Filed electronically with the Securities and Exchange Commission
                               on December 3, 2009

                                                                File No. 2-57937
                                                               File No. 811-2719

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM N-1A


                   REGISTRATION STATEMENT UNDER THE SECURITIES
                                  ACT OF 1933                              |___|
                          Pre-Effective Amendment No.                      |___|
                        Post-Effective Amendment No. 47                    | X |
                                       And
                        REGISTRATION STATEMENT UNDER THE
                         INVESTMENT COMPANY ACT OF 1940                    |___|

                               Amendment No. 47                            | X |


                    DWS STRATEGIC GOVERNMENT SECURITIES FUND
                    ----------------------------------------
               (Exact Name of Registrant as Specified in Charter)

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

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

                   John Millette, Vice President and Secretary
                       One Beacon Street, Boston, MA 02108
                       -----------------------------------
                     (Name and Address of Agent for Service)

                                    copy to:
                                 David A. Sturms
                                Vedder Price P.C.
                              222 N. LaSalle Street
                                Chicago, IL 60601


|___|     Immediately upon filing pursuant to paragraph (b)
|___|     60 days after filing pursuant to paragraph (a) (1)
|___|     75 days after filing pursuant to paragraph (a) (2)
|___|     On _______________ pursuant to paragraph (b)
| X |     On February 1, 2010 pursuant to paragraph (a) (1)
|___|     On _______________ pursuant to paragraph (a) (2) of Rule 485

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



                                       1
<PAGE>


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

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

o        DWS Strategic Government Securities Fund: Classes A, B, C, S and
         Institutional Class


                                       2
<PAGE>


[GRAPHIC APPEARS HERE]



PROSPECTUS


FEBRUARY 1, 2010




<TABLE>
<S>                   <C> <C>      <C> <C>      <C> <C>      <C>    <C>
DWS High Income Fund
CLASS/TICKER          A   KHYAX    B   KHYBX    C   KHYCX    INST   KHYIX
</TABLE>


...............................................................................


<TABLE>
<S>                        <C> <C>      <C> <C>      <C> <C>      <C> <C>
DWS Strategic Income Fund
CLASS/TICKER               A   KSTAX    B   KSTBX    C   KSTCX    S   KSTSX
</TABLE>


...............................................................................


<TABLE>
<S>                                       <C> <C>      <C> <C>      <C> <C>      <C>    <C>      <C> <C>
DWS Strategic Government Securities Fund
CLASS/TICKER                              A   KUSAX    B   KUSBX    C   KUSCX    INST   KUSIX    S   KUSMX
</TABLE>


(Class B closed as of March 1, 2010)


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


                                     RESHAPING INVESTING. [DWS INVESTMENTS LOGO]
                                                             Deutsche Bank Group




<PAGE>

TABLE OF CONTENTS





<TABLE>
<S>                                             <C>
DWS HIGH INCOME FUND
Investment Objective...........................  1
Fees and Expenses of the Fund..................  1
Principal Investment Strategy..................  2
Main Risks.....................................  2
Past Performance...............................  3
Management.....................................  4
Purchase and Sale of Fund Shares...............  4
Tax Information................................  4
Payments to Broker-Dealers and
Other Financial Intermediaries.................  4
DWS STRATEGIC INCOME FUND
Investment Objective...........................  5
Fees and Expenses of the Fund..................  5
Principal Investment Strategy..................  6
Main Risks.....................................  6
Past Performance...............................  7
Management.....................................  8
Purchase and Sale of Fund Shares...............  8
Tax Information................................  8
Payments to Broker-Dealers and
Other Financial Intermediaries.................  8
DWS STRATEGIC GOVERNMENT
SECURITIES FUND
Investment Objective...........................  9
Fees and Expenses of the Fund..................  9
Principal Investment Strategy.................. 10
Main Risks..................................... 10
Past Performance............................... 11
Management..................................... 12
Purchase and Sale of Fund Shares............... 12
Tax Information................................ 12
Payments to Broker-Dealers and
Other Financial Intermediaries................. 12
FUND DETAILS
Other Policies and Risks....................... 13
Who Manages and Oversees the Funds............. 14
Management..................................... 15


</TABLE>
<TABLE>
<S>                                             <C>
INVESTING IN THE FUNDS
Choosing a Share Class......................... 17
Buying, Exchanging and Selling Shares.......... 21
How to Buy Shares.............................. 21
How to Exchange Shares......................... 23
How to Sell Shares............................. 23
Financial Intermediary Support Payments........ 24
Policies You Should Know About................. 25
Policies About Transactions.................... 25
How each Fund Calculates Share Price........... 29
Other Rights We Reserve........................ 29
Understanding Distributions and Taxes.......... 30
FINANCIAL HIGHLIGHTS........................... 32
APPENDIX....................................... 45
</TABLE>



-------------------------------------------------------------------------------
YOUR INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY,
ENTITY OR PERSON.
-------------------------------------------------------------------------------

<PAGE>



                                                          [DWS INVESTMENTS LOGO]
                                                             Deutsche Bank Group



DWS HIGH INCOME FUND



INVESTMENT OBJECTIVE

The fund seeks the highest level of current income obtainable from a
diversified portfolio of fixed-income securities which portfolio management
considers consistent with reasonable risk. As a secondary objective, the fund
will seek capital gain where consistent with its primary objective.




FEES AND EXPENSES OF THE FUND


These are the fees you may pay when you buy and hold shares in this fund. You
may qualify for sales charge discounts if you and your immediate family invest,
or agree to invest in the future, at least $100,000 in DWS funds. More
information about these and other discounts is available from your financial
professional and in Choosing a Share Class (p. 17) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (p. II-10).



SHAREHOLDER FEES (paid directly from your investment)


<TABLE>
<CAPTION>
                                           A          B          C       INST
                             ---------------  ---------  ---------  ---------
<S>                          <C>              <C>        <C>        <C>
Maximum sales charge
(load) on purchases, as %
of offering price                   4.50        None       None       None
---------------------------         -----       --         --         --
Maximum contingent
deferred sales charge
(load), as % of redemption
proceeds                         None(1)          4.00       1.00     None
---------------------------      --------       ------     ------     --
Redemption/exchange fee
on shares owned less than
30 days, as % of redemp-
tion proceeds                       2.00          2.00       2.00       2.00
---------------------------      --------       ------     ------     ------
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)


<TABLE>
<CAPTION>
                              A    B    C   INST
                            ---  ---  ---  -----
<S>                         <C>  <C>  <C>  <C>
Management fee
--------------------------  ---  ---  ---  -----
Distribution/service
(12b-1) fees                               None
--------------------------  ---  ---  ---  -----
Other expenses (includes
an administrative fee)
--------------------------  ---  ---  ---  -----
Total operating expenses
--------------------------  ---  ---  ---  -----
</TABLE>


(1)   Investments of $1 million or more may be eligible to buy Class A shares
      without a sales charge (load), but may be subject to a contingent
      deferred sales charge of 1.00% if redeemed within 12 months of purchase
      and 0.50% if redeemed within the following six months.


EXAMPLE

This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the fund's operating expenses
[(including one year of capped expenses for _____)] remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:



<TABLE>
<CAPTION>
YEARS      A    B    C   INST
-------  ---  ---  ---  -----
<S>      <C>  <C>  <C>  <C>
1
--       ---  ---  ---  -----
3
--       ---  ---  ---  -----
5
--       ---  ---  ---  -----
10
--       ---  ---  ---  -----
</TABLE>

You would pay the following expenses if you did not redeem your shares:



<TABLE>
<CAPTION>
YEARS      A    B    C   INST
-------  ---  ---  ---  -----
<S>      <C>  <C>  <C>  <C>
1
--       ---  ---  ---  -----
3
--       ---  ---  ---  -----
5
--       ---  ---  ---  -----
10
--       ---  ---  ---  -----
</TABLE>

Class B converts to Class A after six years; the Example for Class B reflects
lower fees incurred in Class A after this conversion.


PORTFOLIO TURNOVER

The fund pays transaction costs when it buys and sells securities (or "turns
over" its portfolio). A higher portfolio turnover may indicate higher
transaction costs and may mean higher taxes if you are investing in a taxable
account.




                                       1
PROSPECTUS February 1, 2010                               DWS High Income Fund
<PAGE>


These costs are not reflected in annual fund operating expenses or in the
expense example, but are reflected in fund performance.

During the most recent fiscal year, the fund's portfolio turnover rate was __%
of the average value of its portfolio.




PRINCIPAL INVESTMENT STRATEGY



MAIN INVESTMENTS. Under normal circumstances, the fund generally invests at
least 65% of net assets, plus the amount of any borrowings for investment
purposes, in junk bonds, which are those rated below the fourth highest credit
rating category (that is, grade BB/Ba and below). The fund may invest up to 50%
of total assets in bonds denominated in US dollars or foreign currencies from
foreign issuers. The fund invests in securities of varying maturities and
intends to maintain a dollar-weighted effective average portfolio maturity that
will not exceed ten years.



MANAGEMENT PROCESS. Portfolio management focuses on cash flow and total return
analysis, and broad diversification among countries, sectors, industries and
individual issuers and maturities. Portfolio management uses an active process
that emphasizes relative value in a global environment, managing on a total
return basis, and using intensive research to identify stable to improving
credit situations that may provide yield compensation for the risk of investing
in junk bonds.


The investment process involves a bottom-up approach, where relative value and
fundamental analysis are used to select the best securities within each
industry, and a top-down approach to assess the overall risk and return in the
market and which considers macro trends in the economy. To select securities or
investments, portfolio management:

o  analyzes economic conditions for improving or undervalued sectors and
   industries;

o  uses independent credit research and on-site management visits to evaluate
   individual issuers' debt service, growth rate, and both downgrade and
   upgrade potential;

o  assesses new offerings versus secondary market opportunities; and

o  seeks issuers within attrative industry sectors and with strong long-term
   fundamentals and improving credits.



OTHER INVESTMENTS AND TECHNIQUES
--------------------------------------------------------------------------------


DERIVATIVES. The fund may use various types of derivatives (contracts whose
value is based on, for example, indices, currencies or securities) for hedging,
risk management or non-hedging purposes to seek to enhance potential gains. The
fund may use derivatives as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions or other
needs.

SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.

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


MAIN RISKS


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


CREDIT RISK. A fund purchasing debt securities faces the risk that the
creditworthiness of an issuer may decline, causing the value of the debt
securities to decline. In addition, an issuer may not be able to make timely
payments on the interest and/or principal on the debt security it has issued.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest category) may be in uncertain
financial health, the prices of their debt securities can be more vulnerable to
bad economic news or even the expectation of bad news, than investment-grade
debt securities. In some cases, debt securities, particularly high-yield debt
securities, may decline in credit quality or go into default. Because the fund
may invest in securities not paying current interest or in securities already
in default, these risks may be more pronounced.


INTEREST RATE RISK. When interest rates rise, prices of debt securities
generally decline. The longer the duration of the fund's debt securities, the
more sensitive it will be to interest rate changes. (As a general rule, a 1%
rise in interest rates means a 1% fall in value for every year of duration.)


PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of
high-yielding bonds may pay off the bonds earlier than expected (prepayment
risk), and the fund may have to reinvest the proceeds at lower yields. When
interest rates rise, issuers of lower-yielding bonds may pay off the bonds
later than expected (extension risk), thus keeping the fund's assets tied up in
lower-yielding bonds. Prepayments could also create capital gains tax liability
in some instances. Any unexpected behavior in interest rates could increase the
volatility of the fund's share price and yield and could hurt fund performance.



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

o  Currency risk. Changes in currency exchange rates may affect the US dollar
   value of foreign securities or the income or gain received on these
   securities.

o  Emerging market risk. In general, foreign investment risks are greater in
   emerging markets than in developed markets, to the point where emerging
   market investments are often considered speculative. For example,
   governments may exert heavy control over commerce and markets, and may
   seize businesses or other assets, impose excessive taxes, interfere in
   trade settlements, or otherwise act in ways that may appear extreme or
   punitive by US standards. The development and stability of emerging markets
   could be hindered by profound



                                       2
PROSPECTUS February 1, 2010                               DWS High Income Fund
<PAGE>


   social changes and by business practices that depart from norms for
   developed countries. Emerging economies can be highly dependent upon
   exports, making them vulnerable to falling demand from developed countries,
   and are more likely to experience high inflation, deflation or currency
   devaluation. These economies may also have high levels of debt, making them
   heavily reliant on foreign capital and vulnerable to capital flight.

o  Governmental risk. Compared to the United States, foreign markets and
   companies are less regulated and investors may have fewer legal remedies.
   Foreign governments may limit how much trading profit or currency can be
   taken out of the country, restrict the exchange of their currencies, extend
   diplomatic disputes to include trade and financial relations, seize foreign
   investments, or impose high taxes.

o  Information risk. Because foreign accounting, auditing and financial
   reporting practices are typically less stringent than in the United States,
   foreign financial reports may present an incomplete, outdated or misleading
   picture of a company.

o  Taxes. Foreign withholding and certain other taxes may reduce the amount of
   income distributed to shareholders, and special US tax considerations may
   apply to foreign investments.

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

SECURITY SELECTION RISK. The securities in the fund's portfolio may decline in
value. Portfolio management could be wrong in its analysis of industries,
companies, economic trends, the relative attractiveness of different securities
or other matters.


PRICING RISK. If market conditions make it difficult to value some investments,
the fund may value these investments using more subjective methods, such as
fair value pricing. In such cases, the value determined for an investment could
be different than the value realized upon such investment's sale. As a result,
you could pay more than the market value when buying fund shares or receive
less than the market value when selling fund shares.


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


SECURITIES LENDING RISK. Any decline in the value of a portfolio security that
occurs while the security is out on loan is borne by the fund, and will
adversely affect performance. Also, there may be delays in recovery of
securities loaned or even a loss of rights in the collateral should the
borrower of the securities fail financially while holding the security.


More information about fund risks, including additional risk factors not
discussed above, is included in Fund Details and the fund's Statement of
Additional Information.


PAST PERFORMANCE


How a fund's returns vary from year to year can give an idea of its risk; so
can comparing fund performance to overall market performance (as measured by an
appropriate market index). As always, past performance may not indicate future
results. All performance figures below assume that dividends were reinvested.
For more recent performance figures, go to www.dws-investments.com (the Web
site does not form a part of this prospectus) or call the phone number for your
share class included in this prospectus.



CALENDAR YEAR TOTAL RETURNS (%) (Class A)

These year-by-year returns do not include sales charges, and would be lower if
they did. Returns for other classes were different and are not shown here.




[BAR GRAPHIC OMITTED HERE]

[BAR GRAPHIC DATA]


<TABLE>
<S>          <C>       <C>        <C>        <C>        <C>       <C>        <C>     <C>       <C>
  -9.22      3.37       -1.01     25.01      12.33      4.00      10.27      1.01    -23.64
    2000       2001    2002       2003       2004       2005      2006       2007    2008      2009
</TABLE>




<TABLE>
<S>                            <C>
Best Quarter: ___%, Q_ ____    Worst Quarter: ____%, Q_ ____
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2009 expressed as a %)

These returns include sales charges, if any. Performance of a broad-based index
is shown for comparison. Indexes have no sales charges and cannot be invested
in directly. After-tax returns (which are shown only for Class A and would be
different for other classes) reflect the highest individual federal income tax
rates in effect at the time, but do not reflect any state or local taxes.
[Return after taxes on distributions with sales is higher than returns after
tax on distributions for each period due to a capital loss upon redemption.]
Your actual after-tax returns may be different. After-tax returns are not
relevant to shares held in an IRA, 401(k) or other tax-advantaged investment
plan. Performance of Class B shares does not assume the conversion




                                       3
PROSPECTUS February 1, 2010                               DWS High Income Fund
<PAGE>


to Class A shares after six years.


<TABLE>
<CAPTION>
                                 CLASS       1        5      10
                             INCEPTION    YEAR    YEARS   YEARS
                           -----------  ------  -------  ------
<S>                        <C>          <C>     <C>      <C>
CLASS A before tax           1/26/78
-------------------------    -------    ------  -------  ------
  After tax on
  distributions()
  After tax on distribu-
  tions, with sale
-------------------------  -------      ------  -------  ------
CLASS B before tax           5/31/94
-------------------------    -------    ------  -------  ------
CLASS C before tax           5/31/94
-------------------------    -------    ------  -------  ------
INST CLASS before tax        8/19/02
-------------------------    -------    ------  -------  ------
CREDIT SUISSE HIGH YIELD
INDEX
-------------------------  -------      ------  -------  ------
</TABLE>


CREDIT SUISSE HIGH YIELD INDEX is an unmanaged trader-priced portfolio,
constructed to mirror the global high-yield debt market.


