION>
Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

<S>                                                          <C>                      <C>
STATE STREET BANK AND TRUST TTEE                             43,926,388.37            69.91% of Institutional Class
FBO KRAFT FOODS INC SVGS PLAN
MASTER TRUST
ATTN MICHELLE L ROBBINS
WESTWOOD MA  02090-2318

STATE STREET BANK & TR TTEE                                  15,688,503.10            24.97% of Institutional Class
FBO ALTRIA CORPORATE SERVICES
DEFERRED PROFIT SHARING MASTER TR
WESTWOOD MA  02090-2318

CHARLES SCHWAB & CO/SCHWAB                                    247,772.03                    56.06% of Class S
OMNIBUS ACCOUNT  REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA  94104-4151

NAT'L FINANCIAL SERVICES CORP FOR                              37,758.26                    8.54% of Class S
EXCL BENEFIT OUR CUSTOMERS
CHURCH STREET STATION
NEW YORK NY  10008-3908
</TABLE>

                               TRUST ORGANIZATION


The Fund is a series of DWS Advisor Funds. 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.

On July 10, 2006, DWS Lifecycle Long Range Fund (the "Predecessor Fund")
transferred all its assets and liabilities from DWS Advisor Funds III, an
open-end, management investment company, into a new series of the Trust, under
the same fund name. Effective October 23, 2006, the Fund's Investment Class
shares were renamed Class S shares.

A Fund generally is not required to hold meetings of its shareholders. Under the
Declaration of Trust, however, shareholder meetings will be held in connection
with the following matters to the extent and as provided in the Declaration of
Trust and as required by applicable law: (a) the election or removal of trustees
if a meeting is called for such purpose; (b) the termination of the Trust or a
Fund; (c) an amendment of the Declaration of Trust; (d) to the same extent as
stockholders of Massachusetts business corporation as to whether or not a court
action, proceeding or claims should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any series or class
thereof or the Shareholders; and (e) such additional matters as may be required
by law, the Declaration of Trust, the By-laws of the Trust, or any registration
of a Fund with the SEC or any state, or as the Trustees may determine to be
necessary or desirable. Shareholders also vote upon changes in fundamental
policies or restrictions.

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

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

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

                             PROXY VOTING GUIDELINES

The Fund has delegated proxy voting responsibilities to the Advisor, subject to
the Board's general oversight. The Advisor votes proxies pursuant to the proxy
voting policy and guidelines set forth in Appendix A to this SAI).

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-investments.com (click on "proxy voting" at the bottom of
the page).

                              FINANCIAL STATEMENTS

The financial statements, including the investment portfolio, for the Lifecycle
Long Range Fund for the fiscal year ended March 31, 2009, and the Report of the
Independent Registered Public Accounting Firm are incorporated herein by
reference to the Annual Report to shareholders of the Lifecycle Long Range Fund
dated March 31, 2009. Copies of the Annual Report may be obtained without charge
by contacting the Service Center at 1-800-730-1313.

                             ADDITIONAL INFORMATION

The Fund will reinvest dividend checks (and future dividends) in shares of that
same Fund and class if checks are returned as undeliverable.

Dividends will be reinvested in shares of the same class of the Fund unless
shareholders indicate in writing that they wish to receive them in cash or in
shares of other DWS Funds with multiple classes of shares or DWS Funds as
provided in the prospectus. To use this privilege of investing dividends of the
Fund in shares of another DWS Fund, shareholders must maintain a minimum account
value of $1,000 in the Fund distributing the dividends. The Fund automatically
will reinvest dividend checks (and future dividends) in shares of that same Fund
and class unless the shareholder requests payment in cash at the time the
application is completed. 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.

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:
dws-investments.com (click on "proxy voting" at the bottom of the page).

Other Information

The CUSIP number:

DWS Lifecycle Long Range Fund - Institutional Class                   23339E525

DWS Lifecycle Long Range Fund has a fiscal year ending March 31st.

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 1933 Act and reference is hereby
made to the Registration Statement for further information with respect to the
Fund and the securities offered hereby.

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



                                             STATEMENT OF ADDITIONAL INFORMATION
                                   August 1, 2009, As Revised September 15, 2009

Investment Advisor
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY  10154

Sub-Advisor
ABERDEEN ASSET MANAGEMENT INC.
1735 Market Street, 37th Floor
Philadelphia, PA  19103

Administrator
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY  10154

Transfer Agent
DWS INVESTMENTS SERVICE COMPANY
c/o DWS Investments
210 W. 10th Street
Kansas City, MO 64105

Distributor
DWS INVESTMENTS DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606-5808

Custodian
STATE STREET BANK and TRUST COMPANY
Layfayette Corporate Center
2 Avenue De Lafayette
Boston, MA 02111

Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA  02110

Counsel
VEDDER PRICE P.C.
222 North LaSalle Street
Chicago, IL  60601

No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectus, its
Statement of Additional Information 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 Fund. Neither the Prospectuses nor this Statement of
Additional Information constitute an offer in any state in which, or to any
person to whom, such offer may not lawfully be made.


                      APPENDIX A -- PROXY VOTING GUIDELINES

       Deutsche Asset Management ("AM") Proxy Voting Policy and Guidelines


I.       INTRODUCTION

AM has adopted and implemented the following policies and procedures, which it
believes are reasonably designed to ensure that proxies are voted in the best
economic interest of clients, in accordance with its fiduciary duties and local
regulation. These Proxy Voting Policies, Procedures and Guidelines shall apply
to all accounts managed by US domiciled advisers and to all US client accounts
managed by non US regional offices. Non US regional offices are required to
maintain procedures and to vote proxies as may be required by law on behalf of
their non US clients. In addition, AM's proxy policies reflect the fiduciary
standards and responsibilities for ERISA accounts.

The attached guidelines represent a set of global recommendations that were
determined by the Global Proxy Voting Sub-Committee ("the GPVSC"). These
guidelines were developed to provide AM with a comprehensive list of
recommendations that represent how AM will generally vote proxies for its
clients. The recommendations derived from the application of these guidelines
are not intended to influence the various AM legal entities either directly or
indirectly by parent or affiliated companies. In addition, the organizational
structures and documents of the various AM legal entities allows, where
necessary or appropriate, the execution by individual AM subsidiaries of the
proxy voting rights independently of any DB parent or affiliated company. This
applies in particular to non U.S. fund management companies. The individuals
that make proxy voting decisions are also free to act independently, subject to
the normal and customary supervision by the management/boards of these AM legal
entities.


II.      AM'S PROXY VOTING RESPONSIBILITIES

Proxy votes are the property of AM's advisory clients.(1) As such, AM's
authority and responsibility to vote such proxies depend upon its contractual
relationships with its clients. AM has delegated responsibility for effecting
its advisory clients' proxy votes to Institutional Shareholder Services ("ISS"),
an independent third-party proxy voting specialist. ISS votes AM's advisory
clients' proxies in accordance with AM's proxy guidelines or AM's specific
instructions. Where a client has given specific instructions as to how a proxy
should be voted, AM will notify ISS to carry out those instructions. Where no
specific instruction exists, AM will follow the procedures in voting the proxies
set forth in this document. Certain Taft-Hartley clients may direct AM to have
ISS vote their proxies in accordance with Taft Hartley voting Guidelines

_____________________

(1)      For purposes of these Policies and Procedures, "clients" refers to
         persons or entities: for which AM serves as investment adviser or
         sub-adviser; for which AM votes proxies; and that have an economic or
         beneficial ownership interest in the portfolio securities of issuers
         soliciting such proxies.

Clients may in certain instances contract with their custodial agent and notify
AM that they wish to engage in securities lending transactions. In such cases,
it is the responsibility of the custodian to deduct the number of shares that
are on loan so that they do not get voted twice.


III.     POLICIES

1.       Proxy voting activities are conducted in the best economic interest of
         clients

AM has adopted the following policies and procedures to ensure that proxies are
voted in accordance with the best economic interest of its clients, as
determined by AM in good faith after appropriate review.

2.       The Global Proxy Voting Sub-Committee

The Global Proxy Voting Sub-Committee (the "GPVSC") is an internal working group
established by the applicable AM's Investment Risk Oversight Committee pursuant
to a written charter. The GPVSC is responsible for overseeing AM's proxy voting
activities, including:

(i)    adopting, monitoring and updating guidelines, attached as Exhibit A (the
       "Guidelines"), that provide how AM will generally vote proxies pertaining
       to a comprehensive list of common proxy voting matters;

(ii)   voting proxies where (A) the issues are not covered by specific client
       instruction or the Guidelines; (B) the Guidelines specify that the issues
       are to be determined on a case-by-case basis; or (C) where an exception
       to the Guidelines may be in the best economic interest of AM's clients;
       and

(iii)  monitoring the Proxy Vendor Oversight's proxy voting activities (see
       below).

AM's Proxy Vendor Oversight, a function of AM's Operations Group, is responsible
for coordinating with ISS to administer AM's proxy voting process and for voting
proxies in accordance with any specific client instructions or, if there are
none, the Guidelines, and overseeing ISS' proxy responsibilities in this regard.

3.       Availability of Proxy Voting Policies and Procedures and proxy voting
         record

Copies of these Policies and Procedures, as they may be updated from time to
time, are made available to clients as required by law and otherwise at AM's
discretion. Clients may also obtain information on how their proxies were voted
by AM as required by law and otherwise at AM's discretion; however, AM must not
selectively disclose its investment company clients' proxy voting records. The
Proxy Vendor Oversight will make proxy voting reports available to advisory
clients upon request. The investment companies' proxy voting records will be
disclosed to shareholders by means of publicly-available annual filings of each
company's proxy voting record for 12-month periods ended June 30 (see
"Recordkeeping" below), if so required by relevant law.


IV.      PROCEDURES

The key aspects of AM's proxy voting process are as follows:

1.       The GPVSC's Proxy Voting Guidelines

The Guidelines set forth the GPVSC's standard voting positions on a
comprehensive list of common proxy voting matters. The GPVSC has developed, and
continues to update the Guidelines based on consideration of current corporate
governance principles, industry standards, client feedback, and the impact of
the matter on issuers and the value of the investments.

The GPVSC will review the Guidelines as necessary to support the best economic
interests of AM's clients and, in any event, at least annually. The GPVSC will
make changes to the Guidelines, whether as a result of the annual review or
otherwise, taking solely into account the best economic interests of clients.
Before changing the Guidelines, the GPVSC will thoroughly review and evaluate
the proposed change and the reasons therefore, and the GPVSC Chair will ask
GPVSC members whether anyone outside of the AM organization (but within Deutsche
Bank and its affiliates) or any entity that identifies itself as a AM advisory
client has requested or attempted to influence the proposed change and whether
any member has a conflict of interest with respect to the proposed change. If
any such matter is reported to the GPVSC Chair, the Chair will promptly notify
the Conflicts of Interest Management Sub-Committee (see below) and will defer
the approval, if possible. Lastly, the GPVSC will fully document its rationale
for approving any change to the Guidelines.

The Guidelines may reflect a voting position that differs from the actual
practices of the public company(ies) within the Deutsche Bank organization or of
the investment companies for which AM or an affiliate serves as investment
adviser or sponsor. Investment companies, particularly closed-end investment
companies, are different from traditional operating companies. These differences
may call for differences in voting positions on the same matter. Further, the
manner in which AM votes investment company proxies may differ from proposals
for which a AM-advised or sponsored investment company solicits proxies from its
shareholders. As reflected in the Guidelines, proxies solicited by closed-end
(and open-end) investment companies are generally voted in accordance with the
pre-determined guidelines of ISS. See Section IV.3.B.

Funds ("Underlying Funds") in which Topiary Fund Management Fund of Funds (each,
a "Fund") invest, may from time to time seek to revise their investment terms
(i.e. liquidity, fees, etc.) or investment structure. In such event, the
Underlying Funds may require approval/consent from its investors to effect the
relevant changes. Topiary Fund Management has adopted Proxy Voting Procedures
which outline the process for these approvals.

2.       Specific proxy voting decisions made by the GPVSC

The Proxy Vendor Oversight will refer to the GPVSC all proxy proposals (i) that
are not covered by specific client instructions or the Guidelines; or (ii) that,
according to the Guidelines, should be evaluated and voted on a case-by-case
basis.

Additionally, if, the Proxy Vendor Oversight, the GPVSC Chair or any member of
the GPVSC, a portfolio manager, a research analyst or a sub-adviser believes
that voting a particular proxy in accordance with the Guidelines may not be in
the best economic interests of clients, that individual may bring the matter to
the attention of the GPVSC Chair and/or the Proxy Vendor Oversight.(2)

_____________________

(2)      The Proxy Vendor Oversight generally monitors upcoming proxy
         solicitations for heightened attention from the press or the industry
         and for novel or unusual proposals or circumstances, which may prompt
         the Proxy Vendor Oversight to bring the solicitation to the attention
         of the GPVSC Chair. AM portfolio managers, AM research analysts and
         sub-advisers also may bring a particular proxy vote to the attention of
         the GPVSC Chair, as a result of their ongoing monitoring of portfolio
         securities held by advisory clients and/or their review of the periodic
         proxy voting record reports that the GPVSC Chair distributes to AM
         portfolio managers and AM research analysts.

If the Proxy Vendor Oversight refers a proxy proposal to the GPVSC or the GPVSC
determines that voting a particular proxy in accordance with the Guidelines is
not in the best economic interests of clients, the GPVSC will evaluate and vote
the proxy, subject to the procedures below regarding conflicts.

The GPVSC endeavors to hold meetings to decide how to vote particular proxies
sufficiently before the voting deadline so that the procedures below regarding
conflicts can be completed before the GPVSC's voting determination.

3.       Certain proxy votes may not be cast

In some cases, the GPVSC may determine that it is in the best economic interests
of its clients not to vote certain proxies. If the conditions below are met with
regard to a proxy proposal, AM will abstain from voting:

o        Neither the Guidelines nor specific client instructions cover an issue;

o        ISS does not make a recommendation on the issue;

o        The GPVSC cannot convene on the proxy proposal at issue to make a
         determination as to what would be in the client's best interest. (This
         could happen, for example, if the Conflicts of Interest Management
         Sub-committee found that there was a material conflict or if despite
         all best efforts being made, the GPVSC quorum requirement could not be
         met).

In addition, it is AM's policy not to vote proxies of issuers subject to laws of
those jurisdictions that impose restrictions upon selling shares after proxies
are voted, in order to preserve liquidity. In other cases, it may not be
possible to vote certain proxies, despite good faith efforts to do so. For
example, some jurisdictions do not provide adequate notice to shareholders so
that proxies may be voted on a timely basis. Voting rights on securities that
have been loaned to third-parties transfer to those third-parties, with loan
termination often being the only way to attempt to vote proxies on the loaned
securities. Lastly, the GPVSC may determine that the costs to the client(s)
associated with voting a particular proxy or group of proxies outweighs the
economic benefits expected from voting the proxy or group of proxies.

The Proxy Vendor Oversight will coordinate with the GPVSC Chair regarding any
specific proxies and any categories of proxies that will not or cannot be voted.
The reasons for not voting any proxy shall be documented.

4.       Conflict of Interest Procedures

A. Procedures to Address Conflicts of Interest and Improper Influence

Overriding Principle. In the limited circumstances where the GPVSC votes
proxies,(3) the GPVSC will vote those proxies in accordance with what it, in
good faith, determines to be the best economic interests of AM's clients.(4)

_____________________

(3)      As mentioned above, the GPVSC votes proxies (i) where neither a
         specific client instruction nor a Guideline directs how the proxy
         should be voted, (ii) where the Guidelines specify that an issue is to
         be determined on a case by case basis or (iii) where voting in
         accordance with the Guidelines may not be in the best economic
         interests of clients.

(4)      The Proxy Vendor Oversight, who serves as the non-voting secretary of
         the GPVSC, may receive routine calls from proxy solicitors and other
         parties interested in a particular proxy vote. Any contact that
         attempts to exert improper pressure or influence shall be reported to
         the Conflicts of Interest Management Sub-Committee.

Independence of the GPVSC. As a matter of Compliance policy, the GPVSC and the
Proxy Vendor Oversight are structured to be independent from other parts of
Deutsche Bank. Members of the GPVSC and the employee responsible for Proxy
Vendor Oversight are employees of AM. As such, they may not be subject to the
supervision or control of any employees of Deutsche Bank Corporate and
Investment Banking division ("CIB"). Their compensation cannot be based upon
their contribution to any business activity outside of AM without prior approval
of Legal and Compliance. They can have no contact with employees of Deutsche
Bank outside of the Private Client and Asset Management division ("PCAM")
regarding specific clients, business matters or initiatives without the prior
approval of Legal and Compliance. They furthermore may not discuss proxy votes
with any person outside of AM (and within AM only on a need to know basis).

Conflict Review Procedures. There will be a committee (the "Conflicts of
Interest Management Sub-Committee") established within AM that will monitor for
potential material conflicts of interest in connection with proxy proposals that
are to be evaluated by the GPVSC. Promptly upon a determination that a vote
shall be presented to the GPVSC, the GPVSC Chair shall notify the Conflicts of
Interest Management Sub-Committee. The Conflicts of Interest Management
Sub-Committee shall promptly collect and review any information deemed
reasonably appropriate to evaluate, in its reasonable judgment, if AM or any
person participating in the proxy voting process has, or has the appearance of,
a material conflict of interest. For the purposes of this policy, a conflict of
interest shall be considered "material" to the extent that a reasonable person
could expect the conflict to influence, or appear to influence, the GPVSC's
decision on the particular vote at issue. GPVSC should provide the Conflicts of
Interest Management Sub-Committee a reasonable amount of time (no less than 24
hours) to perform all necessary and appropriate reviews. To the extent that a
conflicts review can not be sufficiently completed by the Conflicts of Interest
Management Sub-Committee the proxies will be voted in accordance with the
standard guidelines.

The information considered by the Conflicts of Interest Management Sub-Committee
may include without limitation information regarding (i) AM client
relationships; (ii) any relevant personal conflict known by the Conflicts of
Interest Management Sub-Committee or brought to the attention of that
sub-committee; (iii) and any communications with members of the GPVSC (or anyone
participating or providing information to the GPVSC) and any person outside of
the AM organization (but within Deutsche Bank and its affiliates) or any entity
that identifies itself as a AM advisory client regarding the vote at issue. In
the context of any determination, the Conflicts of Interest Management
Sub-Committee may consult with, and shall be entitled to rely upon, all
applicable outside experts, including legal counsel.

Upon completion of the investigation, the Conflicts of Interest Management
Sub-Committee will document its findings and conclusions. If the Conflicts of
Interest Management Sub-Committee determines that (i) AM has a material conflict
of interest that would prevent it from deciding how to vote the proxies
concerned without further client consent or (ii) certain individuals should be
recused from participating in the proxy vote at issue, the Conflicts of Interest
Management Sub-Committee will so inform the GPVSC chair.

If notified that AM has a material conflict of interest as described above, the
GPVSC chair will obtain instructions as to how the proxies should be voted
either from (i) if time permits, the effected clients, or (ii) in accordance
with the standard guidelines. If notified that certain individuals should be
recused from the proxy vote at issue, the GPVSC Chair shall do so in accordance
with the procedures set forth below.

Note: Any AM employee who becomes aware of a potential, material conflict of
interest in respect of any proxy vote to be made on behalf of clients shall
notify Compliance. Compliance shall call a meeting of the conflict review
committee to evaluate such conflict and determine a recommended course of
action.

Procedures to be followed by the GPVSC. At the beginning of any discussion
regarding how to vote any proxy, the GPVSC Chair (or his or her delegate) will
inquire as to whether any GPVSC member (whether voting or ex officio) or any
person participating in the proxy voting process has a personal conflict of
interest or has actual knowledge of an actual or apparent conflict that has not
been reported to the Conflicts of Interest Management Sub-Committee.

The GPVSC Chair also will inquire of these same parties whether they have actual
knowledge regarding whether any director, officer or employee outside of the AM
organization (but within Deutsche Bank and its affiliates) or any entity that
identifies itself as a AM advisory client, has: (i) requested that AM, the Proxy
Vendor Oversight (or any member thereof) or a GPVSC member vote a particular
proxy in a certain manner; (ii) attempted to influence AM, the Proxy Vendor
Oversight (or any member thereof), a GPVSC member or any other person in
connection with proxy voting activities; or (iii) otherwise communicated with a
GPVSC member or any other person participating or providing information to the
GPVSC regarding the particular proxy vote at issue, and which incident has not
yet been reported to the Conflicts of Interest Management Sub- Committee.

If any such incidents are reported to the GPVSC Chair, the Chair will promptly
notify the Conflicts of Interest Management Sub-Committee and, if possible, will
delay the vote until the Conflicts of Interest Management Sub-Committee can
complete the conflicts report. If a delay is not possible, the Conflicts of
Interest Management Sub-Committee will instruct the GPVSC whether anyone should
be recused from the proxy voting process, or whether AM should vote the proxy in
accordance with the standard guidelines, seek instructions as to how to vote the
proxy at issue from ISS or, if time permits, the effected clients. These
inquiries and discussions will be properly reflected in the GPVSC's minutes.

Duty to Report. Any AM employee, including any GPVSC member (whether voting or
ex officio), that is aware of any actual or apparent conflict of interest
relevant to, or any attempt by any person outside of the AM organization (but
within Deutsche Bank and its affiliates) or any entity that identifies itself as
a AM advisory client to influence, how AM votes its proxies has a duty to
disclose the existence of the situation to the GPVSC Chair (or his or her
designee) and the details of the matter to the Conflicts of Interest Management
Sub-Committee. In the case of any person participating in the deliberations on a
specific vote, such disclosure should be made before engaging in any activities
or participating in any discussion pertaining to that vote.

Recusal of Members. The GPVSC will recuse from participating in a specific proxy
vote any GPVSC members (whether voting or ex officio) and/or any other person
who (i) are personally involved in a material conflict of interest; or (ii) who,
as determined by the Conflicts of Interest Management Sub-Committee, have actual
knowledge of a circumstance or fact that could effect their independent
judgment, in respect of such vote. The GPVSC will also exclude from
consideration the views of any person (whether requested or volunteered) if the
GPVSC or any member thereof knows, or if the Conflicts of Interest Management
Sub-Committee has determined, that such other person has a material conflict of
interest with respect to the particular proxy, or has attempted to influence the
vote in any manner prohibited by these policies.

If, after excluding all relevant GPVSC voting members pursuant to the paragraph
above, there are three or more GPVSC voting members remaining, those remaining
GPVSC members will determine how to vote the proxy in accordance with these
Policies and Procedures. If there are fewer than three GPVSC voting members
remaining, the GPVSC Chair will vote the proxy in accordance with the standard
guidelines, will obtain instructions as to how to have the proxy voted from, if
time permits, the effected clients and otherwise from ISS.

B.       Investment Companies and Affiliated Public Companies

Investment Companies. As reflected in the Guidelines, all proxies solicited by
open-end and closed-end investment companies are voted in accordance with the
pre-determined guidelines of ISS, unless the investment company client directs
AM to vote differently on a specific proxy or specific categories of proxies.
However, regarding investment companies for which AM or an affiliate serves as
investment adviser or principal underwriter, such proxies are voted in the same
proportion as the vote of all other shareholders (i.e., "mirror" or "echo"
voting). Master fund proxies solicited from feeder funds are voted in accordance
with applicable provisions of Section 12 of the Investment Company Act of 1940.

Subject to participation agreements with certain Exchange Traded Funds ("ETF")
issuers that have received exemptive orders from the U.S. Securities and
Exchange Commission allowing investing DWS funds to exceed the limits set forth
in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will
echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of
outstanding voting shares globally when required to do so by participation
agreements and SEC orders.

Affiliated Public Companies. For proxies solicited by non-investment company
issuers of or within the Deutsche Bank organization, e.g., Deutsche bank itself,
these proxies will be voted in the same proportion as the vote of other
shareholders (i.e., "mirror" or "echo" voting).

Note: With respect to the QP Trust (not registered under the Investment Company
Act of 1940), the Fund is not required to engage in echo voting and the
investment adviser will use these Guidelines, and may determine, with respect to
the QP Trust, to vote contrary to the positions in the Guidelines, consistent
with the Fund's best interest.

C.       Other Procedures That Limit Conflicts of Interest

AM and other entities in the Deutsche Bank organization have adopted a number of
policies, procedures and internal controls that are designed to avoid various
conflicts of interest, including those that may arise in connection with proxy
voting, including:

o        Deutsche Bank Americas Restricted Activities Policy. This policy
         provides for, among other things, independence of AM employees from
         CIB, and information barriers between AM and other affiliates.
         Specifically, no AM employee may be subject to the supervision or
         control of any employee of CIB. No AM employee shall have his or her
         compensation based upon his or her contribution to any business
         activity within the Bank outside of the business of AM, without the
         prior approval of Legal or Compliance. Further, no employee of CIB
         shall have any input into the compensation of a AM employee without the
         prior approval of Legal or Compliance. Under the information barriers
         section of this policy, as a general rule, AM employees who are
         associated with the investment process should have no contact with
         employees of Deutsche Bank or its affiliates, outside of PCAM,
         regarding specific clients, business matters, or initiatives. Further,
         under no circumstances should proxy votes be discussed with any
         Deutsche Bank employee outside of AM (and should only be discussed on a
         need-to-know basis within AM).

Other relevant internal policies include the Deutsche Bank Americas Code of
Professional Conduct, the Deutsche Asset Management Information Sharing
Procedures, the Deutsche Asset Management Code of Ethics, the Sarbanes-Oxley
Senior Officer Code of Ethics, and the Deutsche Bank Group Code of Conduct. The
GPVSC expects that these policies, procedures and internal controls will greatly
reduce the chance that the GPVSC (or, its members) would be involved in, aware
of or influenced by, an actual or apparent conflict of interest.


V.       RECORDKEEPING

At a minimum, the following types of records must be properly maintained and
readily accessible in order to evidence compliance with this policy.

o        AM will maintain a record of each vote cast by AM that includes among
         other things, company name, meeting date, proposals presented, vote
         cast and shares voted.

o        The Proxy Vendor Oversight maintains records for each of the proxy
         ballots it votes. Specifically, the records include, but are not
         limited to:

         -        The proxy statement (and any additional solicitation
                  materials) and relevant portions of annual statements.

         -        Any additional information considered in the voting process
                  that may be obtained from an issuing company, its agents or
                  proxy research firms.

         -        Analyst worksheets created for stock option plan and share
                  increase analyses.

         -        Proxy Edge print-screen of actual vote election.

o        AM will retain these Policies and Procedures and the Guidelines; will
         maintain records of client requests for proxy voting information; and
         will retain any documents the Proxy Vendor Oversight or the GPVSC
         prepared that were material to making a voting decision or that
         memorialized the basis for a proxy voting decision.

o        The GPVSC also will create and maintain appropriate records documenting
         its compliance with these Policies and Procedures, including records of
         its deliberations and decisions regarding conflicts of interest and
         their resolution.

o        With respect to AM's investment company clients, ISS will create and
         maintain records of each company's proxy voting record for 12-month
         periods ended June 30. AM will compile the following information for
         each matter relating to a portfolio security considered at any
         shareholder meeting held during the period covered by the report and
         with respect to which the company was entitled to vote:

         -        The name of the issuer of the portfolio security;

         -        The exchange ticker symbol of the portfolio security (if
                  symbol is available through reasonably practicable means);

         -        The Council on Uniform Securities Identification Procedures
                  number for the portfolio security (if the number is available
                  through reasonably practicable means);

         -        The shareholder meeting date;

         -        A brief identification of the matter voted on;

         -        Whether the matter was proposed by the issuer or by a security
                  holder;

         -        Whether the company cast its vote on the matter;

         -        How the company cast its vote (e.g., for or against proposal,
                  or abstain; for or withhold regarding election of directors);
                  and

         -        Whether the company cast its vote for or against management.

Note: This list is intended to provide guidance only in terms of the records
that must be maintained in accordance with this policy. In addition, please note
that records must be maintained in accordance with the applicable AM Records
Management Policy.

With respect to electronically stored records, "properly maintained" is defined
as complete, authentic (unalterable) usable and backed-up. At a minimum, records
should be retained for a period of not less than six years (or longer, if
necessary to comply with applicable regulatory requirements), the first three
years in an appropriate AM office.


VI.      THE GPVSC'S OVERSIGHT ROLE

In addition to adopting the Guidelines and making proxy voting decisions on
matters referred to it as set forth above, the GPVSC will monitor the proxy
voting process by reviewing summary proxy information presented by ISS. The
GPVSC will use this review process to determine, among other things, whether any
changes should be made to the Guidelines. This review will take place at least
quarterly and will be documented in the GPVSC's minutes.


Attachment A - Global Proxy Voting Guidelines







                            Deutsche Asset Management

                         Global Proxy Voting Guidelines



                             As Amended October 2008


                                [GRAPHIC OMITTED]
Table of contents

I        Board Of Directors And Executives

         A        Election Of Directors

         B        Classified Boards Of Directors

         C        Board And Committee Independence

         D        Liability And Indemnification Of Directors

         E        Qualifications Of Directors

         F        Removal Of Directors And Filling Of Vacancies

         G        Proposals To Fix The Size Of The Board

         H        Proposals to Restrict Chief Executive Officer's Service on

                  Multiple Boards

         I        Proposals to Restrict Supervisory Board Members Service on

                  Multiple Boards

         J        Proposals to Establish Audit Committees

II       Capital Structure

         A        Authorization Of Additional Shares

         B        Authorization Of "Blank Check" Preferred Stock

         C        Stock Splits/Reverse Stock Splits

         D        Dual Class/Supervoting Stock

         E        Large Block Issuance

         F        Recapitalization Into A Single Class Of Stock

         G        Share Repurchases

         H        Reductions In Par Value

III      Corporate Governance Issues

         A        Confidential Voting

         B        Cumulative Voting

         C        Supermajority Voting Requirements

         D        Shareholder Right To Vote

IV       Compensation

         A        Establishment of a Remuneration Committee

         B        Executive And Director Stock Option Plans

         C        Employee Stock Option/Purchase Plans

         D        Golden Parachutes

         E        Proposals To Limit Benefits Or Executive Compensation

         F        Option Expensing

         G        Management board election and motion

         H        Remuneration (variable pay)

         I        Long-term incentive plans

         J        Shareholder Proposals Concerning "Pay For Superior
                  Performance"

         K        Executive Compensation Advisory

V        Anti-Takeover Related Issues

         A        Shareholder Rights Plans ("Poison Pills")

         B        Reincorporation

         C        Fair-Price Proposals

         D        Exemption From State Takeover Laws

         E        Non-Financial Effects Of Takeover Bids

VI       Mergers & Acquisitions

VII      Social & Political Issues

         A        Labor & Human Rights

         B        Diversity & Equality

         C        Health & Safety

         D        Government/Military

         E        Tobacco

VIII     Environmental Issues

IX       Miscellaneous Items

         A        Ratification Of Auditors

         B        Limitation Of Non-Audit Services Provided By Independent
                  Auditor

         C        Audit Firm Rotation

         D        Transaction Of Other Business

         E        Motions To Adjourn The Meeting

         F        Bundled Proposals

         G        Change Of Company Name

         H        Proposals Related To The Annual Meeting

         I        Reimbursement Of Expenses Incurred From Candidate Nomination

         J        Investment Company Proxies

         K        International Proxy Voting


These Guidelines may reflect a voting position that differs from the actual
practices of the public company (ies) within the Deutsche Bank organization or
of the investment companies for which AM or an affiliate serves as investment
adviser or sponsor.

NOTE: Because of the unique structure and regulatory scheme applicable to
closed-end investment companies, the voting guidelines (particularly those
related to governance issues) generally will be inapplicable to holdings of
closed-end investment companies. As a result, determinations on the appropriate
voting recommendation for closed-end investment company shares will be made on a
case-by-case basis.


I.       Board of Directors and Executives

A.       Election of Directors

Routine: AM Policy is to vote "for" the uncontested election of directors. Votes
for a director in an uncontested election will be withheld in cases where a
director has shown an inability to perform his/her duties in the best interests
of the shareholders.

Proxy contest: In a proxy contest involving election of directors, a
case-by-case voting decision will be made based upon analysis of the issues
involved and the merits of the incumbent and dissident slates of directors. AM
will incorporate the decisions of a third party proxy research vendor,
currently, Institutional Shareholder Services ("ISS") subject to review by the
Proxy Voting Sub-Committee (GPVSC) as set forth in the AM's Proxy Voting
Policies and Procedures.

Rationale: The large majority of corporate directors fulfill their fiduciary
obligation and in most cases support for management's nominees is warranted. As
the issues relevant to a contested election differ in each instance, those cases
must be addressed as they arise.

B.       Classified Boards of Directors

AM policy is to vote against proposals to classify the board and for proposals
to repeal classified boards and elect directors annually.