MANAGEMENT



INVESTMENT ADVISOR

Deutsche Investment Management Americas Inc.


PORTFOLIO MANAGER(S)

GARY SULLIVAN, CFA. Managing Director of Deutsche Asset Management. Portfolio
Manager of the fund since 2006.



PURCHASE AND SALE OF FUND SHARES


MINIMUM INITIAL INVESTMENT ($)


<TABLE>
<CAPTION>
                                               AUTOMATIC
                           IRAS (AND UGMAS/   INVESTMENT
              NON-IRA    UTMAS FOR CLASS S)        PLANS
         ------------  --------------------  -----------
<S>      <C>           <C>                   <C>
A B C        1,000             500               500
-------      -----             ---               ---
INST     1,000,000             N/A               N/A
-------  ---------             ---               ---
</TABLE>

For participants in certain fee-based and wrap programs offered through certain
financial intermediaries approved by the Advisor there is no minimum initial
investment for Class A, B and C shares and no minimum additional investment for
Class A shares. Institutional Class shares also have no additional investment
minimum. The minimum additional investment for all other instances is $50. The
maximum Automatic Investment Plan investment is $250,000.


TO PLACE ORDERS


<TABLE>
<S>            <C>                       <C>
MAIL           First Investment         DWS Investments, PO Box 219356
                                        Kansas City, MO 64121-9356
               Additional Investments   DWS Investments, PO Box 219154
                                        Kansas City, MO 64121-9154
               Exchanges and            DWS Investments, PO Box 219557
               Redemptions              Kansas City, MO 64121-9557
EXPEDITED MAIL                          DWS Investments, 210 West 10th Street
                                        Kansas City, MO 64105-1614
WEB SITE                                www.dws-investments.com
TELEPHONE                               Class A, B or C shares: (800) 621-1048
                                        Institutional Class shares: (800) 730-1313
                                        M - F 9 a.m. - 6 p.m. ET
TDD LINE                                (800) 728-3006, M - F 9 a.m. - 6 p.m. ET
</TABLE>



You can buy or sell shares of the fund on any business day at our web site, by
mail, or by telephone. The fund is generally open on days when the New York
Stock Exchange is open for regular trading.


Effective March 1, 2010, Class B shares will be closed to new purchases, except
for exchanges and the reinvestment of dividends. Institutional Class shares are
generally available only to qualified institutions.



TAX INFORMATION


The fund's distributions (dividend distributions are expected to be paid
monthly and capital gains distributions are expected to be paid annually) are
generally taxable to you as ordinary income or capital gains, except when your
investment is in an IRA, 401(k), or other tax-deferred investment plan.



PAYMENTS TO BROKER-DEALERS AND

OTHER FINANCIAL INTERMEDIARIES

If you purchase the fund through a broker-dealer or other financial
intermediary (such as a bank), the fund and its affiliates may pay the
intermediary for the sale of fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the

fund over another investment. Ask your salesperson or visit your financial
intermediary's web site for more information.



                                       4
PROSPECTUS February 1, 2010                               DWS High Income Fund
<PAGE>




                                                          [DWS INVESTMENTS LOGO]
                                                             Deutsche Bank Group


DWS STRATEGIC INCOME FUND



INVESTMENT OBJECTIVE

The fund seeks a high current return.




FEES AND EXPENSES OF THE FUND


These are the fees you may pay when you buy and hold shares in this fund. You
may qualify for sales charge discounts if you and your immediate family invest,
or agree to invest in the future, at least $100,000 in DWS funds. More
information about these and other discounts is available from your financial
professional and in Choosing a Share Class (p. 17) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (p. II-10).



SHAREHOLDER FEES (paid directly from your investment)


<TABLE>
<CAPTION>
                                           A          B          C      S
                             ---------------  ---------  ---------  -----
<S>                          <C>              <C>        <C>        <C>
Maximum sales charge
(load) on purchases, as %
of offering price                   2.75        None       None     None
---------------------------         -----       --         --       -----
Maximum contingent
deferred sales charge
(load), as % of redemption
proceeds                         None(1)          4.00       1.00   None
---------------------------      --------       ------     ------   -----
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)


<TABLE>
<CAPTION>
                               A    B    C   S
                             ---  ---  ---  --
<S>                          <C>  <C>  <C>  <C>
Management fee
---------------------------  ---  ---  ---  --
Distribution/service
(12b-1) fees
---------------------------  ---  ---  ---  --
Other expenses (includes
an administrative fee)
---------------------------  ---  ---  ---  --
Acquired funds (underlying
funds) fees and expenses
---------------------------  ---  ---  ---  --
TOTAL OPERATING EXPENSES
---------------------------  ---  ---  ---  --
Less expense waiver/
reimbursement
---------------------------  ---  ---  ---  --
NET OPERATING EXPENSES
---------------------------  ---  ---  ---  --
</TABLE>


(1)   Investments of $1 million or more may be eligible to buy Class A shares
      without a sales charge (load), but may be subject to a contingent
      deferred sales charge of 1.00% if redeemed within 12 months of purchase
      and 0.50% if redeemed within the following six months.

The Advisor has contractually agreed through [_________] to waive and/or
reimburse fund expenses to the extent necessary to maintain the fund's total
operating expenses at [__%, ___%, ___% and ___%] for Class A, Class B, Class C
and Class S shares, respectively. The agreement may only be terminated with the
consent of the fund's Board and does not extend to extraordinary expenses,
taxes, brokerage and interest expense.

EXAMPLE

This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the fund's operating expenses
[(including one year of capped expenses for _____)] remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:



<TABLE>
<CAPTION>
YEARS      A    B    C   S
-------  ---  ---  ---  --
<S>      <C>  <C>  <C>  <C>
1
--       ---  ---  ---  --
3
--       ---  ---  ---  --
5
--       ---  ---  ---  --
10
--       ---  ---  ---  --
</TABLE>

You would pay the following expenses if you did not redeem your shares:



<TABLE>
<CAPTION>
YEARS      A    B    C   S
-------  ---  ---  ---  --
<S>      <C>  <C>  <C>  <C>
1
--       ---  ---  ---  --
3
--       ---  ---  ---  --
5
--       ---  ---  ---  --
10
--       ---  ---  ---  --
</TABLE>

Class B converts to Class A after six years; the Example for Class B reflects
lower fees incurred in Class A after this conversion.




                                       5
PROSPECTUS February 1, 2010                          DWS Strategic Income Fund
<PAGE>


PORTFOLIO TURNOVER

The fund pays transaction costs when it buys and sells securities (or "turns
over" its portfolio). A higher portfolio turnover may indicate higher
transaction costs and may mean higher taxes if you are investing in a taxable
account. These costs are not reflected in annual fund operating expenses or in
the expense example, but are reflected in fund performance.


During the most recent fiscal year, the fund's portfolio turnover rate was __%
of the average value of its portfolio.




PRINCIPAL INVESTMENT STRATEGY



MAIN INVESTMENTS. Under normal circumstances, the fund invests mainly in bonds
issued by both US and foreign corporations and governments. The credit quality
of the fund's investments may vary; the fund may invest up to 100% of total
assets in either investment-grade bonds or in junk bonds, which are those below
the fourth highest credit rating category (that is, grade BB/Ba and below). The
fund may invest up to 50% of total assets in foreign bonds. The fund may also
invest in emerging markets securities and dividend-paying common stocks.


MANAGEMENT PROCESS. Portfolio management may shift the allocations of the
fund's holdings, favoring different types of securities at different times,
while still maintaining variety in terms of the companies and industries
represented in the fund's holdings.



In deciding which types of securities to buy and sell, portfolio management
typically weighs a number of factors against each other, from economic outlooks
and possible interest rate movements to changes in supply and demand within the
bond market. In choosing individual bonds, portfolio management considers how
they are structured and uses independent analysis of issuers' creditworthiness.




IGAP STRATEGY. In addition to the fund's main investment strategy, portfolio
management seeks to enhance returns by employing a proprietary overlay strategy
called iGAP (integrated Global Alpha Platform), which attempts to take
advantage of mispricings within global equity, bond and currency markets. The
iGAP strategy uses derivatives (contracts whose value is based on, for example,
indices, currencies or securities), in particular exchange-traded futures
contracts on global equities and bonds and over-the-counter forward currency
contracts.


The fund may invest up to 5% of net assets in shares of DWS Floating Rate Plus
Fund, which invests primarily in adjustable rate loans that have a senior right
to payment and also uses the iGAP strategy.



OTHER INVESTMENTS AND TECHNIQUES
--------------------------------------------------------------------------------

DERIVATIVES. The fund also may use various types of derivatives outside of the
iGAP strategy, such as futures contracts, forward currency contracts, interest
rate swaps, total return swaps and credit default swaps. It may use these for
hedging, risk management or non-hedging purposes to seek to enhance potential
gains. The fund may use derivatives as a substitute for direct investment in a
particular asset class or to keep cash on hand to meet shareholder redemptions
or other needs.

SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.


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


MAIN RISKS


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


ASSET ALLOCATION RISK. Portfolio management may favor one or more types of
investments or assets that underperform other investments, assets, or
securities markets as a whole. Anytime portfolio management buys or sells
securities in order to adjust the fund's asset allocation this will increase
portfolio turnover and generate transaction costs.


INTEREST RATE RISK. When interest rates rise, prices of debt securities
generally decline. The longer the duration of the fund's debt securities, the
more sensitive it will be to interest rate changes. (As a general rule, a 1%
rise in interest rates means a 1% fall in value for every year of duration.)


CREDIT RISK. A fund purchasing debt securities faces the risk that the
creditworthiness of an issuer may decline, causing the value of the debt
securities to decline. In addition, an issuer may not be able to make timely
payments on the interest and/or principal on the debt security it has issued.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest category) may be in uncertain
financial health, the prices of their debt securities can be more vulnerable to
bad economic news or even the expectation of bad news, than investment-grade
debt securities. In some cases, debt securities, particularly high-yield debt
securities, may decline in credit quality or go into default. Because the fund
may invest in securities not paying current interest or in securities already
in default, these risks may be more pronounced.


IGAP RISK. The success of the iGAP strategy depends, in part, on portfolio
management's ability to analyze the correlation between various global markets
and asset classes. If portfolio management's correlation analysis proves to be
incorrect, losses to the fund may be significant and may substantially exceed
the intended level of market exposure for the iGAP strategy.


DERIVATIVES RISK. Risks associated with derivatives include the risk that the
derivative is not well correlated with the security, index or currency to which
it relates; the risk that derivatives may result in losses or missed
opportunities; the risk that the fund will be unable to sell the derivative
because of an illiquid secondary market; the risk that a counterparty is
unwilling or unable to meet its obligation; and the risk that the derivative
transaction could expose the fund to the effects of leverage, which could
increase




                                       6
PROSPECTUS February 1, 2010                          DWS Strategic Income Fund
<PAGE>


the fund's exposure to the market and magnify potential losses. There is no
guarantee that derivatives, to the extent employed, will have the intended
effect, and their use could cause lower returns or even losses to the fund. The
use of derivatives by the fund to hedge risk may reduce the opportunity for
gain by offsetting the positive effect of favorable price movements.

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

o  Currency risk. Changes in currency exchange rates may affect the US dollar
   value of foreign securities or the income or gain received on these
   securities.

o  Emerging market risk. In general, foreign investment risks are greater in
   emerging markets than in developed markets, to the point where emerging
   market investments are often considered speculative. For example,
   governments may exert heavy control over commerce and markets, and may
   seize businesses or other assets, impose excessive taxes, interfere in
   trade settlements, or otherwise act in ways that may appear extreme or
   punitive by US standards. The development and stability of emerging markets
   could be hindered by profound social changes and by business practices that
   depart from norms for developed countries. Emerging economies can be highly
   dependent upon exports, making them vulnerable to falling demand from
   developed countries, and are more likely to experience high inflation,
   deflation or currency devaluation. These economies may also have high
   levels of debt, making them heavily reliant on foreign capital and
   vulnerable to capital flight.

o  Governmental risk. Compared to the United States, foreign markets and
   companies are less regulated and investors may have fewer legal remedies.
   Foreign governments may limit how much trading profit or currency can be
   taken out of the country, restrict the exchange of their currencies, extend
   diplomatic disputes to include trade and financial relations, seize foreign
   investments, or impose high taxes.

o  Information risk. Because foreign accounting, auditing and financial
   reporting practices are typically less stringent than in the United States,
   foreign financial reports may present an incomplete, outdated or misleading
   picture of a company.

o  Taxes. Foreign withholding and certain other taxes may reduce the amount of
   income distributed to shareholders, and special US tax considerations may
   apply to foreign investments.

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


SECURITY SELECTION RISK. The securities in the fund's portfolio may decline in
value. Portfolio management could be wrong in its analysis of industries,
companies, economic trends, the relative attractiveness of different securities
or other matters.


PRICING RISK. If market conditions make it difficult to value some investments,
the fund may value these investments using more subjective methods, such as
fair value pricing. In such cases, the value determined for an investment could
be different than the value realized upon such investment's sale. As a result,
you could pay more than the market value when buying fund shares or receive
less than the market value when selling fund shares.


SECURITIES LENDING RISK. Any decline in the value of a portfolio security that
occurs while the security is out on loan is borne by the fund, and will
adversely affect performance. Also, there may be delays in recovery of
securities loaned or even a loss of rights in the collateral should the
borrower of the securities fail financially while holding the security.


More information about fund risks, including additional risk factors not
discussed above, is included in Fund Details and the fund's Statement of
Additional Information.


PAST PERFORMANCE


How a fund's returns vary from year to year can give an idea of its risk; so
can comparing fund performance to overall market performance (as measured by an
appropriate market index). As always, past performance may not indicate future
results. All performance figures below assume that dividends were reinvested.
For more recent performance figures, go to www.dws-investments.com (the Web
site does not form a part of this prospectus) or call the phone number for your
share class included in this prospectus.



CALENDAR YEAR TOTAL RETURNS (%) (Class A)

These year-by-year returns do not include sales charges, and would be lower if
they did. Returns for other classes were different and are not shown here.



[BAR GRAPHIC OMITTED HERE]

[BAR GRAPHIC DATA]



<TABLE>
<S>          <C>       <C>       <C>        <C>        <C>       <C>       <C>     <C>      <C>
  -4.77      3.89      5.56      19.34      11.00      2.16       8.62     5.37    -8.66
    2000       2001    2002      2003       2004       2005      2006      2007    2008     2009
</TABLE>




<TABLE>
<S>                            <C>
Best Quarter: ____%, Q_ ____   Worst Quarter: ___%, Q_ ____
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2009 expressed as a %)

These returns include sales charges, if any. Performance of a broad-based index
is shown for comparison. Indexes have no sales charges and cannot be invested
in directly. After-tax returns (which are shown only for Class A and would be
different for other classes) reflect the highest




                                       7
PROSPECTUS February 1, 2010                          DWS Strategic Income Fund
<PAGE>


individual federal income tax rates in effect at the time, but do not reflect
any state or local taxes. [Return after taxes on distributions with sales is
higher than returns after tax on distributions for each period due to a capital
loss upon redemption.] Your actual after-tax returns may be different.
After-tax returns are not relevant to shares held in an IRA, 401(k) or other
tax-advantaged investment plan. Performance of Class B shares does not assume
the conversion to Class A shares after six years.


<TABLE>
<CAPTION>
                                 CLASS       1        5      10
                             INCEPTION    YEAR    YEARS   YEARS
                           -----------  ------  -------  ------
<S>                        <C>          <C>     <C>      <C>
CLASS A before tax           6/23/77
-------------------------    -------    ------  -------  ------
  After tax on
  distributions()
  After tax on distribu-
  tions, with sale
-------------------------  -------      ------  -------  ------
CLASS B before tax           5/31/94
-------------------------    -------    ------  -------  ------
CLASS C before tax           5/31/94
-------------------------    -------    ------  -------  ------
CLASS S before tax            2/1/05
-------------------------    -------    ------  -------  ------
BARCLAYS CAPITAL US
GOVERNMENT/CREDIT
INDEX
-------------------------  -------      ------  -------  ------
BLENDED INDEX
-------------------------  -------      ------  -------  ------
</TABLE>

The BARCLAYS CAPITAL US GOVERNMENT/CREDIT INDEX is an unmanaged index
comprising intermediate- and long-term government and investment-grade
corporate debt securities.

The BLENDED INDEX consists of the Credit Suisse High Yield Index (35%),
Barclays Capital US Government/Credit Index (35%), J.P. Morgan Emerging Markets
Bond Index Global Diversified (15%) and Citigroup Non US Hedged WBGI (15%).



MANAGEMENT



INVESTMENT ADVISOR

Deutsche Investment Management Americas Inc.


PORTFOLIO MANAGER(S)

GARY SULLIVAN, CFA. Managing Director of Deutsche Asset Management. Lead
Portfolio Manager of the fund since 2006.


WILLIAM CHEPOLIS, CFA. Managing Director of Deutsche Asset Management.
Portfolio Manager of the fund since 2005.


MATTHEW F. MACDONALD, CFA. Director of Deutsche Asset Management. Portfolio
Manager of the fund since 2006.


THOMAS PICCIOCHI. Director of Deutsche Asset Management. Portfolio Manager of
the fund since 2007.


ROBERT WANG. Managing Director of Deutsche Asset Management. Portfolio Manager
of the fund since 2007.


PURCHASE AND SALE OF FUND SHARES


MINIMUM INITIAL INVESTMENT ($)


<TABLE>
<CAPTION>
                                            AUTOMATIC
                        IRAS (AND UGMAS/   INVESTMENT
           NON-IRA    UTMAS FOR CLASS S)        PLANS
         ---------  --------------------  -----------
<S>      <C>        <C>                   <C>
A B C     1,000               500              500
-------   -----               ---              ---
S         2,500             1,000            1,000
-------   -----             -----            -----
</TABLE>

For participants in certain fee-based and wrap programs offered through certain
financial intermediaries approved by the Advisor, there is no minimum initial
investment for Class A, B, C and S shares and no minimum additional investment
for Class A and S shares. The minimum additional investment for all other
instances is $50. The maximum Automatic Investment Plan investment is $250,000.



TO PLACE ORDERS


<TABLE>
<S>            <C>                       <C>
MAIL           First Investment          DWS Investments, PO Box 219356
                                         Kansas City, MO 64121-9356
               Additional Investments    DWS Investments, PO Box 219154
                                         Kansas City, MO 64121-9154
               Exchanges and             DWS Investments, PO Box 219557
               Redemptions               Kansas City, MO 64121-9557
EXPEDITED MAIL                          DWS Investments, 210 West 10th Street
                                        Kansas City, MO 64105-1614
WEB SITE                                www.dws-investments.com
TELEPHONE                               Class A, B or C shares: (800) 621-1048
                                        Class S shares: (800) 728-3337
                                        M - F 9 a.m. - 6 p.m. ET
TDD LINE                                (800) 728-3006, M - F 9 a.m. - 6 p.m. ET
</TABLE>


You can buy or sell shares of the fund on any business day at our web site, by
mail, or by telephone. The fund is generally open on days when the New York
Stock Exchange is open for regular trading.


Effective March 1, 2010, Class B shares will be closed to new purchases, except
for exchanges and the reinvestment of dividends. Class S shares are generally
available only to existing Class S shareholders.



TAX INFORMATION


The fund's distributions (dividend distributions are expected to be paid
monthly and capital gains distributions are expected to be paid annually) are
generally taxable to you as ordinary income or capital gains, except when your
investment is in an IRA, 401(k), or other tax-deferred investment plan.



PAYMENTS TO BROKER-DEALERS AND

OTHER FINANCIAL INTERMEDIARIES

If you purchase the fund through a broker-dealer or other financial
intermediary (such as a bank), the fund and its affiliates may pay the
intermediary for the sale of fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the

fund over another investment. Ask your salesperson or visit your financial
intermediary's web site for more information.



                                       8
PROSPECTUS February 1, 2010                          DWS Strategic Income Fund
<PAGE>


                                                          [DWS INVESTMENTS LOGO]
                                                             Deutsche Bank Group



DWS STRATEGIC GOVERNMENT SECURITIES FUND



INVESTMENT OBJECTIVE

The fund seeks high current income, liquidity and security of principal.




FEES AND EXPENSES OF THE FUND


These are the fees you may pay when you buy and hold shares in this fund. You
may qualify for sales charge discounts if you and your immediate family invest,
or agree to invest in the future, at least $100,000 in DWS funds. More
information about these and other discounts is available from your financial
professional and in Choosing a Share Class (p. 17) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (p. II-10).



SHAREHOLDER FEES (paid directly from your investment)


<TABLE>
<CAPTION>
                                         A          B          C    INST      S
                             -------------  ---------  ---------  ------  -----
<S>                          <C>            <C>        <C>        <C>     <C>
Maximum sales charge
(load) on purchases, as %
of offering price                  2.75       None       None     None    None
---------------------------        ----       --         --       ------  -----
Maximum contingent
deferred sales charge
(load), as % of redemption
proceeds                        None(1)         4.00       1.00   None    None
---------------------------     -------       ------     ------   ------  -----
</TABLE>

ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)


<TABLE>
<CAPTION>
                              A    B    C    INST      S
                            ---  ---  ---  ------  -----
<S>                         <C>  <C>  <C>  <C>     <C>
Management fee
--------------------------  ---  ---  ---  ------  -----
Distribution/service
(12b-1) fees                               None    None
--------------------------  ---  ---  ---  ------  -----
Other expenses (includes
an administrative fee)
--------------------------  ---  ---  ---  ------  -----
TOTAL OPERATING EXPENSES
--------------------------  ---  ---  ---  ------  -----
Less expense waiver/
reimbursement
--------------------------  ---  ---  ---  ------  -----
NET OPERATING EXPENSES
--------------------------  ---  ---  ---  ------  -----
</TABLE>


(1)   Investments of $1 million or more may be eligible to buy Class A shares
      without a sales charge (load), but may be subject to a contingent
      deferred sales charge of 1.00% if redeemed within 12 months of purchase
      and 0.50% if redeemed within the following six months.

The Advisor has contractually agreed through [___________] to waive and/or
reimburse fund expenses to the extent necessary to maintain the fund's total
operating expenses at [__%] for Class B shares. The agreement may only be
terminated with the consent of the fund's Board and does not extend to
extraordinary expenses, taxes, brokerage and interest expense.


EXAMPLE

This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the fund's operating expenses
[(including one year of capped expenses for _____)] remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:



<TABLE>
<CAPTION>
YEARS      A    B    C    INST   S
-------  ---  ---  ---  ------  --
<S>      <C>  <C>  <C>  <C>     <C>
1
--       ---  ---  ---  ------  --
3
--       ---  ---  ---  ------  --
5
--       ---  ---  ---  ------  --
10
--       ---  ---  ---  ------  --
</TABLE>

You would pay the following expenses if you did not redeem your shares:



<TABLE>
<CAPTION>
YEARS      A    B    C    INST   S
-------  ---  ---  ---  ------  --
<S>      <C>  <C>  <C>  <C>     <C>
1
--       ---  ---  ---  ------  --
3
--       ---  ---  ---  ------  --
5
--       ---  ---  ---  ------  --
10
--       ---  ---  ---  ------  --
</TABLE>

Class B converts to Class A after six years; the Example for Class B reflects
lower fees incurred in Class A after this conversion.




                                       9
PROSPECTUS February 1, 2010           DWS Strategic Government Securities Fund
<PAGE>


PORTFOLIO TURNOVER

The fund pays transaction costs when it buys and sells securities (or "turns
over" its portfolio). A higher portfolio turnover may indicate higher
transaction costs and may mean higher taxes if you are investing in a taxable
account. These costs are not reflected in annual fund operating expenses or in
the expense example, but are reflected in fund performance.


During the most recent fiscal year, the fund's portfolio turnover rate was __%
of the average value of its portfolio.




PRINCIPAL INVESTMENT STRATEGY



MAIN INVESTMENTS. Under normal circumstances, the fund invests at least 80% of
net assets, plus the amount of any borrowings for investment purposes, in
securities backed by the full faith and credit of the US government, including
related repurchase agreements (the "80% test"). Within the 80% test, the fund
invests principally in Ginnie Maes (mortgage-backed securities issued or
guaranteed by the Government National Mortgage Association (GNMA)), but may
also invest in US Treasuries and other securities that are backed by the full
faith and credit of the US government. Outside the 80% test, the fund may also
invest in other debt and mortgage-backed securities, including securities that
are issued by US government agencies or instrumentalities but are not backed by
the full faith and credit of the US government.


MANAGEMENT PROCESS. In deciding which types of government bonds to buy and
sell, portfolio management first considers the relative attractiveness of US
Treasuries compared to other US government and agency securities and then
determines allocations. Their decisions are generally based on a number of
factors, including changes in supply and demand within the bond market.


In choosing individual bonds, portfolio management reviews each bond's
fundamentals, compares the yields of shorter maturity bonds to those of longer
maturity bonds and uses technical analysis to project prepayment rates and
other factors that could affect a bond's attractiveness. Portfolio management
may also adjust the duration (a measure of sensitivity to interest rate
movements) of the fund's portfolio, based upon their analysis.


IGAP STRATEGY. In addition to the fund's policy of investing at least 80% of
its assets in securities backed by the full faith and credit of the US
government, portfolio management seeks to enhance returns by employing a
propietary tactical asset allocation overlay strategy called iGAP (integrated
Global Alpha Platform), which attempts to take advantage of changes within
global bond and currency markets. The iGAP strategy uses derivatives,
(contracts whose value is based on, for example, indices, currencies or
securities) in particular exchange-traded futures contracts on global bonds and
over-the-counter forward currency contracts.


In employing the iGAP strategy, portfolio management intends to limit its use
of derivatives to those that it considers to be liquid. In addition, because of
the aggregation of the various long and short positions, portfolio management
believes the iGAP strategy can potentially enhance the fund's returns over time
without adding undue risk to the fund's profile.


For the purpose of complying with the 80% test, the fund does not use the
notional value of a derivative instrument, but rather, uses the
"mark-to-market" value (i.e., the unrealized net gain or loss on an open
derivative instrument) of the derivative instrument. The "mark-to-market" value
of a derivative instrument will not be treated as an investment in securities
backed by the full faith and credit of the US government. By calculating the
80% test on the basis of "mark-to-market" value, rather than the notional
value, of derivative instruments, the fund may invest a greater percentage of
its assets in such derivative instruments than would otherwise be the case.


Although the fund's aggregate notional market exposure from derivatives
employed as part of the iGAP strategy may equal up to 100% of the fund's
assets, the fund normally limits the net notional value of all open iGAP
related derivatives instruments, after aggregating the fund's long and short
positions, to 20% of the fund's net assets. In addition, the net
"mark-to-market" value of all open iGAP related derivatives instruments, plus
any required initial margin payments, is normally expected to be less than 5%
of the fund's net assets. There can be no assurance, however, that these limits
will prevent the fund from incurring losses due to its use of iGAP related
derivative instruments.



OTHER INVESTMENTS AND TECHNIQUES
--------------------------------------------------------------------------------

DERIVATIVES. The fund also may use various types of derivatives outside of the
iGAP strategy, such as futures contracts, forward currency contracts, interest
rate swaps, total return swaps and credit default swaps. It may use these for
hedging, risk management or non-hedging purposes to seek to enhance potential
gains. The fund may use derivatives as a substitute for direct investment in a
particular asset class or to keep cash on hand to meet shareholder redemptions
or other needs.

SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.

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

MAIN RISKS


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


INTEREST RATE RISK. When interest rates rise, prices of debt securities
generally decline. The longer the duration of the fund's debt securities, the
more sensitive it will be to interest rate changes. (As a general rule, a 1%
rise in interest rates means a 1% fall in value for every year of duration.)




                                       10
PROSPECTUS February 1, 2010           DWS Strategic Government Securities Fund
<PAGE>


PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of
high-yielding bonds may pay off the bonds earlier than expected (prepayment
risk), and the fund may have to reinvest the proceeds at lower yields. When
interest rates rise, issuers of lower-yielding bonds may pay off the bonds
later than expected (extension risk), thus keeping the fund's assets tied up in
lower-yielding bonds. Prepayments could also create capital gains tax liability
in some instances. Any unexpected behavior in interest rates could increase the
volatility of the fund's share price and yield and could hurt fund performance.



CREDIT RISK. The fund's performance could be hurt if a security declines in
credit quality or goes into default, or if an issuer does not make timely
payments of interest or principal.


Some securities issued by US government agencies or instrumentalities are
backed by the full faith and credit of the US government. Others are supported
only by the credit of that agency or instrumentality. For this latter group, if
there is a potential or actual loss of principal and interest of these
securities, the US government might provide financial support, but has no
obligation to do so.


IGAP RISK. The success of the iGAP strategy depends, in part, on portfolio
management's ability to analyze the correlation between various global markets
and asset classes. If portfolio management's correlation analysis proves to be
incorrect, losses to the fund may be significant and may substantially exceed
the intended level of market exposure for the iGAP strategy.


As part of the iGAP strategy, the fund will be exposed to the risks of non-US
currency markets, and global bond markets. Foreign currency rates may fluctuate
significantly over short periods of time for a number of reasons, including
changes in interest rates and economic or political developments in the US or
abroad. Global bond markets may also fluctuate for the same or similar reasons.
As a result, the fund's exposure to foreign currencies and global bond markets
could cause lower returns or even losses to the fund. Although portfolio
management seeks to limit these risks through the aggregation of various long
and short positions, there can be no assurance that they will be able to do so.



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


SECURITY SELECTION RISK. The securities in the fund's portfolio may decline in
value. Portfolio management could be wrong in its analysis of industries,
companies, economic trends, the relative attractiveness of different securities
or other matters.


SECURITIES LENDING RISK. Any decline in the value of a portfolio security that
occurs while the security is out on loan is borne by the fund, and will
adversely affect performance. Also, there may be delays in recovery of
securities loaned or even a loss of rights in the collateral should the
borrower of the securities fail financially while holding the security.


More information about fund risks, including additional risk factors not
discussed above, is included in Fund Details and the fund's Statement of
Additional Information.


PAST PERFORMANCE


How a fund's returns vary from year to year can give an idea of its risk; so
can comparing fund performance to overall market performance (as measured by an
appropriate market index). As always, past performance may not indicate future
results. All performance figures below assume that dividends were reinvested.
For more recent performance figures, go to www.dws-investments.com (the Web
site does not form a part of this prospectus) or call the phone number for your
share class included in this prospectus.



CALENDAR YEAR TOTAL RETURNS (%) (Class A)

These year-by-year returns do not include sales charges, and would be lower if
they did. Returns for other classes were different and are not shown here.



[BAR GRAPHIC OMITTED HERE]

[BAR GRAPHIC DATA]



<TABLE>
<S>          <C>       <C>       <C>       <C>       <C>       <C>       <C>     <C>     <C>
  10.39      7.23      8.14      1.97      3.61      2.42       3.86     5.79    4.89
    2000       2001    2002      2003      2004      2005      2006      2007    2008    2009
</TABLE>




<TABLE>
<S>                            <C>
Best Quarter: ____% Q_ ____    Worst Quarter: ____%, Q_ ____
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2009 expressed as a %)

These returns include sales charges, if any. Performance of a broad-based index
is shown for comparison. Indexes have no sales charges and cannot be invested
in directly. After-tax returns (which are shown only for Class A and would be
different for other classes) reflect the highest individual federal income tax
rates in effect at the time, but do not reflect any state or local taxes.
[Return after taxes on distributions with sales is higher than returns after
tax on distributions for each period due to a capital loss upon redemption.]
Your actual after-tax returns may be different.




                                       11
PROSPECTUS February 1, 2010           DWS Strategic Government Securities Fund
<PAGE>


After-tax returns are not relevant to shares held in an IRA, 401(k) or other
tax-advantaged investment plan. Performance of Class B shares does not assume
the conversion to Class A shares after six years.