Rationale: Directors should be held accountable on an annual basis. By
entrenching the incumbent board, a classified board may be used as an
anti-takeover device to the detriment of the shareholders in a hostile take-over
situation.

C.       Board and Committee Independence

AM policy is to vote:

1.       "For" proposals that require that a certain percentage (majority up to
         66 2/3%) of members of a board of directors be comprised of independent
         or unaffiliated directors.

2.       "For" proposals that require all members of a company's compensation,
         audit, nominating, or other similar committees be comprised of
         independent or unaffiliated directors.

3.       "Against" shareholder proposals to require the addition of special
         interest, or constituency, representatives to boards of directors.

4.       "For" separation of the Chairman and CEO positions.

5.       "Against" proposals that require a company to appoint a Chairman who is
         an independent director.

Rationale: Board independence is a cornerstone of effective governance and
accountability. A board that is sufficiently independent from management assures
that shareholders' interests are adequately represented. However, the Chairman
of the board must have sufficient involvement in and experience with the
operations of the company to perform the functions required of that position and
lead the company.

No director qualifies as 'independent' unless the board of directors
affirmatively determines that the director has no material relationship with the
listed company (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the company).

Whether a director is in fact not "independent" will depend on the laws and
regulations of the primary market for the security and the exchanges, if any, on
which the security trades.

D.       Liability and Indemnification of Directors

AM policy is to vote "for" management proposals to limit directors' liability
and to broaden the indemnification of directors, unless broader indemnification
or limitations on directors' liability would effect shareholders' interests in
pending litigation.

Rationale: While shareholders want directors and officers to be responsible for
their actions, it is not in the best interests of the shareholders for them to
be to risk averse. If the risk of personal liability is too great, companies may
not be able to find capable directors willing to serve. We support expanding
coverage only for actions taken in good faith and not for serious violations of
fiduciary obligation or negligence.

E.       Qualifications of Directors

AM policy is to follow management's recommended vote on either management or
shareholder proposals that set retirement ages for directors or require specific
levels of stock ownership by directors.

Rationale: As a general rule, the board of directors, and not the shareholders,
is most qualified to establish qualification policies.

F.       Removal of Directors and Filling of Vacancies

AM policy is to vote "against" proposals that include provisions that directors
may be removed only for cause or proposals that include provisions that only
continuing directors may fill board vacancies.

Rationale: Differing state statutes permit removal of directors with or without
cause. Removal of directors for cause usually requires proof of self-dealing,
fraud or misappropriation of corporate assets, limiting shareholders' ability to
remove directors except under extreme circumstances. Removal without cause
requires no such showing.

Allowing only incumbent directors to fill vacancies can serve as an
anti-takeover device, precluding shareholders from filling the board until the
next regular election.

G.       Proposals to Fix the Size of the Board

AM policy is to vote:

1.       "For" proposals to fix the size of the board unless: (a) no specific
         reason for the proposed change is given; or (b) the proposal is part of
         a package of takeover defenses.

2.       "Against" proposals allowing management to fix the size of the board
         without shareholder approval.

Rationale: Absent danger of anti-takeover use, companies should be granted a
reasonable amount of flexibility in fixing the size of its board.

H.       Proposals to Restrict Chief Executive Officer's Service on Multiple
         Boards

AM policy is to vote "For" proposals to restrict a Chief Executive Officer from
serving on more than three outside boards of directors.

Rationale: Chief Executive Officer must have sufficient time to ensure that
shareholders' interests are represented adequately.

Note: A director's service on multiple closed-end fund boards within a fund
complex are treated as service on a single Board for the purpose of the proxy
voting guidelines.

I.       Proposals to Restrict Supervisory Board Members Service on Multiple
         Boards (For FFT Securities)

AM policy is to vote "for" proposals to restrict a Supervisory Board Member from
serving on more than five supervisory boards.

Rationale: We consider a strong, independent and knowledgeable supervisory board
as important counter-balance to executive management to ensure that the
interests of shareholders are fully reflected by the company.

Full information should be disclosed in the annual reports and accounts to allow
all shareholders to judge the success of the supervisory board controlling their
company.

Supervisory Board Member must have sufficient time to ensure that shareholders'
interests are represented adequately.

Note: A director's service on multiple closed-end fund boards within a fund
complex are treated as service on a single Board for the purpose of the proxy
voting guidelines.

J.       Proposals to Establish Audit Committees (For FFT and U.S. Securities)
         AM policy is to vote "for" proposals that require the establishment of
         audit committees.

Rationale: The audit committee should deal with accounting and risk management
related questions, verifies the independence of the auditor with due regard to
possible conflicts of interest. It also should determine the procedure of the
audit process.


II.      Capital Structure

A.       Authorization of Additional Shares (For U.S. Securities)

AM policy is to vote "for" proposals to increase the authorization of existing
classes of stock that do not exceed a 3:1 ratio of shares authorized to shares
outstanding for a large cap company, and do not exceed a 4:1 ratio of shares
authorized to shares outstanding for a small-midcap company (companies having a
market capitalization under one billion U.S. dollars.).

Rationale: While companies need an adequate number of shares in order to carry
on business, increases requested for general financial flexibility must be
limited to protect shareholders from their potential use as an anti-takeover
device. Requested increases for specifically designated, reasonable business
purposes (stock split, merger, etc.) will be considered in light of those
purposes and the number of shares required.

B.       Authorization of "Blank Check" Preferred Stock (For U.S. Securities)

AM policy is to vote:

1.   "Against" proposals to create blank check preferred stock or to increase
     the number of authorized shares of blank check preferred stock unless the
     company expressly states that the stock will not be used for anti-takeover
     purposes and will not be issued without shareholder approval.

2.   "For" proposals mandating shareholder approval of blank check stock
     placement.

Rationale: Shareholders should be permitted to monitor the issuance of classes
of preferred stock in which the board of directors is given unfettered
discretion to set voting, dividend, conversion and other rights for the shares
issued.

C.       Stock Splits/Reverse Stock Splits

AM policy is to vote "for" stock splits if a legitimate business purpose is set
forth and the split is in the shareholders' best interests. A vote is cast "for"
a reverse stock split only if the number of shares authorized is reduced in the
same proportion as the reverse split or if the effective increase in authorized
shares (relative to outstanding shares) complies with the proxy guidelines for
common stock increases (see, Section II.A, above.)

Rationale: Generally, stock splits do not detrimentally effect shareholders.
Reverse stock splits, however, may have the same result as an increase in
authorized shares and should be analyzed accordingly.

D.       Dual Class/Supervoting Stock

AM policy is to vote "against" proposals to create or authorize additional
shares of super-voting stock or stock with unequal voting rights.

Rationale: The "one share, one vote" principal ensures that no shareholder
maintains a voting interest exceeding their equity interest in the company.

E.       Large Block Issuance (For U.S. Securities)

AM policy is to address large block issuances of stock on a case-by-case basis,
incorporating the recommendation of an independent third party proxy research
firm (currently ISS) subject to review by the GPVSC as set forth in AM's Proxy
Policies and Procedures.

Additionally, AM supports proposals requiring shareholder approval of large
block issuances.

Rationale: Stock issuances must be reviewed in light of the business
circumstances leading to the request and the potential impact on shareholder
value.

F.       Recapitalization into a Single Class of Stock

AM policy is to vote "for" recapitalization plans to provide for a single class
of common stock, provided the terms are fair, with no class of stock being
unduly disadvantaged.

Rationale: Consolidation of multiple classes of stock is a business decision
that may be left to the board and/management if there is no adverse effect on
shareholders.

G.       Share Repurchases

AM policy is to vote "for" share repurchase plans provided all shareholders are
able to participate on equal terms.

Rationale: Buybacks are generally considered beneficial to shareholders because
they tend to increase returns to the remaining shareholders.

H.       Reductions in Par Value

AM policy is to vote "for" proposals to reduce par value, provided a legitimate
business purpose is stated (e.g., the reduction of corporate tax
responsibility.)

Rationale: Usually, adjustments to par value are a routine financial decision
with no substantial impact on shareholders.


III.     Corporate Governance Issues

A.       Confidential Voting

AM policy is to vote "for" proposals to provide for confidential voting and
independent tabulation of voting results and to vote "against" proposals to
repeal such provisions.

Rationale: Confidential voting protects the privacy rights of all shareholders.
This is particularly important for employee-shareholders or shareholders with
business or other affiliations with the company, who may be vulnerable to
coercion or retaliation when opposing management. Confidential voting does not
interfere with the ability of corporations to communicate with all shareholders,
nor does it prohibit shareholders from making their views known directly to
management.

B.       Cumulative Voting (For U.S. Securities)

AM policy is to vote "against" shareholder proposals requesting cumulative
voting and "for" management proposals to eliminate it. The protections afforded
shareholders by cumulative voting are not necessary when a company has a history
of good performance and does not have a concentrated ownership interest.
Accordingly, a vote is cast "against" cumulative voting and "for" proposals to
eliminate it if:

a)       The company has a five year return on investment greater than the
         relevant industry index,

b)       All directors and executive officers as a group beneficially own less
         than 10% of the outstanding stock, and

c)       No shareholder (or voting block) beneficially owns 15% or more of the
         company.

Thus, failure of any one of the three criteria results in a vote for cumulative
voting in accordance with the general policy.

Rationale: Cumulative voting is a tool that should be used to ensure that
holders of a significant number of shares may have board representation;
however, the presence of other safeguards may make their use unnecessary.

C.       Supermajority Voting Requirements

AM policy is to vote "against" management proposals to require a supermajority
vote to amend the charter or bylaws and to vote "for" shareholder proposals to
modify or rescind existing supermajority requirements.

*Exception made when company holds a controlling position and seeks to lower
threshold to maintain control and/or make changes to corporate by-laws.

Rationale: Supermajority voting provisions violate the democratic principle that
a simple majority should carry the vote. Setting supermajority requirements may
make it difficult or impossible for shareholders to remove egregious by-law or
charter provisions. Occasionally, a company with a significant insider held
position might attempt to lower a supermajority threshold to make it easier for
management to approve provisions that may be detrimental to shareholders. In
that case, it may not be in the shareholders interests to lower the
supermajority provision.

D.       Shareholder Right to Vote

AM policy is to vote "against" proposals that restrict the right of shareholders
to call special meetings, amend the bylaws, or act by written consent. Policy is
to vote "for" proposals that remove such restrictions.

Rationale: Any reasonable means whereby shareholders can make their views known
to management or effect the governance process should be supported.


IV.      Compensation

Annual Incentive Plans or Bonus Plans are often submitted to shareholders for
approval. These plans typically award cash to executives based on company
performance. Deutsche Bank believes that the responsibility for executive
compensation decisions rest with the board of directors and/or the compensation
committee, and its policy is not to second-guess the board's award of cash
compensation amounts to executives unless a particular award or series of awards
is deemed excessive. If stock options are awarded as part of these bonus or
incentive plans, the provisions must meet Deutsche Bank's criteria regarding
stock option plans, or similar stock-based incentive compensation schemes, as
set forth below.

A.       Establishment of a Remuneration Committee (For FFT Securities)

AM policy is to vote "for" proposals that require the establishment of a
remuneration committee.

Rationale: Corporations should disclose in each annual report or proxy statement
their policies on remuneration. Essential details regarding executive
remuneration including share options, long-term incentive plans and bonuses,
should be disclosed in the annual report, so that investors can judge whether
corporate pay policies and practices meet the standard.

The remuneration committee shall not comprise any board members and should be
sensitive to the wider scene on executive pay. It should ensure that
performance-based elements of executive pay are designed to align the interests
of shareholders.

B.       Executive and Director Stock Option Plans

AM policy is to vote "for" stock option plans that meet the following criteria:

(1)      The resulting dilution of existing shares is less than (a) 15 percent
         of outstanding shares for large capital corporations or (b) 20 percent
         of outstanding shares for small-mid capital companies (companies having
         a market capitalization under one billion U.S. dollars.)

(2)      The transfer of equity resulting from granting options at less than FMV
         is no greater than 3% of the over-all market capitalization of large
         capital corporations, or 5% of market cap for small-mid capital
         companies.

(3)      The plan does not contain express repricing provisions and, in the
         absence of an express statement that options will not be repriced; the
         company does not have a history of repricing options.

(4)      The plan does not grant options on super-voting stock.

AM will support performance-based option proposals as long as a) they do not
mandate that all options granted by the company must be performance based, and
b) only certain high-level executives are subject to receive the performance
based options.

AM will support proposals to eliminate the payment of outside director pensions.

Rationale: Determining the cost to the company and to shareholders of
stock-based incentive plans raises significant issues not encountered with
cash-based compensation plans. These include the potential dilution of existing
shareholders' voting power, the transfer of equity out of the company resulting
from the grant and execution of options at less than FMV and the authority to
reprice or replace underwater options. Our stock option plan analysis model
seeks to allow reasonable levels of flexibility for a company yet still protect
shareholders from the negative impact of excessive stock compensation.
Acknowledging that small mid-capital corporations often rely more heavily on
stock option plans as their main source of executive compensation and may not be
able to compete with their large capital competitors with cash compensation, we
provide slightly more flexibility for those companies.

C.       Employee Stock Option/Purchase Plans

AM policy is to vote for employee stock purchase plans (ESPP's) when the plan
complies with Internal Revenue Code 423, allowing non-management employees to
purchase stock at 85% of FMV.

AM policy is to vote "for" employee stock option plans (ESOPs) provided they
meet the standards for stock option plans in general. However, when computing
dilution and transfer of equity, ESOPs are considered independently from
executive and director option plans.

Rationale: ESOPs and ESPP's encourage rank-and-file employees to acquire an
ownership stake in the companies they work for and have been shown to promote
employee loyalty and improve productivity.

D.       Golden Parachutes

AM policy is to vote "for" proposals to require shareholder approval of golden
parachutes and for proposals that would limit golden parachutes to no more than
three times base compensation. Policy is to vote "against" more restrictive
shareholder proposals to limit golden parachutes.

Rationale: In setting a reasonable limitation, AM considers that an effective
parachute should be less attractive than continued employment and that the IRS
has opined that amounts greater than three times annual salary, are excessive.

E.       Proposals to Limit Benefits or Executive Compensation

AM policy is to vote "against"

1.   Proposals to limit benefits, pensions or compensation and

2.   Proposals that request or require disclosure of executive compensation
     greater than the disclosure required by Securities and Exchange Commission
     (SEC) regulations.

Rationale: Levels of compensation and benefits are generally considered to be
day-to-day operations of the company, and are best left unrestricted by
arbitrary limitations proposed by shareholders.

F.       Option Expensing

AM policy is to support proposals requesting companies to expense stock options.

Rationale: Although companies can choose to expense options voluntarily, the
Financial Accounting Standards Board (FASB) does not yet require it, instead
allowing companies to disclose the theoretical value of options as a footnote.
Because the expensing of stock options lowers earnings, most companies elect not
to do so. Given the fact that options have become an integral component of
compensation and their exercise results in a transfer of shareholder value, AM
agrees that their value should not be ignored and treated as "no cost"
compensation. The expensing of stock options would promote more modest and
appropriate use of stock options in executive compensation plans and present a
more accurate picture of company operational earnings.

G.        Management board election and motion (For FFT Securities)

AM policy is to vote "against":

o        the election of board members with positions on either remuneration or
         audit committees;

o        the election of supervisory board members with too many supervisory
         board mandates;

o        "automatic" election of former board members into the supervisory
         board.

Rationale: Management as an entity, and each of its members, are responsible for
all actions of the company, and are - subject to applicable laws and regulations
- accountable to the shareholders as a whole for their actions.

Sufficient information should be disclosed in the annual company report and
account to allow shareholders to judge the success of the company.

H.       Remuneration (variable pay): (For FFT Securities)

Executive remuneration for Management Board

AM policy is to vote "for" remuneration for Management Board that is transparent
and linked to results.

Rationale: Executive compensation should motivate management and align the
interests of management with the shareholders. The focus should be on criteria
that prevent excessive remuneration; but enable the company to hire and retain
first-class professionals.

Shareholder interests are normally best served when management is remunerated to
optimise long-term returns. Criteria should include suitable measurements like
return on capital employed or economic value added.

Interests should generally also be correctly aligned when management own shares
in the company - even more so if these shares represent a substantial portion of
their own wealth.

Its disclosure shall differentiate between fixed pay, variable (performance
related) pay and long-term incentives, including stock option plans with
valuation ranges as well as pension and any other significant arrangements.

Executive remuneration for Supervisory Board

AM policy is to vote "for" remuneration for Supervisory Board that is at least
50% in fixed form.

Rationale: It would normally be preferable if performance linked compensation
were not based on dividend payments, but linked to suitable result based
parameters. Consulting and procurement services should also be published in the
company report.

I.       Long-term incentive plans (For FFT Securities)

AM policy is to vote "for" long-term incentive plans for members of a management
board that reward for above average company performance.

Rationale: Incentive plans will normally be supported if they:

o        directly align the interests of members of management boards with those
         of shareholders;

o        establish challenging performance criteria to reward only above average
         performance;

o        measure performance by total shareholder return in relation to the
         market or a range of comparable companies;

o        are long-term in nature and encourage long-term ownership of the shares
         once exercised through minimum holding periods;

o        do not allow a repricing of the exercise price in stock option plans.

J.       Shareholder Proposals Concerning "Pay for Superior Performance"

AM policy is to address pay for superior performance proposals on a case-by-case
basis, incorporating the recommendation of an independent third party proxy
research firm (currently ISS) subject to review by the GPVSC as set forth in
AM's Proxy Policies and Procedures.

Rationale: While AM agrees that compensation issues are better left to the
discretion of management, they appreciate the need to monitor for excessive
compensation practices on a case by case basis. If, after a review of the ISS
metrics, AM is comfortable with ISS's applying this calculation and will vote
according to their recommendation.

K.       Executive Compensation Advisory

AM policy is to follow management's recommended vote on shareholder proposals to
propose an advisory resolution seeking to ratify the compensation of the
company's named executive officers (NEOs) on an annual basis.

Rationale: AM believes that controls exist within senior management and
corporate compensation committees, ensuring fair compensation to executives.
This might allow shareholders to require approval for all levels of management's
compensation.

V.       Anti-Takeover Related Issues

A.       Shareholder Rights Plans ("Poison Pills")

AM policy is to vote "for" proposals to require shareholder ratification of
poison pills or that request boards to redeem poison pills, and to vote
"against" the adoption of poison pills if they are submitted for shareholder
ratification.

Rationale: Poison pills are the most prevalent form of corporate takeover
defenses and can be (and usually are) adopted without shareholder review or
consent. The potential cost of poison pills to shareholders during an attempted
takeover outweighs the benefits.

B.       Reincorporation

AM policy is to examine reincorporation proposals on a case-by-case basis. The
voting decision is based on: (1) differences in state law between the existing
state of incorporation and the proposed state of incorporation; and (2)
differences between the existing and the proposed charter/bylaws/articles of
incorporation and their effect on shareholder rights. If changes resulting from
the proposed reincorporation violate the corporate governance principles set
forth in these guidelines, the reincorporation will be deemed contrary to
shareholder's interests and a vote cast "against."

Rationale: Reincorporations can be properly analyzed only by looking at the
advantages and disadvantages to their shareholders. Care must be taken that
anti-takeover protection is not the sole or primary result of a proposed change.

C.       Fair-Price Proposals

AM policy is to vote "for" management fair-price proposals, provided that: (1)
the proposal applies only to two-tier offers; (2) the proposal sets an objective
fair-price test based on the highest price that the acquirer has paid for a
company's shares; (3) the supermajority requirement for bids that fail the
fair-price test is no higher than two-thirds of the outstanding shares; (4) the
proposal contains no other anti-takeover provisions or provisions that restrict
shareholders rights.

A vote is cast for shareholder proposals that would modify or repeal existing
fair-price requirements that do not meet these standards.

Rationale: While fair price provisions may be used as anti-takeover devices, if
adequate provisions are included, they provide some protection to shareholders
who have some say in their application and the ability to reject those
protections if desired.

D.       Exemption from state takeover laws

AM policy is to vote "for" shareholder proposals to opt out of state takeover
laws and to vote "against" management proposals requesting to opt out of state
takeover laws.

Rationale: Control share statutes, enacted at the state level, may harm
long-term share value by entrenching management. They also unfairly deny certain
shares their inherent voting rights.

E.       Non-financial Effects of Takeover Bids

Policy is to vote "against" shareholder proposals to require consideration of
non-financial effects of merger or acquisition proposals.

Rationale: Non-financial effects may often be subjective and are secondary to
AM's stated purpose of acting in its client's best economic interest.


VI.      Mergers & Acquisitions

Evaluation of mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings
and recapitalizations) are performed on a case-by-case basis incorporating
information from an independent proxy research source (currently ISS.)
Additional resources including portfolio management and research analysts may be
considered as set forth in AM's Policies and Procedures.


VII.     Social, Environmental & Political Issues

Social and environmental issues are becoming increasingly important to corporate
success. We incorporate social and environmental considerations into both our
investment decisions and our proxy voting decisions - particularly if the
financial performance of the company could be impacted.

With increasing frequency, shareholder proposals are submitted relating to
social and political responsibility issues. Almost universally, the company
management will recommend a vote "against" these proposals. These types of
proposals cover an extremely wide range of issues. Many of the issues tend to be
controversial and are subject to more than one reasonable, yet opposing, theory
of support. More so than with other types of proxy proposals, social and
political responsibility issues may not have a connection to the economic and
corporate governance principles effecting shareholders' interests. AM's policy
regarding social and political responsibility issues, as with any other issue,
is designed to protect our client shareholders' economic interests.

Occasionally, a distinction is made between a shareholder proposal requesting
direct action on behalf of the board and a request for a report on (or
disclosure of) some information. In order to avoid unduly burdening any company
with reporting requirements, AM's policy is to vote against shareholder
proposals that demand additional disclosure or reporting than is required by the
Securities and Exchange Commission unless it appears there is a legitimate issue
and the company has not adequately addressed shareholders' concerns.

A.       Labor & Human Rights

AM policy is to vote "against" adopting global codes of conduct or workplace
standards exceeding those mandated by law.

Rationale: Additional requirements beyond those mandated by law are deemed
unnecessary and potentially burdensome to companies

B.       Diversity & Equality

1.       AM policy is to vote "against" shareholder proposals to force equal
         employment opportunity, affirmative action or board diversity.

Rationale: Compliance with State and Federal legislation along with information
made available through filings with the EEOC provides sufficient assurance that
companies act responsibly and make information public.

2.       AM policy is also to vote "against" proposals to adopt the Mac Bride
         Principles. The Mac Bride Principles promote fair employment,
         specifically regarding religious discrimination.

Rationale: Compliance with the Fair Employment Act of 1989 makes adoption of the
Mac Bride Principles redundant. Their adoption could potentially lead to charges
of reverse discrimination.

C.       Health & Safety

1.       AM policy is to vote "against" adopting a pharmaceutical price
         restraint policy or reporting pricing policy changes.

Rationale: Pricing is an integral part of business for pharmaceutical companies
and should not be dictated by shareholders (particularly pursuant to an
arbitrary formula.) Disclosing pricing policies may also jeopardize a company's
competitive position in the marketplace.

2.       AM policy is to vote "against" shareholder proposals to control the use
         or labeling of and reporting on genetically engineered products.

Rationale: Additional requirements beyond those mandated by law are deemed
unnecessary and potentially burdensome to companies.

D.       Government/Military

1.       AM policy is to vote against shareholder proposals regarding the
         production or sale of military arms or nuclear or space-based weapons,
         including proposals seeking to dictate a company's interaction with a
         particular foreign country or agency.

Rationale: Generally, management is in a better position to determine what
products or industries a company can and should participate in. Regulation of
the production or distribution of military supplies is, or should be, a matter
of government policy.

2.       AM policy is to vote "against" shareholder proposals regarding
         political contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should
evaluate and determine the recipients of any contributions made by the company.

3.       AM policy is to vote "against" shareholder proposals regarding
         charitable contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should
evaluate and determine the recipients of any contributions made by the company.

E.       Tobacco

1.       AM policy is to vote "against" shareholder proposals requesting
         additional standards or reporting requirements for tobacco companies as
         well as "against" requesting companies to report on the intentional
         manipulation of nicotine content.

Rationale: Where a tobacco company's actions meet the requirements of legal and
industry standards, imposing additional burdens may detrimentally effect a
company's ability to compete. The disclosure of nicotine content information
could affect the company's rights in any pending or future litigation.

2.       Shareholder requests to spin-off or restructure tobacco businesses will
         be opposed.

Rationale: These decisions are more appropriately left to the Board and
management, and not to shareholder mandate.


VIII.    Environmental Issues

AM policy is to follow management's recommended vote on CERES Principles or
other similar environmental mandates (e.g., those relating to Greenhouse gas
emissions or the use of nuclear power).

Rationale: Environmental issues are extensively regulated by outside agencies
and compliance with additional requirements often involves significant cost to
companies.


IX.      Miscellaneous Items

A.       Ratification of Auditors

AM policy is to vote "for" a) the management recommended selection of auditors
and b) proposals to require shareholder approval of auditors.

Rationale: Absent evidence that auditors have not performed their duties
adequately, support for management's nomination is warranted.

B.       Limitation of non-audit services provided by independent auditor

AM policy is to support proposals limiting non-audit fees to 50% of the
aggregate annual fees earned by the firm retained as a company's independent
auditor.

Rationale: In the wake of financial reporting problems and alleged audit
failures at a number of companies, AM supports the general principle that
companies should retain separate firms for audit and consulting services to
avoid potential conflicts of interest. However, given the protections afforded
by the recently enacted Sarbanes-Oxley Act of 2002 (which requires Audit
Committee pre-approval for non-audit services and prohibits auditors from
providing specific types of services), and the fact that some non-audit services
are legitimate audit-related services, complete separation of audit and
consulting fees may not be warranted. A reasonable limitation is appropriate to
help ensure auditor independence and it is reasonable to expect that audit fees
exceed non-audit fees.

C.       Audit firm rotation

AM policy is to support proposals seeking audit firm rotation unless the
rotation period sought is less than five years.

Rationale: While the Sarbanes-Oxley Act mandates that the lead audit partner be
switched every five years, AM believes that rotation of the actual audit firm
would provide an even stronger system of checks and balances on the audit
function.

D.       Transaction of Other Business

AM policy is to vote against "transaction of other business" proposals.

Rationale: This is a routine item to allow shareholders to raise other issues
and discuss them at the meeting. As the nature of these issues may not be
disclosed prior to the meeting, we recommend a vote against these proposals.
This protects shareholders voting by proxy (and not physically present at a
meeting) from having action taken at the meeting that they did not receive
proper notification of or sufficient opportunity to consider.

E.       Motions to Adjourn the Meeting

AM Policy is to vote against proposals to adjourn the meeting.

Rationale: Management may seek authority to adjourn the meeting if a favorable
outcome is not secured. Shareholders should already have had enough information
to make a decision. Once votes have been cast, there is no justification for
management to continue spending time and money to press shareholders for
support.

F.       Bundled Proposals

AM policy is to vote against bundled proposals if any bundled issue would
require a vote against it if proposed individually.

Rationale: Shareholders should not be forced to "take the good with the bad" in
cases where the proposals could reasonably have been submitted separately.

G.       Change of Company Name

AM policy is to support management on proposals to change the company name.

Rationale: This is generally considered a business decision for a company.

H.       Proposals Related to the Annual Meeting

AM Policy is to vote in favor of management for proposals related to the conduct
of the annual meeting (meeting time, place, etc.)

Rationale: These are considered routine administrative proposals.

I.       Reimbursement of Expenses Incurred from Candidate Nomination

AM policy is to follow management's recommended vote on shareholder proposals
related to the amending of company bylaws to provide for the reimbursement of
reasonable expenses incurred in connection with nominating one or more
candidates in a contested election of directors to the corporation's board of
directors.

Rationale: Corporations should not be liable for costs associated with
shareholder proposals for directors.

J.       Investment Company Proxies

Proxies solicited by investment companies are voted in accordance with the
recommendations of an independent third party, currently ISS. However, regarding
investment companies for which AM or an affiliate serves as investment adviser
or principal underwriter, such proxies are voted in the same proportion as the
vote of all other shareholders. Proxies solicited by master funds from feeder
funds will be voted in accordance with applicable provisions of Section 12 of
the Investment Company Act of 1940.

Investment companies, particularly closed-end investment companies, are
different from traditional operating companies. These differences may call for
differences in voting positions on the same matter. For example, AM could vote
"for" staggered boards of closed-end investment companies, although AM generally
votes "against" staggered boards for operating companies. Further, the manner in
which AM votes investment company proxies may differ from proposals for which a
AM-advised investment company solicits proxies from its shareholders. As
reflected in the Guidelines, proxies solicited by closed-end (and open-end)
investment companies are voted in accordance with the pre-determined guidelines
of an independent third-party.

Subject to participation agreements with certain Exchange Traded Funds ("ETF")
issuers that have received exemptive orders from the U.S. Securities and
Exchange Commission allowing investing DWS funds to exceed the limits set forth
in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will
echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of
outstanding voting shares globally when required to do so by participation
agreements and SEC orders.

Note: With respect to the QP Trust (not registered under the Investment Company
Act of 1940), the Fund is not required to engage in echo voting and the
investment adviser will use these Guidelines, and may determine, with respect to
the QP Trust, to vote contrary to the positions in the Guidelines, consistent
with the Fund's best interest.


K.       International Proxy Voting

The above guidelines pertain to issuers organized in the United States, Canada
and Germany. Proxies solicited by other issuers are voted in accordance with
international guidelines or the recommendation of ISS and in accordance with
applicable law and regulation.







                      APPENDIX B -- RATINGS OF INVESTMENTS

BOND AND COMMERCIAL PAPER RATINGS

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

Moody's Investors Service, Inc.'s ("Moody's") Corporate Bond Ratings

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

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

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

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

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

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

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

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

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

Issues that are secured by escrowed funds held in trust, reinvested in direct,
non-callable US government obligations or noncallable obligations
unconditionally guaranteed by the US Government or Resolution Funding
Corporation are identified with a # (hash mark) symbol, e.g., #Aaa.

Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by a) earnings of projects under construction, b) earnings of projects
unseasoned in operation experience, c) rentals which begin when facilities are
completed, or d) payments to which some other limiting condition attaches. The
parenthetical rating denotes probable credit stature upon completion of
construction or elimination of the basis of the condition.

Moody's assigns ratings to individual debt securities issued from medium-term
note (MTN) programs, in addition to indicating ratings to MTN programs
themselves. Notes issued under MTN programs with such indicated ratings are
rated at issuance at the rating applicable to all pari passu notes issued under
the same program, at the program's relevant indicated rating, provided such
notes do not exhibit any of the characteristics listed below. For notes with any
of the following characteristics, the rating of the individual note may differ
from the indicated rating of the program:

1.       Notes containing features which link the cash flow and/or market value
         to the credit performance of any third party or parties.

2.       Notes allowing for negative coupons, or negative principal.

Notes containing any provision which could obligate the investor to make any
additional payments.

Market participants must determine whether any particular note is rated, and if
so, at what rating level. Moody's encourages market participants to contact
Moody's Rating Desks directly if they have questions regarding ratings for
specific notes issued under a medium-term note program.

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Caa in its corporate bond rating 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.

Moody's Short-Term Debt Ratings

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
one year. Such obligations generally have an original maturity not exceeding one
year.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

Issuers rated Prime-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:

o        Leading market positions in well established industries.

o        High rates of return on funds employed.

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

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

o        Well established access to a range of financial markets and assured
         sources of alternate liquidity.

Issuers rated Prime-2 or P-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment. Moody's
makes no representation and gives no opinion on the legal validity or
enforceability of any support arrangements.

Standard & Poor's  ("S&P") Corporate Bond Ratings

Investment Grade

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.

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

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

Speculative Grade

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

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

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.

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 has a currently identifiable vulnerability to default.

C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued. Debt rated C has a
currently highly identifiable vulnerability to default. A "C" will also be
assigned to a preferred stock issue in arrears on dividends or sinking fund
payments, but that is currently paying.

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 also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

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

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

r: This symbol is attached to the ratings of instruments with significant
non-credit risks. It highlights risks to principal expected returns which are
not addressed in the credit rating.

S&P's Commercial Paper Ratings

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

A-1: A short-term obligation rated "A-1" is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

B: A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.

C: A short-term obligation rated "C" is currently vulnerable to nonpayment and
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

D: A short-term obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.