<TABLE>
<CAPTION>
                                 CLASS       1        5      10
                             INCEPTION    YEAR    YEARS   YEARS
                           -----------  ------  -------  ------
<S>                        <C>          <C>     <C>      <C>
CLASS A before tax           10/1/79
-------------------------    -------    ------  -------  ------
  After tax on
  distributions()
  After tax on distribu-
  tions, with sale
-------------------------  -------      ------  -------  ------
CLASS B before tax           5/31/94
-------------------------    -------    ------  -------  ------
CLASS C before tax           5/31/94
-------------------------    -------    ------  -------  ------
INST CLASS before tax         7/3/95
-------------------------    -------    ------  -------  ------
CLASS S before tax            8/1/05
-------------------------    -------    ------  -------  ------
BARCLAYS CAPITAL GNMA
INDEX
-------------------------  -------      ------  -------  ------
</TABLE>

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



MANAGEMENT



INVESTMENT ADVISOR

Deutsche Investment Management Americas Inc.


PORTFOLIO MANAGER(S)

WILLIAM CHEPOLIS, CFA. Managing Director of Deutsche Asset Management.
Co-Manager of the fund since 2002.


MATTHEW F. MACDONALD. Director of Deutsche Asset Management. Co-Manager of the
fund since 2006.


ROBERT WANG. Managing Director of Deutsche Asset Management. Co-Manager of the
fund since 2008.


THOMAS PICCIOCHI. Director of Deutsche Asset Management. Co-Manager of the fund
since 2008.



PURCHASE AND SALE OF FUND SHARES


MINIMUM INITIAL INVESTMENT ($)


<TABLE>
<CAPTION>
                                                             AUTOMATIC
                                  IRAS (AND UGMAS/          INVESTMENT
              NON-IRA           UTMAS FOR CLASS S)               PLANS
         ------------  ---------------------------  ------------------
<S>      <C>           <C>                          <C>
A B C        1,000                  500                      500
-------      -----                  ---                      ---
INST     1,000,000                 N/A                      N/A
-------  ---------                 ----                     ----
S            2,500                1,000                    1,000
-------  ---------                -----                    -----
</TABLE>

For participants in certain fee-based and wrap programs offered through certain
financial intermediaries approved by the Advisor, there is no minimum initial
investment for Class A, B, C and S shares and no minimum additional investment
for Class A and S shares. Institutional Class shares also have no additional
investment minimum. The minimum additional investment for all other instances
is $50. The maximum Automatic Investment Plan investment is $250,000.

TO PLACE ORDERS


<TABLE>
<S>            <C>                       <C>
MAIL           First Investment          DWS Investments, PO Box 219356
                                         Kansas City, MO 64121-9356
               Additional Investments    DWS Investments, PO Box 219154
                                         Kansas City, MO 64121-9154
               Exchanges and             DWS Investments, PO Box 219557
               Redemptions               Kansas City, MO 64121-9557
EXPEDITED MAIL                          DWS Investments, 210 West 10th Street
                                        Kansas City, MO 64105-1614
WEB SITE                                www.dws-investments.com
TELEPHONE                               Class A, B or C shares: (800) 621-1048
                                        Institutional Class shares: (800) 730-1313
                                        Class S shares: (800) 728-3337
                                        M - F 9 a.m. - 6 p.m. ET
TDD LINE                                (800) 728-3006, M - F 9 a.m. - 6 p.m. ET
</TABLE>


You can buy or sell shares of the fund on any business day at our web site, by
mail, or by telephone. The fund is generally open on days when the New York
Stock Exchange is open for regular trading.


Effective March 1, 2010, Class B shares will be closed to new purchases, except
for exchanges and the reinvestment of dividends. Institutional Class shares are
generally available only to qualified institutions. Class S shares are
generally available only to existing Class S shareholders.



TAX INFORMATION


The fund's distributions (dividend distributions are expected to be paid
monthly and capital gains distributions are expected to be paid annually) are
generally taxable to you as ordinary income or capital gains, except when your
investment is in an IRA, 401(k), or other tax-deferred investment plan.



PAYMENTS TO BROKER-DEALERS AND

OTHER FINANCIAL INTERMEDIARIES

If you purchase the fund through a broker-dealer or other financial
intermediary (such as a bank), the fund and its affiliates may pay the
intermediary for the sale of fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the fund over another investment.
Ask your salesperson or visit your financial intermediary's web site for more
information.



                                       12
PROSPECTUS February 1, 2010           DWS Strategic Government Securities Fund
<PAGE>


FUND DETAILS


OTHER POLICIES AND RISKS

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

o  Although major changes tend to be infrequent, each fund's Board could change
   a fund's investment objective without seeking shareholder approval.
   However, the Board of DWS Strategic Government Securities Fund will provide
   shareholders with at least 60 days notice prior to making any changes to
   the fund's 80% investment policy.

o  When in the Advisor's opinion it is advisable to adopt a temporary defensive
   position because of unusual and adverse or other market conditions, up to
   100% of each fund's assets may be held in cash or invested in money market
   securities or other short-term investments. Short-term investments consist
   of (1) foreign and domestic obligations of sovereign governments and their
   agencies and instrumentalities, authorities and political subdivisions; (2)
   other short-term high quality rated debt securities or, if unrated,
   determined to be of comparable quality in the opinion of the Advisor; (3)
   commercial paper; (4) bank obligations, including negotiable certificates
   of deposit, time deposits and bankers' acceptances; and (5) repurchase
   agreements.This could prevent losses, but, while engaged in a temporary
   defensive position, a fund will not be pursuing its investment objective.
   However, portfolio management may choose not to use these strategies for
   various reasons, even in volatile market conditions.

o  Each fund (or, if applicable, underlying funds) may trade actively. This
   could raise transaction costs (thus lowering return) and could mean
   increased taxable distributions to shareholders and distributions that will
   be taxable to shareholders at higher federal income tax rates.

o  Certain DWS funds-of-funds are permitted to invest in DWS High Income Fund
   and DWS Strategic Government Securities Fund. As a result, a fund may have
   large inflows or outflows of cash from time to time. This could have
   adverse effects on a fund's performance if a fund were required to sell
   securities or invest cash at times when it otherwise would not do so. This
   activity could also accelerate the realization of capital gains and
   increase a fund's transaction costs.


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


Additional risks listed below are in alphabetical order.


COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business (such as trading or securities lending), or that
underwrites, distributes or guarantees any investments or contracts that the
fund owns or is otherwise exposed to, may decline in financial health and
become unable to honor its commitments. This could cause losses for the fund or
could delay the return or delivery of collateral or other assets to the fund.


LIQUIDITY RISK. In certain situations, it may be difficult or impossible to
sell an investment in an orderly fashion at an acceptable price. This risk can
be ongoing for any security that does not trade actively or in large volumes
(for example, many small company and foreign securities), for any security that
trades primarily on smaller markets, and for investments that typically trade
only among a limited number of large investors (such as certain types of
derivatives or restricted securities). In unusual market conditions, even
normally liquid securities may be affected by a degree of liquidity risk. This
may affect only certain securities or an overall securities market.


PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of
high-yielding bonds may pay off the bonds earlier than expected (prepayment
risk), and the fund may have to reinvest the proceeds at lower yields. When
interest rates rise, issuers of lower-yielding bonds may pay off the bonds
later than expected (extension risk), thus keeping the fund's assets tied up in
lower-yielding bonds. Prepayments could also create capital gains tax liability
in some instances. Any unexpected behavior in interest rates could increase the
volatility of the fund's share price and yield and could hurt fund performance.



PRICING RISK. If market conditions make it difficult to value some investments,
the fund may value these investments using more subjective methods, such as
fair value pricing.




                                       13
PROSPECTUS February 1, 2010                                       Fund Details
<PAGE>


In such cases, the value determined for an investment could be different than
the value realized upon such investment's sale. As a result, you could pay more
than the market value when buying fund shares or receive less than the market
value when selling fund shares.

SECURITY SELECTION RISK. The securities in the fund's portfolio may decline in
value. Portfolio management could be wrong in its analysis of industries,
companies, economic trends, the relative attractiveness of different securities
or other matters.



FOR MORE INFORMATION

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


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


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


A complete list of each fund's portfolio holdings as of the month-end is posted
on www.dws-investments.com on or about the 15th day of the following month.
More frequent posting of portfolio holdings information may be made from time
to time on www.dws-investments.com. The posted portfolio holdings information
is available by fund and generally remains accessible at least until the date
on which a fund files its Form N-CSR or N-Q with the Securities and Exchange
Commission for the period that includes the date as of which the posted
information is current. Each fund's Statement of Additional Information
includes a description of a fund's policies and procedures with respect to the
disclosure of a fund's portfolio holdings.



WHO MANAGES AND OVERSEES THE FUNDS


THE INVESTMENT ADVISOR

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



DWS Investments is part of the Asset Management division of Deutsche Bank AG
and, within the US, represents the retail asset management activities of
Deutsche Bank AG, Deutsche Bank Trust Company Americas, DIMA and DWS Trust
Company.



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


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


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




<TABLE>
<CAPTION>
FUND NAME                        FEE PAID
--------------------------  -------------
<S>                         <C>
DWS High Income Fund              XX%
--------------------------  -------------
DWS Strategic Income Fund         XX%(*)
--------------------------- -------------
DWS Strategic Government
Securities Fund                   XX%(*)
--------------------------- -------------
</TABLE>


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

A discussion regarding the basis for the Board's approval of each fund's
investment management agreement is contained in the most recent shareholder
report for the annual period ended September 30 for DWS High Income Fund and
the most recent shareholder reports for the annual period ended October 31 for
both DWS Strategic Income Fund and DWS Strategic Government Securities Fund
(see "Shareholder reports" on the back cover).



Under a separate administrative services agreement between each fund and the
Advisor, each fund pays the Advisor a fee of 0.10% for providing most of each
fund's administrative services.


SUB-ADVISOR APPROVAL POLICY. The Advisor, subject to the approval of the Board,
has ultimate responsibility to recommend to the Board the hiring and
replacement of sub-advisors. Pursuant to a sub-advisor policy approved by each
fund's Board and shareholders (Sub-Advisor Approval Policy), the Advisor, with
the approval of each fund's Board, may hire sub-advisors to manage all or a
portion of each fund's assets without obtaining shareholder approval. The
Advisor also has the discretion to terminate any sub-advisor and allocate and
reallocate the fund's assets among other sub-advisors or assume the management
responsibilities itself. The Sub-Advisor Approval Policy would also permit the
Advisor, subject to the approval of the Board, to materially amend an existing
sub-advisory agreement without shareholder approval.


Each fund and the Advisor have filed an exemptive application with the SEC and
cannot implement the Sub-Advisor Approval Policy without the SEC first granting
the relief requested in the application. There can be no assurance that the
relief requested in the exemptive application will




                                       14
PROSPECTUS February 1, 2010                                       Fund Details
<PAGE>


be granted by the SEC. The SEC also proposed Rule 15a-5 under the Investment
Company Act of 1940, as amended (1940 Act) in October 2003 to permit the
appointment and termination of sub-advisors and amendments to sub-advisory
agreements without shareholder approval. No action has been taken on proposed
Rule 15a-5 since its proposal and there is no assurance that the rule will be
adopted as proposed. Each fund and the Advisor will be subject to the
conditions imposed by the SEC (as part of any exemptive order or rule) whenever
the Advisor acts under the Sub-Advisor Approval Policy, including any
shareholder notice requirements.



MANAGEMENT



DWS HIGH INCOME FUND

GARY SULLIVAN, CFA. Managing Director of Deutsche Asset Management. Portfolio
Manager of the fund since 2006.


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

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

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


DWS STRATEGIC INCOME FUND

GARY SULLIVAN, CFA. Managing Director of Deutsche Asset Management. Lead
Portfolio Manager of the fund since 2006.

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

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

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

WILLIAM CHEPOLIS, CFA. Managing Director of Deutsche Asset Management.
Portfolio Manager of the fund since 2005.

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

o  Portfolio Manager for Retail Fixed Income: New York.

o  BIS, University of Minnesota.

MATTHEW F. MACDONALD, CFA. Director of Deutsche Asset Management. Portfolio
Manager of the fund since 2006.


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

o  Portfolio Manager for Retail Fixed Income: New York.

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

ROBERT WANG. Managing Director of Deutsche Asset Management. Portfolio Manager
of the fund since 2007.

o  Joined Deutsche Asset Management in 1995 as portfolio manager for asset
   allocation after 13 years of experience of trading fixed income, foreign
   exchange and derivative products at J.P. Morgan.

o  Global Head of Quantitative Strategies Portfolio Management: New York.

o  BS, The Wharton School, University of Pennsylvania.

THOMAS PICCIOCHI. Director of Deutsche Asset Management. Portfolio Manager of
the fund since 2007.

o  Joined Deutsche Asset Management in 1999, formerly serving as portfolio
   manager for Absolute Return Strategies, after 13 years of experience in
   various research and analysis positions at State Street Global Advisors,
   FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial
   Management.

o  Senior Portfolio Manager for Quantitative Strategies: New York.

o  BA and MBA, University of Miami.



DWS STRATEGIC GOVERNMENT SECURITIES FUND

WILLIAM CHEPOLIS, CFA. Managing Director of Deutsche Asset Management.
Co-Manager of the fund since 2002.


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

o  Portfolio Manager for Retail Fixed Income: New York.

o  BIS, University of Minnesota.

MATTHEW F. MACDONALD. Director of Deutsche Asset Management. Co-Manager of the
fund since 2006.

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

o  Portfolio Manager for Retail Fixed Income: New York.

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

ROBERT WANG. Managing Director of Deutsche Asset Management. Co-Manager of the
fund since 2008.



                                       15
PROSPECTUS February 1, 2010                                       Fund Details
<PAGE>

o  Joined Deutsche Asset Management in 1995 as portfolio manager for asset
   allocation after 13 years of experience of trading fixed income, foreign
   exchange and derivative products at J.P. Morgan.

o  Global Head of Quantitative Strategies Portfolio Management: New York.

o  BS, The Wharton School, University of Pennsylvania.

THOMAS PICCIOCHI. Director of Deutsche Asset Management. Co-Manager of the fund
since 2008.

o  Joined Deutsche Asset Management in 1999, formerly serving as portfolio
   manager for Absolute Return Strategies, after 13 years of experience in
   various research and analysis positions at State Street Global Advisors,
   FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial
   Management.

o  Senior Portfolio Manager for Quantitative Strategies: New York.

o  BA and MBA, University of Miami.

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


                                       16
PROSPECTUS February 1, 2010                                       Fund Details
<PAGE>

INVESTING IN THE FUNDS


This prospectus offers the share classes noted on the front cover. Each class
has its own fees and expenses, offering you a choice of cost structures:

o  CLASS A, B AND C SHARES are intended for investors seeking the advice and
   assistance of a financial advisor, who will typically receive compensation
   for those services.

o  INSTITUTIONAL CLASS SHARES AND CLASS S SHARES are only available to
   particular investors or through certain programs, as described below.

The following pages tell you how to invest in a fund and what to expect as a
shareholder. The following pages also tell you about many of the services,
choices and benefits of being a shareholder. You'll also find information on
how to check the status of your account using the method that's most convenient
for you.


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


You can find out more about the topics covered here by speaking with your
financial advisor or a representative of your workplace retirement plan or
other investment provider.



CHOOSING A SHARE CLASS


Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you.


We describe each share class in detail on the following pages. But first, you
may want to look at the following table, which gives you a brief description
and comparison of the main features of each class. You should consult with your
financial advisor to determine which class of shares is appropriate for you.


Effective March 1, 2010, Class B shares will be closed to new purchases, except
for exchanges and the reinvestment of dividends.



<TABLE>
<CAPTION>
 CLASSES AND FEATURES                 POINTS TO HELP YOU COMPARE
<S>                                  <C>
 CLASS A
 o Sales charge of up to 4.50%       o Some investors may be able to
   for DWS High Income Fund and        reduce or eliminate their sales
   2.75% for DWS Strategic             charge; see "Class A shares"
   Income Fund and DWS Strate-       o Total annual expenses are
   gic Government Securities           lower than those for Class B or
   Fund charged when you buy           Class C
   shares
                                     o Distributions are generally
 o In most cases, no charge when       higher than Class B or Class C
   you sell shares
 o Up to 0.25% annual share-
   holder servicing fee
 CLASS B
 o No sales charge when you buy    o The deferred sales charge rate
   shares.                            falls to zero after six years
 o Deferred sales charge           o Shares automatically convert to
   declining from 4.00%, charged     Class A after six years, which
   when you sell shares you bought   means lower annual expenses
   within the last six years         going forward
 o 0.75% annual distribution fee  o Distributions are generally
   and up to 0.25% annual share-    lower than Class A
   holder servicing fee
 CLASS C
 o No sales charge when you buy    o The first year deferred sales
   shares                            charge rate is lower for Class C
                                     shares than Class B shares, but
 o Deferred sales charge of          your shares never automatically
   1.00%, charged when you sell      convert to Class A, so annual
   shares you bought within the      expenses remain higher than
   last year                         Class A
 o 0.75% annual distribution fee   o Distributions are generally
   and up to 0.25% annual share-     lower than Class A
   holder servicing fee            o Maximum investment of
                                     $250,000 for DWS Strategic
                                     Income Fund and DWS Strate-
                                     gic Government Securities
                                     Fund and $500,000 for DWS
                                     High Income Fund
 INSTITUTIONAL CLASS
 o No charges when you buy or      o Only available to certain institu-
   sell shares, unless you sell      tional investors; typically
   within 30 days of buying, if      $1,000,000 minimum initial
   applicable                        investment
                                     o Distributions are generally
                                     higher than Class A, B and C,
                                     and may be higher than Class
                                     S, depending on relative
                                     expenses
 CLASS S
 o No charges when you buy or      o Limited availability, see "Eligibil-
   sell shares, unless you sell      ity Requirements" under
   within 30 days of buying, if      "Class S Shares"
   applicable
</TABLE>




                                       17
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

CLASS A SHARES


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


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



Class A shares of DWS High Income Fund have an up-front sales charge that
varies with the amount you invest:




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


Class A shares of DWS Strategic Income Fund and DWS Strategic Government
Securities Fund have an up-front sales charge that varies with the amount you
invest:



<TABLE>
<CAPTION>
                               FRONT-END SALES         FRONT-END SALES
                                 CHARGE AS A %   CHARGE AS A % OF YOUR
YOUR INVESTMENT         OF OFFERING PRICE(1,2)       NET INVESTMENT(2)
--------------------  ------------------------  ----------------------
<S>                   <C>                       <C>

Under $100,000        2.75%                     2.83%
--------------------  -----                     -----
$100,000-$249,999     2.50                      2.56
-----------------     -----                     -----
$250,000 or more                   see below                see below
--------------------  ------------------------  ----------------------
</TABLE>

(1)   The "offering price", the price you pay to buy shares, includes the sales
      charge which will be deducted directly from your investment.
(2)   Because of rounding in the calculation of the offering price, the actual
      front-end sales charge paid by an investor may be higher or lower than
      the percentages noted.


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

o  you indicate your intent in writing to invest at least $100,000 in Class A
   shares (including Class A shares in other retail DWS funds) over the next
   24 months (Letter of Intent)

o  the amount of Class A shares you already own (including Class A shares in
   other retail DWS funds) plus the amount you're investing now in Class A
   shares is at least $100,000 (Cumulative Discount)

o  you are investing a total of $100,000 or more in Class A shares of several
   retail DWS funds on the same day (Combined Purchases)

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


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


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


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


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


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


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


IF YOU'RE INVESTING $250,000 FOR DWS STRATEGIC INCOME FUND AND DWS STRATEGIC
GOVERNMENT SECURITIES FUND AND $1 MILLION FOR DWS HIGH INCOME FUND OR MORE,
either as a lump sum or through one of the sales charge reduction features
described above, you may be eligible to buy Class A shares without a sales
charge ("Large Order



                                       18
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

NAV Purchase Privilege"). However, you may be charged a contingent deferred
sales charge (CDSC) of 0.50% for DWS Strategic Income Fund and DWS Strategic
Government Securities Fund and 0.85% for DWS High Income Fund on any shares you
sell within 12 months of owning them and a similar charge of 0.50% for DWS High
Income Fund on shares you sell within the following six months. This CDSC is
waived under certain circumstances (see "Policies You Should Know About"). Your
financial advisor or Shareholder Services can answer your questions and help
you determine if you're eligible.

CLASS B SHARES

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


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


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



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

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


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


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


Effective March 1, 2010 (the "Effective Date"), Class B shares of each fund
will be closed to new purchases, except that Class B shares may continue to be
purchased in connection with an exchange or the reinvestment of dividends or
other distributions (including the investment of dividends and distributions in
Class B shares of another fund). From and after the Effective Date, except as
noted above, no new purchases of Class B shares will be allowed, whether by new
investors or existing shareholders, including purchases under an automatic
investment plan. The Effective Date is subject to change.


The closing of the Class B shares will not affect: (a) the right of
shareholders of Class B shares to continue to sell (redeem) their shares as
provided in the prospectus, subject to any applicable contingent deferred sales
charge ("CDSC"); or (b) the automatic conversion of Class B shares to Class A
shares six years after purchase. Class B shares held as of the Effective Date
will continue as Class B shares with all Class B attributes, including Rule
12b-1 fees, until sold or until their automatic conversion to Class A shares.


From and after the Effective Date, purchases by shareholders under Class B
shares automatic investment plans ("AIPs") established on or prior to December
1, 2009 will be automatically continued with Class A shares. Such shareholders
will then be permitted to purchase Class A shares at net asset value, without a
sales charge, whether as part of their AIP or otherwise. The foregoing applies
only to purchases under (i) AIPs established directly with DWS Investments
("DWS AIPs") and, (ii) provided they are identified as an AIP by DWS
Investments, AIPs sponsored by others, such as government direct deposit,
employer sponsored payroll direct deposit and auto-debit programs established
with the shareholder's bank or credit union ("non-DWS AIP"). Shareholders with
a non-DWS AIP should contact DWS Investments at (800) 621-1048 prior to the
Effective Date to ensure that their account is identified as an AIP. For any
AIP established after December 1, 2009, this privilege to purchase Class A
shares without a sales charge will not apply and orders for Class B shares from
such an AIP received on or after the Effective Date will not be accepted. For
this reason, shareholders will not be permitted to establish DWS AIPs for Class
B shares after December 1, 2009 and shareholders should not establish non-DWS
AIPs for Class B shares after that date.


Additionally, from and after the Effective Date, certain employer-sponsored
employee benefit plans (known as "DWS Investments Flex Plans") using the
ExpertPlan subaccount record keeping system maintained for DWS
Investments-branded plans that are currently purchasing Class B shares instead
will purchase Class A shares at net asset value, without a sales charge.



                                       19
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

CLASS C SHARES

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


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


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


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



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

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


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


Orders to purchase Class C shares of $250,000 for DWS Strategic Income Fund and
DWS Strategic Government Securities Fund and $500,000 for DWS High Income Fund
or more will be declined with the exception of orders received from financial
representatives acting for clients whose shares are held in an omnibus account
and certain employer-sponsored employee benefit plans.



INSTITUTIONAL CLASS SHARES

You may buy Institutional Class shares through your securities dealer or
through any financial institution that is authorized to act as a shareholder
servicing agent ("financial advisor"). Contact them for details on how to place
and pay for your order.


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

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

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

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


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

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


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

INVESTMENT MINIMUM


The minimum initial investment is waived for:

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

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

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

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

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

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

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

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

o  Employee benefit plan platforms approved by the Advisor that invest in a
   fund through an omnibus account, and that meet or, in the Advisor's
   judgment, will meet within a reasonable period of time, the $1,000,000
   minimum investment.

Each fund reserves the right to modify the above eligibility requirements and
investment minimum at any time. In addition, each fund, in its discretion, may
waive the minimum initial investment for specific employee benefit plans (or
family of plans) whose aggregate investment in Institutional Class shares of a
fund equals or exceeds the minimum initial investment amount but where a
particular account or program may not on its own meet such minimum amount.


CLASS S SHARES

Class S shares are generally only available to new investors through fee-based
programs of investment dealers that have special agreements with each fund's
distributor,




                                       20
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>


through certain group retirement plans and through certain registered
investment advisors. These dealers and advisors typically charge ongoing fees
for services they provide.

ELIGIBILITY REQUIREMENTS. Class S shares of a fund are offered at net asset
value without a sales charge to certain eligible investors as described below.
The following investors may purchase Class S shares of DWS funds either (i)
directly from DWS Investments Distributors, Inc. ("DIDI"), each 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.

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

o  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.

o  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.

o  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.

o  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.

o  Officers, fund Board Members, and full-time employees and their family
   members, of the Advisor and its affiliates.

o  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.

o  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.

o  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.

o  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.

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


o  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.

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

o  Persons who purchase shares as part of an investment only placement in a 529
   College Savings Plan (i.e., when the DWS fund is one of various investment
   options in a 529 College Savings Plan sponsored by another provider).

o  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.



BUYING, EXCHANGING AND SELLING SHARES


The following information applies to Class A, B, C, Institutional and S shares.



TO CONTACT DWS INVESTMENTS


BY PHONE


<TABLE>
<CAPTION>
CLASS    NUMBER
-------  ---------------
<S>      <C>
A B C    (800) 621-1048
-------  ---------------
INST     (800) 730-1313
-------  ---------------
S        (800) 728-3337
-------  ---------------
</TABLE>

BY MAIL


<TABLE>
<CAPTION>
TYPE               ADDRESS
-----------------  ------------------------------------------------
<S>                <C>
EXPEDITED MAIL
  All Requests     DWS Investments
-----------------
                   Attn: (see department names under Regular Mail)
                   210 West 10th Street
                   Kansas City, MO 64121-1614
                   ------------------------------------------------
REGULAR MAIL
  New Accounts     DWS Investments
                   Attn: New Applications
                   P.O. Box 219356
                   Kansas City, MO 64121-9356
  Additional       DWS Investments
  Investments      Attn: Purchases
                   P.O. Box 219154
                   Kansas City, MO 64121-9154
  Exchanges and    DWS Investments
  Redemptions      Attn: Transaction Processing
                   P.O. Box 219557
                   Kansas City, MO 64121-9557
</TABLE>


HOW TO BUY SHARES


Please note that your account cannot be opened until we receive a completed
account application.



                                       21
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

MINIMUM INITIAL INVESTMENT ($)


<TABLE>
<CAPTION>
                                                             AUTOMATIC
                                  IRAS (AND UGMAS/          INVESTMENT
              NON-IRA           UTMAS FOR CLASS S)               PLANS
         ------------  ---------------------------  ------------------
<S>      <C>           <C>                          <C>
A B C        1,000                  500                      500
-------      -----                  ---                      ---
INST     1,000,000                 N/A                      N/A
-------  ---------                 ----                     ----
S            2,500                1,000                    1,000
-------  ---------                -----                    -----
</TABLE>

For participants in certain fee-based and wrap programs offered through certain
financial intermediaries approved by the Advisor, there is no minimum initial
investment for Class A, B, C and S shares and no minimum additional investment
for Class A and S shares. Institutional Class shares also have no additional
investment minimum. The minimum additional investment for all other instances
is $50. The maximum Automatic Investment Plan investment is $250,000.


THROUGH A FINANCIAL ADVISOR

Contact your financial advisor to obtain a new account application or for
instructions about how to set up a new account. Your advisor can also assist
with making additional investments into an existing account.


BY MAIL OR EXPEDITED MAIL

To establish an account, simply complete the appropriate application and mail
it to the address provided on the form (P.O. Box or expedited mail). With your
application, include your check made payable to "DWS Investments" for the
required initial minimum investment for the share class you have selected.


Once your account is established, to make additional investments, send a check
made payable to "DWS Investments" and an investment slip to the appropriate
address. If you do not have an investment slip, include a letter with your
name, account number, the full fund name and share class, and your investment
instructions.


BY AUTOMATIC INVESTMENT PLAN

If you wish to take advantage of the lower initial investment minimums by
establishing an Automatic Investment Plan, make sure to complete that section
on the new account application and attach a voided check for the bank account
from which the funds will be drawn. Investments are made automatically 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 DWS Investments has received the request. Each fund
may immediately terminate a shareholder's Automatic Investment Plan in the
event that any item is unpaid by the shareholder's financial institution.


OTHER WAYS TO BUY SHARES

The following privileges must be established on your account before an
investment request is made. This can either be done by completing the
applicable section(s) on the new account application or by contacting a
customer service representative for instructions and any required paperwork.


BY PHONE USING QUICKBUY (FOR ADDITIONAL INVESTMENTS ONLY). Call DWS Investments
using the appropriate telephone number for your share class. You can use our
automated system to place your QuickBuy purchase using the Automated Clearing
House system (ACH), or you can choose to be transferred to a customer service
representative to complete your request. Transactions take two to three days to
be completed and there is a $50 minimum and a $250,000 maximum.


ON THE INTERNET (FOR ADDITIONAL INVESTMENTS ONLY). Register at
www.dws-investments.com to set up on-line access to your account(s). Or, log in
to the website if you have previously registered. Follow the instructions on
the website to request a purchase with money from the bank account you have
established on your DWS account(s).


BY WIRE (FOR ADDITIONAL INSTITUTIONAL CLASS INVESTMENTS ONLY). You may buy
shares by wire only if your account is authorized to do so. Please note that
you or your financial advisor must call us in advance of a wire transfer
purchase. After you inform us of the amount of your purchase, you will receive
a trade confirmation number. Instruct your bank to send payment by wire using
the wire instructions noted below. All wires must be received by 4:00 p.m.
Eastern time the next business day following your purchase. If your wire is not
received by 4:00 p.m. Eastern time on the next business day after the fund
receives your request to purchase shares, your transaction will be canceled at
your expense and risk.


WIRE DETAILS


<TABLE>
<S>              <C>
Bank name        State Street Bank Boston
---------------  --------------------------------
Routing Number   011000028
---------------- ---------
Attention        DWS Investments
---------------- --------------------------------
DDA Number       9903-5552
---------------- ---------
FBO              (Account name) (Account number)
---------------- -------------------------------
Credit           (Fund name, Fund number and, if
----------------
                 applicable, class name)
                 --------------------------------
</TABLE>

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



                                       22
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

HOW TO EXCHANGE SHARES


REQUIREMENTS AND LIMITS


<TABLE>
<CAPTION>
CLASS   EXCHANGING INTO ANOTHER FUND ($)
------- -----------------------------------------------
<S>     <C>
A B C   1,000 minimum into new non-IRA accounts per
------- fund
        500 minimum into new IRA accounts per fund
        50 minimum into all existing accounts per fund
        -----------------------------------------------
INST    1,000,000 minimum into new accounts per fund
------- 50 minimum into all existing accounts per fund
        -----------------------------------------------
S       2,500 minimum into new non-IRA accounts per
------- fund
        1,000 minimum into new IRA and UTMA/UGMA
        accounts per fund
        50 minimum into all existing accounts per fund
        -----------------------------------------------
</TABLE>

Exchanges are allowed between like share classes only.

In addition to what is detailed below, your financial advisor can assist you
with exchanging shares. Please contact your financial advisor using the method
that is most convenient for you.


BY PHONE

Call DWS Investments using the appropriate telephone number for your share
class. You may use our automated system to place your exchange, or you may
choose to be transferred to a customer service representative to complete your
request. For accounts with $5,000 or more, you may also establish an Automatic
Exchange Plan of a minimum of $50 to another DWS fund on a regular basis. A
representative can assist you with establishing this privilege.


ON THE INTERNET

Register at www.dws-investments.com to set up on-line access to your
account(s). Or, log in to the website if you have previously registered. Follow
the instructions on the website to request an exchange to another DWS fund.


BY MAIL OR EXPEDITED MAIL

Write a letter that includes the following information: the name(s) of all
owners and address as they appear on your account, the fund name, share class,
and account number from which you want to exchange, the dollar amount or number
of shares you wish to exchange, and the name of the fund into which you want to
exchange. Also include a daytime telephone number if we have any questions. All
owners should sign the letter and it should be mailed to the appropriate
address for exchanges and redemptions.


HOW TO SELL SHARES


REQUIREMENTS AND LIMITS


<TABLE>
<CAPTION>
        SELLING SHARES ($)
        --------------------------------------------
<S>     <C>
A B C   Check redemption:
------- Up to 100,000, more than 100,000 see
        "Signature Guarantee"
        QuickSell to your bank: Minimum 50, maximum
        250,000
        Wire redemption to your bank: Minimum 1,000
        --------------------------------------------
INST    Same as Classes A, B and C
------- --------------------------------------------
S       Same as Classes A, B and C
------- --------------------------------------------
</TABLE>

In addition to what is detailed below, your financial advisor can assist you
with selling shares. Please contact your financial advisor using the method
that is most convenient for you.