Local Currency and Foreign Currency Risks

County risk considerations are a standard part of Standard & Poor's analysis for
credit ratings on any issuer or issue. Currency of repayment is a key factor in
this analysis. An obligor's capacity to repay foreign currency obligation may be
lower than its capacity to repay obligations in its local currency due to the
sovereign government's own relatively lower capacity to repay external versus
domestic debt. These sovereign risk considerations are incorporated in the debt
ratings assigned to specific issues. Foreign currency issuer ratings are also
distinguished from local currency issuer ratings to identify those instances
where sovereign risks make them different for the same issuer.

Fitch Inc. ("Fitch")  Bond 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.

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.

Fitch Short-Term Ratings

F-1: Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.

F-2: 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.

F-3: Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments;
plus vulnerability to near-term adverse changes in financial and economic
conditions.

C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

D:  Default.  Denotes actual or imminent payment default.

Notes to Long-Term and Short-Term Ratings

"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA" Long-Term rating
category, to categories below "CCC," or to Short-Term ratings other than "F1."

NR:  "NR" indicates that Fitch does not rate the issuer or issue in question.

Withdrawn: A rating is withdrawn when Fitch 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 rating may be raised,
lowered, or maintained. Rating Watch is typically resolved over a relatively
short period.

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,
companies whose 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. In these
cases, the Rating Outlook may be described as evolving.



<PAGE>

                                DWS ADVISOR FUNDS

                          DWS Lifecycle Long Range Fund
                                (Class S shares)


                       STATEMENT OF ADDITIONAL INFORMATION


                  August 1, 2009, As Revised September 15, 2009



This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus dated August 1, 2009, for Class S, as amended
from time to time, for DWS Lifecycle Long Range Fund (the "Fund"), a series of
DWS Advisor Funds (the "Trust"), copies of which may be obtained without charge
by calling (800) 728-3337, through the DWS Investments Web site at
www.dws-investments.com or from the firm from which this Statement of Additional
was obtained and are available along with other materials on the Securities and
Exchange Commission's Internet Web site (http://www.sec.gov).

Portions of the Annual Report to Shareholders, dated March 31, 2009, are
incorporated herein by reference and are deemed to be part of this Statement of
Additional Information as specified herein. A copy of the Fund's Annual Report
may be obtained without charge by calling the Fund at the toll-free number (800)
728-3337.

This Statement of Additional Information ("SAI") is incorporated by reference
into the prospectus for Class S shares of the Fund.



                                TABLE OF CONTENTS

                                                                         Page
                                                                         ----


INVESTMENT RESTRICTIONS.....................................................2

INVESTMENT POLICIES AND TECHNIQUES..........................................3
       Investment Techniques................................................3
       Portfolio Holdings..................................................43

MANAGEMENT OF THE FUND.....................................................44
       Investment Advisor..................................................44
       Subadvisor..........................................................46
       Administrator.......................................................51

FUND SERVICE PROVIDERS.....................................................54
       Distributor.........................................................54
       Custodian...........................................................54
       Transfer Agent......................................................54
       Legal Counsel.......................................................55
       Independent Registered Public Accounting Firm.......................55

PORTFOLIO TRANSACTIONS.....................................................55

PURCHASE AND REDEMPTION OF SHARES..........................................60

DIVIDENDS..................................................................70

TAXES......................................................................71

NET ASSET VALUE............................................................77

BOARD MEMBERS AND OFFICERS.................................................79

TRUST ORGANIZATION.........................................................88

PROXY VOTING GUIDELINES....................................................89

FINANCIAL STATEMENTS.......................................................89

ADDITIONAL INFORMATION.....................................................90

APPENDIX A -- PROXY VOTING GUIDELINES......................................92

APPENDIX B -- RATINGS OF INVESTMENTS......................................117


                             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.

The Fund has elected to be classified as a diversified series of the Trust, an
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 or mortgage or hypothecate assets of the Fund, except that
         in an amount not to exceed 1/3 of the current value of the Fund's net
         assets, it may borrow money as a temporary measure for extraordinary or
         emergency purposes and enter into reverse repurchase agreements or
         dollar roll transactions, and except that it may pledge, mortgage or
         hypothecate not more than 1/3 of such assets to secure such borrowings
         (it is intended that money would be borrowed only from banks and only
         either to accommodate requests for the withdrawal of beneficial
         interests (redemption of shares) while effecting an orderly liquidation
         of portfolio securities or to maintain liquidity in the event of an
         unanticipated failure to complete a portfolio security transaction or
         other similar situations) or reverse repurchase agreements, provided
         that collateral arrangements with respect to options and futures,
         including deposits of initial deposit and variation margin, are not
         considered a pledge of assets for purposes of this restriction and
         except that assets may be pledged to secure letters of credit solely
         for the purpose of participating in a captive insurance company
         sponsored by the Investment Company Institute; for additional related
         restrictions, see clause (1) under the caption "Additional
         Restrictions";

2.       underwrite securities issued by other persons except insofar as the
         Trust or the Fund may technically be deemed an underwriter under the
         Securities Act of 1933, as amended (the "1933 Act") in selling a
         portfolio security;

3.       make loans to other persons except: (a) through the lending of the
         Fund's portfolio securities and provided that any such loans not exceed
         30% of the Fund's total assets (taken at market value); (b) through the
         use of repurchase agreements or the purchase of short-term obligations;
         or (c) by purchasing a portion of an issue of debt securities of types
         distributed publicly or privately;

4.       purchase or sell real estate (including limited partnership interests
         but excluding securities secured by real estate or interests therein),
         interests in oil, gas or mineral leases, commodities or commodity
         contracts (except futures and option contracts) in the ordinary course
         of business (except that the Trust may hold and sell, for the Fund's
         portfolio, real estate acquired as a result of the Fund's ownership of
         securities);

5.       concentrate its investments in any particular industry (excluding US
         government securities), but if it is deemed appropriate for the
         achievement of the Fund's investment objective(s), up to 25% of its
         total assets may be invested in any one industry;

6.       issue any senior security (as that term is defined in the Investment
         Company Act of 1940, as amended (the "1940 Act")) if such issuance is
         specifically prohibited by the 1940 Act or the rules and regulations
         promulgated thereunder, provided that collateral arrangements with
         respect to options and futures, including deposits of initial deposit
         and variation margin, are not considered to be the issuance of a senior
         security for purposes of this restriction; and

7.       with respect to 75% of the Fund's total assets, invest more than 5% of
         its total assets in the securities of any one issuer (excluding cash
         and cash-equivalents, US government securities and the securities of
         other investment companies) or own more than 10% of the voting
         securities of any issuer.

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

Additional Restrictions. In order to comply with certain statutes and policies
the Fund (or the Trust, on behalf of the Fund) will not as a matter of operating
policy:

1.       borrow money (including through reverse repurchase agreements) for any
         purpose in excess of 5% of the Fund's net assets (taken at market),
         except that the Fund may borrow for temporary or emergency purposes up
         to 1/3 of its net assets;

2.       pledge, mortgage or hypothecate for any purpose in excess of 10% of the
         Fund's total assets (taken at market value), provided that collateral
         arrangements with respect to options and futures, including deposits of
         initial deposit and variation margin, and reverse repurchase agreements
         are not considered a pledge of assets for purposes of this restriction;

3.       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 margin and variation margin may be made in
         connection with the purchase, ownership, holding or sale of futures;

4.       invest for the purpose of exercising control or management;

5.       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 (a) Rule 144A securities that have been determined
         to be liquid by the Board of Trustees; and (b) commercial paper that is
         sold under section 4(2) of the 1933 Act which: (i) is not traded flat
         or in default as to interest or principal; and (ii) is rated in one of
         the two highest categories by at least two NRSROs and the Fund's Board
         of Trustees have determined the commercial paper to be liquid; or (iii)
         is rated in one of the two highest categories by one NRSRO and the
         Fund's Board of Trustees has determined that the commercial paper is of
         equivalent quality and is liquid.

There will be no violation of any investment restriction if that restriction is
complied with at the time the relevant action is taken notwithstanding a later
change in market value of an investment, in net or total assets, in the
securities rating of the investment, or any other later change.

The Fund's investment objective is not a fundamental policy and may be changed
upon Board approval with 30 days prior written 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.

                       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.

Integrated Global Alpha Platform Strategy ("iGAP Strategy"). In addition to the
Fund's main investment strategy, the Advisor seeks to enhance returns by
employing a global tactical asset allocation overlay strategy. The global
tactical asset allocation strategy, which the Advisor calls iGAP, is a total
return strategy designed to add value by benefiting from mispricings within
global equity, bond and currency markets.

The iGAP strategy combines diverse macro investment views from various
investment teams within Deutsche Asset Management. Because a single investment
approach rarely works in all market conditions, the teams are chosen to
diversify investment approaches thereby enhancing the expected return for a
given level of risk. The collective views are then used to determine iGAP's
positions using a disciplined, risk managed process. The result is a collection
of long and short investment positions within global equity, bond and currency
markets designed to generate excess returns. The equity, bond and currency
positions are then implemented by the iGAP portfolio managers using
exchange-traded futures and over-the-counter forward currency transactions. The
iGAP portfolio managers consider factors such as liquidity, cost, margin
requirement and credit quality when selecting the appropriate derivative or
other instrument. When used as a part of the iGAP strategy, derivatives and
other instruments generally will not be used for hedging purposes.

Asset Segregation. Certain investment transactions expose the Fund to an
obligation to make future payments to third parties. Examples of these types of
transactions, include, but are not limited to, reverse repurchase agreements,
short sales, dollar rolls, when-issued, delayed-delivery or forward commitment
transactions and certain derivatives such as swaps, futures, forwards, and
options. To the extent that the Fund engages in such transactions, the Fund will
(to the extent required by applicable law) either (1) segregate cash or liquid
assets in the prescribed amount or (2) otherwise "cover" its future obligations
under the transaction, such as by holding an offsetting investment. If the Fund
segregates sufficient cash or other liquid assets or otherwise "covers" its
obligations under such transactions, the Fund will not consider the transactions
to be borrowings for purposes of its investment restrictions or "senior
securities" under the 1940 Act, and therefore, such transactions will not be
subject to the 300% asset coverage requirement under the 1940 Act otherwise
applicable to borrowings by the Fund.

In some cases (e.g., with respect to futures and forwards that are contractually
required to "cash-settle"), the Fund will segregate cash or other liquid assets
with respect to the amount of the daily net (marked-to-market) obligation
arising from the transaction, rather than the notional amount of the underlying
contract. By segregating assets in an amount equal to the net obligation rather
than the notional amount, the Fund will have the ability to employ leverage to a
greater extent than if it set aside cash or other liquid assets equal to the
notional amount of the contract, which may increase the risk associated with
such transactions.

The Fund may utilize methods of segregating assets or otherwise "covering"
transactions that are currently or in the future permitted under the 1940 Act,
the rules and regulation thereunder, or orders issued by the Securities and
Exchange Commission ("SEC") thereunder. For these purposes, interpretations and
guidance provided by the SEC staff may be taken into account when deemed
appropriate by the Fund.

Assets used as segregation or cover cannot be sold while the position in the
corresponding transaction is open, unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of a Fund's
assets for segregation and cover purposes could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.

Segregating assets or otherwise "covering" for these purposes does not
necessarily limit the percentage of the assets of the Fund that may be at risk
with respect to certain derivative transactions.

Cash Management Vehicles. 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, assets to cover the Fund's open futures and other
derivatives positions, 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. The Fund may use
Uninvested Cash to purchase shares of affiliated money market funds for which
the Advisor may act as investment advisor now or in the future that are
registered under the 1940 Act or that operate in accordance with Rule 2a-7 under
the 1940 Act but are excluded from the definition of "investment company" under
Section 3(c)(1) or 3(c)(7) of the 1940 Act. Investments in such cash management
vehicles may exceed the limits of Section 12(d)(1)(A) of the 1940 Act.

Equity Securities

General. The Fund may invest in equity securities listed on any domestic or
non-US securities exchange or traded in the over-the-counter ("OTC") market as
well as certain restricted or unlisted securities. As used herein, "equity
securities" include 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).

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 Fund, and thus
the value of your investment. Smaller companies are especially sensitive to
these factors.

Warrants. The 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. This 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
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. The 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 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 Fund.

Convertible Securities. The Fund may invest in 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 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, generally higher in yield than in 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). Because a convertible security is a fixed income security, its
market value generally increases when interest rates decline and generally
decreases when interest rates rise; however, the price of a convertible security
also 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, Small-Capitalization and Micro-Capitalization Stocks. The
Fund may invest in lesser known companies with medium-, small- and micro-market
capitalizations. Such companies frequently offer greater growth potential than
larger, more mature, better-known companies. Investments in such 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
and 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 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. 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.

In addition, many medium-, small- and micro-market 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 such companies and the securities of smaller
capitalization companies may not be readily marketable, making it difficult to
dispose of shares when desirable. Also, the securities of smaller capitalization
companies traded on the over-the-counter 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
capitalization companies.

Fixed Income Securities and Money Market Instruments

General. The Fund may invest in a broad range of domestic and foreign fixed
income (debt) securities. 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 held by the Fund's portfolio generally
varies inversely with changes in interest rates. Prices of fixed income
securities with longer effective maturities are more sensitive to interest rate
changes than those with shorter effective maturities.

In periods of declining interest rates, the yield (the income generated over a
stated period of time) of the 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 the 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 portfolio, thereby reducing the
yield of the Fund. In periods of rising interest rates, the opposite can be
true. The net asset value of the Fund investing in fixed income securities can
generally be expected to change as general levels of interest rates fluctuate.

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); (4) prepayment risk or call risk (the
likelihood that, during 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); and (5)
extension risk (the likelihood that as interest rates increase, slower than
expected principal payments may extend the average life of fixed income
securities, which will have the effect of locking in a below-market interest
rate, increasing the security's duration and reducing the value of the
security).

Short-Term Instruments. At the time of the Fund's investment in short-term
instruments, the issuer (or the issuer's parent) must have outstanding debt
rated within the top two rating categories by a nationally recognized
statistical rating organization ("NRSRO") or, if not so rated, must be believed
by the Advisor to be of comparable quality.

When the Fund experiences large cash inflows, for example, through the sale of
securities or of its shares 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, their agencies, instrumentalities,
authorities or political subdivisions; (2) other investment grade short-term
debt securities; (3) investment grade commercial paper; (4) bank obligations,
including negotiable certificates of deposit, time deposits and banker's
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, commercial paper or bank obligations
rated investment grade; 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.

Obligations of Banks and Other Financial Institutions. The Fund may invest in US
dollar-denominated fixed rate or variable rate obligations of US or foreign
financial institutions, including banks. Obligations of domestic and foreign
financial institutions in which the Fund may invest include (but are not limited
to) certificates of deposit, bankers' acceptances, bank time deposits,
commercial paper, and other instruments issued or supported by the credit of US
or foreign financial institutions, including banks.

For purposes of the Fund's investment policies with respect to bank obligations,
the assets of a bank will be deemed to include the assets of its domestic and
foreign branches. Obligations of foreign branches of US banks and foreign banks
may be general obligations of the parent bank in addition to the issuing bank or
may be limited by the terms of a specific obligation and by government
regulation. If the Advisor deems the instruments to present minimal credit risk,
the Fund may invest in obligations of foreign banks or foreign branches of US
banks, which include banks located in the United Kingdom, Grand Cayman Island,
Nassau, Japan and Canada.

Investments in these obligations may entail risks that are different from those
of investments in obligations of US domestic banks because of differences in
political, regulatory and economic systems and conditions. These risks include
future political and economic developments, currency blockage, the possible
imposition of withholding taxes on interest payments, possible seizure or
nationalization of foreign deposits, difficulty or inability of pursuing legal
remedies and obtaining judgments in foreign courts, possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
that might affect adversely the payment of principal and interest on bank
obligations. Foreign branches of US banks and foreign banks may also be subject
to less stringent reserve requirements and to different accounting, auditing,
reporting and record keeping standards than those applicable to domestic
branches of US banks.

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 up to one year)
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. At the
time of the Fund's investment in commercial paper, the issuer (or the issuer's
parent) must have outstanding debt rated within the top two rating categories by
a NRSRO or, if not so rated, must be believed by the Advisor to be of comparable
quality.

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 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.

For a description of commercial paper ratings, see the Appendix to this SAI.

Variable Rate Master Demand Notes. 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. Because variable rate master demand
notes are direct lending arrangements between the Fund and the issuer, they are
not ordinarily traded. Although no active secondary market may exist for these
notes, the Fund will purchase only those notes under which it may demand and
receive payment of principal and accrued interest daily or may resell the note
to a third party. While the notes are not typically rated by credit rating
agencies, issuers of variable rate master demand notes must satisfy the Advisor,
acting under the supervision of the Board of Trustees, that the same criteria as
set forth above for issuers of commercial paper are met. In the event an issuer
of a variable rate master demand note defaulted on its payment obligation, the
Fund might be unable to dispose of the note because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default. The face maturities of variable rate master demand notes
subject to a demand feature may exceed 397 days in certain circumstances.

US Government Securities. The Fund may invest in obligations issued or
guaranteed by the US government and include: (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 US 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 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")).

The value of the companies' securities fell sharply in 2008 due to concerns that
the firms did not have sufficient capital to offset losses. In mid-2008, the
U.S. Treasury was authorized to increase the size of home loans that FNMA and
FHLMC could purchase in certain residential areas and, until 2009, to lend FNMA
and FHLMC emergency funds and to purchase the companies' stock. More recently,
in September 2008, the U.S. Treasury announced that FNMA and FHLMC had been
placed in conservatorship by the Federal Housing Finance Agency ("FHFA"), a
newly created independent regulator. In addition to placing the companies in
conservatorship, the U.S. Treasury announced three additional steps that it
intended to take with respect to FNMA and FHLMC. First, the U.S. Treasury has
entered into preferred stock purchase agreements ("PSPAs") under which, if the
FHFA determines that FNMA's or FHLMC's liabilities have exceeded its assets
under generally accepted accounting principles, the U.S. Treasury will
contribute cash capital to the company in an amount equal to the difference
between liabilities and assets. The PSPAs are designed to provide protection to
the senior and subordinated debt and the mortgage-backed securities issued by
FNMA and FHLMC. Second, the U.S. Treasury established a new secured lending
credit facility that is available to FNMA and FHLMC until December 2009. Third,
the U.S. Treasury initiated a temporary program to purchase FNMA and FHLMC
mortgage-backed securities, which is expected to continue until December 2009.
No assurance can be given that the U.S. Treasury initiatives discussed above
with respect to the debt and mortgage-backed securities issued by FNMA and FHLMC
will be successful.

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 component
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."

Custodial Receipts. The Fund may invest in custodial receipts which are
interests in separately traded interest and principal component parts of US
government securities that are issued by banks or brokerage firms and are
created by depositing US government securities into a special account at a
custodian bank. The custodian holds the interest and principal payments for the
benefit of the registered owners of the certificates or receipts. The custodian
arranges for the issuance of the certificates or receipts evidencing ownership
and maintains the register. Custodial receipts include Treasury Receipts
("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and Certificates of
Accrual on Treasury Securities ("CATS"). TIGRs and CATS are interests in private
proprietary accounts while TRs and STRIPS are interests in accounts sponsored by
the US Treasury. Receipts are sold as zero coupon securities. See "Zero Coupon
Securities and Deferred Interest Bonds and Deferred Interest Bonds."

The Fund may acquire US government securities and their unmatured interest
coupons that have been separated ("stripped") by their holder, typically a
custodian bank or investment brokerage firm. Having separated the interest
coupons from the underlying principal of the US government securities, the
holder will resell the stripped securities in custodial receipt programs with a
number of different names, including TIGRs, and CATS. The stripped coupons are
sold separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying US Treasury bonds and notes themselves are
generally held in book-entry form at a Federal Reserve Bank. Counsel to the
underwriters of these certificates or other evidences of ownership of US
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying US government securities for federal tax and securities purposes. In
the case of CATS and TIGRS, the Internal Revenue Service (the "IRS") has reached
this conclusion for the purpose of applying the tax diversification requirements
applicable to regulated investment companies such as the Fund. CATS and TIGRS
are not considered US government securities by the staff of the Securities and
Exchange Commission ("SEC"). Further, the IRS conclusion noted above is
contained only in a general counsel memorandum, which is an internal document of
no precedential value or binding effect, and a private letter ruling, which also
may not be relied upon by the Fund. The Trust is not aware of any binding
legislative, judicial or administrative authority on this issue.

Zero Coupon Securities and Deferred Interest Bonds. The 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 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."

Variable Rate Securities. The Fund may invest in long-term maturity securities
which are subject to frequently available put option or tender option features
under which the holder may put the security back to the issuer or its agent at a
predetermined price (generally par) after giving specified notice. The interest
rate on a variable rate security changes at intervals according to an index or a
formula or other standard measurement as stated in the bond contract. One common
method is to calculate the interest rate as a percentage of the rate paid on
selected issues of Treasury securities on specified dates. The put option or
tender option right is typically available to the investor on a weekly or
monthly basis although on some demand securities the investor has a daily right
to exercise the put option. Variable rate securities with the put option
exercisable on dates on which the variable rate changes are often called
"variable rate demand notes." 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.
See "Illiquid Securities."

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

Yields and Ratings. The yields on certain obligations in which the Fund may
invest (such as commercial paper and bank obligations) are dependent on a
variety of factors, including the ratings of the issue. The ratings of S&P,
Moody's and other recognized rating organizations represent their respective
opinions as to the quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality or value.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.

Lower-Rated Debt Securities ("Junk Bonds" or "High Yield Debt Securities"). No
more than 5% of the Fund's net assets (at the time of investment) may be
invested in lower rated (BB/Ba or lower), high yield bonds. The Fund may retain
any bond whose rating drops below investment grade if it is in the best interest
of the respective Fund's shareholders.

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, 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 are 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
yielding 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.

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

Registered Loans. The Fund may invest in loan obligations issued or guaranteed
by sovereign governments or their agencies and instrumentalities. The ownership
of these loans is registered in the books of an agent bank and/or the borrower,
and transfers of ownership are effected by assignment agreements. Documentation
for these assignments includes a signed notice of assignment, which is sent to
the agent and/or borrower for registration shortly after the execution of the
assignment agreement. Prior to the notice of assignment being registered with
the agent and/or borrower, the borrower or its agent will make any payments of
principal and interest to the last registered owner.

Given the volume of secondary market trading in registered loans, the agent
and/or borrower's books may be out of date, making it difficult for the Fund to
establish independently whether the seller of a registered loan is the owner of
the loan. For this reason, the Fund will require a contractual warranty from the
seller to this effect. In addition, to assure the Fund's ability to receive
principal and interest owed to it but paid to a prior holder because of delays
in registration, the Fund will purchase registered loans only from parties that
agree to pay the amount of such principal and interest to the Fund upon demand
after the borrower's payment of such principal and interest to any prior holder
has been established.

Generally, registered loans trade in the secondary market with interest (i.e.,
the right to accrued but unpaid interest is transferred to purchasers).
Occasionally, however, the Fund may sell a registered loan and retain the right
to such interest ("sell a loan without interest"). To assure the Fund's ability
to receive such interest, the Fund will make such sales only to parties that
agree to pay the amount of such interest to the Fund upon demand after the
borrower's payment of such interest to any subsequent holder of the loan has
been established. In this rare situation, the Fund's ability to receive such
interest (and, therefore, the value of shareholders' investments in the Fund
attributable to such interest) will depend on the creditworthiness of both the
borrower and the party who purchased the loan from the Fund.

To further assure the Fund's ability to receive interest and principal on
registered loans, the Fund will only purchase registered loans from, and sell
loans without interest to, parties determined to be creditworthy by the Advisor.
For purposes of the Fund's issuer diversification and industry concentration
policies, the Fund will treat the underlying borrower of a registered loan as an
issuer of that loan. Where the Fund sells a loan without interest, it will treat
both the borrower and the purchaser of the loan as issuers for purposes of this
policy.

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

Other Debt Obligations. The Fund may invest in deposits, bonds, notes and
debentures and other debt obligations that at the time of purchase have, or are
comparable in priority and security to other securities of such issuer which
have, outstanding short-term obligations meeting the above short-term rating
requirements, or if there are no such short-term ratings, are determined by the
Advisor to be of comparable quality and are rated in the top four highest
long-term rating categories by the NRSROs rating such security.

Municipal Securities

General. The Fund may invest in municipal securities. Municipal securities
consist of bonds, notes and other instruments issued by or on behalf of states,
territories and possessions of the United States (including the District of
Columbia) and their political subdivisions, agencies or instrumentalities, the
interest on which is exempt from regular federal income tax (i.e., excluded from
gross income for federal income tax purposes but not necessarily exempt from the
federal alternative minimum tax or from state and local taxes). Municipal
securities may also be issued on a taxable basis (i.e., the interest on such
securities is not exempt from regular federal income tax).

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

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

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

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

An entire issue of municipal securities may be purchased by one or a small
number of institutional investors such as the Fund. 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 are often readily marketable.

The obligations of an issuer to pay the principal 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, as a result of litigation or other conditions, the power or
ability of the issuer to pay principal or interest when due on a municipal
security may be materially affected.

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. 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 Anticipation Notes. Tax anticipation notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipation of
various seasonal tax revenue, such as income, sales, use and business taxes, and
are payable from these specific future taxes.

Revenue Anticipation Notes. Revenue anticipation notes are issued in expectation
of receipt of other types of revenue, such as federal revenues available under
federal revenue sharing programs.

Bond Anticipation Notes. Bond anticipation notes are issued to provide interim
financing until long-term financing can be arranged. In most cases, the
long-term bonds provide funds for the repayment of these notes.

Tax and Revenue Anticipation Notes. Tax and revenue anticipation notes combine
the funding sources of both tax anticipation notes and revenue anticipation
notes.

Construction Loan Notes. Construction loan notes are secured by mortgage notes
insured by the Federal Housing Authority ("FHA"); 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. Construction loan
notes are sold to provide construction financing. Permanent financing, the
proceeds of which are applied to the payment of construction loan notes, is
sometimes provided by a commitment of GNMA to purchase the loan, accompanied by
a commitment by the FHA to insure mortgage advances thereunder. In other
instances, permanent financing is provided by commitments of banks to purchase
the loan. The Fund will only purchase construction loan notes that are subject
to permanent GNMA or bank purchase commitments.

Miscellaneous, Temporary and Anticipatory Instruments. These instruments may
include notes issued to obtain interim financing pending entering into alternate
financial arrangements, such as receipt of anticipated federal, state or other
grants or aid, passage of increased legislative authority to issue longer-term
instruments or obtaining other refinancing.

Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by agencies
of state and local governments to finance seasonal working capital needs or to
provide interim construction financing and are paid from general revenues of the
municipalities or are refinanced with long-term debt. In most cases, tax-exempt
commercial paper is backed by letters of credit, lending agreements, note
repurchase agreements or other credit facility agreements offered by banks or
other institutions.

Municipal Bonds. Municipal bonds generally fund longer-term capital needs than
municipal notes and have maturities exceeding one year when issued. The Fund may
invest in municipal bonds. Municipal bonds include general obligation bonds,
revenue bonds, private activity bonds and tender option bonds.

General Obligation Bonds. Issuers of general obligation bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.

Revenue Bonds. The principal security for a revenue bond is generally the net
revenues derived from a particular facility, group of facilities or, in some
cases, the proceeds of a special excise tax or other specific revenue source.
Revenue bonds are issued to finance a wide variety of capital projects,
including electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund that may be used
to make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, certificates
of deposit and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.

Private Activity Bonds. Private activity bonds, which are considered municipal
obligations if the interest paid thereon is excluded from gross income for
federal income tax purposes and is not a specific tax preference item for
federal individual and corporate alternative minimum tax purposes, are issued by
or on behalf of public authorities to raise money to finance various privately
operated facilities such as manufacturing facilities, certain hospital and
university facilities and housing projects. These bonds are also used to finance
public facilities such as airports, mass transit systems and ports. The payment
of the principal and interest on these bonds is dependent solely on the ability
of the facility's user to meet its financial obligations and generally the
pledge, if any, of real and personal property so financed as security for
payment.

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.

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 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.

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

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

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

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. See "Illiquid
Securities."

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

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

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

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"). See "Investment Company Securities."

Derivative Securities

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. 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, for speculative purposes, 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.

There is a range of risks associated with those uses. 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. 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 could not be purchased for the Fund. The
use of derivatives for non-hedging purposes may be considered speculative.

The Fund's investment in options, futures or forward contracts, swaps and
similar strategies (collectively, "derivatives") depends on the Advisor's
judgment as to the potential risks and rewards of different types of strategies.
Derivatives 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, derivative strategies may lower the Fund's return. The Fund could
also experience losses if the prices of its derivative 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.

Derivative Securities:  Options

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) 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 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 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 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 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. Where 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.

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 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 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 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 effect 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 recognized foreign exchanges. The Fund may
also purchase and sell options traded on US exchanges and, to the extent
permitted by law, options traded in the OTC market.

The Fund may also engage in options transactions in the OTC market with
broker-dealers who make markets in these options. The Fund will engage in OTC
options only with broker-dealers deemed by the Advisor to be creditworthy. 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 a counter party
approved for these purposes by the Advisor. The Advisor will monitor the
creditworthiness of dealers with whom the Fund enters into such options
transactions.

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, fluctuating 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 Standard & Poor's 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
securities 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 receive upon exercise a cash payment based on the level of the
index on the exercise date. The Fund would ordinarily have a gain if the value
of the index increased above the exercise price sufficiently to cover the
premium and would have a loss if the value of the index remained at or below the
exercise price during the option period.

As discussed in "Options on Securities," the Fund would normally purchase
"protective puts" in anticipation of a decline in the market value of the
relevant index. The purchase of a put option would entitle the Fund, in exchange
for the premium paid, to receive upon exercise a cash payment based on the level
of the index on the exercise date. The purchase of protective puts is generally
designed 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 security, 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 securities prices in the securities
market generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular security.
Accordingly, successful use by the Fund of options on securities indices will be
subject to the Advisor's ability to predict correctly movements in the direction
of the securities market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual securities.

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 may be 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 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.

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.

Options on Non-US Securities Indices. The Fund may purchase and write put and
call options on foreign securities indices listed on domestic and foreign
securities exchanges. The Fund may also purchase and write OTC options on
foreign securities indices.

The Fund may, to the extent allowed by federal and state securities laws, invest
in options on non-US securities indices instead of investing directly in
individual non-US securities. The Fund may also use foreign securities index
options for bona fide hedging and non-hedging purposes.

Yield Curve Options. The Fund may enter into options on the yield spread or
yield differential between two securities. These options are referred to as
yield curve options. In contrast to other types of options, a yield curve option
is based on the difference between the yields of designated securities, rather
than the prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this
differential widens (in the case of a call) or narrows (in the case of a put),
regardless of whether the yields of the underlying securities increase or
decrease.

Spreadlocks. The Fund may enter into spreadlocks. A spreadlock is a form of swap
contract which is an exchange of a one time cash payment between the Fund and
another party which is based on a specific financial index. A spreadlock allows
an interest rate swap user to lock in the forward differential between the
interest rate swap rate and the yield of the government bond underlying the
swap. Essentially, a spreadlock allows the investor to buy or sell the spread
forward by entering into a forward contract on the swap spread (i.e., the spread
between the government yield and the swap rate (or yield)) for a given maturity.
The price of a spreadlock is determined by the yield spread between a forward
starting fixed/floating swap and a forward transaction in a government bond. The
value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation up until the agreement matures at which
time the cash payment, based on the value of the swap on the maturity date, is
exchanged between the two parties.

Derivative Securities:  Futures Contracts and Options on Futures Contracts

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 will engage in futures and related options transactions only for bona
fide hedging or other non-hedging purposes as permitted by CFTC regulations
which permit principals of an investment company registered under the 1940 Act
to engage in such transactions without registering as commodity pool operators.
The Fund may, for example, 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
or as an efficient means of managing allocations between asset classes. All
futures contracts entered into by the Fund are traded on US exchanges or boards
of trade that are licensed and regulated by the CFTC or on foreign exchanges
approved by the CFTC. The Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities or instruments held by
the Fund or securities or instruments which they expect to purchase. Aggregate
initial margin and premiums required to establish positions other than those
considered by the CFTC to be "bona fide hedging" will not exceed 5% of the
Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts.

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 "contract 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 or equity securities, foreign currencies, or financial indices
including any index of US or foreign securities, US government securities,
foreign government securities, corporate debt securities, or municipal
securities. Futures contracts on foreign currencies may be used for speculative
purposes or to hedge the value of securities that are denominated in foreign
currencies.

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 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.

One purpose of the acquisition or sale of a futures contract, in cases where the
Fund holds or intends to acquire fixed-income or equity securities, is to
attempt to protect the Fund from fluctuations in interest or foreign exchange
rates or in securities prices without actually buying or selling fixed-income or
equity 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. The 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 the
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, 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 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 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 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 securities prices, currency
rates, 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 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.