BY PHONE

Call DWS Investments using the appropriate telephone number for your share
class. You may use our automated system or you may choose to be transferred to
a customer service representative to complete your request. You may request a
check for the redemption amount sent to the address on the account.


OTHER WAYS TO SELL SHARES


The following privileges must be established on your account before a
redemption request is made. This can either be done by completing the
applicable section(s) on the new account application when you establish your
account or by contacting a customer service representative for instructions and
any required paperwork to add them to an existing account. Depending on the
method you choose to send these withdrawals, different transaction maximums may
apply.


BY PHONE USING QUICKSELL. Call DWS Investments using the appropriate phone
number for your share class. You may request a QuickSell redemption (see table
for applicable minimum and maximum amounts). The proceeds are sent via the
Automated Clearing House system (ACH) to your bank. Transactions generally take
two to three days to be completed. For accounts with $5,000 or more, you may
also establish an Automatic Withdrawal Plan of a minimum of $50 to be sent on a
regular basis as you direct.


ON THE INTERNET. Register at www.dws-investments.com to set up on-line access
to your account(s). Or, log in to the website if you have previously
registered. Follow the instructions on the website to request a redemption from
your account using the desired method from your available options.


BY MAIL OR EXPEDITED MAIL. Write a letter that includes the following
information: the name(s) of all owners and address as they appear on your
account, the fund name, share class, and account number from which you want to
sell shares, the dollar amount or number of shares you



                                       23
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

wish to sell, and a daytime telephone number if we have questions. All owners
should sign the letter and it should be mailed to the appropriate address.

Some redemptions can only be ordered in writing with a signature guarantee. For
more information, please contact DWS Investments using the appropriate
telephone number for your share class.


BY WIRE. You may sell shares by wire only if your account is authorized to do
so. You will be paid for redeemed shares by wire transfer of funds to your
financial advisor or bank upon receipt of a duly authorized redemption request
as promptly as feasible. For your protection, you may not change the
destination bank account over the phone. To sell by wire, call DWS Investments
using the appropriate telephone number for your share class. After you inform
DWS Investments of the amount of your redemption, you will receive a trade
confirmation number. We must receive your order by 4:00 p.m. Eastern time to
wire to your account the next business day.




FINANCIAL INTERMEDIARY SUPPORT PAYMENTS


The Advisor, DWS Investments Distributors, Inc. (the "Distributor") and/or
their affiliates may pay additional compensation, out of their own assets and
not as an additional charge to each fund, to selected affiliated and
unaffiliated brokers, dealers, participating insurance companies or other
financial intermediaries ("financial advisors") in connection with the sale
and/or distribution of fund shares or the retention and/or servicing of fund
investors and fund shares ("revenue sharing"). Such revenue sharing payments
are in addition to any distribution or service fees payable under any Rule
12b-1 or service plan of each fund, any record keeping/sub-transfer agency/

networking fees payable by each fund (generally through the Distributor or an
affiliate) and/or the Distributor to certain financial advisors for performing
such services and any sales charge, commissions, non-cash compensation
arrangements expressly permitted under applicable rules of the Financial
Industry Regulatory Authority or other concessions described in the fee table
or elsewhere in this prospectus or the Statement of Additional Information as
payable to all financial advisors. For example, the Advisor, the Distributor
and/or their affiliates may compensate financial advisors for providing a fund
with "shelf space" or access to a third party platform or fund offering list or
other marketing programs, including, without limitation, inclusion of the fund
on preferred or recommended sales lists, mutual fund "supermarket" platforms
and other formal sales programs; granting the Distributor access to the
financial advisor's sales force; granting the Distributor access to the
financial advisor's conferences and meetings; assistance in training and
educating the financial advisor's personnel; and obtaining other forms of
marketing support.

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


The Advisor, the Distributor and/or their affiliates currently make revenue
sharing payments from their own assets in connection with the sale and/or
distribution of DWS fund shares or the retention and/or servicing of investors
and DWS fund shares to financial advisors in amounts that generally range from
..01% up to .50% of assets of each fund serviced and maintained by the financial
advisor, .05% to .25% of sales of each fund attributable to the financial
advisor, a flat fee of $4,000 up to $500,000, or any combination thereof. These
amounts are subject to change at the discretion of the Advisor, the Distributor
and/or their affiliates. Receipt of, or the prospect of receiving, this
additional compensation may influence your financial advisor's recommendation
of each fund or of any particular share class of each fund. You should review
your financial advisor's compensation disclosure and/or talk to your financial
advisor to obtain more information on how this compensation may have influenced
your financial advisor's recommendation of each fund. Additional information
regarding these revenue sharing payments is included in each fund's Statement
of Additional Information, which is available to you on request at no charge
(see the back cover of this prospectus for more information on how to request a
copy of the Statement of Additional Information).


The Advisor, the Distributor and/or their affiliates may also make such revenue
sharing payments to financial advisors under the terms discussed above in
connection with the distribution of both DWS funds and non-DWS funds by
financial advisors to retirement plans that obtain record keeping services from
ADP, Inc. on the DWS 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.


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



                                       24
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

to prevent its traders from considering sales of DWS fund shares as a factor in
the selection of broker-dealers to execute portfolio transactions for each
fund. In addition, the Advisor, the Distributor and/or their affiliates will
not use fund brokerage to pay for their obligation to provide additional
compensation to financial advisors as described above.


POLICIES YOU SHOULD KNOW ABOUT


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


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



POLICIES ABOUT TRANSACTIONS


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


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


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


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


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


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


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


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


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


SUB-MINIMUM BALANCES FOR INSTITUTIONAL CLASS. Each fund may redeem your shares
and close your account on 60 days' notice if it fails to meet the minimum
account balance requirement of $1,000,000 for any reason.



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


An account maintenance fee of $6.25 per quarter (for a $25 annual fee) will be
assessed on accounts whose balances fail to meet the minimum initial investment
requirement for a period of 90 days prior to the assessment date. The quarterly
assessment will occur on or about the 15th of the last month in each calendar
quarter. Please note that the fee will be assessed on accounts that




                                       25
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>


fall below the minimum for any reason, including due to market value
fluctuations, redemptions or exchanges. The account maintenance fee does not
apply to: (i) accounts with an automatic investment plan; (ii) accounts held in
an omnibus account through a financial services firm; (iii) accounts maintained
on behalf of participants in certain fee based and wrap programs offered
through certain financial intermediaries approved by the Advisor; (iv)
participant level accounts in group retirement plans held on the records of a
retirement plan record keeper; and (v) accounts held by shareholders who
maintain $100,000 or more in aggregate assets in DWS fund shares.


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


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


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


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


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


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


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


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



                                       26
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

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

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


REDEMPTION FEES. DWS High Income Fund imposes a redemption fee of 2% of the
total redemption amount (calculated at net asset value, without regard to the
effect of any contingent deferred sales charge; any contingent deferred sales
charge is also assessed on the total redemption amount without regard to the
assessment of the 2% redemption fee) on all fund shares redeemed or exchanged
within 30 days of buying them (either by purchase or exchange). The redemption
fee is paid directly to the fund and is designed to encourage long-term
investment and to offset transaction and other costs associated with short-term
or excessive trading. For purposes of determining whether the redemption fee
applies, shares held the longest time will be treated as being redeemed first
and shares held the shortest time will be treated as being redeemed last.


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


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

THE AUTOMATED INFORMATION LINE is available 24 hours a day by calling the
appropriate telephone number for your share class. You can use our automated
phone service to get information on DWS funds generally and on accounts held
directly at DWS Investments. You can also use this service to request share
transactions.


TELEPHONE AND ELECTRONIC TRANSACTIONS. Generally, you are automatically
entitled to telephone redemption and exchange privileges, but you may elect not
to have them when you open your account or by contacting DWS Investments (see
phone number on the back cover).


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



                                       27
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

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


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


EACH FUND ACCEPTS PAYMENT FOR SHARES ONLY IN US DOLLARS by a check drawn on a
US bank, a bank or Federal Funds wire transfer or an electronic bank transfer.
Each fund does not accept third party checks. A third party check is a check
made payable to one or more parties and offered as payment to one or more other
parties (e.g., a check made payable to you that you offer as payment to someone
else). Checks should normally be payable to DWS Investments and drawn by you or
a financial institution on your behalf with your name or account number
included with the check.


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


A signature guarantee is simply a certification of your signature - a valuable
safeguard against fraud. You can get a signature guarantee from an eligible
guarantor institution, including commercial banks, savings and loans, trust
companies, credit unions, member firms of a national stock exchange or any
member or participant of an approved signature guarantor program. We require
stamps from members of a medallion signature guarantee program. A notarized
document cannot be accepted in lieu of a signature guarantee.


SELLING SHARES OF TRUST ACCOUNTS AND BUSINESS OR ORGANIZATION ACCOUNTS may
require additional documentation. Please call DWS Investments (see phone
numbers on the back cover) or contact your financial advisor for more
information.



WHEN YOU SELL SHARES THAT HAVE A CDSC, the CDSC is based on the original
purchase cost or current market value of the shares sold, whichever is less. In
processing orders to sell shares, the shares with the lowest CDSC are sold
first. For each investment you make, the date you first bought shares is the
date we use to calculate a CDSC on that particular investment. A CDSC is not
imposed when you exchange from one fund into another. When you sell shares of
the fund that you exchanged into, however, a CDSC may be imposed WHICH MAY
DIFFER FROM THE SCHEDULE FOR THE FUND YOU ARE EXCHANGING OUT OF. Your shares
will retain their original cost and purchase date.



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

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

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

o  Withdrawals related to certain retirement or benefit plans

o  Redemptions for certain loan advances, hardship provisions or returns of
   excess contributions from retirement plans

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

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

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



IF YOU SELL SHARES IN A DWS FUND FOR WHICH YOU PAID A SALES CHARGE AND THEN
DECIDE TO INVEST WITH DWS INVESTMENTS AGAIN WITHIN SIX MONTHS, you may be able
to take advantage of the "reinstatement feature." With this feature, you can
put your money back into the same class of a DWS fund at its current net asset
value and, for purposes of a sales charge, it will be treated as if it had
never left DWS Investments. You'll be reimbursed (in the form of fund shares)
for any CDSC you paid when you sold shares in a DWS fund. Future CDSC
calculations will be based on your original investment date, rather than your
reinstatement date. The reinstatement feature will be modified on March 1,
2010, the date the Class B shares are closed to new purchases, to no longer
permit shareholders who have sold their Class B shares to repurchase Class B
shares as provided above.



There is also an option that lets investors who sold Class B shares buy Class A
shares (if available) with no sales charge, although they won't be reimbursed
for any CDSC



                                       28
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

they paid. You can only use the reinstatement feature once for any given group
of shares. To take advantage of this feature, contact Shareholder Services or
your financial advisor.


CLASS A TO CLASS S IN THE SAME FUND EXCHANGE PRIVILEGE. Investors who have
invested in Class A shares through a comprehensive or "wrap" fee program, or
other fee-based program sponsored by a broker-dealer, bank or registered
investment adviser, may become eligible to invest in Class S shares. Subject to
the discretion of the Distributor, such shareholders may exchange their Class A
shares for Class S shares of equal aggregate value of the same fund. No sales
charges or other charges will apply to any such exchanges. Investors should
contact their selling and/or servicing agents to learn more about the details
of this exchange feature.



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



HOW EACH FUND CALCULATES SHARE PRICE


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



<TABLE>

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


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


DWS HIGH INCOME FUND CHARGES A REDEMPTION FEE EQUAL TO 2% of the value of
shares redeemed or exchanged within 30 days of purchase. Please see "Policies
about transactions - Redemption fees" for further information.


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


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



OTHER RIGHTS WE RESERVE


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

o  withdraw or suspend the offering of shares at any time


                                       29
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

o  withhold a portion of your distributions and redemption proceeds if we have
   been notified by the IRS that you are subject to backup withholding or if
   you fail to provide us with the correct taxpayer ID number and certain
   certifications, including certification that you are not subject to backup
   withholding

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

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

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

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

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



UNDERSTANDING DISTRIBUTIONS AND TAXES


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


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


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


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


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


BUYING, SELLING OR EXCHANGING FUND SHARES WILL USUALLY HAVE FEDERAL INCOME TAX
CONSEQUENCES FOR YOU (except in employer-sponsored qualified plans, IRAs or
other tax-advantaged accounts). Your sale of shares may result in a capital
gain or loss. The gain or loss will be long-term or short-term depending on how
long you owned the shares that were sold. For federal income tax purposes, an
exchange is treated the same as a sale.


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



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


ANY DIRECT INVESTMENTS IN FOREIGN SECURITIES BY A FUND MAY BE SUBJECT TO
FOREIGN WITHHOLDING TAXES. In that case, a fund's yield on those securities
would generally be decreased. Shareholders generally will not be entitled to
claim a credit or deduction with respect to foreign taxes paid by a fund. In
addition, any investments in foreign securities or foreign currencies may
increase or accelerate a fund's recognition of ordinary income and may affect



                                       30
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

the timing or amount of the fund's distributions. If you invest in a fund
through a taxable account, your after-tax return could be negatively affected.

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


A fund's use of the iGAP strategy may increase or accelerate the fund's
recognition of income, affect the character of such income, and affect the
timing, amount, and character of taxable distributions to shareholders.


For taxable years beginning before January 1, 2011, distributions to
individuals and other noncorporate shareholders of investment income designated
by a fund as derived from qualified dividend income are eligible for taxation
for federal income tax purposes at the more favorable long-term capital gain
rates. It is currently unclear whether Congress will extend this provision for
taxable years beginning on or after January 1, 2011. Qualified dividend income
generally includes dividends received by a fund from domestic and some foreign
corporations. It does not include income from investments in debt securities
or, generally, from real estate investment trusts. In addition, a fund must
meet certain holding period and other requirements with respect to the
dividend-paying stocks in its portfolio and the shareholder must meet certain
holding period and other requirements with respect to a fund's shares for the
lower tax rates to apply. The funds do not expect a significant portion of
their distributions to constitute qualified dividend income.


For taxable years beginning before January 1, 2011, the maximum federal income
tax rate imposed on long-term capital gains recognized by individuals and other
noncorporate shareholders has been temporarily reduced to 15%, in general, with
lower rates applying to taxpayers in the 10% and 15% rate brackets. It is
currently unclear whether Congress will extend this provision for taxable years
beginning on or after January 1, 2011. For taxable years beginning on or after
January 1, 2011, the maximum long-term capital gain rate is scheduled to return
to 20%.


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


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


If a fund's distributions exceed its current and accumulated earnings and
profits, the excess will be treated for federal income tax purposes as a
tax-free return of capital to the extent of your basis in your shares and
thereafter as a capital gain. Because a return of capital distribution reduces
the basis of your shares, a return of capital distribution may result in a
higher capital gain or a lower capital loss when you sell your shares.


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


The above discussion summarizes certain federal income tax consequences for
shareholders who are US persons. If you are a non-US person, please consult
your own tax advisor with respect to the US tax consequences to you of an
investment in a fund. For more information, see "Taxes" in the Statement of
Additional Information.