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. Index futures
may be used for speculative purposes, 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 which
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. An index futures contract may also be entered into to
close out or offset an existing futures position.

When used for hedging purposes, each transaction in futures contracts on a
securities index 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 speculative or 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 futures contract
that is deliverable upon exercise of the option on that futures contract. If the
futures price at expiration of the option is below the exercise price specified
in the option, 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 the 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 declining securities values.

The amount of risk the Fund assumes when it purchases an option on an index
futures contract 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.

Derivative Securities:  Swap Agreements

General. The Fund may enter into swaps relating to indices, currencies, interest
rates, equity and debt interests. A swap transaction is an agreement between the
Fund and a counter party to act in accordance with the terms of the swap
contract. Interest rate swaps involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, such as an
exchange of fixed rate payments for floating rate payments. Mortgage swaps are
similar to interest rate swaps in that they represent commitments to pay and
receive interest. The notional principal amount, however, is tied to a reference
pool or pools of mortgages. Index swaps involve the exchange by the Fund with
another party of the respective amounts payable with respect to a notional
principal amount related to one or more indexes. Currency swaps involve the
exchange of cash flows on a notional amount of two or more currencies based on
their relative future values. An equity swap is an agreement to exchange streams
of payments computed by reference to a notional amount based on the performance
of a basket of stocks or a single stock. The purchase of an interest rate cap
entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payment of interest on a notional
principal amount from the party selling such interest rate cap. The purchase of
an interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of interest
on a notional principal amount from the party selling the interest rate floor.
An interest rate collar is the combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates.

The Fund may enter into these transactions to preserve a return or spread on a
particular investment or portion of its assets, 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 may also use such transactions for speculative purposes, such as
to obtain the price performance of a security without actually purchasing the
security in circumstances, for example, where the subject security is illiquid,
is unavailable for direct investment or available only on less attractive terms.
Swaps have special risks associated including possible default by the
counterpart to the transaction, illiquidity and, where swaps are used as hedges,
the risk that the use of a swap could result in losses greater than if the swap
had not been employed. See "Illiquid Securities."

The Fund will usually enter into swaps on a net basis (i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the agreement, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments). Swaps do not involve the delivery
of securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps is limited to the net amount of payments that the
Fund is contractually obligated to make or receive. If the counter party to a
swap defaults, the Fund's risk of loss consists of the net amount of payments
that the Fund is contractually entitled to receive. Where swaps are entered into
for good faith hedging purposes, the Advisor believes such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to the Fund's borrowing restrictions. Where swaps are
entered into for other than hedging purposes, the Fund will segregate an amount
of cash or other liquid securities having a value equal to the accrued excess of
its obligations over entitlements with respect to each swap on a daily basis.

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 counter party.

The Fund will attempt to minimize this risk by entering into agreements that
mark to market no less frequently than quarterly.

In addition, the Fund will enter into swap agreements only with counter parties
that would be eligible for consideration as repurchase agreement counter parties
under the Fund's repurchase agreement guidelines. Certain restrictions imposed
on the Fund by the Code may limit the Fund's ability to use swap agreements. The
swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect the Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.

Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act (the "CEA") and, therefore, are not regulated as futures or
commodity option transactions under the CEA, pursuant to regulations approved by
the CFTC. To qualify for this exemption, a swap agreement must be entered into
by eligible participants, which includes the following, provided the
participant's total assets exceed established levels: a bank or trust company,
savings association or credit union, insurance company, investment company
subject to regulation under the 1940 Act, commodity pool, corporation,
partnership, proprietorship, organization, trust or other entity, employee
benefit plan, governmental entity, broker-dealer, futures commission merchant,
natural person, or regulated foreign person. To be eligible, natural persons and
most other entities must have total assets exceeding $10 million; commodity
pools and employee benefit plans must have asset exceeding $5 million. In
addition, an eligible swap transaction must meet three conditions. First, the
swap agreement may not be part of a fungible class of agreements that are
standardized as to their material economic terms. Second, the creditworthiness
of parties with actual or potential obligations under the swap agreement must be
a material consideration in entering into or determining the terms of the swap
agreement, including pricing, cost or credit enhancement terms. Third, swap
agreements may not be entered into and traded on or through a multilateral
transaction execution facility.

This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a "safe harbor" for swap transactions from regulation as
futures or commodity option transactions under the CEA or its regulations. The
Policy Statement applies to swap transactions settled in cash that: (1) have
individually tailored terms; (2) lack exchange style offset and the use of a
clearing organization or margin system; (3) are undertaken in conjunction with a
line of business; and (4) are not marketed to the public.

The Fund will not enter into any swap, cap or floor transaction unless the
unsecured commercial paper, senior debt or the claims-paying ability of the
other party thereto is considered to be investment grade by the Advisor. If
there is a default by the other party to such a transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with the markets for other similar instruments
which are traded in the interbank market. See "Illiquid Securities."
Restrictions adopted by the CFTC may in the future restrict the Fund's ability
to enter into swap transactions.

Derivative Securities:  Hedging Strategies

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 a desired portfolio duration or to protect against market
risk should the Fund change 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, currency 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.

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 derivative 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 generally 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.

In hedging transactions based on an index, whether the Fund will realize a gain
or loss depends upon movements in the level of securities prices in the
securities market generally or, in the case of certain indexes, in an industry
or market segment, rather than movements in the price of a particular security.
The risk of imperfect correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort to compensate
for imperfect correlation of relative movements in the hedged position and the
hedge, the Fund's hedge positions may be in a greater or lesser dollar amount
than the dollar amount of the hedged position. Such "over hedging" or "under
hedging" may adversely affect the Fund's net investment results if market
movements are not as anticipated when the hedge is established.

Securities index futures transactions may be subject to additional correlation
risks. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which would distort the normal relationship between the securities
index and futures markets. Secondly, from the point of view of speculators, the
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 also may cause temporary price distortions.
Because of the possibility of price distortions in the futures market and the
imperfect correlation between movements in a securities index and movements in
the price of securities index futures, a correct forecast of general market
trends by the Advisor still may not result in a successful hedging transaction.

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 a default by a counterparty to an off-exchange transaction. See
"Illiquid Securities."

Mortgage-Backed and Asset-Backed Securities

General Characteristics. 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) properties, agriculture 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.

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 ("CMOs") 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 may invest 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 corporation
organized and existing under the Federal National Mortgage Association Charter
Act of 1938. The obligations of Fannie Mae 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 corporate instrumentality 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 (CMOs and REMIC Certificates). The
Fund may invest in multiple class mortgage-backed securities including 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. 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"). PCs represent undivided interests in specified level payment,
residential mortgages or participation 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 or 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 absorbs 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.

Privately Issued Mortgage-Backed Securities. The Fund may also invest in
mortgage-backed securities issued by trusts or other entities formed or
sponsored by private originators of and institutional investors in mortgage
loans and other foreign or domestic non-governmental entities (or representing
custodial arrangements administered by such institutions). These private
originators and institutions include domestic and foreign savings and loan
associations, mortgage bankers, commercial banks, insurance companies,
investment banks and special purpose subsidiaries of the foregoing. Privately
issued mortgage-backed securities are generally backed by pools of conventional
(i.e., non-government guaranteed or insured) mortgage loans. Since such
mortgage-backed securities are not guaranteed by an entity having the credit
standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high
quality rating, they normally are structured with one or more types of "credit
enhancement." Such credit enhancements fall generally into two categories; (1)
liquidity protection and (2) protection against losses resulting after default
by a borrower and liquidation of the collateral. Liquidity protection refers to
the providing of cash advances to holders of mortgage-backed securities when a
borrower on an underlying mortgage fails to make its monthly payment on time.

Protection against losses resulting after default and liquidation is designed to
cover losses resulting when, for example, the proceeds of a foreclosure sale are
insufficient to cover the outstanding amount on the mortgage. Such protection
may be provided through guarantees, insurance policies or letters of credit,
through various means of structuring the transaction or through a combination of
such approaches.

Mortgage Pass-Through Securities. The Fund may invest in mortgage pass-through
securities, which are fixed or adjustable rate mortgage-backed securities that
provide for monthly payments that are a "pass-through" of the monthly interest
and principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees or other amounts paid to
any guarantor, administrator and/or servicers of the underlying mortgage loans.

Stripped Mortgage-Backed Securities. The Fund may purchase stripped
mortgage-backed securities ("SMBS"), which are derivative multi-class mortgage
securities. The market value of the class consisting entirely of principal
payments generally is unusually 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. See "Illiquid Securities."

In accordance with a requirement imposed by the staff of the SEC, the Advisor
will consider privately-issued fixed rate interest only classes of SMBS ("IO")
and principal only classes of SMBS ("PO") to be illiquid securities for purposes
of the Fund's limitation on investments in illiquid securities. Unless the
Advisor determines that a particular government-issued fixed rate IO or PO is
liquid, it will also consider these IOs and POs to be illiquid.

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, at any time the Cost of Funds Index may not reflect 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.

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 consumer loans (unrelated to mortgage loans), trade receivables or
other types of 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 varies 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 change
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 loans and receivables by individuals,
businesses and other borrowers, 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. However, the underlying assets are not first lien
mortgage loans or interests therein but 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,
receivables from revolving credit (credit card) agreements and trade
receivables. 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
are readily marketable and rated investment grade by S&P, Moody's or Fitch.

The yield characteristics of the 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
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 will not usually 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.

Impact of Sub-Prime Mortgage Market. The Fund may invest in mortgage-backed,
asset-backed and other fixed-income securities whose value and liquidity may be
adversely affected by the critical downturn in the sub-prime mortgage lending
market in the US. Sub-prime loans, which, have higher interest rates, are made
to borrowers with low credit ratings or other factors that increase the risk of
default. Concerns about widespread defaults on sub-prime loans have also created
heightened volatility and turmoil in the general credit markets. As a result,
the Fund's investments in certain fixed-income securities may decline in value,
their market value may be more difficult to determine, and the Fund may have
more difficulty disposing of them.

Securities of Non-US Issuers

With respect to certain countries in which capital markets are either less
developed or not easily accessed, investments by the Fund may be made through
investment in other investment companies that in turn are authorized to invest
in the securities of such countries. Investment in other investment companies is
generally limited in amount by the 1940 Act, will involve the indirect payment
of a portion of the expenses (including advisory fees) of such other investment
companies and may result in a duplication of fees and expenses. See "Investment
Company Securities."

Investments in American, European, Global and International Depository Receipts.
The Fund may invest in non-US securities in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs") and International Depository Receipts ("IDRs") or other
similar securities representing ownership of securities of non-US issuers held
in trust by a bank or similar financial institution. 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. ADRs, EDRs, GDRs and IDRs are alternatives to
the purchase of the underlying securities in their national markets and
currencies, but are subject to the same risks as the non-US securities to which
they relate.

Foreign Corporate Debt Securities. The Fund may invest in the 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.

Foreign Government Debt Securities. The Fund may invest in 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. Foreign government securities also include mortgage-related
securities issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.

Foreign Fixed Income Securities. Since most foreign fixed income securities are
not rated, the Fund will invest in foreign fixed income securities based on the
Advisor's analysis without relying on published ratings. Since such investments
will be based upon the Advisor's analysis rather than upon published ratings,
achievement of the Fund's goals may depend more upon the abilities of the
Advisor than would otherwise be the case.

The value of the foreign fixed income securities held by the Fund, and thus the
net asset value of the Fund's shares, generally will fluctuate with (a) changes
in the perceived creditworthiness of the issuers of those securities, (b)
movements in interest rates, and (c) changes in the relative values of the
currencies in which the Fund's investments in fixed income securities are
denominated with respect to the US Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of the Fund's
investments in foreign fixed income securities, and the extent to which the Fund
hedges its interest rate, credit and currency exchange rate risks. A longer
average maturity generally is associated with a higher level of volatility in
the market value of such securities in response to changes in market conditions.

Investments in sovereign debt, including Brady Bonds (Brady Bonds are debt
securities issued under a plan implemented to allow debtor nations to
restructure their outstanding commercial bank indebtedness), involve special
risks. Foreign governmental issuers of debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or pay interest when due. In the event of default, there may be limited or no
legal recourse in that, generally, remedies for defaults must be pursued in the
courts of the defaulting party. Political conditions, especially a sovereign
entity's willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and the Fund may be unable to
collect all or any part of its investment in a particular issue. Foreign
investment in certain sovereign debt is restricted or controlled to varying
degrees, including requiring governmental approval for the repatriation of
income, capital or proceed of sales by foreign investors. These restrictions or
controls may at times limit or preclude foreign investment in certain sovereign
debt or increase the costs and expenses of the Fund.

Sovereign debt of emerging market governmental issuers is to be considered
speculative. Emerging market governmental issuers are among the largest debtors
to commercial banks, foreign governments, international financial organizations
and other financial institutions. Certain emerging market governmental issuers
have not been able to make payments of interest on or principal of debt
obligations as those payments have come due. There is a history of defaults with
respect to commercial bank loans by public and private entities issuing
sovereign debt. All or a portion of the interest payments and/or principal
repayment with respect to sovereign debt may be uncollateralized. Obligations
arising from past restructuring agreements may affect the economic performance
and political and social stability of those issuers.

The ability of emerging market country governmental issuers to make timely
payments on their obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance, and its access to
international credits and investments. An emerging market whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities. Increased
protectionism on the part of an emerging market's trading partners could also
adversely affect the country's exports and diminish its trade account surplus,
if any. To the extent that emerging markets receive payment for its exports in
currencies other than dollars or non-emerging market currencies, its ability to
make debt payments denominated in dollars or non-emerging market currencies
could be affected.

Another factor bearing on the ability of emerging market countries to repay debt
obligations is the level of international reserves of the country. Fluctuations
in the level of these reserves affect the amount of foreign exchange readily
available for external debt payments and thus could have a bearing on the
capacity of emerging market countries to make payments on these debt
obligations.

To the extent that an emerging market country cannot generate a trade surplus,
it must depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign governments
and inflows of foreign investment. The access of emerging markets to these forms
of external funding may not be certain, and a withdrawal of external funding
could adversely affect the capacity of emerging market country governmental
issuers to make payments on their obligations. In addition, the cost of
servicing emerging market debt obligations can be affected by a change in
international interest rates since the majority of these obligations carry
interest rates that are adjusted periodically based upon international rates.

Foreign Investments. Foreign securities are normally denominated and traded in
foreign currencies. As a result, the value of the Fund's foreign investments and
the value of its shares may be affected favorably or unfavorably by changes in
currency exchange rates relative to the US dollar. There may be less information
publicly available about a foreign issuer than about a US issuer, and foreign
issuers may not be subject to accounting, auditing and financial reporting
standards and practices comparable to those in the US. The securities of some
foreign issuers are less liquid and at times more volatile than securities of
comparable US issuers. Foreign brokerage commissions and other fees are also
generally higher than in the US. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment or delivery of
securities or in the recovery of the Fund's assets held abroad) and expenses not
present in the settlement of investments in US markets. Payment for securities
without delivery may be required in certain foreign markets.

In addition, foreign securities may be subject to the risk of nationalization or
expropriation of assets, imposition of currency exchange controls or
restrictions on the repatriation of foreign currency, confiscatory taxation,
political or financial instability and diplomatic developments which could
affect the value of the Fund's investments in certain foreign countries.
Governments of many countries have exercised and continue to exercise
substantial influence over many aspects of the private sector through the
ownership or control of many companies, including some of the largest in these
countries. As a result, government actions in the future could have a
significant effect on economic conditions which may adversely affect prices of
certain portfolio securities. There is also generally less government
supervision and regulation of stock exchanges, brokers, and listed companies
than in the US. Dividends or interest on, or proceeds from the sale of, foreign
securities may be subject to foreign withholding taxes, and special US tax
considerations may apply. Moreover, foreign economies may differ favorably or
unfavorably from the US economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.

Legal remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the US or in other
foreign countries. The laws of some foreign countries may limit the Fund's
ability to invest in securities of certain issuers organized under the laws of
those foreign countries.

Of particular importance, many foreign countries are heavily dependent upon
exports, particularly to developed countries, and, accordingly, have been and
may continue to be adversely affected by trade barriers, managed adjustments in
relative currency values, and other protectionist measures imposed or negotiated
by the US and other countries with which they trade. These economies also have
been and may continue to be negatively impacted by economic conditions in the US
and other trading partners, which can lower the demand for goods produced in
those countries.

The risks described above, including the risks of nationalization or
expropriation of assets, typically are increased in connection with investments
in "emerging markets." For example, political and economic structures in these
countries may be in their infancy and developing rapidly, and such countries may
lack the social, political and economic stability characteristic of more
developed countries (including amplified risk of war and terrorism). Certain of
these countries have in the past failed to recognize private property rights and
have at times nationalized and expropriated the assets of private companies.
Investments in emerging markets may be considered speculative.

The currencies of certain emerging market countries have experienced
devaluations relative to the US dollar, and future devaluations may adversely
affect the value of assets denominated in such currencies. In addition, currency
hedging techniques may be unavailable in certain emerging market countries. Many
emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation or deflation for many years, and future
inflation may adversely affect the economies and securities markets of such
countries.

In addition, unanticipated political or social developments may affect the value
of investments in emerging markets and the availability of additional
investments in these markets. Any change in the leadership or politics of
emerging market countries, or the countries that exercise a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and adversely affect
existing investment opportunities. The small size, limited trading volume and
relative inexperience of the securities markets in these countries may make
investments in securities traded in emerging markets illiquid and more volatile
than investments in securities traded in more developed countries. For example,
limited market size may cause prices to be unduly influenced by traders who
control large positions. In addition, the Fund may be required to establish
special custodial or other arrangements before making investments in securities
traded in emerging markets. There may be little financial or accounting
information available with respect to issuers of emerging market securities, and
it may be difficult as a result to assess the value of prospects of an
investment in such securities.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Fund's securities in such markets may
not be readily available. The Fund may suspend redemption of its shares for any
period during which an emergency exists, as determined by the SEC. Accordingly
if the Fund believes that appropriate circumstances exist, it will promptly
apply to the SEC for a determination that an emergency is present. During the
period commencing from the Fund's identification of such condition until the
date of the SEC action, the Fund's securities in the affected markets will be
valued at fair value determined in good faith by or under the direction of the
Fund's Board.

Certain of the foregoing risks may also apply to some extent to securities of US
issuers that are denominated in foreign currencies or that are traded in foreign
markets, or securities of US issuers having significant foreign operations.

Currency Management

General. In connection with the Fund's investments denominated in foreign
currencies, the Advisor may choose to utilize a variety of currency management
(hedging) strategies. The Advisor seeks to take advantage of different yield,
risk and return characteristics that different currencies, currency
denominations and countries can provide to US investors. In doing so, the
Advisor will consider such factors as the outlook for currency relationships;
current and anticipated interest rates; levels of inflation within various
countries; prospects for relative economic growth; and government policies
influencing currency exchange rates and business conditions. Although the
Advisor may attempt to manage currency exchange rate risks, there is no
assurance that the Advisor will do so, or do so at an appropriate time or that
the Advisor will be able to predict exchange rates accurately.

Currency Exchange Transactions. Because the Fund may buy and sell securities
denominated in currencies other than the US dollar and receives 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 currencies and to convert foreign currencies to and from the
US dollar. The Fund either enters into these transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the currency exchange market or uses
forward currency exchange contracts (discussed below) to purchase or sell
currencies. Neither spot transactions nor forward currency exchange contracts
eliminate fluctuations in the prices of the Fund's securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.

Currency Hedging. The Fund's currency hedging strategies may include hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward currency with respect to specific
receivables or payables of the Fund generally accruing in connection with the
purchase or sale of its portfolio securities. Position hedging is the sale of
forward currency with respect to portfolio security positions.

A decline in the US dollar value of a foreign currency in which the Fund's
securities are denominated will reduce the US dollar value of the securities,
even if their value in the foreign currency remains constant. The use of
currency hedges does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in the
future. For example, in order to protect against diminutions in the US dollar
value of non-dollar denominated securities it holds, the Fund may purchase
foreign currency put options. If the value of the foreign currency does decline,
the Fund will have the right to sell the currency for a fixed amount in dollars
and will thereby offset, in whole or in part, the adverse effect on the US
dollar value of its securities that otherwise would have resulted. Conversely,
if a rise in the US dollar value of a currency in which securities to be
acquired are denominated is projected, thereby potentially increasing the cost
of the securities, the Fund may purchase call options on the particular
currency. The purchase of these options could offset, at least partially, the
effects of the adverse movements in exchange rates. The benefit to the Fund
derived from purchases of currency options, like the benefit derived from other
types of options, will be reduced by premiums and other transaction costs.

Because transactions in currency exchange are generally conducted on a principal
basis, no fees or commissions are generally involved. Currency hedging involves
some of the same risks and considerations as other transactions with similar
instruments. Although currency hedges limit the risk of loss due to a decline in
the value of a hedged currency, at the same time, they also limit any potential
gain that might result should the value of the currency increase. If a
devaluation is generally anticipated, the Fund may not be able to contract to
sell a currency at a price above the devaluation level it anticipates.

Cross Hedging. At the discretion of the Advisor, the Fund may employ the
currency hedging strategy known as "cross-hedging" by using forward currency
contracts, currency options or a combination of both. When engaging in
cross-hedging, the Fund seeks to protect against a decline in the value of a
foreign currency in which certain of its portfolio securities are denominated by
selling that currency forward into a different foreign currency for the purpose
of diversifying the Fund's total currency exposure or gaining exposure to a
foreign currency that is expected to appreciate.

Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation by the 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. The Fund
maintains a segregated account of cash or liquid securities in an amount at
least equal to its obligations under each forward currency exchange contract.

The Fund may enter into forward currency exchange contracts as described in the
prospectus. Additionally, the Fund also 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, the 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, at the same time they
tend 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 the
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 the 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, the 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 contracts to hedge or
cross-hedge its assets. Also, with regard to the 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 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.

The Fund will segregate cash or liquid securities in an amount equal to the
value of the Fund's total assets committed to the consummation of forward
currency contracts requiring the Fund to purchase foreign currencies or forward
contracts entered into for non-hedging purposes. If the value of the segregated
securities declines, additional cash or liquid securities will be segregated on
a daily basis so that the value of the assets will equal the amount of the
Fund's commitments with respect to such contracts.

The Fund may sell US dollars and buy a foreign currency forward in order to gain
exposure to a currency which is expected to appreciate against the US dollar.
This speculative strategy allows the Fund to benefit from currency appreciation
potential without requiring it to purchase a local fixed income instrument, for
which prospects may be relatively unattractive. It is the Advisor's intention
that the Fund's net US dollar currency exposure generally will not fall below
zero (i.e., that net short positions in the US dollar generally will not be
taken).

The Fund may also utilize forward foreign currency contracts to establish a
synthetic investment position designed to change the currency characteristics of
a particular security without the need to sell such security. Synthetic
investment positions will typically involve the purchase of US
dollar-denominated securities together with a forward contract to purchase the
currency to which the Fund seeks exposure and to sell US dollars. This may be
done because the range of highly liquid short-term instruments available in the
US may provide greater liquidity to the Fund than actual purchases of foreign
currency-denominated securities in addition to providing superior returns in
some cases. Depending on (a) the Fund's liquidity needs, (b) the relative yields
of securities denominated in different currencies and (c) spot and forward
currency rates, a significant portion of the Fund's assets may be invested in
synthetic investment positions, subject to compliance with the tax requirements
for qualification as a regulated investment company.

There is a risk in adopting a synthetic investment position. It is impossible to
forecast with absolute precision what the market value of a particular security
will be at any given time. If the value of the US dollar-denominated security is
not exactly matched with the Fund's obligation under a forward currency contract
on the date of maturity, the Fund may be exposed to some risk of loss from
fluctuations in the value of the US dollar. Although the Advisor will attempt to
hold such mismatching to a minimum, there can be no assurance that the Advisor
will be able to do so.

Options on Foreign Currencies. The Fund may write covered put and call options
and purchase put 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 Fund may
also use currency options to achieve a desired currency weighting in a
cost-effective manner. The 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
the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may be used to hedge against fluctuations in exchange
rates although, in the event of exchange rate movements adverse to the Fund's
position, it may forfeit the entire amount of the premium plus related
transaction costs. In addition the Fund may purchase call options on currency
when the Advisor anticipates that the currency will appreciate in value.

The Fund may also write options on foreign currencies for the same types of
hedging or currency management purposes. For example, where the 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 options 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, the 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, the Fund also may be required to forego all or a portion
of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.

The Fund may write covered call options on foreign currencies. A call option
written on a foreign currency by the 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 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 the Fund in cash or liquid securities.

The 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 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 the 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
the Fund is unable to effect a closing sale transaction with respect to options
it has purchased, it would have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of underlying
currency. The Fund pays brokerage commissions or spreads in connection with its
options transactions.

Certain options on foreign currencies are traded OTC and involve liquidity and
credit risks which may not be present in the case of exchange-traded currency
options. In some circumstances, the 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. See "Illiquid Securities."

Additional Limitations and Risk Factors

In addition to the risks discussed above, the Fund's investments may be subject
to the following limitations and risk factors:

Non-US Securities. The value of the Fund's 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
those 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 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 and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. In general, less information is publicly
available with respect to non-US issuers than is available with respect to US
companies. Most foreign companies are also not subject to the uniform accounting
and financial reporting requirements applicable to issuers in the United States.
Any foreign investments made by the Fund must be made in compliance with US and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.

Because non-US securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund may hold various foreign currencies
from time to time, the value of the net assets of the Fund as measured in US
dollars will be affected favorably or unfavorably by changes in exchange rates.
Generally, the Fund's currency exchange transactions will be conducted on a spot
(i.e., cash) basis at the spot rate prevailing in the currency exchange market.
The cost of the Fund's currency exchange transactions will generally be the
difference between the bid and offer spot rate of the currency being purchased
or sold. In order to protect against uncertainty in the level of future foreign
currency exchange rates, the Fund is authorized to enter into certain foreign
currency exchange transactions.

In addition, while the volume of transactions effected on foreign securities
exchanges has increased in recent years, in most cases it remains appreciably
below that of The New York Stock Exchange, Inc. (the "Exchange"). Accordingly,
the Fund's foreign investments may be less liquid and their prices may be more
volatile than comparable investments in securities of US issuers. Moreover, the
settlement periods for non-US securities, which are often longer than those for
securities of US issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, the Fund normally pays fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States.

Rating Services. The ratings of Moody's and S&P 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 Fund investments, the Advisor also makes its own evaluation of
these securities, subject to review by the Board of Trustees. 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 used herein and in the
Prospectus is set forth in Appendix to this SAI.

Other Investments and Investment Practices

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 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. Investments in 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 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 FINRA (as defined below).

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
Advisor determines that the Rule 144A Securities are liquid. In reaching
liquidity decisions, the Advisor 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.

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
or other income and could also increase transaction costs, which may impact the
Fund's expense ratio.

Investment Company Securities. A fund may acquire securities of other investment
companies to the extent consistent with its investment objective and 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.

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, among other things, 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's investing any cash collateral in interest-bearing short-term
investments), and distributions on the loaned securities and any increase in
their market value. The Fund will bear any losses incurred from the investment
of the collateral it receives. 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.

The Fund may pay negotiated fees in connection with loaned securities, pursuant
to written contracts. In addition, voting rights may pass with the loaned
securities, but if a material event occurs affecting an investment on loan, the
loan will 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).

TBA Purchase Commitments. The Fund may enter into TBA purchase commitments to
purchase securities for a fixed price at a future date, typically not exceeding
45 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.

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. 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 to be advantageous.

Repurchase Agreements. The Fund may engage in repurchase agreement transactions
with member banks of the Federal Reserve System, certain non-US banks and
certain non-bank dealers, including governmental securities dealers. 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 by, among other things,
agreeing to sell portfolio securities to financial institutions that meet the
standards described under "Repurchase Agreements" and to repurchase them at a
mutually agreed date and price (a "reverse repurchase agreement"). The Fund may
enter into reverse repurchase agreements with banks and domestic broker-dealers.
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.

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

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 (but not
limited to) 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 $100 million as of the end of their most recent fiscal year;
commercial paper rated at the time of purchase at least A-1/2 by S&P or P-1/2 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.

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

Indexed Securities. The Fund may invest in indexed securities whose value
depends on the price of foreign currencies, securities indices or other
financial values or statistics. Examples 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. These securities may be positively or
negatively indexed; that is, their value may increase or decrease if the
underlying instrument appreciates.

Portfolio Holdings

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

The Fund's procedures permit non-public portfolio holdings information to be
shared with Deutsche Asset Management and its affiliates (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys, officers and trustees/directors and each of their respective
affiliates and advisers who require access to this information to fulfill their
duties to the Fund and are subject to the duties of confidentiality, including
the duty not to trade on non-public information, imposed by law or contract, or
by the Fund's procedures. This non-public information may also be disclosed,
subject to the requirements described below, to certain third parties, such as
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, alpha, beta, tracking
error, default rate, portfolio turnover, and risk and style characteristics so
long as the identity of 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 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

The Trust has retained the services of Deutsche Investment Management Americas
Inc. ("DIMA") as investment advisor. DIMA is located at 345 Park Avenue, New
York, New York 10154. DIMA is registered with the SEC as an investment advisor
and provides a full range of investment advisory services to institutional
clients. DIMA is an indirect wholly owned subsidiary of Deutsche Bank AG
("Deutsche Bank"), an international commercial and investment banking group. 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.

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

Pursuant to the Investment Management Agreement between the Trust and DIMA (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 adopted by the Board of Trustees. The Advisor will
also monitor, to the extent not monitored by the Fund's administrator or other
agent, the Fund's compliance with its investment and tax guidelines and other
compliance policies. For all services provided under the Investment Management
Agreement, the Fund pays the Advisor a fee of 0.60% on the first $250 million in
average daily net assets, which declines to a fee of 0.575% on average daily net
assets in excess of $250 million up to $1 billion, and to 0.55% on average daily
net assets in excess of $1 billion. Prior to June 1, 2006, the Advisor received
a fee from the Fund, computed daily and paid monthly, at the annual rate of
0.65% of the average daily net assets of the Fund.

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

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

From time to time, Deutsche Bank or an affiliate (collectively, "DB") may at its
sole discretion invest its own assets in shares of the Fund ("proprietary
investment") for such purposes it deems appropriate, including investments
designed to assist in the management of the Fund's portfolio. Any proprietary
investment may be hedged and, in that event, the return on the proprietary
investment, net of the effect of the hedge, would be expected to differ from the
return of the Fund. DB has no obligation to make any proprietary investments and
the amount of any proprietary investment that is made may or may not be
significant in comparison to the level of assets of the Fund. In the event that
a proprietary investment is made, except as otherwise required under the
Investment Company Act of 1940, DB would be permitted to redeem the investment
at such time that it deems appropriate.

In addition, the Fund has a subadvisor approval policy (the "Sub-advisor
Approval Policy"). The Sub-advisor Approval Policy permits the Advisor, subject
to the approval of the Board, including a majority of its independent board
members, to appoint and replace sub-advisors and to amend sub-advisory contracts
without obtaining shareholder approval. Under the Sub-advisor Approval Policy,
the Board, including its independent board members, will continue to evaluate
and approve all new sub-advisory contracts between the Advisor and any
subadvisor, as well as all changes to any existing sub-advisory contract. The
Fund cannot implement the Sub-advisor Approval Policy without the SEC either
adopting revisions to current rules (as it proposed to do in October 2003) or
granting the Fund exemptive relief from existing rules. The Fund and the Advisor
would be subject to certain conditions imposed by the SEC (and certain
conditions that may be imposed in the future within either exemptive relief or a
rule) to ensure that the interests of the Fund and its shareholders are
adequately protected whenever the Advisor acts under the Sub-advisor Approval
Policy, including any shareholder notice requirements.

The Investment Management Agreement provides that the Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with matters to which the Agreement relates, except a
loss resulting from willful malfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from reckless disregard
by the Advisor of its obligations and duties under the Investment Management
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. The
Investment Management Agreement continues in effect from year to year only if
its continuance is approved annually by the vote of a majority of those Trustees
who are not parties to such Investment Management Agreement or interested
persons of the Advisor or the Trust, cast in person at a meeting called for the
purpose of voting on such approval, and either by a vote of the Trust's Trustees
or of a majority of the outstanding voting securities of the Fund

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

                                     2009              2008             2007
                                     ----              ----             ----

DWS Lifecycle Long Range Fund     $3,171,932        $4,589,629       $4,499,191

The Fund's Class S Prospectus contains disclosure as to the amount of the
Advisor's investment advisory and the Administrator's administration and
services fees, including waivers thereof. The Advisor and the Administrator may
not recoup any of their waived investment advisory or administration and
services fees.

Through September 30, 2009, the Advisor has contractually agreed to waive all or
a portion of its management fee and reimburse or pay certain operating expenses
so that the total annual operating expenses of the fund will not exceed 1.00%
for Class S shares, excluding certain expenses such as extraordinary expenses,
taxes, brokerage and interest expenses.

Effective October 1, 2009 through September 30, 2010, the Advisor has
contractually agreed to waive all or a portion of its management fee and
reimburse or pay certain operating expenses so that the total annual operating
expenses of the fund will not exceed 1.01% for Class S shares, excluding certain
expenses such as extraordinary expenses, taxes, brokerage and interest expenses.

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

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

Subadvisor

Aberdeen Asset Management Inc. As of December 2, 2005, the Fund's Advisor
entered into an investment subadvisory agreement with Aberdeen Asset Management
Inc. ("AAMI"), a US registered investment advisor. AAMI acts as a subadvisor for
the Fund with respect to the core bond and active fixed income portions of the
Fund only. AAMI makes the investment decisions, buys and sells securities, and
conducts the research that leads to these purchase and sale decisions. AAMI is
also responsible for selecting brokers and dealers to negotiate portfolio
transactions and for negotiating brokerage commissions and dealer charges. AAMI
provides a full range of international investment advisory services to
institutional and retail clients.

AAMI is paid for its services by the Advisor from its fee as investment advisor
to the Fund. DIMA pays AAMI a fee at the annual rate of 0.18% of the average
daily net assets of the fund, computed daily and paid monthly.

The subadvisory fee paid by the Advisor to AAMI for the fiscal years ended March
31, 2009, March 31, 2008 and March 31, 2007 was $320,085, $488,295 and $477,083,
respectively.

AAMI is a direct, wholly owned subsidiary of Aberdeen Asset Management PLC, the
parent company of an asset management group formed in 1983. AAMI's principal
business address is 1735 Market Street, Philadelphia, PA 19103.

Compensation of Portfolio Managers -- Advisor

Portfolio managers are eligible for total compensation comprised of base salary
and variable compensation.

Base Salary - Base salary is linked to job functions, responsibilities and
financial services industry peer comparison through the use of extensive market
data surveys.

Variable Compensation - Generally, variable compensation comprises a greater
proportion of total compensation as a portfolio manager's seniority and
compensation levels increase. Variable Compensation may include a cash bonus
incentive, and potential participation in long-term incentive programs including
but not limited to, Deutsche Bank equity, equity linked vehicle, and restricted
cash. Variable compensation is determined based on an analysis of a number of
factors, including among other things, the performance of Deutsche Bank, the
performance of the Asset Management division, and the portfolio manager's
individual contribution. In evaluating individual contribution, management will
consider a combination of quantitative and qualitative factors. Top performing
investment professionals earn a total compensation package that is highly
competitive. As variable compensation increases, the percentage awarded in
long-term incentives also increases. Long-term incentives are subject to a
clawback provision for unvested portions only during the three-year life of the
plan should the individual engage in any conduct that is a significant breach of
DB policies and procedures.

o        The quantitative analysis of a portfolio manager's individual
         performance is based on, among other factors, performance of all of the
         accounts managed by the portfolio manager (which includes the fund and
         any other accounts managed by the portfolio manager) over a one-,
         three-, and five-year period relative to the appropriate Morningstar
         and Lipper peer group universes and/or benchmark index(es) with respect
         to each account. Additionally, the portfolio manager's
         retail/institutional asset mix is weighted, as appropriate for
         evaluation purposes. Generally the benchmark index used is a benchmark
         index set forth in the fund's prospectus to which the fund's
         performance is compared. Additional or different appropriate peer group
         or benchmark indices may also be used. Primary weight is given to
         pre-tax portfolio performance over three-year and five-year time
         periods (adjusted as appropriate if the portfolio manager has served
         for less than five years) with lesser consideration given to portfolio
         performance over a one-year period. The increase or decrease in a
         fund's assets due to the purchase or sale of fund shares is not
         considered a material factor.

o        The qualitative analysis of a portfolio manager's individual
         performance is based on, among other things, the results of an annual
         management and internal peer review process, and management's
         assessment of overall portfolio manager contributions to investor
         relations, the investment process and overall performance (distinct
         from fund and other account performance). Other factors, including
         contributions made to the investment team, as well as adherence to
         Compliance Policies and Procedures, Risk Management procedures, the
         firm's Code of Ethics and "living the values" of the Advisor are also
         factors.

The quantitative analysis of a portfolio manager's performance is given more
weight in determining variable compensation than the qualitative portion.

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                 Dollar Range of All DWS
Name of Portfolio Manager                          Fund Shares Owned                   Fund Shares Owned
-------------------------                          -----------------                   -----------------

<S>                                                  <C>                             <C>
J. Christopher Gagnier                                    $0                                  N/A
Inna Okounkova                                       $1 - $10,000                    $100,001 - $500,0000
Jim Francis                                               $0                           $10,001 - $50,000
Robert Wang                                          $1 - $10,000                     $50,001 - $100,000
Thomas Picciochi                                     $1 - $10,000                     $50,001 - $100,000
</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 as of the Fund's
most recent fiscal year end.

Other SEC Registered Investment Companies Managed:

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

<S>                                       <C>             <C>                        <C>                  <C>
J. Christopher Gagnier                    3               $328,161,612               0                    $0
Inna Okounkova                           15             $2,103,093,916               0                    $0
Jim Francis                              22             $5,312,499,493               0                    $0
Robert Wang                              46            $10,935,712,019               0                    $0
Thomas Picciochi                         14             $6,264,111,655               0                    $0

Other Pooled Investment Vehicles Managed:

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

J. Christopher Gagnier                      8            $2,811,830,892              0                          $0
Inna Okounkova                              3               $52,658,030              0                          $0
Jim Francis                                18              $212,029,437              0                          $0
Robert Wang                                38            $1,391,850,020              1                     $31,529
Thomas Picciochi                           14              $516,286,364              1                     $31,529

Other Accounts Managed:

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

J. Christopher Gagnier                    144           $18,553,709,447              4                   $414,858,112
Inna Okounkova                              0                        $0              0                             $0
Jim Francis                                 4              $198,259,166              0                             $0
Robert Wang                                41            $5,930,855,648              5                   $109,222,687
Thomas Picciochi                           10              $957,829,788              5                   $109,222,687
</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 the Fund. Purchase and sale orders for the Fund may be combined
         with those of other clients of the Advisor in the interest of achieving
         the most favorable net results to the Fund and the other clients.

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

o        In some cases, an apparent conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with respect to other accounts it manages. The Advisor will not
         determine allocations based on whether it receives a performance-based
         fee from the client. 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 Funds may
         manage other mutual funds and separate accounts on a long-short basis.
         The simultaneous management of long and short portfolios creates
         potential conflicts of interest including the risk that short sale
         activity could adversely affect the market value of the long
         positions(and vice versa), the risk arising from sequential orders in
         long and short positions, and the risks associated with receiving
         opposing orders at the same time. The Advisor has adopted procedures
         that it believes are reasonably designed to mitigate these potential
         conflicts of interest. Included in these procedures are specific
         guidelines developed to ensure fair and equitable treatment for all
         clients whose accounts are managed by each Fund's portfolio management
         team. The Advisor and the portfolio management team have established
         monitoring procedures, a protocol for supervisory reviews, as well as
         compliance oversight to ensure that potential conflicts of interest
         relating to this type of activity are properly addressed.

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

Compensation of Portfolio Managers - Subadvisor

Remuneration of Personnel

AAMI's remuneration policy ("Policy") is designed to reflect the importance of
recruiting, retaining and motivating senior executives and portfolio managers of
the caliber necessary to maintain and improve AAMI's position in the asset
management industry. The Policy seeks to reward performance in a manner which
aligns the interests of clients, shareholders and executives. The elements of
the Policy as it relates to the Fund's portfolio managers are as follows:

Basic salary. The salaries of all employees are reviewed annually and are
determined by reference to external market research. AAMI's Policy is to pay
salaries which, when taken together with other benefits, will provide a
remuneration package that is reasonable and competitive in the asset management
industry. AAMI participates in compensation surveys which provide salary
comparisons for a range of employees across AAMI. AAMI also considers
information included in other publicly available research and survey results.
Staff performance is reviewed formally once a year with mid-term reviews.

The review process looks at all of the ways in which an individual has
contributed to the organization, and specifically, in the case of portfolio
managers, to the investment team.

Annual bonus. The Policy is to recognize corporate and individual achievements
each year through an appropriate annual bonus plan. The aggregate amount of a
cash bonus available in any year is dependent on AAMI's overall performance and
profitability. Consideration will also be given to the levels of bonuses paid in
the marketplace. Individual awards, payable to all members of staff, are
determined by a rigorous assessment of achievement against defined objectives,
and are reviewed and approved by AAMI's Remuneration Committee.

Portfolio managers' bonuses are based on a combination of the investment team's
overall performance, the individual's performance and the overall performance of
AAMI. In calculating a portfolio manager's bonus, AAMI takes into consideration
the performance of funds managed by the team as well as more subjective issues
that benefit AAMI. Portfolio manager performance on investment matters is judged
over all funds to which the fund manager contributes. Performance is measured
against appropriate market indices as well as peer universes over various time
periods.

Deferred bonus. A deferred bonus plan exists and is designed to encourage the
retention of certain key employees identified as critical to AAMI's achievement
of its long-term goals. Deferred bonuses may be in the form of deferred equity
in Aberdeen PLC.

Retention and incentives for former Deutsche Asset Management employees. In
addition to the Policy, appropriate retention and incentive arrangements have
been put into place for certain employees of the former Deutsche Asset
Management businesses, including in some cases participation in the Long Term
Incentive Plan. The costs of these arrangements are being borne by both Deutsche
Asset Management and AAMI.

Potential Conflicts of Interest - Subadvisor

In addition, 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. AAMI 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 AAMI, including other client accounts managed by the
         Portfolio'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 AAMI 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 Portfolio may differ from the results achieved for
         other clients of AAMI . 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 AAMI to be most equitable to each client, generally
         utilizing a pro rata allocation methodology. In some cases, the
         allocation procedure could potentially have an adverse effect or
         positive effect on the price or amount of the securities purchased or
         sold by the Fund. Purchase and sale orders for the Portfolio may be
         combined with those of other clients of AAMI in the interest of
         achieving the most favorable net results to the Portfolio 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.

In some cases, an apparent conflict may arise where AAMI 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, AAMI
has in place supervisory oversight processes to periodically monitor performance
deviations for accounts with like strategies.

Administrator

Pursuant to an administrative services agreement with the Advisor (or the
"Administrator") (the "Administrative Services Agreement"), 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 the DIMA a fee of 0.10% of the Fund's 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 the Fund
reasonably deems necessary for the proper administration of the Fund. DIMA
provides the Fund with personnel; arranges for the preparation and filing of the
Fund's tax returns; prepares and submits reports and meeting materials to the
Board and the shareholders; prepares and files updates to the Fund's Prospectus
and SAI 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.

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.

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

<TABLE>
<CAPTION>
                                                                  For the fiscal year ended March 31,
                                                                  -----------------------------------
                                                            2009                 2008                 2007
                                                            ----                 ----                 ----

<S>                                                        <C>                  <C>                  <C>
DWS Lifecycle Long Range Fund -- Class S                   $540,771*            $787,327*            $37,194**
</TABLE>

*        Administration Fee paid to Administrator for all classes of the Fund.

**       Administration fee paid to administrator for Class S shares of the
         Fund.

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

Waivers and Reimbursements

The following table sets forth the amounts waived and/or reimbursed by the
Advisor and/or administrator for the fiscal years ended March 31:

<TABLE>
<CAPTION>
                                              2009               2008                2007
                                              ----               ----                ----

<S>                                      <C>                 <C>                 <C>
DWS Lifecycle Long Range Fund            $1,404,379***       $1,355,984**        $1,617,730*
</TABLE>

*        The 2007 fee waivers by the Advisor and Administrator were $1,364,070
         and $253,660, respectively.

**       The 2008 fee waivers by the Advisor and Administrator were $1,355,984
         and $0, respectively.

***      The 2009 fee waivers by the Advisor and Administrator were $1,404,379
         and $0, respectively.

Code of Ethics

The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule
17j-1 under the 1940 Act. The Trust's Code of Ethics permits Fund personnel to
invest in securities for their own accounts, but requires compliance with the
Code's pre-clearance requirements (with certain exceptions). In addition, the
Trust's Code of Ethics provides for trading "blackout periods" that prohibit
trading by personnel within periods of trading by each Trust in the same
security. The Trust's Code of Ethics also prohibits short-term trading profits
and personal investment in initial public offerings. The Code of Ethics requires
prior approval with respect to purchases of securities in private placements.

The Trust's advisor and its affiliates (including the Fund's Distributor, DIDI)
have each adopted a Code of Ethics pursuant to Rule 17j-1 under the 1940 Act
("Consolidated Code"). The Consolidated Code permits access persons to trade in
securities that may be purchased or held by the Funds for their own accounts,
subject to compliance with the Consolidated Code's preclearance requirements. In
addition, the Consolidated Code also provides for trading "blackout periods"
that prohibit trading by personnel within periods of trading by the Funds in the
same security. The Consolidated Code also prohibits short-term trading profits
and personal investment in initial public offerings and requires prior approval
with respect to purchases of securities in private placements.

Regulatory Matters 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 Investments 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 overseeing the DWS Funds continue to be independent of
DeAM; the Chairmen of the DWS Funds' Boards of Trustees 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 the Financial Industry Regulatory Authority, or
"FINRA") announced final agreements in which Deutsche Investment Management
Americas Inc. ("DIMA"), Deutsche Asset Management, Inc. ("DAMI") and DWS Scudder
Distributors, Inc. (now known as DWS Investments Distributors, Inc. ("DIDI"))
settled administrative proceedings regarding disclosure of brokerage allocation
practices in connection with sales of the DWS Funds' (now known as the DWS
Investments 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 DIDI'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 DWS Fund shares. These directed brokerage
practices were discontinued in October 2003.

Under the terms of the settlements, in which DIMA, DAMI and DIDI neither
admitted nor denied any of the regulators' findings, DIMA, DAMI and DIDI 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 DIDI 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-investments.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, 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

Distributor

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

Custodian

The Fund employs State Street Bank and Trust Company ("SSB") Lafayette Corporate
Center, 2 Avenue De Lafayette, Boston, MA 02111 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 Investments Service Company ("DISC" or the "Transfer Agent"), 210 West 10th
Street, Kansas City, Missouri 64105-1614, an affiliate of the Advisor, is the
transfer agent, dividend-paying agent and shareholder service agent for all
classes of 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 $20.99 to $24.09 per account, for open wholesale
money funds the fee is $35.55 per account, while for certain retirement accounts
serviced on the recordkeeping system of ExpertPlan, Inc., the fee is a flat fee
up to $3.91 per account (as of February 2009, 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
fees in excess of 0.25%, and processing of proxy statements, may only be
reimbursed by the Fund with the prior approval of the Fund's Board.

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

Legal Counsel

Vedder Price P.C., 222 North LaSalle Street, Chicago, Illinois 60601, serves as
legal counsel to the Fund.

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

Independent Registered Public Accounting Firm

The financial highlights of the Fund included in the Fund's prospectus and the
Financial Statements incorporated by reference in this Statement of Additional
Information have been so included or incorporated by reference in reliance on
the report of PricewaterhouseCoopers LLP, Independent Registered Public
Accounting Firm, 125 High Street, Boston, MA 02110-2624, given on the authority
of said firm as experts in auditing and accounting. PricewaterhouseCoopers
audits the financial statements of the Fund and provides other audit, tax and
related services. Shareholders will receive annual audited financial statements
and semiannual unaudited financial statements.

                             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.

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. Provided a
Subadvisor is acting in accordance with any instructions and directions of the
Advisor or the Board, the Subadvisor is authorized to pay to a broker or dealer
who provides third party brokerage and research services a commission for
executing a portfolio transaction for the Fund, if the Subadvisor determines in
good faith that such commission was reasonable in relation to the value of the
third party brokerage and research services provided by such broker or dealer.

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 transaction, the affiliated broker charges the Funds a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions.

The Fund did not pay any affiliated brokerage commissions for the fiscal years
ended March 31, 2009, 2008 and 2007.

Affiliated Brokers do not knowingly participate in commissions paid by the Fund
to other brokers or dealers and do not seek or knowingly receive any reciprocal
business as the result of the payment of such commissions. In the event that an
Affiliated Broker learns at any time that it has knowingly received reciprocal
business, it will so inform the Board.

The following table sets forth the brokerage commissions paid by the Fund during
the periods indicated:

<TABLE>
<CAPTION>
                                                          For the fiscal year ended March 31,
                                                          -----------------------------------
                                                      2009              2008                2007
                                                      ----              ----                ----

<S>                                                 <C>                <C>                   <C>
DWS Lifecycle Long Range Fund                       $778,000           $856,000              $0
</TABLE>

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 March 31, 2009, the Fund held the
following securities of its regular brokers or dealers.

<TABLE>
<CAPTION>
                                                                              Value of Securities Owned as of March
Name of Regular Broker or Dealer or Parent (Issuer)                                          31, 2009
---------------------------------------------------                                          --------

<S>                                                                                             <C>
Buffalo Thunder Development Authority                                                           $1,000
Kerry Properties Ltd.                                                                           $2,000
Legal & General Group LPC                                                                       $2,000
Lend Lease Corp., Ltd.                                                                          $2,000
Aviva PLC                                                                                       $3,000
Great West Lifeco, Inc.                                                                         $3,000
Hannover Rueckversicherung AG (Registered)                                                      $3,000
Irish Life & Permanent PLC                                                                      $3,000
ASX Limited                                                                                     $4,000
Bank of Yokohama Ltd.                                                                           $4,000
Banca Cariage SpA                                                                               $4,000
Banco de Sabadell SA                                                                            $4,000
CNP Assurances                                                                                  $4,000
Criteria Caixacorp                                                                              $4,000
Daiwa Securities Group, Inc.                                                                    $4,000
Insurance Australia Group Ltd.                                                                  $4,000
Julius Baer Holdings AG-B                                                                       $4,000
Local TV Finance LLC                                                                            $4,000
Allied Irish Banks PLC                                                                          $5,000
AMP Limited NPV                                                                                 $5,000
Anglo Irish Bank Corp. Plc                                                                      $5,000
Bank of East Asia                                                                               $5,000
Banco Popular Espanol SA                                                                        $5,000
Hopewell Holdings                                                                               $5,000
IGM Financial, Inc.                                                                             $5,000
Immoeast AG                                                                                     $5,000
Lloyds Banking Group Plc                                                                        $5,000
Macquarie Group Ltd.                                                                            $5,000
Brookfield Asset Management, Inc.                                                               $6,000
Chuo Mitsui Trust Holdings, Inc.                                                                $6,000
Alleanza Assicurazioni SpA                                                                      $7,000
Atrium European Real Estate Ltd.                                                                $7,000
Balois Holdings PLC                                                                             $7,000
BOC Hong Kong (Holdings) Ltd.                                                                   $7,000
Eurazeo                                                                                         $7,000
Hang Lung Properties, Ltd.                                                                      $7,000
Capitaland Ltd.                                                                                 $8,000
Henderson Land Development Co.                                                                  $8,000
Intesa Sanpaolo (RSP)                                                                           $8,000
Governor & Co. of the Bank of Ireland                                                           $9,000
Banco Popolare Societa Cooperativa                                                             $10,000
Bank of Montreal                                                                               $10,000
Barclays PLC                                                                                   $11,000
Canadian Imperial Bank of Commerce                                                             $11,000
Jyske Bank A/S                                                                                 $11,000
Banca Popolare di Milano                                                                       $12,000
Commerzbank AG                                                                                 $12,000
Fraser & Neave Ltd.                                                                            $12,000
Hong Kong Exchange & Clearing Ltd                                                              $13,000
Australia & New Zealand Banking Group, PLC                                                     $14,000
Credit Agricole SA                                                                             $14,000
DEXIA SA                                                                                       $15,000
Deutsche Boerse AG                                                                             $16,000
Ashton Woods USA LLC                                                                           $19,000
Deutsche Post AG (Registered)                                                                  $19,000
Bank of Novia Scotia                                                                           $20,000
KBC Groep NV                                                                                   $20,000
Commonwealth Bank of Australia                                                                 $22,000
ARGO Group International Holding                                                               $24,000
Cheung Kong (Holdings) LTD                                                                     $25,000
Investor AB                                                                                    $25,000
AEGON NV                                                                                       $28,000
DBS Group Holdings Ltd.                                                                        $28,000
Banco Bilbao Vizcaya Argenta                                                                   $31,000
Assicurazioni Generali SpA                                                                     $35,000
Intesa Sanpaolo SpA                                                                            $40,000
Danske Bank A/S                                                                                $47,000
Doral Financial Corp.                                                                          $49,000
ING Groep NV                                                                                   $55,000
Frontier Financial Corp.                                                                       $57,000
Banco Espirito Santo SA                                                                        $60,000
Fortis                                                                                         $82,000
Banco Comercial Portugues SA                                                                   $94,000
Labranche & Co., Inc.                                                                         $122,000
Erste Group Bank AG                                                                           $129,000
Hellas Telecom                                                                                $129,000
HBOS PLC                                                                                      $143,000
Banco Latinoamericano de Exportaciones                                                        $184,000
CVB Financial Corp.                                                                           $192,000
Hang Seng Bank Ltd.                                                                           $194,000
Knight Capital Group, Inc.                                                                    $199,000
Arch Capital Group Ltd.                                                                       $259,000
AXA SA                                                                                        $276,000
BNP Paribas                                                                                   $287,000
DNB NOR Bank ASA                                                                              $354,000
Industrial & Commercial Bank of China                                                         $356,000
Allianz SE                                                                                    $359,000
HSBC Holdings PLC                                                                             $367,000
ANZ National International Ltd.                                                               $386,000
Banco Santander, S.A.                                                                         $458,000
Bank of New York Mellon Corp.                                                                 $494,000
China Life Insurance Co., Ltd.                                                                $510,000
Credit Suisse Group (Registered)                                                              $582,000
GMAC LLC                                                                                      $734,000
CME Group, Inc.                                                                             $1,429,000
Bear Stearns Adjustable Rate Mortgage Trust                                                 $1,930,000
Citigroup Inc.                                                                              $2,739,000
Bank of America Corp.                                                                       $3,277,000
JPMorgan Chase                                                                              $8,537,000
</TABLE>

Portfolio Turnover

The Fund's annual portfolio turnover rate (the lesser of the value of the
purchases or sales for the year divided by the average monthly market value of
the portfolio during the year, excluding US government securities and securities
with maturities of one year or less) may vary from year to year, as well as
within a year, depending on market conditions. For the fiscal years ended March
31, 2009 and March 31, 2008, the Fund's portfolio turnover rate was 242% and
264%, respectively.

A higher rate involves greater brokerage and transaction expenses to the Fund
and may result in the realization of net capital gains, which would be taxable
to shareholders when distributed. Purchases and sales are made for the Fund's
portfolio whenever necessary, in management's opinion, to meet the Fund's
investment objective.

                        PURCHASE AND REDEMPTION OF SHARES

General Information

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

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, if an automatic investment plan (AIP) of
$50/month is established. DWS Investments 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.

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 Investments Service Company (the
"Transfer Agent" or "DISC") 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 DIDI, 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.

DIDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents ("DWS Investments Wholesalers"). Generally, DWS
Investments 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 Investments Wholesalers
will receive a monetary monthly incentive based on the amount of sales generated
from their marketing of the funds, and that incentive will differ depending on
the product category of the fund. Each fund is assigned to one of three product
categories -- "Focus list funds," "Extended list funds" or "Index funds" --
taking into consideration, among other things, the following criteria, where
applicable:

o        The Fund's consistency with DWS Investments' branding and long-term
         strategy.

o        The Fund's competitive performance;

o        The Fund's Morningstar rating;

o        The length of time the Fund's Portfolio Managers have managed the
         Fund/Strategy

o        Market size for the fund category;

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


This information and other factors are presented to a committee comprised of
representatives from various groups within DWS Investments, 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 on the Focus
list and Extended list 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-investments.com, approximately one month after the end of each
quarter. DWS Investments Wholesalers receive the highest compensation for Focus
list funds, less for Extended list funds and the lowest for Index funds. The
level of compensation among these categories may differ significantly.

In the normal course of business, DWS Investments will from time to time
introduce new funds into the DWS family of funds. As a general rule, new funds
will be assigned to the Focus list compensation category. As described above,
the fund category assignments are reviewed periodically and are subject to
change.

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

Telephone and Electronic Transaction Procedures. Shareholders have various
telephone, Internet, wire and other electronic privileges available. The Fund or
its agents will not be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized instructions pursuant to these privileges if the Fund
or its agents reasonably believe, based upon reasonable verification procedures,
that the instructions were genuine. Verification procedures include recording
instructions, requiring certain identifying information before acting upon
instructions and sending written confirmations. During periods when it is
difficult to contact 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.


Dividend Payment Option. Investors may have dividends and distributions
automatically deposited to their predesignated bank account through DWS
Investments' 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-investments.com or calling 1-800-728-3337. 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 DIDI 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
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
Prospectus.

Eligible Class S Investors

A.        The following investors may purchase Class S shares of DWS Funds
          either (i) directly from DWS Investments Distributors, Inc. ("DIDI"),
          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 DIDI
                  and to DWS Allocation Series or other fund of funds managed by
                  the Advisor or its affiliates.

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

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

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

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

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

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

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

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

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

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 Investments 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 Investments mutual funds, employees, their
spouses or life partners and children or stepchildren age 21 or younger of
Deutsche Bank or its affiliates or a sub-advisor to any fund in the DWS family
of funds or a broker-dealer authorized to sell shares of the funds. 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.

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 each
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 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 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 each Fund with "shelf space" or access to a
third party platform or fund offering list, or other marketing programs
including, without limitation, inclusion of each 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 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, .05% to
..25% of sales of the Fund attributable to the financial advisor, a flat fee of
$13,350 up to $500,000, or any combination thereof. These amounts are annual
figures typically paid on a quarterly basis and 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 Investments 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, each 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
----------------------------------------------
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)
Deutsche Bank Group
Ensemble Financial Services
First Allied Securities
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Advisors Network
John Hancock Distributors LLC
LPL Financial
M.L. Stern & Co.
Meridien Financial Group
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
PlanMember Services
Prime Capital Inc.
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
------------------------------
Allegheny Investments LTD
Bank of America
Bank of New York (Hare & Co.)
BMO Capital Markets
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange
D.A. Davidson & Company
Deutsche Bank Group
Emmett A. Larkin Company
Fiduciary Trust Co. - International
First Southwest Company
J.P. Morgan Clearing Corp.
Legent Clearing LLC
Lincoln Investment Planning
LPL Financial
Mellon Financial Markets LLC
Mesirow Financial, Inc.
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Ridge Clearing & Outsourcing Solutions
Robert W. Baird & Co.
Romano Brothers and Company
SAMCO Capital Markets
Smith Moore & Company
Sungard Institutional Brokerage Inc.
Treasury Curve LLC
US Bancorp
UBS Financial Services
William Blair & Company

Channel: Third Party Insurance Platforms
----------------------------------------
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
EquiTrust Life Insurance Company
Farm Bureau Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
First Great West Life and Annuity 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
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
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 Group
Symetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

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

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

The prospect of receiving, or the receipt of additional compensation or
promotional incentives described above by financial advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS funds or a particular DWS fund over sales of shares of mutual
funds (or non-mutual fund investments) with respect to which the financial
advisor does not receive additional compensation or promotional incentives, or
receives lower levels of additional compensation or promotional incentives.
Similarly, financial advisors may receive different compensation or incentives
that may influence their recommendation of any particular share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that 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.

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

Automatic Investment Plan. A shareholder may purchase shares of the Fund through
an automatic investment plan. Investments are made automatically (minimum $500
and maximum $250,000 for initial investments and a minimum of $50 and maximum
$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 automatic investment plan in the event that any item
is unpaid by the shareholder's financial institution.

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

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

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


Redemptions

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

The Fund may suspend or postpone redemptions as permitted pursuant to Section
22(e) of the 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
nonroutine 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 DIDI, 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 (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 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 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 readily
marketable securities. These securities will be chosen by the Fund and valued as
they are for purposes of computing the Fund's net asset value. A shareholder may
incur transaction expenses in converting these securities to cash. The Trust, on
behalf of the Fund, has elected, however, to be governed by Rule 18f-1 under the
1940 Act, as a result of which the Fund is obligated to redeem shares or
beneficial interests, as the case may be, with respect to any one investor
during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund, at the beginning of the period.

Exchanges

Shareholders may request a taxable exchange of their shares for shares of the
corresponding class of certain 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.

Shareholders who exchange their shares out of a DWS money market fund (not
including shares acquired by dividend reinvestment or by exchange from Class A
shares of another DWS fund) into Class A shares of certain other DWS funds, will
generally be subject to the applicable sales charge.

Certain DWS funds may not be available to shareholders on an exchange. To learn
more about which DWS funds may be available on exchange, please contact your
financial services firm or visit our Web site at: www.dws-investments.com or
call (800) 728-3337.

Shareholders may obtain prospectus(es) of the DWS fund they are exchanging into
from dealers, other firms or DIDI.

                                    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. In such a case, shareholders would also
have to include in their income their pro rata portion of the amount of such
gain. 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
amount necessary to avoid excise taxes.

The Fund distributes income dividends quarterly. The 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.

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 dividends in cash and
         long-term capital gain dividends in shares of the same class at net
         asset value; or

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

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

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

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

                                      TAXES

The following is intended to be a general summary of certain federal income tax
consequences of investing in the Fund. It is not intended as a complete
discussion of all such consequences, nor does it purport to deal with all
categories of investors. Investors are therefore advised to consult with their
tax advisors before making an investment in the Fund. The summary is based on
the laws in effect on the date of this statement of additional information and
existing judicial and administrative interpretations thereof, all of which are
subject to change, possibly with retroactive effect.

The Fund has elected to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and
has qualified as such since inception. The Fund intends to continue to so
qualify in each taxable year as required under the Code in order to avoid
payment of federal income tax at the Fund level. In order to qualify as a
regulated investment company, the Fund must meet certain requirements regarding
the source of its income, the diversification of its assets and the distribution
of its income. The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities and foreign currencies, other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies and net income derived from interests in "qualified publicly traded
partnerships" (i.e., partnerships that are traded on an established security
market or tradable on a secondary market, other than partnerships that derive
90% of their income from interest, dividends, capital gains, and other
traditionally permitted mutual fund income). The Fund must diversify its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash and cash
items, US government securities, securities of other regulated investment
companies, and other securities limited in respect of any one issuer of such
other securities to a value not greater than 5% of the value of the Fund's total
assets and to not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities (other than those of the US Government or other regulated investment
companies) of any one issuer, of two or more issuers of which 20% or more of the
voting stock is held by the Fund and which are engaged in the same, similar, or
related trades or businesses or in the securities of one or more qualified
publicly traded partnerships. The Fund is required to distribute to its
shareholders at least 90% of its taxable and tax-exempt net investment income
(including the excess of net short-term capital gains over net long-term capital
losses) and generally is not subject to federal income tax to the extent that it
distributes annually its net investment income and net realized capital gain in
the manner required under the Code.

Although in general the passive loss rules of the Code do not apply to regulated
investment companies, such rules do apply to a regulated investment company with
respect to items attributable to an interest in a qualified publicly traded
partnership. Fund investments in partnerships, including in qualified publicly
traded partnerships, may result in the Fund's being subject to state, local or
foreign income, franchise or withholding tax liabilities.

If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders), and all distributions from
earnings and profits, including any distributions of net tax-exempt income and
net long-term capital gains, will be taxable to shareholders as ordinary income.
Such distributions will be eligible (i) to be treated as qualified dividend
income in the case of shareholders taxed as individuals and (ii) for the
dividends received deduction in the case of corporate shareholders. In addition,
the Fund could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying as a
regulated investment company that is accorded special tax treatment.

The Fund is subject to a 4% nondeductible excise tax on amounts required to be
but not distributed under a prescribed formula. The formula requires payment to
shareholders during a calendar year of distributions representing at least 98%
of the Fund's 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 by, nor taxed to, the Fund during any prior calendar
year. Although the Fund's distribution policies should enable it to avoid excise
tax liability, the Fund may retain (and be subject to income or excise tax on) a
portion of its capital gains or other income if it appears to be in the interest
of the Fund.

Dividends or other income (including, in some cases, capital gains) received by
the Fund from investments in foreign securities may be subject to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes in some
cases. Foreign taxes paid by the Fund will reduce the return from the Fund's
investments. 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 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.