                                       31
PROSPECTUS February 1, 2010                             Investing in the Funds
<PAGE>

FINANCIAL HIGHLIGHTS

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


DWS HIGH INCOME FUND - CLASS A





                                       32
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS HIGH INCOME FUND - CLASS B





                                       33
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS HIGH INCOME FUND - CLASS C





                                       34
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS HIGH INCOME FUND - INSTITUTIONAL CLASS





                                       35
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC INCOME FUND - CLASS A





                                       36
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC INCOME FUND - CLASS B





                                       37
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC INCOME FUND - CLASS C





                                       38
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC INCOME FUND - CLASS S





                                       39
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS A





                                       40
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS B




                                       41
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS C





                                       42
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC GOVERNMENT SECURITIES FUND - INSTITUTIONAL CLASS





                                       43
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS S





                                       44
PROSPECTUS February 1, 2010                               Financial Highlights
<PAGE>

APPENDIX

HYPOTHETICAL EXPENSE SUMMARY

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


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


DWS HIGH INCOME FUND - CLASS A




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             4.50%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER    ANNUAL FEES
            FEES AND      EXPENSE      FEES AND         FEES AND          AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


                                       45
PROSPECTUS February 1, 2010                                           Appendix
<PAGE>

DWS HIGH INCOME FUND - CLASS B




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


DWS HIGH INCOME FUND - CLASS C




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER    ANNUAL FEES
            FEES AND      EXPENSE      FEES AND         FEES AND          AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


                                       46
PROSPECTUS February 1, 2010                                           Appendix
<PAGE>

DWS HIGH INCOME FUND - INSTITUTIONAL CLASS




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER    ANNUAL FEES
            FEES AND      EXPENSE      FEES AND         FEES AND          AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


DWS STRATEGIC INCOME FUND - CLASS A




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             2.75%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


                                       47
PROSPECTUS February 1, 2010                                           Appendix
<PAGE>

DWS STRATEGIC INCOME FUND - CLASS B




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER    ANNUAL FEES
            FEES AND      EXPENSE      FEES AND         FEES AND          AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


DWS STRATEGIC INCOME FUND - CLASS C




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


                                       48
PROSPECTUS February 1, 2010                                           Appendix
<PAGE>

DWS STRATEGIC INCOME FUND - CLASS S




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER    ANNUAL FEES
            FEES AND      EXPENSE      FEES AND         FEES AND          AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS A




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             2.75%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


                                       49
PROSPECTUS February 1, 2010                                           Appendix
<PAGE>

DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS B




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS C




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  -----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  ------------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%         1.60%         3.40%       $ 10,340.00    $   162.72
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


                                       50
PROSPECTUS February 1, 2010                                           Appendix
<PAGE>

DWS STRATEGIC GOVERNMENT SECURITIES FUND - INSTITUTIONAL CLASS




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  ----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  -----------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS S




<TABLE>
<CAPTION>
            MAXIMUM        INITIAL HYPOTHETICAL             ASSUMED RATE
         SALES CHARGE:          INVESTMENT:                  OF RETURN:
             0.00%                $10,000                        5%
        ---------------  -------------------------  ----------------------------
                                                      HYPOTHETICAL
           CUMULATIVE      ANNUAL     CUMULATIVE        YEAR-END
         RETURN BEFORE      FUND     RETURN AFTER    BALANCE AFTER      ANNUAL
            FEES AND      EXPENSE      FEES AND         FEES AND       FEES AND
YEAR        EXPENSES       RATIOS      EXPENSES         EXPENSES       EXPENSES
------  ---------------  ---------  --------------  ---------------  -----------
<S>     <C>              <C>        <C>             <C>              <C>
   1          5.00%
 ---         -----
   2         10.25%
 ---         -----
   3         15.76%
 ---         -----
   4         21.55%
 ---         -----
   5         27.63%
 ---         -----
   6         34.01%
 ---         -----
   7         40.71%
 ---         -----
   8         47.75%
 ---         -----
   9         55.13%
 ---         -----
 10          62.89%
 ---         -----
TOTAL
---
</TABLE>



                                       51
PROSPECTUS February 1, 2010                                           Appendix
<PAGE>

TO GET MORE INFORMATION

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


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


For a free copy of any of these documents or to request other information about
a fund, contact DWS Investments at the phone number or address listed below.
SAIs and shareholder reports are also available through the DWS Investments Web
site at www.dws-investments.com. These documents and other information about
each fund are available from the EDGAR Database on the SEC's Internet site at
www.sec.gov. If you like, you may obtain copies of this information, after
paying a copying fee, by e-mailing a request to publicinfo@sec.gov or by
writing the SEC at the address listed below.



You can also review and copy these documents and other information about each
fund, including each fund's SAI, at the SEC's Public Reference Room in
Washington, D.C. Information on the operation of the SEC's Public Reference
Room may be obtained by calling (800) SEC-0330.


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


CONTACT INFORMATION

<TABLE>
<S>               <C>
DWS INVESTMENTS   PO Box 219151
                  Kansas City, MO
                  64121-9151
                  www.dws-investments.com
                  Class A, B or C: (800) 621-1048
                  Institutional Class: (800) 730-1313
                  Class S: (800) 728-3337
SEC               100 F Street, N.E.
                  Washington, D.C. 20549-0102
                  WWW.SEC.GOV
                  (800) SEC-0330
DISTRIBUTOR       DWS Investments Distributors, Inc.
                  222 South Riverside Plaza
                  Chicago, IL 60606-5808
                  (800) 621-1148
SEC FILE NUMBER   DWS High Income Series
                  DWS High Income Fund
                  811-2786
                  DWS Strategic Income Fund
                  811-2743
                  DWS Strategic Government Securities
                  Fund
                  811-2719
</TABLE>



                                     RESHAPING INVESTING. [DWS INVESTMENTS LOGO]
                                                             Deutsche Bank Group



(02/01/09) DTXIF-1
<PAGE>

                      STATEMENT OF ADDITIONAL INFORMATION




                                FEBRUARY 1, 2010




                             DWS HIGH INCOME SERIES



                              DWS HIGH INCOME FUND

<TABLE>
<S>                 <C>           <C>           <C>           <C>
  CLASS (Ticker):   A (KHYAX)     B (KHYBX)     C (KHYCX)     INST (KHYIX)
</TABLE>



                           DWS STRATEGIC INCOME FUND



                           DWS STRATEGIC INCOME FUND

<TABLE>
<S>                 <C>           <C>           <C>           <C>
  CLASS (Ticker):   A (KSTAX)     B (KSTBX)     C (KSTCX)     S (KSTSX)
</TABLE>



                    DWS STRATEGIC GOVERNMENT SECURITIES FUND



                    DWS STRATEGIC GOVERNMENT SECURITIES FUND

<TABLE>
<S>                 <C>           <C>           <C>           <C>              <C>
  CLASS (Ticker):   A (KUSAX)     B (KUSBX)     C (KUSCX)     INST (KUSIX)     S (KUSMX)
</TABLE>



This combined Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the prospectus for each fund dated
February 1, 2010, as amended from time to time, a copy of which may be obtained
without charge by calling (800) 621-1048 (A, B, C), (800) 730-1313 (INST) and
(800) 728-3337 (S); or from the firm from which this SAI was obtained. This SAI
is incorporated by reference into the prospectus.



Portions of the Annual Report to Shareholders of each fund are incorporated
herein by reference, as specified herein, and are hereby deemed to be part of
this SAI. Reports to Shareholders may also be obtained without charge by
calling the number provided in the preceding paragraph.


This SAI is divided into two Parts - Part I and Part II. Part I contains
information that is specific to each fund, while Part II contains information
that generally applies to each of the funds in the DWS funds.



                                                          [DWS INVESTMENTS LOGO]
                                                             Deutsche Bank Group



<PAGE>


STATEMENT OF ADDITIONAL INFORMATION (SAI) - PART I



<TABLE>
<CAPTION>
                                                                                           PAGE
<S>                                                                                       <C>
Part I...................................................................................   I-1
  Definitions............................................................................   I-1
  Fund Organization......................................................................   I-1
  Management of Each Fund................................................................   I-3
  Sales Charges and Distribution Plan Payments...........................................   I-4
  Portfolio Transactions and Brokerage Commissions.......................................   I-4
  Investments............................................................................   I-4
  Investment Restrictions................................................................   I-4
  Taxes..................................................................................   I-6
  Independent Registered Public Accounting Firm, Reports to Shareholders and Financial      I-6
  Statements   .
  Additional Information.................................................................   I-6
  Part I: Appendix I-A - Board Member Share Ownership and Control........................   I-7
  Part I: Appendix I-B - Board Committees and Meetings...................................  I-10
  Part I: Appendix I-C - Board Member Compensation.......................................  I-12
  Part I: Appendix I-D - Portfolio Management............................................  I-13
  Part I: Appendix I-E - Affiliated Service Provider Compensation........................  I-17
  Part I: Appendix I-F - Sales Charges...................................................  I-19
  Part I: Appendix I-G - Distribution Plan Agreements....................................  I-20
  Part I: Appendix I-H - Portfolio Transactions and Brokerage Commissions................  I-21
  Part I: Appendix I-I - Investment Practices and Techniques.............................  I-23
  Part I: Appendix I-J - Additional Information..........................................  I-25
Part II..................................................................................  II-1
</TABLE>


<PAGE>


PART I

DEFINITIONS

"1934 Act" - the Securities Exchange Act of 1934, as amended


"1940 Act" - the Investment Company Act of 1940, as amended


"Code" - the Internal Revenue Code of 1986, as amended


"DeAM" - Deutsche Asset Management


"DIMA" or "Advisor" or "Administrator" - Deutsche Investment Management
Americas Inc., 345 Park Avenue, New York, New York


"DIDI" or "Distributor" - DWS Investments Distributors, Inc., 222 South
Riverside Plaza, Chicago, Illinois 60606


"DISC" or "Transfer Agent" - DWS Investments Service Company, 210 W. 10th
Street, Kansas City, Missouri 64105-1614


"DIFA" - DWS Investments Fund Accounting Corporation, One Beacon Street,
Boston, Massachusetts 02108 (formerly Scudder Fund Accounting Corporation)


"DWS funds" - The US registered investment companies advised by DIMA


"Board Members" - Members of the Board of Trustees of the Trust


"Board" - Board of Trustees of the Trust


"Independent Board Members"- Board Members who are not interested persons (as
defined in the 1940 Act)


"fund" or "series" - DWS High Income Fund, DWS Strategic Income Fund and/or DWS
Strategic Government Securities Fund as the context may require


"Custodian" - State Street Bank and Trust Company, Lafayette Corporate Center,
2 Avenue De Lafayette, Boston, MA 02111


"Fund Legal Counsel" - Vedder Price P.C., 222 North LaSalle Street, Chicago, IL
60601


"Trustee/Director Legal Counsel" - Ropes & Gray LLP, One International Place,
Boston, MA 02110

"Trust" - DWS High Income Series, DWS Strategic Income Fund or DWS Strategic
Government Securities Fund, (each, a "Trust")


"NRSRO"- A nationally recognized statistical rating organization


"S&P" - Standards & Poor's Ratings Group, an NRSRO


"Moody's" - Moody's Investors Service, Inc., an NRSRO


"Fitch" - Fitch Investors Service, Inc., an NRSRO



FUND ORGANIZATION

DWS High Income Fund is a series of DWS High Income Series. DWS High Income
Series is a registered open-end management investment company organized as a
Massachusetts business trust under the laws of Massachusetts on October 24,
1985. On February 6, 2006, Scudder High Income Fund was renamed DWS High Income
Fund.


DWS Strategic Income Fund is a registered open-end management investment
company organized as a Massachusetts business trust under the laws of
Massachusetts on October 24, 1985. On February 6, 2006, Scudder Strategic
Income Fund was renamed DWS Strategic Income Fund.


DWS Strategic Government Securities Fund is a registered open-end management
investment company organized as a Massachusetts business trust under the laws
of Massachusetts on October 24, 1985. On February 6, 2006, Scudder U.S.
Government Securities Fund was renamed DWS U.S. Government Securities Fund, and
on March 25, 2008 was renamed DWS Strategic Government Securities Fund.
Effective August 1, 2005, the fund, pursuant to a reorganization, succeeded to
the assets of Scudder Intermediate Government & Agency Trust, a Massachusetts
business trust.


Each Trust is governed by Amended and Restated Declaration of Trust dated June
2, 2008 for DWS High Income Series and DWS Strategic Government Securities Fund
and an Amended and Restated Declaration of Trust dated June 24, 2008 for DWS
Strategic Income Fund, as may be further amended from time to time (the
"Declaration of Trust"). The Declaration of Trust was last approved by
shareholders in 2008.


                                      I-1
<PAGE>

The Board has the authority to divide the shares of each Trust into multiple
funds by establishing and designating two or more series of each Trust. The
Board also has the authority to establish and designate two or more classes of
shares of each Trust, or of any series thereof, with variations in the relative
rights and preferences between the classes as determined by the Board; provided
that all shares of a class shall be identical with each other and with the
shares of each other class of the same series except for such variations
between the classes, including bearing different expenses, as may be authorized
by the Board and not prohibited by the 1940 Act and the rules and regulations
thereunder. All shares issued and outstanding are transferable, have no
pre-emptive or conversion rights (except as may be determined by the Board) and
are redeemable as described in the SAI and in the prospectus. Each share has
equal rights with each other share of the same class of the fund as to voting,
dividends, exchanges, conversion features and liquidation. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held.


A fund generally is not required to hold meetings of its shareholders. Under
the Declaration of Trust, shareholders only have the power to vote in
connection with the following matters and only to the extent and as provided in
the Declaration of Trust and as required by applicable law: (a) the election,
re-election or removal of one or more Trustees if a meeting of shareholders is
called by or at the direction of the Board for such purpose(s), provided that
the Board shall promptly call a meeting of shareholders for the purpose of
voting upon the question of removal of one or more Trustees as a result of a
request in writing by the holders of not less than ten percent of the
outstanding shares of the Trust; (b) the termination of the Trust or a fund if,
in either case, the Board submits the matter to a vote of shareholders; (c) any
amendment of the Declaration of Trust that (i) would affect the rights of
shareholders to vote under the Declaration of Trust, (ii) requires shareholder
approval under applicable law or (iii) the Board submits to a vote of
shareholders; and (d) such additional matters as may be required by law or as
the Board 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 By-laws. The By-laws of each Trust currently
provide that the presence in person or by proxy of the holders of thirty
percent of the shares entitled to vote at a meeting shall constitute a quorum
for the transaction of business at meetings of shareholders of each Trust (or
of an individual series or class if required to vote separately).


On any matter submitted to a vote of shareholders, all shares of each Trust
entitled to vote shall, except as otherwise provided in the 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 Board has
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 Board has 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 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, in its
sole discretion, also may cause each 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 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 or other
securities of the Trust. The Declaration of Trust also authorizes the Board to
terminate a fund or any class without shareholder approval, and each Trust may
suspend the right of shareholders to require each Trust to redeem shares to the
extent permissible under the 1940 Act.


The Declaration of Trust provides that, except as otherwise required by
applicable law, the Board may authorize the Trust or any series or class
thereof to merge, reorganize


                                      I-2
<PAGE>

or consolidate with any corporation, association, trust or series thereof
(including another series or class of the Trust) or other entity (in each case,
the "Surviving Entity") or the Board may sell, lease or exchange all or
substantially all of the Trust property (or all or substantially all of the
Trust property allocated or belonging to a particular series or class)
including its good will to any Surviving Entity, upon such terms and conditions
and for such consideration as authorized by the Board. Such transactions may be
effected through share-for-share exchanges, transfers or sales of assets,
in-kind redemptions and purchases, exchange offers or any other method approved
by the Board. The Board shall provide notice to affected shareholders of each
such transaction. The authority of the Board with respect to the merger,
reorganization or consolidation of any class of the Trust is in addition to the
authority of the Board to combine two or more classes of a series into a single
class.


Upon the termination of each Trust or any series or class, 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 Board may distribute the remaining Trust property or
property of the series or class, in cash or in kind or partly each, to the
shareholders of the Trust or the series or class involved, ratably according to
the number of shares of the Trust or such series or class held by the several
shareholders of the Trust or such series or class 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
a fund or a 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 Board considers adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which a
disclaimer is inoperative and a fund itself is unable to meet its obligations.



MANAGEMENT OF EACH FUND


BOARD MEMBERS AND OFFICERS' IDENTIFICATION AND BACKGROUND

The identification and background of the Board Members and officers of each
Trust are set forth in PART II - APPENDIX II-A.


BOARD COMMITTEES AND COMPENSATION

Compensation paid to the Board Members, for certain specified periods, as well
as information regarding the committees of the Board, is set forth in PART I -
APPENDIX I-B and PART I - APPENDIX I-C.


BOARD MEMBER SHARE OWNERSHIP AND CONTROL PERSONS

Information concerning the ownership of fund shares by Board Members and
officers of each Trust, as a group, as well as the dollar range value of each
Board Member's share ownership in each fund and, on an aggregate basis, in all
DWS funds overseen, by investors who control the fund, if any, and by investors
who own 5% or more of any class of fund shares, if any, is set forth in PART I
- APPENDIX I-A.


PORTFOLIO MANAGEMENT

Information regarding each fund's portfolio manager(s), including other
accounts managed, compensation, ownership of fund shares and possible conflicts
of interest, is set forth in PART I - APPENDIX I-D and PART II - APPENDIX II-B.
This section does not apply to money market funds.