For federal income tax purposes, distributions of investment income are
generally taxable as ordinary income. For taxable years beginning before January
1, 2011, distributions of investment income designated by the Fund as derived
from "qualified dividend income" will be taxed in the hands of individuals at
the rates applicable to long-term capital gain, provided holding period and
other requirements are met at both the shareholder and fund level.

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

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

Dividends from domestic corporations may comprise a substantial 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
fewer than 46 days during the 91-day period beginning 45 days before the shares
become ex-dividend.

Taxes on distributions of capital gains are determined by how long the Fund
owned the investments that generated them, rather than how long a shareholder
has owned his or her shares. Distributions of net capital gains that are
properly designated by the Fund as capital gain dividends will be taxable as
long-term capital gains. "Net capital gains" for this purpose are the Fund's (x)
net long-term capital gains for the taxable year less (y) the sum of the Fund's
(i) net short-term capital losses for the taxable year and (ii) available
capital loss carryforwards. Distributions of net short-term capital gains, which
are gains attributable to the sales of investments that the Fund owned for one
year or less, will be taxable as ordinary income. If the Fund retains for
investment an amount equal to all or a portion of its net capital gains, it will
be subject to tax at the highest rate of tax imposed on corporations (currently
a 35% rate) 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 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 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 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 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.

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

Long-term capital gain rates applicable to individuals have been reduced -- in
general, to 15% with a 0% rate applying to taxpayers in the 10% and 15% ordinary
income rate brackets -- for taxable years beginning before January 1, 2011.

Dividends and other distributions by the Fund are generally treated under the
Code as received by the shareholders at the time the dividend or distribution is
made. However, any dividend or distribution declared by the Fund in October,
November or December of any calendar year and payable to shareholders of record
on a specified date in such a month shall be deemed to have been received by
each shareholder on December 31 of such calendar year and to have been paid by
the Fund not later than such December 31, provided such dividend is actually
paid by the Fund during January of the following calendar year.

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

The sale, exchange or redemption of Fund shares may give rise to a gain or loss.
In general, any gain or loss realized on 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 the redemption of shares held for six months or less at the time
of redemption will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period. Furthermore, any loss from the sale or redemption of shares held six
months or less generally will be disallowed to the extent that tax-exempt
interest dividends were paid on such shares. In addition, any loss realized on a
sale or exchange will be disallowed to the extent the shares disposed of are
replaced with a 61-day period beginning 30 days before and ending 30 days after
the disposition of the shares. In such a case, the basis of the shares acquired
will be increased to reflect the disallowed loss.

Certain types of income received by the Fund from real estate investment trusts
("REITs"), real estate mortgage investment conduits ("REMICs"), taxable mortgage
pools or other investments may cause the Fund to designate some or all of its
distributions as "excess inclusion income." To Fund shareholders such excess
inclusion income may (1) constitute taxable income, as "unrelated business
taxable income" ("UBTI") for those shareholders who would otherwise be
tax-exempt such as individual retirement accounts, 401(k) accounts, Keogh plans,
pension plans and certain charitable entities; (2) as UBTI cause a charitable
remainder trust to become subject to an excise tax of 100% of the UBTI; (3) not
be offset by otherwise allowable deductions for tax purposes; (4) not be
eligible for reduced US withholding for non-US shareholders even from tax treaty
countries; and (5) cause the Fund to be subject to tax if certain "disqualified
organizations" as defined by the Code are Fund shareholders.

The Fund's use of options, futures contracts, forward contracts (to the extent
permitted) and certain other investments 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.

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). With respect to certain
types of swaps, the Fund may be required to currently recognize income or loss
with respect to future payments on such swaps or may elect under certain
circumstances to mark such swaps to market annually for tax purposes as ordinary
income or loss. The tax treatment of many types of credit default swaps is
uncertain.

The Fund may be required to treat amounts as taxable income or gain, subject to
the distribution requirements referred to above, even though no corresponding
amounts of cash are received concurrently, as a result of (1) mark-to-market or
constructive sale rules or rules applicable to PFICs (as defined below) or
partnerships or trusts in which the Fund invests or to certain options, futures
or forward contracts, or "appreciated financial positions" or (2) the inability
to obtain cash distributions or other amounts due to currency controls or
restrictions on repatriation imposed by a foreign country with respect to the
Fund's investments (including through depositary receipts) in issuers in such
country or (3) tax rules applicable to debt obligations acquired with "original
issue discount," including zero-coupon or deferred payment bonds and pay-in-kind
debt obligations, or to market discount if an election is made with respect to
such market discount. The Fund may therefore be required to obtain cash to be
used to satisfy these distribution requirements by selling securities at times
that it might not otherwise be desirable to do so or borrowing the necessary
cash, thereby incurring interest expenses. In certain situations, the Fund may,
for a taxable year, defer all or a portion of its capital losses and currency
losses realized after October until the next taxable year in computing its
investment company taxable income and net capital gain, which will defer the
recognition of such realized losses. Such deferrals and other rules regarding
gains and losses realized after October may affect the tax character of
shareholder distributions.

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.

Foreign Investments. Dividends or other income (including, in some cases,
capital gains) received by the Fund from investments in foreign securities may
be subject to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes in some cases. The Fund will not be eligible to elect to
treat any foreign taxes it pays as paid by its shareholders, who therefore will
not be entitled to credits or deductions for such taxes on their own tax
returns. Foreign taxes paid by the Fund will reduce the return from the Fund's
investments.

Under Section 988 of the Code, gains or losses attributable to fluctuations in
exchange rates between the time the Fund accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such income or pays such liabilities are generally
treated as ordinary income or ordinary loss. In general, gains (and losses)
realized on debt instruments will be treated as Section 988 gain (or loss) to
the extent attributable to changes in exchange rates between the US dollar and
the currencies in which the instruments are denominated. Similarly, gains or
losses on foreign currency, foreign currency forward contracts and certain
foreign currency options or futures contracts, to the extent attributable to
fluctuations in exchange rates between the acquisition and disposition dates,
are also treated as ordinary income or loss unless the Fund were to elect
otherwise.

Passive Foreign Investment Companies. If the Fund purchases shares in certain
foreign investment entities, called "passive foreign investment companies"
("PFICs"), it may be subject to US federal income tax on a portion of any
"excess distribution" or gain from the disposition of such shares even if such
income is distributed as a taxable dividend by the Fund to its shareholders.
Additional charges in the nature of interest may be imposed on the Fund in
respect of deferred taxes arising from such distributions or gains.

If the Fund were to invest in a PFIC and elect to treat the PFIC as a "qualified
electing fund" under the Code, in lieu of the foregoing requirements, the Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if not
distributed to the Fund, and such amounts would be subject to the 90% and excise
tax distribution requirements described above. In order to make this election,
the Fund would be required to obtain certain annual information from the PFICs
in which it invests, which may be difficult or impossible to obtain.

Alternatively, the Fund may make a mark-to-market election that will result in
the Fund being treated as if it had sold and repurchased its PFIC stock at the
end of each year. In such case, the Fund would report any such gains as ordinary
income and would deduct any such losses as ordinary losses to the extent of
previously recognized gains. The election must be made separately for each PFIC
owned by the Fund and, once made, would be effective for all subsequent taxable
years, unless revoked with the consent of the Internal Revenue Service (the
"IRS"). By making the election, the Fund could potentially ameliorate the
adverse tax consequences with respect to its ownership of shares in a PFIC, but
in any particular year may be required to recognize income in excess of the
distributions it receives from PFICs and its proceeds from dispositions of PFIC
stock. The Fund may have to distribute this "phantom" income and gain to satisfy
the 90% distribution requirement and to avoid imposition of the 4% excise tax.

The Fund will make the appropriate tax elections, if possible, and take any
additional steps that are necessary to mitigate the effect of these rules.

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.

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

All distributions by the Fund result in a reduction in the net asset value of
Fund 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.

Shareholders will receive, if appropriate, various written notices after the
close of the Fund's taxable year regarding the federal income tax status of
certain dividends, distributions and deemed distributions that were paid (or
that are treated as having been paid) by the Fund to its shareholders during the
preceding taxable year.

Under Treasury regulations, if a shareholder recognizes a loss with respect to
the Fund's shares of $2 million or more for an individual shareholder or $10
million or more for a corporate shareholder, the shareholder must file with the
Internal Revenue Service a disclosure statement on Form 8886. Direct
shareholders of portfolio securities are in many cases excepted from this
reporting requirement, but under current guidance, shareholders of a regulated
investment company are not excepted. 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.

Other Taxation

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.
Rules of state and local taxation of dividend and capital gains distributions
from regulated investment companies often differ from rules for federal income
taxation described above. In particular, dividends or portions of dividends
attributable to US government and/or federal agency debt obligations, if any,
held by the regulated investment company may not be taxable at the state or
local level depending upon state or local tax requirements. You are urged to
consult your tax advisor as to the consequences and applicability of these and
other state and local tax rules affecting an investment in the Fund.

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor the Fund is 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.

Taxation of Non-US Shareholders

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

A non-US shareholder who fails to provide an IRS Form W-8BEN or other applicable
form may be subject to backup withholding at the appropriate rate.

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

A distribution from the Fund to foreign shareholders who have held more than 5%
of the Fund at any time during the one-year period ending on the date of
distribution is treated as real property gain subject to 35% withholding tax and
treated as income effectively connected to a US trade or business with certain
tax filing requirements applicable, if such distribution is attributable to a
distribution of real property gain received by the Fund from a REIT and if 50%
or more of the value of the Fund's assets are invested in REITs and other US
real property holding corporations.

Shares of the Fund held by a non-US shareholder at death will be considered
situated in the United States and subject to the US estate tax.

The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders should consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.

The foregoing is only a summary of certain material US federal income tax
consequences affecting the Fund 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 the 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 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 by the exchange or
one or more pricing agents 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 prices 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 a broker-dealer. 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 pm 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
the Fund asset as determined in accordance with Board-approved procedures does
not represent the fair market value of the Fund asset, the value of the Fund
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 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 Fund's Board and overseen
primarily by the Fund's Pricing Committee.

Redemptions and Purchases In Kind

The Trust, on behalf of the Fund, reserves the right, if conditions exist which
make cash payments undesirable, to honor any request for redemption or
repurchase order by making payment in whole or in part in readily marketable
securities chosen by the Trust, or the Fund, as the case may be, and valued as
they are for purposes of computing the Fund's net asset value, as the case may
be (a redemption in kind). If payment is made to the Fund shareholder in
securities, the shareholder may incur transaction expenses in converting these
securities into cash. The Trust, on behalf of the Fund, has elected, however, to
be governed by Rule 18f-1 under the 1940 Act as a result of which the Fund is
obligated to redeem shares or beneficial interests, as the case may be, with
respect to any one investor during any 90-day period, solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund, as the case may be,
at the beginning of the period.

Each investor in the Fund, may add to or reduce its investment in the Fund on
each day the Fund determines its net asset value. At the close of each such
business day, the value of each investor's beneficial interest in the Fund will
be determined by multiplying the net asset value of the Fund by the percentage,
effective for that day, which represents that investor's share of the aggregate
beneficial interests in the Fund. Any additions or withdrawals which are to be
effected as of the close of business on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the Fund will
then be recomputed as the percentage equal to the fraction (i) the numerator of
which is the value of such investor's investment in the Fund as of the close of
business on such day plus or minus, as the case may be, the amount of net
additions to or withdrawals from the investor's investment in the Fund effected
as of the close of business on such day, and (ii) the denominator of which is
the aggregate net asset value of the Fund as of the close of business on such
day plus or minus, as the case may be, the amount of net additions to or
withdrawals from the aggregate investments in the Fund by all investors in the
Fund. The percentage so determined will then be applied to determine the value
of the investor's interest in the Fund as the close of business on the following
business day.

The 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 is
a taxable transaction to the shareholder. Securities may be accepted in payment
for shares only if they are, in the judgment of the Advisor, appropriate
investments for the Fund. In addition, securities accepted in payment for shares
must: (i) be acquired by the Fund for investment and not for resale; (ii) be
liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (iii) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. The Fund reserves the right to accept or reject at its own option
any and all securities offered in payment for its shares.

Trading in Foreign Securities

Trading in foreign markets may be completed at times which vary from the closing
of the Exchange. In computing the net asset value, 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 Exchange. Similarly, 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 they are determined and the closing of the Exchange. If such
events materially affect the value of the portfolio securities, these securities
may be valued at their fair value as determined in good faith by the Trustees,
although the actual calculation may be done by others.

                           BOARD MEMBERS 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.

Independent Board Members

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position                                                                   Number of Funds
 with the Trust and Length of     Business Experience and                                        in DWS Fund
 Time Served(1)                   Directorships During the Past 5 Years                          Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                               <C>                                                                   <C>
Paul K. Freeman                   Consultant, World Bank/Inter-American Development Bank;               125
(1950)                            Governing Council of the Independent Directors Council
Chairperson since 2009, and       (governance, executive committees); formerly: Project Leader,
Board Member since 1993           International Institute for Applied Systems Analysis
                                  (1998-2001); Chief Executive Officer, The Eric Group, Inc.
                                  (environmental insurance) (1986-1998)
--------------------------------------------------------------------------------------------------------------------
John W. Ballantine (1946)         Retired; formerly: Executive Vice President and Chief Risk            125
Board Member since 1999           Management Officer, First Chicago NBD Corporation/The First
                                  National Bank of Chicago (1996-1998); Executive Vice
                                  President and Head of International Banking (1995-1996);
                                  Directorships: Healthways Inc. (provider of disease and care
                                  management services); Portland General Electric (utility
                                  company); Stockwell Capital Investments PLC (private equity);
                                  former Directorships: First Oak Brook Bancshares, Inc. and
                                  Oak Brook Bank
--------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr. (1943)      Vice Chair, WGBH Educational Foundation; Directorships:               125
 Board Member since               Association of Public Television Stations; Becton Dickinson
 1990                             and Company(2) (medical technology company); Belo
                                  Corporation(2) (media company); Boston Museum of Science;
                                  Public Radio International; PRX, The Public Radio Exchange;
                                  The PBS Foundation; former Directorships: American Public
                                  Television; Concord Academy; New England Aquarium; Mass.
                                  Corporation for Educational Telecommunications; Committee for
                                  Economic Development; Public Broadcasting Service
--------------------------------------------------------------------------------------------------------------------
Dawn-Marie Driscoll (1946)        President, Driscoll Associates (consulting firm); Executive           125
Board Member since 1987           Fellow, Center for Business Ethics, Bentley University;
                                  formerly: Partner, Palmer & Dodge (1988-1990); Vice President
                                  of Corporate Affairs and General Counsel, Filene's
                                  (1978-1988); Directorships: Trustee of 20 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
                                  University; Trustee, Southwest Florida Community Foundation
                                  (charitable organization); former Directorships: Investment
                                  Company Institute (audit, executive, nominating committees)
                                  and Independent Directors Council (governance, executive
                                  committees)
--------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)               Managing General Partner, Exeter Capital Partners (a series           125
Board Member since                of 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           125
(1945)                            (1997-present); Member, Finance Committee, Association for
Board Member since                Asian Studies (2002-present); Director, Mitsui Sumitomo
2001                              Insurance Group (US) (2004-present); prior thereto, Managing
                                  Director, J.P. Morgan (investment banking firm) (until 1996)
--------------------------------------------------------------------------------------------------------------------
Richard J. Herring                Jacob Safra Professor of International Banking and Professor,         125
(1946)                            Finance Department, The Wharton School, University of
Board Member since                Pennsylvania (since July 1972); Co-Director, Wharton
1990                              Financial Institutions 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)
--------------------------------------------------------------------------------------------------------------------
William McClayton (1944)          Managing Director, Diamond Management & Technology                    125
Board Member since 2004           Consultants, Inc. (global management consulting firm)
                                  (2001-present); Directorship: Board of Managers, YMCA of
                                  Metropolitan Chicago; formerly: Senior Partner, Arthur
                                  Andersen LLP (accounting) (1966-2001); Trustee, Ravinia
                                  Festival
-------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel                  President and Chief Executive Officer, The Pew Charitable             125
(1951)                            Trusts (charitable organization) (1994 to present); Trustee,
Board Member since                Thomas Jefferson Foundation (charitable organization) (1994
1995                              to present); Trustee, Executive Committee, Philadelphia
                                  Chamber of Commerce (2001 to 2007); Trustee, Pro Publica
                                  (2007-present) (charitable organization); Director,
                                  CardioNet, Inc.(2) (2009-present) (health care); 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(2) (January
                                  2007-June 2007)
--------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.            Private investor since October 2003; Trustee of 20 open-end           125
(1946)                            mutual funds managed by Sun Capital Advisers, Inc. (since
Board Member since                October 1998); formerly: Pension & Savings Trust Officer,
1993                              Sprint Corporation(2) (telecommunications) (November
                                  1989-September 2003)
--------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg            Retired; formerly: Consultant (1997-2001); Director, US               125
(1943)                            Government Accountability Office (1996-1997); Partner,
Board Member since                Fulbright & Jaworski, L.L.P. (law firm) (1978-1996);
1997                              Directorships: The William and Flora Hewlett Foundation;
                                  Business Leadership Council, Wellesley College; former
                                  Directorships: Service Source, Inc., Mutual Fund Directors
                                  Forum (2002-2004), American Bar Retirement Association
                                  (funding vehicle for retirement plans) (1987-1990 and
                                  1994-1996)
--------------------------------------------------------------------------------------------------------------------
Robert H. Wadsworth (1940)        President, Robert H. Wadsworth & Associates, Inc. (consulting         128
Board Member since 1999           firm) (1983 to present); Director, The Phoenix Boys Choir
                                  Association
--------------------------------------------------------------------------------------------------------------------

Interested Board Member

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position                                                                   Number of Funds
 with the Trust and Length of     Business Experience and                                        in DWS Fund
 Time Served(1)                   Directorships During the Past 5 Years                          Complex Overseen
--------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(3)                Managing Director(4), Deutsche Asset Management; Head of              125
 (1958)                           Deutsche Asset Management Americas; CEO of DWS Investments;
 Board Member since               relocated to Germany in July 2009 as Vice Chairman(4) of
 2006                             Deutsche Asset Management and Member of the Management Board
                                  of DWS Investments, responsible for Global Relationship
                                  Management; formerly: board member of DWS Investments,
                                  Germany (1999-2005); Head of Sales and Product Management for
                                  the Retail and Private Banking Division of Deutsche Bank in
                                  Germany (1997-1999); 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(5)

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position
 with the Trust and Length of     Business Experience and
 Time Served(6)                   Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(7) (1965)       Managing Director(4), Deutsche Asset Management (2006-present); President of
 President, 2006-present          DWS family of funds; Director, ICI Mutual Insurance Company (since
                                  October 2007); 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(8) (1962)          Director(4), Deutsche Asset Management
 Vice President and Secretary,
 1999-present
--------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(7) (1963)       Managing Director(4), Deutsche Asset Management (since July 2004); formerly:
 Chief Financial Officer,         Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family
 2004-present                     of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS
 Treasurer, 2005-present          Global Asset Management (1994-1998)
--------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(8) (1962)       Managing Director(4), Deutsche Asset Management
 Assistant Secretary,
 1997-present
--------------------------------------------------------------------------------------------------------------------
 Rita Rubin(9) (1970)             Vice President and Counsel, Deutsche Asset Management (since October 2007);
 Assistant Secretary,             formerly, Vice President, Morgan Stanley Investment Management (2004-2007);
 2009-present                     Attorney, Shearman & Sterling LLP (2004); Vice President and Associate General
                                  Counsel, UBS Global Asset Management (2001-2004)
--------------------------------------------------------------------------------------------------------------------
 Paul Antosca(8)                  Director(4), Deutsche Asset Management (since 2006); formerly: Vice President,
 (1957)                           The Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jack Clark (8)                   Director(4), Deutsche Asset Management (since 2007); formerly: Vice President,
 (1967)                           State Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(8)               Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(9) (1972)          Vice President, Deutsche Asset Management (since 2006); formerly: AML
 Anti-Money Laundering            Operations Manager for Bear Stearns (2004-2006); Supervising Compliance
 Compliance Officer,              Principal and Operations Manager for AXA Financial (1999-2004)
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(9) (1962)           Managing Director(4), Deutsche Asset Management (2004-present); formerly: Chief
 Chief Compliance Officer,        Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President,
 2006-present                     The Prudential Insurance Company of America (1988-2000); E.F. Hutton and
                                  Company (1984-1988)
--------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(9)        Director(4), Deutsche Asset Management (2006-present); formerly: Director,
 (1951)                           Senior Vice President, General Counsel, and Assistant Secretary, Hansberger
 Chief Legal Officer,             Global Investors, Inc. (1996-2006); Director, National Society of Compliance
 2006-present                     Professionals (2002-2005) (2006-2009)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      The length of time served represents the year in which the Board Member
         joined the board of one or more DWS funds currently overseen by the
         Board.

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

(3)      The mailing address of Axel Schwarzer is DWS Investment GmbH, Mainzer
         Landstr. 178-190, Floor 5C, 60327 Frankfurt am Main, Germany. 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 Fund.

(4)      Executive title, not a board directorship.

(5)      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 Fund.

(6)      The length of time served represents the year in which the officer was
         first elected in such capacity for one or more DWS funds.

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

(8)      Address: One Beacon Street, Boston, Massachusetts 02108.

(9)      Address:  280 Park Avenue, New York, New York 10017.

Certain officers hold similar positions for other investment companies for which
DIMA or an affiliate serves as the Advisor.

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

 Paul H. Schubert:             Vice President
 Jason Vazquez:                Vice President and AML Compliance Officer
 Caroline Pearson:             Secretary

Board Members' Responsibilities. The officers of the Trust manage its day-to-day
operations under the direction of the Board. The primary responsibility of the
Board is to represent the interests of the Fund and to provide oversight of the
management of the Fund.

Board Committees. The Board has established the following standing committees:
Audit Committee, Nominating and Governance Committee, Contract Committee, Equity
Oversight Committee, Fixed-Income and Quant Oversight Committee, Marketing and
Shareholder Services Committee, and Operations Committee. For each committee,
the Board has adopted a written charter setting forth each committee's
responsibilities. Each committee was reconstituted effective April 1, 2008.

Audit Committee: The Audit Committee, which consists entirely of Independent
Board Members, assists the Board in fulfilling its responsibility for oversight
of (1) the integrity of the financial statements, (2) the Fund's accounting and
financial reporting policies and procedures, (3) the Fund's compliance with
legal and regulatory requirements related to accounting and financial reporting
and (4) the qualifications, independence and performance of the independent
registered public accounting firm for the Fund. It also approves and recommends
to the Board the appointment, retention or termination of the independent
registered public accounting firm for the Fund, reviews the scope of audit and
internal controls, considers and reports to the Board on matters relating to the
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
William McClayton (Chair), Kenneth C. Froewiss (Vice Chair), John W. Ballantine,
Henry P. Becton, Jr., Keith R. Fox and William N. Searcy, Jr. During the
calendar year 2008, the Audit Committee of the Fund's Board held six (6)
meetings.

Nominating and Governance Committee: The Nominating and Governance Committee,
which consists entirely of Independent Board Members, recommends individuals for
membership on the Board, nominates officers, Board and committee chairs, vice
chairs and committee members, and oversees the operations of the Board. The
Nominating and Governance Committee also reviews recommendations by shareholders
for candidates for Board positions. Shareholders may recommend candidates for
Board positions by forwarding their correspondence by US mail or courier service
to Dawn-Marie Driscoll, P.O. Box 100176, Cape Coral, FL 33904. The members of
the Nominating and Governance Committee are Henry P. Becton, Jr. (Chair),
Rebecca W. Rimel (Vice Chair), Paul K. Freeman and William McClayton. During the
calendar year 2008, the Nominating and Governance Committee of the Fund's Board
held four (4) meetings.

Contract Committee: The Contract Committee, which consists entirely of
Independent Board Members, reviews at least annually, (a) the Fund's financial
arrangements with DIMA and its affiliates, and (b) the Fund's expense ratios.
The members of the Contract Committee are Robert H. Wadsworth (Chair), Keith R.
Fox (Vice Chair), Henry P. Becton, Jr., Richard J. Herring, William McClayton
and Jean Gleason Stromberg. During the calendar year 2008, the Contract Review
Committee of the Fund's Board held seven (7) meetings.

Equity Oversight Committee: The Equity Oversight Committee reviews the
investment operations of those funds that primarily invest in equity securities
(except for those funds managed by a quantitative investment team). The members
of the Equity Oversight Committee are John W. Ballantine (Chair), William
McClayton (Vice Chair), Henry P. Becton, Jr., Keith R. Fox, Richard J. Herring
and Rebecca W. Rimel. During the calendar year 2008, the Equity Oversight
Committee of the Fund's Board held five (5) meetings.

Fixed-Income and Quant Oversight Committee: The Fixed-Income and Quant Oversight
Committee reviews the investment operations of those funds that primarily invest
in fixed-income securities or are managed by a quantitative investment team. The
members of the Fixed-Income and Quant Oversight Committee are William N. Searcy,
Jr. (Chair), Jean Gleason Stromberg (Vice Chair), Dawn-Marie Driscoll, Kenneth
C. Froewiss and Robert H. Wadsworth. During the calendar year 2008, the
Fixed-Income Oversight Committee of the Fund's Board held five (5) meetings.

Marketing and Shareholder Services Committee: The Marketing and Shareholder
Services Committee reviews the Fund's marketing program, sales practices and
literature and shareholder services. The Marketing and Shareholder Services
Committee also considers matters relating to fund mergers and liquidations and
the organization of new funds. The members of the Marketing and Shareholder
Services Committee are Richard J. Herring (Chair), Dawn-Marie Driscoll (Vice
Chair), Rebecca W. Rimel, Jean Gleason Stromberg and Robert H. Wadsworth. During
the calendar year 2008, the Marketing/Distribution/Shareholder Service Committee
of the Fund's Board held four (4) meetings.

The Operations Committee: The Operations Committee reviews the administrative
operations, legal affairs and general compliance matters of the Fund. The
Operations Committee reviews administrative matters related to the operations of
the Fund, policies and procedures relating to portfolio transactions, custody
arrangements, fidelity bond and insurance arrangements, valuation of Fund assets
and securities and such other tasks as the full Board deems necessary or
appropriate. The Operations Committee also oversees the valuation of the Fund's
securities and other assets and determines, as needed, the fair value of Fund
securities or other assets under certain circumstances as described in the
Fund's Valuation Procedures. The Operations Committee has appointed a Valuation
Sub-Committee, which may make determinations of fair value required when the
Operations Committee is not in session. The members of the Operations Committee
are Dawn-Marie Driscoll (Chair), John W. Ballantine (Vice Chair), Kenneth C.
Froewiss, Rebecca W. Rimel and William N. Searcy, Jr. The members of the
Valuation Sub-Committee are Kenneth C. Froewiss (Chair), John W. Ballantine,
Dawn-Marie Driscoll (Alternate), Rebecca W. Rimel (Alternate) and William N.
Searcy, Jr. (Alternate). During the calendar year 2008, the Operations Committee
held four (4) meetings and the Valuation Sub-Committee held no meetings.

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

Remuneration. Each Independent Board Member receives compensation from the Fund
for his or her services, which includes retainer fees and specified amounts for
various committee services and for the Board Chairperson. 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.

Board Members who are officers, directors, employees or stockholders of Deutsche
Asset Management or its affiliates receive no direct compensation from the 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
Fund. The following tables show compensation from the Fund and aggregate
compensation from all of the funds in the DWS fund complex received by each
Independent Board Member during the calendar year 2008. Mr. Schwarzer is an
interested person of the Fund and received no compensation from the Fund or any
fund in the DWS fund complex during the relevant periods.

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

<S>                                             <C>                             <C>
  John W. Ballantine                            $1,008                          $237,500
  Henry P. Becton, Jr.(2)                         $929                          $246,000
  Dawn-Marie Driscoll(2)(3)                     $1,081                          $292,500
  Keith R. Fox(2)                                 $869                          $229,500
  Paul K. Freeman                               $1,073                          $255,000
  Kenneth C. Froewiss                             $855                          $226,750
  Richard J. Herring(2)                           $900                          $240,000
  William McClayton(4)                          $1,048                          $257,500
  Rebecca W. Rimel(2)                             $888                          $233,500
  William N. Searcy, Jr.                          $890                          $238,000
  Jean Gleason Stromberg                          $849                          $225,500
  Robert H. Wadsworth                           $1,048                          $273,500
</TABLE>

(1)      The DWS fund complex is composed of 136 funds as of December 31, 2008.

(2)      Aggregate compensation includes amounts paid to the Board Members for
         special meetings of ad hoc committees of the Board in connection with
         the consolidation of the DWS fund boards and various funds, meetings
         for considering fund expense simplification initiatives, and
         consideration of issues specific to the Fund's direct shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $8,000 for Mr. Becton, $2,000 for
         Ms. Driscoll, $2,000 for Mr. Fox, $2,000 for Dr. Herring and $8,000 for
         Ms. Rimel. These meeting fees were borne by the funds.

(3)      Includes $70,000 in annual retainer fees received by Ms. Driscoll as
         Chairperson of DWS funds.

(4)      Includes $15,000 paid to Mr. McClayton for numerous special meetings of
         an ad hoc committee of the former Chicago Board in connection with
         board consolidation initiatives.

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,
2008.

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

Independent Board Member:
-------------------------

<S>                                                <C>                                     <C>
John W. Ballantine                                     None                                Over $100,000
Henry P. Becton, Jr.                               $1 - $10,000                            Over $100,000
Dawn-Marie Driscoll                                    None                                Over $100,000
Keith R. Fox                                           None                                Over $100,000
Paul K. Freeman                                        None                                Over $100,000
Kenneth C. Froewiss                                    None                                Over $100,000
Richard J. Herring                                     None                                Over $100,000
William McClayton                                      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
Robert H. Wadsworth                                    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 and 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, 2008. Immediate family members can be a
spouse, children residing in the same household including step and adoptive
children, and any dependents. The securities represent ownership in the Advisor
or principal underwriter of the Fund and any persons (other than a registered
investment company) directly or indirectly controlling, controlled by, or under
common control with the Advisor or principal underwriter of the Fund (including
Deutsche Bank AG).

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

<S>     <C>    <C>    <C>    <C>    <C>    <C>
John W. Ballantine                                      None
Henry P. Becton, Jr.                                    None
Dawn-Marie Driscoll                                     None
Keith R. Fox                                            None
Paul K. Freeman                                         None
Kenneth C. Froewiss                                     None
Richard J. Herring                                      None
William McClayton                                       None
Rebecca W. Rimel                                        None
William N. Searcy, Jr.                                  None
Jean Gleason Stromberg                                  None
Robert H. Wadsworth                                     None
</TABLE>

Securities Beneficially Owned

As of July 7, 2009, 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 July 7, 2009, no person owned of
record or beneficially 5% or more of any class of the Fund's outstanding shares,
except as noted below.

DWS Lifecycle Long Range Fund

<TABLE>
<CAPTION>
Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

<S>                                                          <C>                      <C>
STATE STREET BANK AND TRUST TTEE                             43,926,388.37            69.91% of Institutional Class
FBO KRAFT FOODS INC SVGS PLAN
MASTER TRUST
ATTN MICHELLE L ROBBINS
WESTWOOD MA  02090-2318

STATE STREET BANK & TR TTEE                                  15,688,503.10            24.97% of Institutional Class
FBO ALTRIA CORPORATE SERVICES
DEFERRED PROFIT SHARING MASTER TR
WESTWOOD MA  02090-2318

CHARLES SCHWAB & CO/SCHWAB                                    247,772.03                    56.06% of Class S
OMNIBUS ACCOUNT  REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA  94104-4151

NAT'L FINANCIAL SERVICES CORP FOR                              37,758.26                    8.54% of Class S
EXCL BENEFIT OUR CUSTOMERS
CHURCH STREET STATION
NEW YORK NY  10008-3908
</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 certain DWS Funds (the "Affected Funds"), DIMA has agreed
to indemnify and hold harmless the Affected Funds ("Fund Indemnification
Agreement") 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 Affected Funds or DIMA ("Enforcement Actions") or that are the basis for
private actions brought by shareholders of the Affected Funds against the
Affected Funds, their directors and officers, DIMA 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 Affected
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, DIMA has also agreed, subject to applicable law
and regulation, to indemnify certain (or, with respect to certain Affected
Funds, all) of the Independent Trustees of the Affected Funds, 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. DIMA is not, however, required to
provide indemnification and advancement of expenses: (1) with respect to any
proceeding or action which the Affected Funds' Board determines that the
Independent Trustees ultimately would not be entitled to indemnification or (2)
for any liability of the Independent Trustees 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 Affected 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 DIMA will survive the termination of the investment
management agreements between DIMA and the Affected Funds.

                               TRUST ORGANIZATION


The Fund is a series of DWS Advisor Funds. 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.

On July 10, 2006, DWS Lifecycle Long Range Fund (the "Predecessor Fund")
transferred all its assets and liabilities from DWS Advisor Funds III, an
open-end, management investment company, into a new series of the Trust, under
the same fund name. Effective October 23, 2006, the Fund's Investment Class
shares were renamed Class S shares.

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 shareholder's failure to
pay for shares or meet or maintain the qualifications for ownership of a
particular class or series of shares, (e) if the Board of Trustees determines
(or pursuant to policies established by the Board it is determined) that share
ownership by a particular shareholder is not in the best interests of remaining
shareholders, (f) when a Fund is requested or compelled to do so by governmental
authority or applicable law and (g) upon a shareholder's failure to comply with
a request for information with respect to the direct or indirect ownership of
shares of the Trust. The Declaration of Trust also authorizes the Board of
Trustees to terminate a Fund or any class without shareholder approval, and the
Trust may suspend the right of shareholders to require the Trust to redeem
shares to the extent permissible under the 1940 Act.

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

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

                             PROXY VOTING GUIDELINES

The Fund has delegated proxy voting responsibilities to the Advisor, subject to
the Board's general oversight. The Advisor votes proxies pursuant to the proxy
voting policy and guidelines set forth in Appendix A to this SAI).

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-investments.com (click on "proxy voting" at the bottom of
the page).

                              FINANCIAL STATEMENTS

The financial statements, including the investment portfolio, for the Lifecycle
Long Range Fund for the fiscal year ended March 31, 2009, and the Report of the
Independent Registered Public Accounting Firm are incorporated herein by
reference to the Annual Report to shareholders of the Lifecycle Long Range Fund
dated March 31, 2009. Copies of the Annual Report may be obtained without charge
by contacting the Service Center at 1-800-728-3337.

                             ADDITIONAL INFORMATION

The Fund will reinvest dividend checks (and future dividends) in shares of that
same Fund and class if checks are returned as undeliverable.

Dividends will be reinvested in shares of the same class of the Fund unless
shareholders indicate in writing that they wish to receive them in cash or in
shares of other DWS Funds with multiple classes of shares or DWS Funds as
provided in the prospectus. To use this privilege of investing dividends of the
Fund in shares of another DWS Fund, shareholders must maintain a minimum account
value of $1,000 in the Fund distributing the dividends. The Fund automatically
will reinvest dividend checks (and future dividends) in shares of that same Fund
and class unless the shareholder requests payment in cash at the time the
application is completed. 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.

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:
dws-investments.com (click on "proxy voting" at the bottom of the page).

Other Information

The CUSIP number of DWS Lifecycle Long Range Fund -- Class S is 23339E517.

The Fund has a fiscal year end of March 31.

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 1933 Act and reference is hereby
made to the Registration Statement for further information with respect to the
Fund and the securities offered hereby.

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


                                             STATEMENT OF ADDITIONAL INFORMATION
                                   August 1, 2009, As Revised September 15, 2009


Investment Advisor
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY  10154

Sub-Advisor
ABERDEEN ASSET MANAGEMENT INC.
1735 Market Street, 37th Floor
Philadelphia, PA  19103

Administrator
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY  10154

Transfer Agent
DWS INVESTMENTS SERVICE COMPANY
c/o DWS Investments
210 W. 10th Street
Kansas City, MO 64105

Distributor
DWS INVESTMENTS DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606-5808

Custodian
STATE STREET BANK and TRUST COMPANY
One Heritage Drive
North Quincy, MA 02171

Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Layfayette Corporate Center
2 Avenue De Lafayette
Boston, MA 02111

Counsel
VEDDER PRICE P.C.
222 North LaSalle Street
Chicago, IL 60601

No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectus, its
Statement of Additional Information 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 Fund. Neither the Prospectuses nor this Statement of
Additional Information constitute an offer in any state in which, or to any
person to whom, such offer may not lawfully be made.


                      APPENDIX A -- PROXY VOTING GUIDELINES

       Deutsche Asset Management ("AM") Proxy Voting Policy and Guidelines


I.       INTRODUCTION

AM has adopted and implemented the following policies and procedures, which it
believes are reasonably designed to ensure that proxies are voted in the best
economic interest of clients, in accordance with its fiduciary duties and local
regulation. These Proxy Voting Policies, Procedures and Guidelines shall apply
to all accounts managed by US domiciled advisers and to all US client accounts
managed by non US regional offices. Non US regional offices are required to
maintain procedures and to vote proxies as may be required by law on behalf of
their non US clients. In addition, AM's proxy policies reflect the fiduciary
standards and responsibilities for ERISA accounts.

The attached guidelines represent a set of global recommendations that were
determined by the Global Proxy Voting Sub-Committee ("the GPVSC"). These
guidelines were developed to provide AM with a comprehensive list of
recommendations that represent how AM will generally vote proxies for its
clients. The recommendations derived from the application of these guidelines
are not intended to influence the various AM legal entities either directly or
indirectly by parent or affiliated companies. In addition, the organizational
structures and documents of the various AM legal entities allows, where
necessary or appropriate, the execution by individual AM subsidiaries of the
proxy voting rights independently of any DB parent or affiliated company. This
applies in particular to non U.S. fund management companies. The individuals
that make proxy voting decisions are also free to act independently, subject to
the normal and customary supervision by the management/boards of these AM legal
entities.


II.      AM'S PROXY VOTING RESPONSIBILITIES

Proxy votes are the property of AM's advisory clients.(1) As such, AM's
authority and responsibility to vote such proxies depend upon its contractual
relationships with its clients. AM has delegated responsibility for effecting
its advisory clients' proxy votes to Institutional Shareholder Services ("ISS"),
an independent third-party proxy voting specialist. ISS votes AM's advisory
clients' proxies in accordance with AM's proxy guidelines or AM's specific
instructions. Where a client has given specific instructions as to how a proxy
should be voted, AM will notify ISS to carry out those instructions. Where no
specific instruction exists, AM will follow the procedures in voting the proxies
set forth in this document. Certain Taft-Hartley clients may direct AM to have
ISS vote their proxies in accordance with Taft Hartley voting Guidelines

_____________________

(1)      For purposes of these Policies and Procedures, "clients" refers to
         persons or entities: for which AM serves as investment adviser or
         sub-adviser; for which AM votes proxies; and that have an economic or
         beneficial ownership interest in the portfolio securities of issuers
         soliciting such proxies.

Clients may in certain instances contract with their custodial agent and notify
AM that they wish to engage in securities lending transactions. In such cases,
it is the responsibility of the custodian to deduct the number of shares that
are on loan so that they do not get voted twice.


III.     POLICIES

1.       Proxy voting activities are conducted in the best economic interest of
         clients

AM has adopted the following policies and procedures to ensure that proxies are
voted in accordance with the best economic interest of its clients, as
determined by AM in good faith after appropriate review.

2.       The Global Proxy Voting Sub-Committee

The Global Proxy Voting Sub-Committee (the "GPVSC") is an internal working group
established by the applicable AM's Investment Risk Oversight Committee pursuant
to a written charter. The GPVSC is responsible for overseeing AM's proxy voting
activities, including:

(i)    adopting, monitoring and updating guidelines, attached as Exhibit A (the
       "Guidelines"), that provide how AM will generally vote proxies pertaining
       to a comprehensive list of common proxy voting matters;

(ii)   voting proxies where (A) the issues are not covered by specific client
       instruction or the Guidelines; (B) the Guidelines specify that the issues
       are to be determined on a case-by-case basis; or (C) where an exception
       to the Guidelines may be in the best economic interest of AM's clients;
       and

(iii)  monitoring the Proxy Vendor Oversight's proxy voting activities (see
       below).

AM's Proxy Vendor Oversight, a function of AM's Operations Group, is responsible
for coordinating with ISS to administer AM's proxy voting process and for voting
proxies in accordance with any specific client instructions or, if there are
none, the Guidelines, and overseeing ISS' proxy responsibilities in this regard.

3.       Availability of Proxy Voting Policies and Procedures and proxy voting
         record

Copies of these Policies and Procedures, as they may be updated from time to
time, are made available to clients as required by law and otherwise at AM's
discretion. Clients may also obtain information on how their proxies were voted
by AM as required by law and otherwise at AM's discretion; however, AM must not
selectively disclose its investment company clients' proxy voting records. The
Proxy Vendor Oversight will make proxy voting reports available to advisory
clients upon request. The investment companies' proxy voting records will be
disclosed to shareholders by means of publicly-available annual filings of each
company's proxy voting record for 12-month periods ended June 30 (see
"Recordkeeping" below), if so required by relevant law.


IV.      PROCEDURES

The key aspects of AM's proxy voting process are as follows:

1.       The GPVSC's Proxy Voting Guidelines

The Guidelines set forth the GPVSC's standard voting positions on a
comprehensive list of common proxy voting matters. The GPVSC has developed, and
continues to update the Guidelines based on consideration of current corporate
governance principles, industry standards, client feedback, and the impact of
the matter on issuers and the value of the investments.

The GPVSC will review the Guidelines as necessary to support the best economic
interests of AM's clients and, in any event, at least annually. The GPVSC will
make changes to the Guidelines, whether as a result of the annual review or
otherwise, taking solely into account the best economic interests of clients.
Before changing the Guidelines, the GPVSC will thoroughly review and evaluate
the proposed change and the reasons therefore, and the GPVSC Chair will ask
GPVSC members whether anyone outside of the AM organization (but within Deutsche
Bank and its affiliates) or any entity that identifies itself as a AM advisory
client has requested or attempted to influence the proposed change and whether
any member has a conflict of interest with respect to the proposed change. If
any such matter is reported to the GPVSC Chair, the Chair will promptly notify
the Conflicts of Interest Management Sub-Committee (see below) and will defer
the approval, if possible. Lastly, the GPVSC will fully document its rationale
for approving any change to the Guidelines.

The Guidelines may reflect a voting position that differs from the actual
practices of the public company(ies) within the Deutsche Bank organization or of
the investment companies for which AM or an affiliate serves as investment
adviser or sponsor. Investment companies, particularly closed-end investment
companies, are different from traditional operating companies. These differences
may call for differences in voting positions on the same matter. Further, the
manner in which AM votes investment company proxies may differ from proposals
for which a AM-advised or sponsored investment company solicits proxies from its
shareholders. As reflected in the Guidelines, proxies solicited by closed-end
(and open-end) investment companies are generally voted in accordance with the
pre-determined guidelines of ISS. See Section IV.3.B.

Funds ("Underlying Funds") in which Topiary Fund Management Fund of Funds (each,
a "Fund") invest, may from time to time seek to revise their investment terms
(i.e. liquidity, fees, etc.) or investment structure. In such event, the
Underlying Funds may require approval/consent from its investors to effect the
relevant changes. Topiary Fund Management has adopted Proxy Voting Procedures
which outline the process for these approvals.

2.       Specific proxy voting decisions made by the GPVSC

The Proxy Vendor Oversight will refer to the GPVSC all proxy proposals (i) that
are not covered by specific client instructions or the Guidelines; or (ii) that,
according to the Guidelines, should be evaluated and voted on a case-by-case
basis.

Additionally, if, the Proxy Vendor Oversight, the GPVSC Chair or any member of
the GPVSC, a portfolio manager, a research analyst or a sub-adviser believes
that voting a particular proxy in accordance with the Guidelines may not be in
the best economic interests of clients, that individual may bring the matter to
the attention of the GPVSC Chair and/or the Proxy Vendor Oversight.(2)

_____________________

(2)      The Proxy Vendor Oversight generally monitors upcoming proxy
         solicitations for heightened attention from the press or the industry
         and for novel or unusual proposals or circumstances, which may prompt
         the Proxy Vendor Oversight to bring the solicitation to the attention
         of the GPVSC Chair. AM portfolio managers, AM research analysts and
         sub-advisers also may bring a particular proxy vote to the attention of
         the GPVSC Chair, as a result of their ongoing monitoring of portfolio
         securities held by advisory clients and/or their review of the periodic
         proxy voting record reports that the GPVSC Chair distributes to AM
         portfolio managers and AM research analysts.

If the Proxy Vendor Oversight refers a proxy proposal to the GPVSC or the GPVSC
determines that voting a particular proxy in accordance with the Guidelines is
not in the best economic interests of clients, the GPVSC will evaluate and vote
the proxy, subject to the procedures below regarding conflicts.

The GPVSC endeavors to hold meetings to decide how to vote particular proxies
sufficiently before the voting deadline so that the procedures below regarding
conflicts can be completed before the GPVSC's voting determination.

3.       Certain proxy votes may not be cast

In some cases, the GPVSC may determine that it is in the best economic interests
of its clients not to vote certain proxies. If the conditions below are met with
regard to a proxy proposal, AM will abstain from voting:

o        Neither the Guidelines nor specific client instructions cover an issue;

o        ISS does not make a recommendation on the issue;

o        The GPVSC cannot convene on the proxy proposal at issue to make a
         determination as to what would be in the client's best interest. (This
         could happen, for example, if the Conflicts of Interest Management
         Sub-committee found that there was a material conflict or if despite
         all best efforts being made, the GPVSC quorum requirement could not be
         met).

In addition, it is AM's policy not to vote proxies of issuers subject to laws of
those jurisdictions that impose restrictions upon selling shares after proxies
are voted, in order to preserve liquidity. In other cases, it may not be
possible to vote certain proxies, despite good faith efforts to do so. For
example, some jurisdictions do not provide adequate notice to shareholders so
that proxies may be voted on a timely basis. Voting rights on securities that
have been loaned to third-parties transfer to those third-parties, with loan
termination often being the only way to attempt to vote proxies on the loaned
securities. Lastly, the GPVSC may determine that the costs to the client(s)
associated with voting a particular proxy or group of proxies outweighs the
economic benefits expected from voting the proxy or group of proxies.

The Proxy Vendor Oversight will coordinate with the GPVSC Chair regarding any
specific proxies and any categories of proxies that will not or cannot be voted.
The reasons for not voting any proxy shall be documented.

4.       Conflict of Interest Procedures

A. Procedures to Address Conflicts of Interest and Improper Influence

Overriding Principle. In the limited circumstances where the GPVSC votes
proxies,(3) the GPVSC will vote those proxies in accordance with what it, in
good faith, determines to be the best economic interests of AM's clients.(4)

_____________________

(3)      As mentioned above, the GPVSC votes proxies (i) where neither a
         specific client instruction nor a Guideline directs how the proxy
         should be voted, (ii) where the Guidelines specify that an issue is to
         be determined on a case by case basis or (iii) where voting in
         accordance with the Guidelines may not be in the best economic
         interests of clients.

(4)      The Proxy Vendor Oversight, who serves as the non-voting secretary of
         the GPVSC, may receive routine calls from proxy solicitors and other
         parties interested in a particular proxy vote. Any contact that
         attempts to exert improper pressure or influence shall be reported to
         the Conflicts of Interest Management Sub-Committee.

Independence of the GPVSC. As a matter of Compliance policy, the GPVSC and the
Proxy Vendor Oversight are structured to be independent from other parts of
Deutsche Bank. Members of the GPVSC and the employee responsible for Proxy
Vendor Oversight are employees of AM. As such, they may not be subject to the
supervision or control of any employees of Deutsche Bank Corporate and
Investment Banking division ("CIB"). Their compensation cannot be based upon
their contribution to any business activity outside of AM without prior approval
of Legal and Compliance. They can have no contact with employees of Deutsche
Bank outside of the Private Client and Asset Management division ("PCAM")
regarding specific clients, business matters or initiatives without the prior
approval of Legal and Compliance. They furthermore may not discuss proxy votes
with any person outside of AM (and within AM only on a need to know basis).

Conflict Review Procedures. There will be a committee (the "Conflicts of
Interest Management Sub-Committee") established within AM that will monitor for
potential material conflicts of interest in connection with proxy proposals that
are to be evaluated by the GPVSC. Promptly upon a determination that a vote
shall be presented to the GPVSC, the GPVSC Chair shall notify the Conflicts of
Interest Management Sub-Committee. The Conflicts of Interest Management
Sub-Committee shall promptly collect and review any information deemed
reasonably appropriate to evaluate, in its reasonable judgment, if AM or any
person participating in the proxy voting process has, or has the appearance of,
a material conflict of interest. For the purposes of this policy, a conflict of
interest shall be considered "material" to the extent that a reasonable person
could expect the conflict to influence, or appear to influence, the GPVSC's
decision on the particular vote at issue. GPVSC should provide the Conflicts of
Interest Management Sub-Committee a reasonable amount of time (no less than 24
hours) to perform all necessary and appropriate reviews. To the extent that a
conflicts review can not be sufficiently completed by the Conflicts of Interest
Management Sub-Committee the proxies will be voted in accordance with the
standard guidelines.

The information considered by the Conflicts of Interest Management Sub-Committee
may include without limitation information regarding (i) AM client
relationships; (ii) any relevant personal conflict known by the Conflicts of
Interest Management Sub-Committee or brought to the attention of that
sub-committee; (iii) and any communications with members of the GPVSC (or anyone
participating or providing information to the GPVSC) and any person outside of
the AM organization (but within Deutsche Bank and its affiliates) or any entity
that identifies itself as a AM advisory client regarding the vote at issue. In
the context of any determination, the Conflicts of Interest Management
Sub-Committee may consult with, and shall be entitled to rely upon, all
applicable outside experts, including legal counsel.

Upon completion of the investigation, the Conflicts of Interest Management
Sub-Committee will document its findings and conclusions. If the Conflicts of
Interest Management Sub-Committee determines that (i) AM has a material conflict
of interest that would prevent it from deciding how to vote the proxies
concerned without further client consent or (ii) certain individuals should be
recused from participating in the proxy vote at issue, the Conflicts of Interest
Management Sub-Committee will so inform the GPVSC chair.

If notified that AM has a material conflict of interest as described above, the
GPVSC chair will obtain instructions as to how the proxies should be voted
either from (i) if time permits, the effected clients, or (ii) in accordance
with the standard guidelines. If notified that certain individuals should be
recused from the proxy vote at issue, the GPVSC Chair shall do so in accordance
with the procedures set forth below.

Note: Any AM employee who becomes aware of a potential, material conflict of
interest in respect of any proxy vote to be made on behalf of clients shall
notify Compliance. Compliance shall call a meeting of the conflict review
committee to evaluate such conflict and determine a recommended course of
action.

Procedures to be followed by the GPVSC. At the beginning of any discussion
regarding how to vote any proxy, the GPVSC Chair (or his or her delegate) will
inquire as to whether any GPVSC member (whether voting or ex officio) or any
person participating in the proxy voting process has a personal conflict of
interest or has actual knowledge of an actual or apparent conflict that has not
been reported to the Conflicts of Interest Management Sub-Committee.

The GPVSC Chair also will inquire of these same parties whether they have actual
knowledge regarding whether any director, officer or employee outside of the AM
organization (but within Deutsche Bank and its affiliates) or any entity that
identifies itself as a AM advisory client, has: (i) requested that AM, the Proxy
Vendor Oversight (or any member thereof) or a GPVSC member vote a particular
proxy in a certain manner; (ii) attempted to influence AM, the Proxy Vendor
Oversight (or any member thereof), a GPVSC member or any other person in
connection with proxy voting activities; or (iii) otherwise communicated with a
GPVSC member or any other person participating or providing information to the
GPVSC regarding the particular proxy vote at issue, and which incident has not
yet been reported to the Conflicts of Interest Management Sub- Committee.

If any such incidents are reported to the GPVSC Chair, the Chair will promptly
notify the Conflicts of Interest Management Sub-Committee and, if possible, will
delay the vote until the Conflicts of Interest Management Sub-Committee can
complete the conflicts report. If a delay is not possible, the Conflicts of
Interest Management Sub-Committee will instruct the GPVSC whether anyone should
be recused from the proxy voting process, or whether AM should vote the proxy in
accordance with the standard guidelines, seek instructions as to how to vote the
proxy at issue from ISS or, if time permits, the effected clients. These
inquiries and discussions will be properly reflected in the GPVSC's minutes.

Duty to Report. Any AM employee, including any GPVSC member (whether voting or
ex officio), that is aware of any actual or apparent conflict of interest
relevant to, or any attempt by any person outside of the AM organization (but
within Deutsche Bank and its affiliates) or any entity that identifies itself as
a AM advisory client to influence, how AM votes its proxies has a duty to
disclose the existence of the situation to the GPVSC Chair (or his or her
designee) and the details of the matter to the Conflicts of Interest Management
Sub-Committee. In the case of any person participating in the deliberations on a
specific vote, such disclosure should be made before engaging in any activities
or participating in any discussion pertaining to that vote.

Recusal of Members. The GPVSC will recuse from participating in a specific proxy
vote any GPVSC members (whether voting or ex officio) and/or any other person
who (i) are personally involved in a material conflict of interest; or (ii) who,
as determined by the Conflicts of Interest Management Sub-Committee, have actual
knowledge of a circumstance or fact that could effect their independent
judgment, in respect of such vote. The GPVSC will also exclude from
consideration the views of any person (whether requested or volunteered) if the
GPVSC or any member thereof knows, or if the Conflicts of Interest Management
Sub-Committee has determined, that such other person has a material conflict of
interest with respect to the particular proxy, or has attempted to influence the
vote in any manner prohibited by these policies.

If, after excluding all relevant GPVSC voting members pursuant to the paragraph
above, there are three or more GPVSC voting members remaining, those remaining
GPVSC members will determine how to vote the proxy in accordance with these
Policies and Procedures. If there are fewer than three GPVSC voting members
remaining, the GPVSC Chair will vote the proxy in accordance with the standard
guidelines, will obtain instructions as to how to have the proxy voted from, if
time permits, the effected clients and otherwise from ISS.

B.       Investment Companies and Affiliated Public Companies

Investment Companies. As reflected in the Guidelines, all proxies solicited by
open-end and closed-end investment companies are voted in accordance with the
pre-determined guidelines of ISS, unless the investment company client directs
AM to vote differently on a specific proxy or specific categories of proxies.
However, regarding investment companies for which AM or an affiliate serves as
investment adviser or principal underwriter, such proxies are voted in the same
proportion as the vote of all other shareholders (i.e., "mirror" or "echo"
voting). Master fund proxies solicited from feeder funds are voted in accordance
with applicable provisions of Section 12 of the Investment Company Act of 1940.

Subject to participation agreements with certain Exchange Traded Funds ("ETF")
issuers that have received exemptive orders from the U.S. Securities and
Exchange Commission allowing investing DWS funds to exceed the limits set forth
in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will
echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of
outstanding voting shares globally when required to do so by participation
agreements and SEC orders.

Affiliated Public Companies. For proxies solicited by non-investment company
issuers of or within the Deutsche Bank organization, e.g., Deutsche bank itself,
these proxies will be voted in the same proportion as the vote of other
shareholders (i.e., "mirror" or "echo" voting).

Note: With respect to the QP Trust (not registered under the Investment Company
Act of 1940), the Fund is not required to engage in echo voting and the
investment adviser will use these Guidelines, and may determine, with respect to
the QP Trust, to vote contrary to the positions in the Guidelines, consistent
with the Fund's best interest.

C.       Other Procedures That Limit Conflicts of Interest

AM and other entities in the Deutsche Bank organization have adopted a number of
policies, procedures and internal controls that are designed to avoid various
conflicts of interest, including those that may arise in connection with proxy
voting, including:

o        Deutsche Bank Americas Restricted Activities Policy. This policy
         provides for, among other things, independence of AM employees from
         CIB, and information barriers between AM and other affiliates.
         Specifically, no AM employee may be subject to the supervision or
         control of any employee of CIB. No AM employee shall have his or her
         compensation based upon his or her contribution to any business
         activity within the Bank outside of the business of AM, without the
         prior approval of Legal or Compliance. Further, no employee of CIB
         shall have any input into the compensation of a AM employee without the
         prior approval of Legal or Compliance. Under the information barriers
         section of this policy, as a general rule, AM employees who are
         associated with the investment process should have no contact with
         employees of Deutsche Bank or its affiliates, outside of PCAM,
         regarding specific clients, business matters, or initiatives. Further,
         under no circumstances should proxy votes be discussed with any
         Deutsche Bank employee outside of AM (and should only be discussed on a
         need-to-know basis within AM).

Other relevant internal policies include the Deutsche Bank Americas Code of
Professional Conduct, the Deutsche Asset Management Information Sharing
Procedures, the Deutsche Asset Management Code of Ethics, the Sarbanes-Oxley
Senior Officer Code of Ethics, and the Deutsche Bank Group Code of Conduct. The
GPVSC expects that these policies, procedures and internal controls will greatly
reduce the chance that the GPVSC (or, its members) would be involved in, aware
of or influenced by, an actual or apparent conflict of interest.


V.       RECORDKEEPING

At a minimum, the following types of records must be properly maintained and
readily accessible in order to evidence compliance with this policy.

o        AM will maintain a record of each vote cast by AM that includes among
         other things, company name, meeting date, proposals presented, vote
         cast and shares voted.

o        The Proxy Vendor Oversight maintains records for each of the proxy
         ballots it votes. Specifically, the records include, but are not
         limited to:

         -        The proxy statement (and any additional solicitation
                  materials) and relevant portions of annual statements.

         -        Any additional information considered in the voting process
                  that may be obtained from an issuing company, its agents or
                  proxy research firms.

         -        Analyst worksheets created for stock option plan and share
                  increase analyses.

         -        Proxy Edge print-screen of actual vote election.

o        AM will retain these Policies and Procedures and the Guidelines; will
         maintain records of client requests for proxy voting information; and
         will retain any documents the Proxy Vendor Oversight or the GPVSC
         prepared that were material to making a voting decision or that
         memorialized the basis for a proxy voting decision.

o        The GPVSC also will create and maintain appropriate records documenting
         its compliance with these Policies and Procedures, including records of
         its deliberations and decisions regarding conflicts of interest and
         their resolution.

o        With respect to AM's investment company clients, ISS will create and
         maintain records of each company's proxy voting record for 12-month
         periods ended June 30. AM will compile the following information for
         each matter relating to a portfolio security considered at any
         shareholder meeting held during the period covered by the report and
         with respect to which the company was entitled to vote:

         -        The name of the issuer of the portfolio security;

         -        The exchange ticker symbol of the portfolio security (if
                  symbol is available through reasonably practicable means);

         -        The Council on Uniform Securities Identification Procedures
                  number for the portfolio security (if the number is available
                  through reasonably practicable means);

         -        The shareholder meeting date;

         -        A brief identification of the matter voted on;

         -        Whether the matter was proposed by the issuer or by a security
                  holder;

         -        Whether the company cast its vote on the matter;

         -        How the company cast its vote (e.g., for or against proposal,
                  or abstain; for or withhold regarding election of directors);
                  and

         -        Whether the company cast its vote for or against management.

Note: This list is intended to provide guidance only in terms of the records
that must be maintained in accordance with this policy. In addition, please note
that records must be maintained in accordance with the applicable AM Records
Management Policy.

With respect to electronically stored records, "properly maintained" is defined
as complete, authentic (unalterable) usable and backed-up. At a minimum, records
should be retained for a period of not less than six years (or longer, if
necessary to comply with applicable regulatory requirements), the first three
years in an appropriate AM office.


VI.      THE GPVSC'S OVERSIGHT ROLE

In addition to adopting the Guidelines and making proxy voting decisions on
matters referred to it as set forth above, the GPVSC will monitor the proxy
voting process by reviewing summary proxy information presented by ISS. The
GPVSC will use this review process to determine, among other things, whether any
changes should be made to the Guidelines. This review will take place at least
quarterly and will be documented in the GPVSC's minutes.


Attachment A - Global Proxy Voting Guidelines







                            Deutsche Asset Management

                         Global Proxy Voting Guidelines



                             As Amended October 2008


                                [GRAPHIC OMITTED]
Table of contents

I        Board Of Directors And Executives

         A        Election Of Directors

         B        Classified Boards Of Directors

         C        Board And Committee Independence

         D        Liability And Indemnification Of Directors

         E        Qualifications Of Directors

         F        Removal Of Directors And Filling Of Vacancies

         G        Proposals To Fix The Size Of The Board

         H        Proposals to Restrict Chief Executive Officer's Service on

                  Multiple Boards

         I        Proposals to Restrict Supervisory Board Members Service on

                  Multiple Boards

         J        Proposals to Establish Audit Committees

II       Capital Structure

         A        Authorization Of Additional Shares

         B        Authorization Of "Blank Check" Preferred Stock

         C        Stock Splits/Reverse Stock Splits

         D        Dual Class/Supervoting Stock

         E        Large Block Issuance

         F        Recapitalization Into A Single Class Of Stock

         G        Share Repurchases

         H        Reductions In Par Value

III      Corporate Governance Issues

         A        Confidential Voting

         B        Cumulative Voting

         C        Supermajority Voting Requirements

         D        Shareholder Right To Vote

IV       Compensation

         A        Establishment of a Remuneration Committee

         B        Executive And Director Stock Option Plans

         C        Employee Stock Option/Purchase Plans

         D        Golden Parachutes

         E        Proposals To Limit Benefits Or Executive Compensation

         F        Option Expensing

         G        Management board election and motion

         H        Remuneration (variable pay)

         I        Long-term incentive plans

         J        Shareholder Proposals Concerning "Pay For Superior
                  Performance"

         K        Executive Compensation Advisory

V        Anti-Takeover Related Issues

         A        Shareholder Rights Plans ("Poison Pills")

         B        Reincorporation

         C        Fair-Price Proposals

         D        Exemption From State Takeover Laws

         E        Non-Financial Effects Of Takeover Bids

VI       Mergers & Acquisitions

VII      Social & Political Issues

         A        Labor & Human Rights

         B        Diversity & Equality

         C        Health & Safety

         D        Government/Military

         E        Tobacco

VIII     Environmental Issues

IX       Miscellaneous Items

         A        Ratification Of Auditors

         B        Limitation Of Non-Audit Services Provided By Independent
                  Auditor

         C        Audit Firm Rotation

         D        Transaction Of Other Business

         E        Motions To Adjourn The Meeting

         F        Bundled Proposals

         G        Change Of Company Name

         H        Proposals Related To The Annual Meeting

         I        Reimbursement Of Expenses Incurred From Candidate Nomination

         J        Investment Company Proxies

         K        International Proxy Voting


These Guidelines may reflect a voting position that differs from the actual
practices of the public company (ies) within the Deutsche Bank organization or
of the investment companies for which AM or an affiliate serves as investment
adviser or sponsor.

NOTE: Because of the unique structure and regulatory scheme applicable to
closed-end investment companies, the voting guidelines (particularly those
related to governance issues) generally will be inapplicable to holdings of
closed-end investment companies. As a result, determinations on the appropriate
voting recommendation for closed-end investment company shares will be made on a
case-by-case basis.


I.       Board of Directors and Executives

A.       Election of Directors

Routine: AM Policy is to vote "for" the uncontested election of directors. Votes
for a director in an uncontested election will be withheld in cases where a
director has shown an inability to perform his/her duties in the best interests
of the shareholders.

Proxy contest: In a proxy contest involving election of directors, a
case-by-case voting decision will be made based upon analysis of the issues
involved and the merits of the incumbent and dissident slates of directors. AM
will incorporate the decisions of a third party proxy research vendor,
currently, Institutional Shareholder Services ("ISS") subject to review by the
Proxy Voting Sub-Committee (GPVSC) as set forth in the AM's Proxy Voting
Policies and Procedures.

Rationale: The large majority of corporate directors fulfill their fiduciary
obligation and in most cases support for management's nominees is warranted. As
the issues relevant to a contested election differ in each instance, those cases
must be addressed as they arise.

B.       Classified Boards of Directors

AM policy is to vote against proposals to classify the board and for proposals
to repeal classified boards and elect directors annually.

Rationale: Directors should be held accountable on an annual basis. By
entrenching the incumbent board, a classified board may be used as an
anti-takeover device to the detriment of the shareholders in a hostile take-over
situation.

C.       Board and Committee Independence

AM policy is to vote:

1.       "For" proposals that require that a certain percentage (majority up to
         66 2/3%) of members of a board of directors be comprised of independent
         or unaffiliated directors.

2.       "For" proposals that require all members of a company's compensation,
         audit, nominating, or other similar committees be comprised of
         independent or unaffiliated directors.

3.       "Against" shareholder proposals to require the addition of special
         interest, or constituency, representatives to boards of directors.

4.       "For" separation of the Chairman and CEO positions.

5.       "Against" proposals that require a company to appoint a Chairman who is
         an independent director.

Rationale: Board independence is a cornerstone of effective governance and
accountability. A board that is sufficiently independent from management assures
that shareholders' interests are adequately represented. However, the Chairman
of the board must have sufficient involvement in and experience with the
operations of the company to perform the functions required of that position and
lead the company.

No director qualifies as 'independent' unless the board of directors
affirmatively determines that the director has no material relationship with the
listed company (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the company).

Whether a director is in fact not "independent" will depend on the laws and
regulations of the primary market for the security and the exchanges, if any, on
which the security trades.

D.       Liability and Indemnification of Directors

AM policy is to vote "for" management proposals to limit directors' liability
and to broaden the indemnification of directors, unless broader indemnification
or limitations on directors' liability would effect shareholders' interests in
pending litigation.

Rationale: While shareholders want directors and officers to be responsible for
their actions, it is not in the best interests of the shareholders for them to
be to risk averse. If the risk of personal liability is too great, companies may
not be able to find capable directors willing to serve. We support expanding
coverage only for actions taken in good faith and not for serious violations of
fiduciary obligation or negligence.

E.       Qualifications of Directors

AM policy is to follow management's recommended vote on either management or
shareholder proposals that set retirement ages for directors or require specific
levels of stock ownership by directors.

Rationale: As a general rule, the board of directors, and not the shareholders,
is most qualified to establish qualification policies.

F.       Removal of Directors and Filling of Vacancies

AM policy is to vote "against" proposals that include provisions that directors
may be removed only for cause or proposals that include provisions that only
continuing directors may fill board vacancies.

Rationale: Differing state statutes permit removal of directors with or without
cause. Removal of directors for cause usually requires proof of self-dealing,
fraud or misappropriation of corporate assets, limiting shareholders' ability to
remove directors except under extreme circumstances. Removal without cause
requires no such showing.

Allowing only incumbent directors to fill vacancies can serve as an
anti-takeover device, precluding shareholders from filling the board until the
next regular election.

G.       Proposals to Fix the Size of the Board

AM policy is to vote:

1.       "For" proposals to fix the size of the board unless: (a) no specific
         reason for the proposed change is given; or (b) the proposal is part of
         a package of takeover defenses.

2.       "Against" proposals allowing management to fix the size of the board
         without shareholder approval.

Rationale: Absent danger of anti-takeover use, companies should be granted a
reasonable amount of flexibility in fixing the size of its board.

H.       Proposals to Restrict Chief Executive Officer's Service on Multiple
         Boards

AM policy is to vote "For" proposals to restrict a Chief Executive Officer from
serving on more than three outside boards of directors.

Rationale: Chief Executive Officer must have sufficient time to ensure that
shareholders' interests are represented adequately.

Note: A director's service on multiple closed-end fund boards within a fund
complex are treated as service on a single Board for the purpose of the proxy
voting guidelines.

I.       Proposals to Restrict Supervisory Board Members Service on Multiple
         Boards (For FFT Securities)

AM policy is to vote "for" proposals to restrict a Supervisory Board Member from
serving on more than five supervisory boards.

Rationale: We consider a strong, independent and knowledgeable supervisory board
as important counter-balance to executive management to ensure that the
interests of shareholders are fully reflected by the company.

Full information should be disclosed in the annual reports and accounts to allow
all shareholders to judge the success of the supervisory board controlling their
company.

Supervisory Board Member must have sufficient time to ensure that shareholders'
interests are represented adequately.

Note: A director's service on multiple closed-end fund boards within a fund
complex are treated as service on a single Board for the purpose of the proxy
voting guidelines.

J.       Proposals to Establish Audit Committees (For FFT and U.S. Securities)
         AM policy is to vote "for" proposals that require the establishment of
         audit committees.

Rationale: The audit committee should deal with accounting and risk management
related questions, verifies the independence of the auditor with due regard to
possible conflicts of interest. It also should determine the procedure of the
audit process.


II.      Capital Structure

A.       Authorization of Additional Shares (For U.S. Securities)

AM policy is to vote "for" proposals to increase the authorization of existing
classes of stock that do not exceed a 3:1 ratio of shares authorized to shares
outstanding for a large cap company, and do not exceed a 4:1 ratio of shares
authorized to shares outstanding for a small-midcap company (companies having a
market capitalization under one billion U.S. dollars.).

Rationale: While companies need an adequate number of shares in order to carry
on business, increases requested for general financial flexibility must be
limited to protect shareholders from their potential use as an anti-takeover
device. Requested increases for specifically designated, reasonable business
purposes (stock split, merger, etc.) will be considered in light of those
purposes and the number of shares required.

B.       Authorization of "Blank Check" Preferred Stock (For U.S. Securities)

AM policy is to vote:

1.   "Against" proposals to create blank check preferred stock or to increase
     the number of authorized shares of blank check preferred stock unless the
     company expressly states that the stock will not be used for anti-takeover
     purposes and will not be issued without shareholder approval.

2.   "For" proposals mandating shareholder approval of blank check stock
     placement.

Rationale: Shareholders should be permitted to monitor the issuance of classes
of preferred stock in which the board of directors is given unfettered
discretion to set voting, dividend, conversion and other rights for the shares
issued.

C.       Stock Splits/Reverse Stock Splits

AM policy is to vote "for" stock splits if a legitimate business purpose is set
forth and the split is in the shareholders' best interests. A vote is cast "for"
a reverse stock split only if the number of shares authorized is reduced in the
same proportion as the reverse split or if the effective increase in authorized
shares (relative to outstanding shares) complies with the proxy guidelines for
common stock increases (see, Section II.A, above.)

Rationale: Generally, stock splits do not detrimentally effect shareholders.
Reverse stock splits, however, may have the same result as an increase in
authorized shares and should be analyzed accordingly.

D.       Dual Class/Supervoting Stock

AM policy is to vote "against" proposals to create or authorize additional
shares of super-voting stock or stock with unequal voting rights.

Rationale: The "one share, one vote" principal ensures that no shareholder
maintains a voting interest exceeding their equity interest in the company.

E.       Large Block Issuance (For U.S. Securities)

AM policy is to address large block issuances of stock on a case-by-case basis,
incorporating the recommendation of an independent third party proxy research
firm (currently ISS) subject to review by the GPVSC as set forth in AM's Proxy
Policies and Procedures.

Additionally, AM supports proposals requiring shareholder approval of large
block issuances.

Rationale: Stock issuances must be reviewed in light of the business
circumstances leading to the request and the potential impact on shareholder
value.

F.       Recapitalization into a Single Class of Stock

AM policy is to vote "for" recapitalization plans to provide for a single class
of common stock, provided the terms are fair, with no class of stock being
unduly disadvantaged.

Rationale: Consolidation of multiple classes of stock is a business decision
that may be left to the board and/management if there is no adverse effect on
shareholders.

G.       Share Repurchases

AM policy is to vote "for" share repurchase plans provided all shareholders are
able to participate on equal terms.

Rationale: Buybacks are generally considered beneficial to shareholders because
they tend to increase returns to the remaining shareholders.

H.       Reductions in Par Value

AM policy is to vote "for" proposals to reduce par value, provided a legitimate
business purpose is stated (e.g., the reduction of corporate tax
responsibility.)

Rationale: Usually, adjustments to par value are a routine financial decision
with no substantial impact on shareholders.


III.     Corporate Governance Issues

A.       Confidential Voting

AM policy is to vote "for" proposals to provide for confidential voting and
independent tabulation of voting results and to vote "against" proposals to
repeal such provisions.

Rationale: Confidential voting protects the privacy rights of all shareholders.
This is particularly important for employee-shareholders or shareholders with
business or other affiliations with the company, who may be vulnerable to
coercion or retaliation when opposing management. Confidential voting does not
interfere with the ability of corporations to communicate with all shareholders,
nor does it prohibit shareholders from making their views known directly to
management.

B.       Cumulative Voting (For U.S. Securities)

AM policy is to vote "against" shareholder proposals requesting cumulative
voting and "for" management proposals to eliminate it. The protections afforded
shareholders by cumulative voting are not necessary when a company has a history
of good performance and does not have a concentrated ownership interest.
Accordingly, a vote is cast "against" cumulative voting and "for" proposals to
eliminate it if:

a)       The company has a five year return on investment greater than the
         relevant industry index,

b)       All directors and executive officers as a group beneficially own less
         than 10% of the outstanding stock, and

c)       No shareholder (or voting block) beneficially owns 15% or more of the
         company.

Thus, failure of any one of the three criteria results in a vote for cumulative
voting in accordance with the general policy.

Rationale: Cumulative voting is a tool that should be used to ensure that
holders of a significant number of shares may have board representation;
however, the presence of other safeguards may make their use unnecessary.

C.       Supermajority Voting Requirements

AM policy is to vote "against" management proposals to require a supermajority
vote to amend the charter or bylaws and to vote "for" shareholder proposals to
modify or rescind existing supermajority requirements.

*Exception made when company holds a controlling position and seeks to lower
threshold to maintain control and/or make changes to corporate by-laws.

Rationale: Supermajority voting provisions violate the democratic principle that
a simple majority should carry the vote. Setting supermajority requirements may
make it difficult or impossible for shareholders to remove egregious by-law or
charter provisions. Occasionally, a company with a significant insider held
position might attempt to lower a supermajority threshold to make it easier for
management to approve provisions that may be detrimental to shareholders. In
that case, it may not be in the shareholders interests to lower the
supermajority provision.

D.       Shareholder Right to Vote

AM policy is to vote "against" proposals that restrict the right of shareholders
to call special meetings, amend the bylaws, or act by written consent. Policy is
to vote "for" proposals that remove such restrictions.

Rationale: Any reasonable means whereby shareholders can make their views known
to management or effect the governance process should be supported.


IV.      Compensation

Annual Incentive Plans or Bonus Plans are often submitted to shareholders for
approval. These plans typically award cash to executives based on company
performance. Deutsche Bank believes that the responsibility for executive
compensation decisions rest with the board of directors and/or the compensation
committee, and its policy is not to second-guess the board's award of cash
compensation amounts to executives unless a particular award or series of awards
is deemed excessive. If stock options are awarded as part of these bonus or
incentive plans, the provisions must meet Deutsche Bank's criteria regarding
stock option plans, or similar stock-based incentive compensation schemes, as
set forth below.

A.       Establishment of a Remuneration Committee (For FFT Securities)

AM policy is to vote "for" proposals that require the establishment of a
remuneration committee.

Rationale: Corporations should disclose in each annual report or proxy statement
their policies on remuneration. Essential details regarding executive
remuneration including share options, long-term incentive plans and bonuses,
should be disclosed in the annual report, so that investors can judge whether
corporate pay policies and practices meet the standard.

The remuneration committee shall not comprise any board members and should be
sensitive to the wider scene on executive pay. It should ensure that
performance-based elements of executive pay are designed to align the interests
of shareholders.

B.       Executive and Director Stock Option Plans

AM policy is to vote "for" stock option plans that meet the following criteria:

(1)      The resulting dilution of existing shares is less than (a) 15 percent
         of outstanding shares for large capital corporations or (b) 20 percent
         of outstanding shares for small-mid capital companies (companies having
         a market capitalization under one billion U.S. dollars.)

(2)      The transfer of equity resulting from granting options at less than FMV
         is no greater than 3% of the over-all market capitalization of large
         capital corporations, or 5% of market cap for small-mid capital
         companies.

(3)      The plan does not contain express repricing provisions and, in the
         absence of an express statement that options will not be repriced; the
         company does not have a history of repricing options.

(4)      The plan does not grant options on super-voting stock.

AM will support performance-based option proposals as long as a) they do not
mandate that all options granted by the company must be performance based, and
b) only certain high-level executives are subject to receive the performance
based options.

AM will support proposals to eliminate the payment of outside director pensions.

Rationale: Determining the cost to the company and to shareholders of
stock-based incentive plans raises significant issues not encountered with
cash-based compensation plans. These include the potential dilution of existing
shareholders' voting power, the transfer of equity out of the company resulting
from the grant and execution of options at less than FMV and the authority to
reprice or replace underwater options. Our stock option plan analysis model
seeks to allow reasonable levels of flexibility for a company yet still protect
shareholders from the negative impact of excessive stock compensation.
Acknowledging that small mid-capital corporations often rely more heavily on
stock option plans as their main source of executive compensation and may not be
able to compete with their large capital competitors with cash compensation, we
provide slightly more flexibility for those companies.

C.       Employee Stock Option/Purchase Plans

AM policy is to vote for employee stock purchase plans (ESPP's) when the plan
complies with Internal Revenue Code 423, allowing non-management employees to
purchase stock at 85% of FMV.

AM policy is to vote "for" employee stock option plans (ESOPs) provided they
meet the standards for stock option plans in general. However, when computing
dilution and transfer of equity, ESOPs are considered independently from
executive and director option plans.

Rationale: ESOPs and ESPP's encourage rank-and-file employees to acquire an
ownership stake in the companies they work for and have been shown to promote
employee loyalty and improve productivity.

D.       Golden Parachutes

AM policy is to vote "for" proposals to require shareholder approval of golden
parachutes and for proposals that would limit golden parachutes to no more than
three times base compensation. Policy is to vote "against" more restrictive
shareholder proposals to limit golden parachutes.

Rationale: In setting a reasonable limitation, AM considers that an effective
parachute should be less attractive than continued employment and that the IRS
has opined that amounts greater than three times annual salary, are excessive.

E.       Proposals to Limit Benefits or Executive Compensation

AM policy is to vote "against"

1.   Proposals to limit benefits, pensions or compensation and

2.   Proposals that request or require disclosure of executive compensation
     greater than the disclosure required by Securities and Exchange Commission
     (SEC) regulations.

Rationale: Levels of compensation and benefits are generally considered to be
day-to-day operations of the company, and are best left unrestricted by
arbitrary limitations proposed by shareholders.

F.       Option Expensing

AM policy is to support proposals requesting companies to expense stock options.

Rationale: Although companies can choose to expense options voluntarily, the
Financial Accounting Standards Board (FASB) does not yet require it, instead
allowing companies to disclose the theoretical value of options as a footnote.
Because the expensing of stock options lowers earnings, most companies elect not
to do so. Given the fact that options have become an integral component of
compensation and their exercise results in a transfer of shareholder value, AM
agrees that their value should not be ignored and treated as "no cost"
compensation. The expensing of stock options would promote more modest and
appropriate use of stock options in executive compensation plans and present a
more accurate picture of company operational earnings.

G.        Management board election and motion (For FFT Securities)

AM policy is to vote "against":

o        the election of board members with positions on either remuneration or
         audit committees;

o        the election of supervisory board members with too many supervisory
         board mandates;

o        "automatic" election of former board members into the supervisory
         board.

Rationale: Management as an entity, and each of its members, are responsible for
all actions of the company, and are - subject to applicable laws and regulations
- accountable to the shareholders as a whole for their actions.

Sufficient information should be disclosed in the annual company report and
account to allow shareholders to judge the success of the company.

H.       Remuneration (variable pay): (For FFT Securities)

Executive remuneration for Management Board

AM policy is to vote "for" remuneration for Management Board that is transparent
and linked to results.

Rationale: Executive compensation should motivate management and align the
interests of management with the shareholders. The focus should be on criteria
that prevent excessive remuneration; but enable the company to hire and retain
first-class professionals.

Shareholder interests are normally best served when management is remunerated to
optimise long-term returns. Criteria should include suitable measurements like
return on capital employed or economic value added.

Interests should generally also be correctly aligned when management own shares
in the company - even more so if these shares represent a substantial portion of
their own wealth.

Its disclosure shall differentiate between fixed pay, variable (performance
related) pay and long-term incentives, including stock option plans with
valuation ranges as well as pension and any other significant arrangements.

Executive remuneration for Supervisory Board

AM policy is to vote "for" remuneration for Supervisory Board that is at least
50% in fixed form.

Rationale: It would normally be preferable if performance linked compensation
were not based on dividend payments, but linked to suitable result based
parameters. Consulting and procurement services should also be published in the
company report.

I.       Long-term incentive plans (For FFT Securities)

AM policy is to vote "for" long-term incentive plans for members of a management
board that reward for above average company performance.

Rationale: Incentive plans will normally be supported if they:

o        directly align the interests of members of management boards with those
         of shareholders;

o        establish challenging performance criteria to reward only above average
         performance;

o        measure performance by total shareholder return in relation to the
         market or a range of comparable companies;

o        are long-term in nature and encourage long-term ownership of the shares
         once exercised through minimum holding periods;

o        do not allow a repricing of the exercise price in stock option plans.

J.       Shareholder Proposals Concerning "Pay for Superior Performance"

AM policy is to address pay for superior performance proposals on a case-by-case
basis, incorporating the recommendation of an independent third party proxy
research firm (currently ISS) subject to review by the GPVSC as set forth in
AM's Proxy Policies and Procedures.

Rationale: While AM agrees that compensation issues are better left to the
discretion of management, they appreciate the need to monitor for excessive
compensation practices on a case by case basis. If, after a review of the ISS
metrics, AM is comfortable with ISS's applying this calculation and will vote
according to their recommendation.

K.       Executive Compensation Advisory

AM policy is to follow management's recommended vote on shareholder proposals to
propose an advisory resolution seeking to ratify the compensation of the
company's named executive officers (NEOs) on an annual basis.

Rationale: AM believes that controls exist within senior management and
corporate compensation committees, ensuring fair compensation to executives.
This might allow shareholders to require approval for all levels of management's
compensation.

V.       Anti-Takeover Related Issues

A.       Shareholder Rights Plans ("Poison Pills")

AM policy is to vote "for" proposals to require shareholder ratification of
poison pills or that request boards to redeem poison pills, and to vote
"against" the adoption of poison pills if they are submitted for shareholder
ratification.

Rationale: Poison pills are the most prevalent form of corporate takeover
defenses and can be (and usually are) adopted without shareholder review or
consent. The potential cost of poison pills to shareholders during an attempted
takeover outweighs the benefits.

B.       Reincorporation

AM policy is to examine reincorporation proposals on a case-by-case basis. The
voting decision is based on: (1) differences in state law between the existing
state of incorporation and the proposed state of incorporation; and (2)
differences between the existing and the proposed charter/bylaws/articles of
incorporation and their effect on shareholder rights. If changes resulting from
the proposed reincorporation violate the corporate governance principles set
forth in these guidelines, the reincorporation will be deemed contrary to
shareholder's interests and a vote cast "against."

Rationale: Reincorporations can be properly analyzed only by looking at the
advantages and disadvantages to their shareholders. Care must be taken that
anti-takeover protection is not the sole or primary result of a proposed change.

C.       Fair-Price Proposals

AM policy is to vote "for" management fair-price proposals, provided that: (1)
the proposal applies only to two-tier offers; (2) the proposal sets an objective
fair-price test based on the highest price that the acquirer has paid for a
company's shares; (3) the supermajority requirement for bids that fail the
fair-price test is no higher than two-thirds of the outstanding shares; (4) the
proposal contains no other anti-takeover provisions or provisions that restrict
shareholders rights.

A vote is cast for shareholder proposals that would modify or repeal existing
fair-price requirements that do not meet these standards.

Rationale: While fair price provisions may be used as anti-takeover devices, if
adequate provisions are included, they provide some protection to shareholders
who have some say in their application and the ability to reject those
protections if desired.

D.       Exemption from state takeover laws

AM policy is to vote "for" shareholder proposals to opt out of state takeover
laws and to vote "against" management proposals requesting to opt out of state
takeover laws.

Rationale: Control share statutes, enacted at the state level, may harm
long-term share value by entrenching management. They also unfairly deny certain
shares their inherent voting rights.

E.       Non-financial Effects of Takeover Bids

Policy is to vote "against" shareholder proposals to require consideration of
non-financial effects of merger or acquisition proposals.

Rationale: Non-financial effects may often be subjective and are secondary to
AM's stated purpose of acting in its client's best economic interest.


VI.      Mergers & Acquisitions

Evaluation of mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings
and recapitalizations) are performed on a case-by-case basis incorporating
information from an independent proxy research source (currently ISS.)
Additional resources including portfolio management and research analysts may be
considered as set forth in AM's Policies and Procedures.


VII.     Social, Environmental & Political Issues

Social and environmental issues are becoming increasingly important to corporate
success. We incorporate social and environmental considerations into both our
investment decisions and our proxy voting decisions - particularly if the
financial performance of the company could be impacted.

With increasing frequency, shareholder proposals are submitted relating to
social and political responsibility issues. Almost universally, the company
management will recommend a vote "against" these proposals. These types of
proposals cover an extremely wide range of issues. Many of the issues tend to be
controversial and are subject to more than one reasonable, yet opposing, theory
of support. More so than with other types of proxy proposals, social and
political responsibility issues may not have a connection to the economic and
corporate governance principles effecting shareholders' interests. AM's policy
regarding social and political responsibility issues, as with any other issue,
is designed to protect our client shareholders' economic interests.

Occasionally, a distinction is made between a shareholder proposal requesting
direct action on behalf of the board and a request for a report on (or
disclosure of) some information. In order to avoid unduly burdening any company
with reporting requirements, AM's policy is to vote against shareholder
proposals that demand additional disclosure or reporting than is required by the
Securities and Exchange Commission unless it appears there is a legitimate issue
and the company has not adequately addressed shareholders' concerns.

A.       Labor & Human Rights

AM policy is to vote "against" adopting global codes of conduct or workplace
standards exceeding those mandated by law.

Rationale: Additional requirements beyond those mandated by law are deemed
unnecessary and potentially burdensome to companies

B.       Diversity & Equality

1.       AM policy is to vote "against" shareholder proposals to force equal
         employment opportunity, affirmative action or board diversity.

Rationale: Compliance with State and Federal legislation along with information
made available through filings with the EEOC provides sufficient assurance that
companies act responsibly and make information public.

2.       AM policy is also to vote "against" proposals to adopt the Mac Bride
         Principles. The Mac Bride Principles promote fair employment,
         specifically regarding religious discrimination.

Rationale: Compliance with the Fair Employment Act of 1989 makes adoption of the
Mac Bride Principles redundant. Their adoption could potentially lead to charges
of reverse discrimination.

C.       Health & Safety

1.       AM policy is to vote "against" adopting a pharmaceutical price
         restraint policy or reporting pricing policy changes.

Rationale: Pricing is an integral part of business for pharmaceutical companies
and should not be dictated by shareholders (particularly pursuant to an
arbitrary formula.) Disclosing pricing policies may also jeopardize a company's
competitive position in the marketplace.

2.       AM policy is to vote "against" shareholder proposals to control the use
         or labeling of and reporting on genetically engineered products.

Rationale: Additional requirements beyond those mandated by law are deemed
unnecessary and potentially burdensome to companies.

D.       Government/Military

1.       AM policy is to vote against shareholder proposals regarding the
         production or sale of military arms or nuclear or space-based weapons,
         including proposals seeking to dictate a company's interaction with a
         particular foreign country or agency.

Rationale: Generally, management is in a better position to determine what
products or industries a company can and should participate in. Regulation of
the production or distribution of military supplies is, or should be, a matter
of government policy.

2.       AM policy is to vote "against" shareholder proposals regarding
         political contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should
evaluate and determine the recipients of any contributions made by the company.

3.       AM policy is to vote "against" shareholder proposals regarding
         charitable contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should
evaluate and determine the recipients of any contributions made by the company.

E.       Tobacco

1.       AM policy is to vote "against" shareholder proposals requesting
         additional standards or reporting requirements for tobacco companies as
         well as "against" requesting companies to report on the intentional
         manipulation of nicotine content.

Rationale: Where a tobacco company's actions meet the requirements of legal and
industry standards, imposing additional burdens may detrimentally effect a
company's ability to compete. The disclosure of nicotine content information
could affect the company's rights in any pending or future litigation.

2.       Shareholder requests to spin-off or restructure tobacco businesses will
         be opposed.

Rationale: These decisions are more appropriately left to the Board and
management, and not to shareholder mandate.


VIII.    Environmental Issues

AM policy is to follow management's recommended vote on CERES Principles or
other similar environmental mandates (e.g., those relating to Greenhouse gas
emissions or the use of nuclear power).

Rationale: Environmental issues are extensively regulated by outside agencies
and compliance with additional requirements often involves significant cost to
companies.


IX.      Miscellaneous Items

A.       Ratification of Auditors

AM policy is to vote "for" a) the management recommended selection of auditors
and b) proposals to require shareholder approval of auditors.

Rationale: Absent evidence that auditors have not performed their duties
adequately, support for management's nomination is warranted.

B.       Limitation of non-audit services provided by independent auditor

AM policy is to support proposals limiting non-audit fees to 50% of the
aggregate annual fees earned by the firm retained as a company's independent
auditor.

Rationale: In the wake of financial reporting problems and alleged audit
failures at a number of companies, AM supports the general principle that
companies should retain separate firms for audit and consulting services to
avoid potential conflicts of interest. However, given the protections afforded
by the recently enacted Sarbanes-Oxley Act of 2002 (which requires Audit
Committee pre-approval for non-audit services and prohibits auditors from
providing specific types of services), and the fact that some non-audit services
are legitimate audit-related services, complete separation of audit and
consulting fees may not be warranted. A reasonable limitation is appropriate to
help ensure auditor independence and it is reasonable to expect that audit fees
exceed non-audit fees.

C.       Audit firm rotation

AM policy is to support proposals seeking audit firm rotation unless the
rotation period sought is less than five years.

Rationale: While the Sarbanes-Oxley Act mandates that the lead audit partner be
switched every five years, AM believes that rotation of the actual audit firm
would provide an even stronger system of checks and balances on the audit
function.

D.       Transaction of Other Business

AM policy is to vote against "transaction of other business" proposals.

Rationale: This is a routine item to allow shareholders to raise other issues
and discuss them at the meeting. As the nature of these issues may not be
disclosed prior to the meeting, we recommend a vote against these proposals.
This protects shareholders voting by proxy (and not physically present at a
meeting) from having action taken at the meeting that they did not receive
proper notification of or sufficient opportunity to consider.

E.       Motions to Adjourn the Meeting

AM Policy is to vote against proposals to adjourn the meeting.

Rationale: Management may seek authority to adjourn the meeting if a favorable
outcome is not secured. Shareholders should already have had enough information
to make a decision. Once votes have been cast, there is no justification for
management to continue spending time and money to press shareholders for
support.

F.       Bundled Proposals

AM policy is to vote against bundled proposals if any bundled issue would
require a vote against it if proposed individually.

Rationale: Shareholders should not be forced to "take the good with the bad" in
cases where the proposals could reasonably have been submitted separately.

G.       Change of Company Name

AM policy is to support management on proposals to change the company name.

Rationale: This is generally considered a business decision for a company.

H.       Proposals Related to the Annual Meeting

AM Policy is to vote in favor of management for proposals related to the conduct
of the annual meeting (meeting time, place, etc.)

Rationale: These are considered routine administrative proposals.

I.       Reimbursement of Expenses Incurred from Candidate Nomination

AM policy is to follow management's recommended vote on shareholder proposals
related to the amending of company bylaws to provide for the reimbursement of
reasonable expenses incurred in connection with nominating one or more
candidates in a contested election of directors to the corporation's board of
directors.

Rationale: Corporations should not be liable for costs associated with
shareholder proposals for directors.

J.       Investment Company Proxies

Proxies solicited by investment companies are voted in accordance with the
recommendations of an independent third party, currently ISS. However, regarding
investment companies for which AM or an affiliate serves as investment adviser
or principal underwriter, such proxies are voted in the same proportion as the
vote of all other shareholders. Proxies solicited by master funds from feeder
funds will be voted in accordance with applicable provisions of Section 12 of
the Investment Company Act of 1940.

Investment companies, particularly closed-end investment companies, are
different from traditional operating companies. These differences may call for
differences in voting positions on the same matter. For example, AM could vote
"for" staggered boards of closed-end investment companies, although AM generally
votes "against" staggered boards for operating companies. Further, the manner in
which AM votes investment company proxies may differ from proposals for which a
AM-advised investment company solicits proxies from its shareholders. As
reflected in the Guidelines, proxies solicited by closed-end (and open-end)
investment companies are voted in accordance with the pre-determined guidelines
of an independent third-party.

Subject to participation agreements with certain Exchange Traded Funds ("ETF")
issuers that have received exemptive orders from the U.S. Securities and
Exchange Commission allowing investing DWS funds to exceed the limits set forth
in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will
echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of
outstanding voting shares globally when required to do so by participation
agreements and SEC orders.

Note: With respect to the QP Trust (not registered under the Investment Company
Act of 1940), the Fund is not required to engage in echo voting and the
investment adviser will use these Guidelines, and may determine, with respect to
the QP Trust, to vote contrary to the positions in the Guidelines, consistent
with the Fund's best interest.


K.       International Proxy Voting

The above guidelines pertain to issuers organized in the United States, Canada
and Germany. Proxies solicited by other issuers are voted in accordance with
international guidelines or the recommendation of ISS and in accordance with
applicable law and regulation.




                      APPENDIX B -- RATINGS OF INVESTMENTS

BOND AND COMMERCIAL PAPER RATINGS

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

Moody's Investors Service, Inc.'s ("Moody's") Corporate Bond Ratings

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

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

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

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

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

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

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

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

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

Issues that are secured by escrowed funds held in trust, reinvested in direct,
non-callable US government obligations or noncallable obligations
unconditionally guaranteed by the US Government or Resolution Funding
Corporation are identified with a # (hash mark) symbol, e.g., #Aaa.

Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by a) earnings of projects under construction, b) earnings of projects
unseasoned in operation experience, c) rentals which begin when facilities are
completed, or d) payments to which some other limiting condition attaches. The
parenthetical rating denotes probable credit stature upon completion of
construction or elimination of the basis of the condition.

Moody's assigns ratings to individual debt securities issued from medium-term
note (MTN) programs, in addition to indicating ratings to MTN programs
themselves. Notes issued under MTN programs with such indicated ratings are
rated at issuance at the rating applicable to all pari passu notes issued under
the same program, at the program's relevant indicated rating, provided such
notes do not exhibit any of the characteristics listed below. For notes with any
of the following characteristics, the rating of the individual note may differ
from the indicated rating of the program:

1.       Notes containing features which link the cash flow and/or market value
         to the credit performance of any third party or parties.

2.       Notes allowing for negative coupons, or negative principal.

Notes containing any provision which could obligate the investor to make any
additional payments.

Market participants must determine whether any particular note is rated, and if
so, at what rating level. Moody's encourages market participants to contact
Moody's Rating Desks directly if they have questions regarding ratings for
specific notes issued under a medium-term note program.

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Caa in its corporate bond rating 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.

Moody's Short-Term Debt Ratings

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
one year. Such obligations generally have an original maturity not exceeding one
year.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

Issuers rated Prime-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:

o        Leading market positions in well established industries.

o        High rates of return on funds employed.

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

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

o        Well established access to a range of financial markets and assured
         sources of alternate liquidity.

Issuers rated Prime-2 or P-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment. Moody's
makes no representation and gives no opinion on the legal validity or
enforceability of any support arrangements.

Standard & Poor's  ("S&P") Corporate Bond Ratings

Investment Grade

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.

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

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

Speculative Grade

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

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

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.

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 has a currently identifiable vulnerability to default.

C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued. Debt rated C has a
currently highly identifiable vulnerability to default. A "C" will also be
assigned to a preferred stock issue in arrears on dividends or sinking fund
payments, but that is currently paying.

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 also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

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

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

r: This symbol is attached to the ratings of instruments with significant
non-credit risks. It highlights risks to principal expected returns which are
not addressed in the credit rating.

S&P's Commercial Paper Ratings

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

A-1: A short-term obligation rated "A-1" is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

B: A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.

C: A short-term obligation rated "C" is currently vulnerable to nonpayment and
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

D: A short-term obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.

Local Currency and Foreign Currency Risks

County risk considerations are a standard part of Standard & Poor's analysis for
credit ratings on any issuer or issue. Currency of repayment is a key factor in
this analysis. An obligor's capacity to repay foreign currency obligation may be
lower than its capacity to repay obligations in its local currency due to the
sovereign government's own relatively lower capacity to repay external versus
domestic debt. These sovereign risk considerations are incorporated in the debt
ratings assigned to specific issues. Foreign currency issuer ratings are also
distinguished from local currency issuer ratings to identify those instances
where sovereign risks make them different for the same issuer.

Fitch Inc. ("Fitch")  Bond 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.

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.

Fitch Short-Term Ratings

F-1: Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.

F-2: 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.

F-3: Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments;
plus vulnerability to near-term adverse changes in financial and economic
conditions.

C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

D:  Default.  Denotes actual or imminent payment default.

Notes to Long-Term and Short-Term Ratings

"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA" Long-Term rating
category, to categories below "CCC," or to Short-Term ratings other than "F1."

NR:  "NR" indicates that Fitch does not rate the issuer or issue in question.

Withdrawn: A rating is withdrawn when Fitch 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 rating may be raised,
lowered, or maintained. Rating Watch is typically resolved over a relatively
short period.

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,
companies whose 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. In these
cases, the Rating Outlook may be described as evolving.