AFFILIATED SERVICE PROVIDER COMPENSATION

Compensation paid by each fund to its affiliated service providers for various
services including investment management, administrative, transfer agency, and,
for certain funds, fund accounting services, is set forth in PART I - APPENDIX
I-E. For information regarding payments made to DIDI, see PART I - APPENDIX
I-F. Fee rates for services of the above referenced affiliated service
providers are included in PART II - APPENDIX II-C.


                                      I-3
<PAGE>

SALES CHARGES AND DISTRIBUTION PLAN PAYMENTS


SALES CHARGES

Sales charges paid in connection with the purchase and sale of fund shares for
the three most recent fiscal years are set forth in PART I - APPENDIX I-F. This
information is not applicable to a fund/class that does not impose sales
charges.


DISTRIBUTION PLAN PAYMENTS

Payments made by each fund for the most recent calendar year under each fund's
Rule 12b-1 Plans are set forth in PART I - APPENDIX I-G. This information is
not applicable to a fund/class that does not incur expenses paid in connection
with Rule 12b-1 Plans.



PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS


PORTFOLIO TURNOVER

The portfolio turnover rates for the two most recent fiscal years are set forth
in PART I - APPENDIX I-H. This section does not apply to money market funds or
to a new fund that has not completed a fiscal reporting period.


BROKERAGE COMMISSIONS

Total brokerage commissions paid by each fund for the three most recent fiscal
years are set forth in PART I - APPENDIX I-H.


Each fund's policy with respect to portfolio transactions and brokerage is set
forth under "Portfolio Transactions" in Part II of this SAI.



INVESTMENTS

GENERAL INVESTMENT PRACTICES AND TECHNIQUES

PART I - APPENDIX I-I includes a list of the investment practices and
techniques which each fund may employ in pursuing its investment objective.
PART II - APPENDIX II-G includes a description of these investment practices
and techniques as well as the associated risks.



INVESTMENT RESTRICTIONS

Unless otherwise stated, the policies below apply to each fund.

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


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


Each fund has elected to be classified as a diversified series of an open-end
management investment company. A diversified fund may not, with respect to 75%
of total assets, invest more than 5% of total assets in the securities of a
single issuer (other than cash and cash items, US government securities or
securities of other investment companies) or invest in more than 10% of the
outstanding voting securities of such issuer.


Unless specified to the contrary, the following fundamental policies may not be
changed without the approval of a majority of the outstanding voting securities
of a fund which, under the 1940 Act and the rules thereunder and as used in
this SAI, means the lesser of (1) 67% or more of the voting securities present
at such meeting, if the holders of more than 50% of the outstanding voting
securities of a fund are present or represented by proxy, or (2) more than 50%
of the outstanding voting securities of a fund.


As a matter of fundamental policy, a fund may not do any of the following:


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



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


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


                                      I-4
<PAGE>

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


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


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



(7)    concentrate its investments in a particular industry, as that term is
       used in the 1940 Act, and as interpreted or modified by regulatory
       authority having jurisdiction, from time to time.



With respect to the policy restricting purchases and sales of real estate
above, the fund has no current intention to hold and sell real estate acquired
as a result of a fund's ownership of securities.


OTHER INVESTMENT POLICIES. The Board has adopted certain non-fundamental
policies and restrictions which are observed in the conduct of a fund's
affairs. They differ from fundamental investment policies in that they may be
changed or amended by action of the Board without requiring prior notice to, or
approval of, the shareholders.


As a matter of non-fundamental policy:


(1)    the fund may not purchase illiquid securities, including time deposits
       and repurchase agreements maturing in more than seven days, if, as a
       result, more than 15% of the fund's net assets would be invested in such
       securities.


(2)    DWS High Income Fund and DWS Strategic Government Securities Fund may
       not acquire securities of registered open-end investment companies or
       registered unit investment trusts in reliance on Sections 12(d)(1)(F) or
       12(d)(1)(G) of the 1940 Act.


(3)    the fund may not acquire securities of other investment companies,
       except as permitted by the 1940 Act and the rules, regulations and any
       applicable exemptive order issued thereunder.

(4)    the fund may not purchase warrants if as a result, such securities,
       taken at the lower of cost or market value would represent more than 5%
       of the value of the fund's total assets (for this purpose, warrants
       acquired in units or attached to securities will be deemed to have no
       value).


(5)    the Board has the discretion to retain the current distribution
       arrangement for the fund while investing in a master fund in a
       master-feeder structure (this policy would permit the Board, without
       shareholder approval to convert the fund to a master-feeder structure).


(6)    DWS High Income Fund and DWS Strategic Income Fund may invest in all
       types of direct debt investments, but among these investments the fund
       currently intends to invest primarily in direct loans and trade claims.


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


(8)    the fund will not sell put options if, as a result, more than 50% of the
       fund's total assets would be required to be segregated to cover its
       potential obligations under such put options other than those with
       respect to futures and options thereon.


(9)    the fund will not sell interest rate caps or floors where it does not
       own securities or other instruments providing the income stream the fund
       may be obligated to pay.


(10)   DWS High Income Fund may invest up to 15% of its total assets in credit
       default swaps (measured by the notional amount of the credit default
       swap).


(11)   For DWS High Income Fund, no more than 5% of total assets may be
       invested in credit default swaps for purposes of buying credit
       protection on individual securities if the fund does not own the
       underlying security or securities at the time of investment.


(12)   the fund will only sell credit protection with respect to securities in
       which it would be authorized to invest directly.



                                      I-5
<PAGE>


(13)   DWS High Income Fund and DWS Strategic Income Fund may not exceed 25% of
       the value of its assets in securities purchased on a when-issued or
       forward delayed-delivery basis.


(14)   the fund currently does not intend to invest more than 20% of its total
       assets in collateralized obligations that are collateralized by a pool
       of credit card or automobile receivables or other types of assets.


(15)   the fund currently does not intend to invest more than 10% of its total
       assets in inverse floaters.


(16)   the fund currently does not intend to invest more than 20% of its net
       assets in zero coupon US government securities.


(17)   DWS Strategic Income Fund may invest up to 50% of its total assets in
       foreign securities that are traded principally in securities markets
       outside the US.


(18)   DWS Strategic Government Securities Fund will not invest in
       Mortgage-Backed Securities issued by private issuers.


(19)   DWS High Income Fund may invest up to 50% of its total assets in bonds
       denominated in US dollars or foreign currencies from foreign issuers.



TAXES

Important information concerning the tax consequences of an investment in each
fund is contained in PART II - APPENDIX II-H.



INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, REPORTS TO SHAREHOLDERS AND
FINANCIAL STATEMENTS

The financial highlights of each fund included in the prospectus and the
financial statements incorporated by reference into this SAI have been so
included or incorporated by reference in reliance on the report of
___________________________________ independent registered public accounting
firm. The report is given on the authority of said firm as experts in auditing
and accounting. The accounting firm audits the financial statements of each
fund and provides other audit, tax and related services. Shareholders will
receive annual audited financial statements and semi-annual unaudited financial
statements.

The financial statements, together with the report of the Independent
Registered Public Accounting Firm, Financial Highlights and notes to financial
statements in the Annual Report to the Shareholders of each fund, dated
September 30, 2009 for DWS High Income Fund (SEC File No. 811-2786) and dated
October 31, 2009 for DWS Strategic Income Fund (SEC File No. 811-2743) and DWS
Strategic Government Securities Fund (SEC File No. 811-2719), are incorporated
herein by reference and are hereby deemed to be a part of this combined SAI.



ADDITIONAL INFORMATION

For information on CUSIP numbers and fund fiscal year end information, see PART
I - APPENDIX I-J.



                                      I-6
<PAGE>


PART I: APPENDIX I-A - BOARD MEMBER SHARE OWNERSHIP AND CONTROL


BOARD MEMBER SHARE OWNERSHIP IN EACH FUND

The following tables show the dollar range of equity securities beneficially
owned by each Board Member in each fund and in DWS funds as of December 31,
2009.


DOLLAR RANGE OF BENEFICIAL OWNERSHIP(1)


<TABLE>
<CAPTION>
                                                          DWS
                                            DWS        STRATEGIC
                            DWS HIGH     STRATEGIC     GOVERNMENT
                             INCOME        INCOME      SECURITIES
BOARD MEMBER                  FUND          FUND          FUND
<S>                        <C>          <C>           <C>
INDEPENDENT BOARD MEMBER:
John W. Ballantine         $            $             $
Henry P. Becton, Jr.       $            $             $
Dawn-Marie Driscoll        $            $             $
Keith R. Fox               $            $             $
Paul K. Freeman            $            $             $
Kenneth C. Froewiss        $            $             $
Richard J. Herring         $            $             $
William McClayton          $            $             $
Rebecca W. Rimel           $            $             $
William N. Searcy, Jr.     $            $             $
Jean Gleason Stromberg     $            $             $
Robert Wadsworth           $            $             $
</TABLE>


AGGREGATE DOLLAR RANGE OF BENEFICIAL OWNERSHIP(1)



<TABLE>
<CAPTION>
                             FUNDS OVERSEEN BY
                            BOARD MEMBER IN THE
BOARD MEMBER                 DWS FUND COMPLEX
<S>                        <C>
INDEPENDENT BOARD MEMBER:
John W. Ballantine            Over $100,000
Henry P. Becton, Jr.          Over $100,000
Dawn-Marie Driscoll           Over $100,000
Keith R. Fox                  Over $100,000
Paul K. Freeman               Over $100,000
Kenneth C. Froewiss           Over $100,000
Richard J. Herring            Over $100,000
William McClayton             Over $100,000
Rebecca W. Rimel              Over $100,000
William N. Searcy, Jr.        Over $100,000
Jean Gleason Stromberg        Over $100,000
Robert Wadsworth              Over $100,000
</TABLE>

                                       I-7
<PAGE>

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



OWNERSHIP IN SECURITIES OF THE ADVISOR AND RELATED COMPANIES

As reported to each fund, the information in the table below reflects ownership
by the Independent Board Members and their immediate family members of certain
securities as of December 31, 2009. An immediate family member can be a spouse,
children residing in the same household including step and adoptive children
and any dependents. The securities represent ownership in the Advisor or
Distributor of each fund and any persons (other than a registered investment
company) directly or indirectly controlling, controlled by, or under common
control with the Advisor or Distributor of each fund (including Deutsche Bank
AG).


<TABLE>
<CAPTION>
                               OWNER AND                                     VALUE OF           PERCENT OF
INDEPENDENT                 RELATIONSHIP TO                 TITLE OF     SECURITIES ON AN       CLASS ON AN
BOARD MEMBER                  BOARD MEMBER      COMPANY       CLASS       AGGREGATE BASIS     AGGREGATE BASIS
<S>                        <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>


As of January __, 2010, all Board Members and officers owned, as a group, less
than 1% of the outstanding shares of a fund.


25% OR GREATER OWNERSHIP

No investor owns 25% of more of a fund's shares as of January __, 2010, and
therefore there is no presumed control of a fund.


5% OR GREATER OWNERSHIP OF SHARE CLASSES

The following table identifies those investors who own 5% or more of each
fund's share class as of January __, 2010. All holdings are of record, unless
otherwise indicated.


DWS HIGH INCOME FUND


<TABLE>
<CAPTION>
NAME AND ADDRESS OF INVESTOR      SHARES     PERCENTAGE
<S>                              <C>        <C>
</TABLE>

                                       I-8
<PAGE>

DWS STRATEGIC INCOME FUND


<TABLE>
<CAPTION>
NAME AND ADDRESS OF INVESTOR      SHARES     PERCENTAGE
<S>                              <C>        <C>
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND



<TABLE>
<CAPTION>
NAME AND ADDRESS OF INVESTOR      SHARES     PERCENTAGE
<S>                              <C>        <C>
</TABLE>



                                      I-9
<PAGE>

PART I: APPENDIX I-B - BOARD COMMITTEES AND MEETINGS


INFORMATION CONCERNING COMMITTEES AND MEETINGS OF THE BOARD

The Board oversees the operation of the DWS funds and meets periodically to
oversee fund activities, and to review fund performance and contractual
arrangements with fund service providers. The Board met [__] times during the
most recently completed calendar year. Each Board Member attended at least 75%
of the meetings of the Board and meetings of the Board Committees on which such
Board Member served.


COMMITTEE INFORMATION TO BE UPDATED:


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.


<TABLE>
<CAPTION>
                        NUMBER OF
                     MEETINGS IN LAST
NAME OF COMMITTEE     CALENDAR YEAR   FUNCTIONS                                             CURRENT MEMBERS(1)
<S>                 <C>               <C>                                                   <C>
AUDIT COMMITTEE            []         Assists the Board in fulfilling its responsibility    William McClayton (Chair),
                                      for oversight of (1) the integrity of the financial   Kenneth C. Froewiss (Vice
                                      statements, (2) the fund's accounting and             Chair), John W. Ballantine,
                                      financial reporting policies and procedures, (3)      Henry P. Becton, Jr., Keith
                                      the fund's compliance with legal and regulatory       R. Fox, and William N.
                                      requirements related to accounting and                Searcy, Jr.
                                      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.
NOMINATING AND             [ ]        Recommends individuals for membership on              Henry P. Becton, Jr. (Chair),
GOVERNANCE                            the Board, nominates officers, Board and              Rebecca W. Rimel (Vice
COMMITTEE                             committee chairs, vice chairs and committee           Chair), Paul K. Freeman and
                                      members, and oversees the operations of the           William McClayton
                                      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.
CONTRACT                   [ ]        Reviews at least annually, (a) the fund's             Robert H. Wadsworth
COMMITTEE                             financial arrangements with DIMA and its              (Chair), Keith R. Fox (Vice
                                      affiliates, and (b) the fund's expense ratios.        Chair), Henry P. Becton, Jr.,
                                                                                            Richard J. Herring, William
                                                                                            McClayton and Jean
                                                                                            Gleason Stromberg
</TABLE>

                                      I-10
<PAGE>


<TABLE>
<CAPTION>
                        NUMBER OF
                     MEETINGS IN LAST
NAME OF COMMITTEE     CALENDAR YEAR   FUNCTIONS                                           CURRENT MEMBERS(1)
<S>                 <C>               <C>                                                 <C>
EQUITY OVERSIGHT           [ ]        Reviews the investment operations of those          John W. Ballantine (Chair),
COMMITTEE                             funds that primarily invest in equity securities    William McClayton (Vice
                                      (except for those funds managed by a                Chair), Henry P. Becton, Jr.,
                                      quantitative investment team).                      Keith R. Fox, Richard J.
                                                                                          Herring and Rebecca W.
                                                                                          Rimel
FIXED INCOME AND           [ ]        Reviews the investment operations of those          William N. Searcy, Jr.
QUANT OVERSIGHT                       funds that primarily invest in fixed-income         (Chair), Jean Gleason
COMMITTEE                             securities or are managed by a quantitative         Stromberg (Vice Chair),
                                      investment team.                                    Dawn-Marie Driscoll, Paul K.
                                                                                          Freeman, Kenneth C.
                                                                                          Froewiss and Robert H.
                                                                                          Wadsworth
MARKETING AND              [ ]        Reviews the fund's marketing program, sales         Richard J. Herring (Chair),
SHAREHOLDER                           practices and literature and shareholder            Dawn-Marie Driscoll (Vice
SERVICES                              services. Considers matters relating to fund        Chair), Rebecca W. Rimel,
COMMITTEE                             mergers and liquidations and the organization       Jean Gleason Stromberg
                                      of new funds.                                       and Robert H. Wadsworth
OPERATIONS                 [ ]        Reviews the administrative operations, legal        Dawn-Marie Driscoll (Chair),
COMMITTEE                  [ ]        affairs and general compliance matters of the       John W. Ballantine ( Vice
VALUATION                             fund. Reviews administrative matters related to     Chair), Kenneth C. Froewiss,
SUBCOMMITTEE                          the operations of the fund, policies and            Rebecca W. Rimel and
                                      procedures relating to portfolio transactions,      William N. Searcy, Jr.
                                      custody arrangements, fidelity bond and             Valuation Sub-Committee:
                                      insurance arrangements, valuation of fund           Kenneth C. Froewiss (Chair),
                                      assets and securities and such other tasks as       John W. Ballantine, Dawn-
                                      the full Board deems necessary or appropriate.      Marie Driscoll (Alternate),
                                      Oversees the valuation of the fund's securities     Rebecca W. Rimel
                                      and other assets and determines, as needed,         (Alternate) and William N.
                                      the fair value of fund securities or other assets   Searcy, Jr. (Alternate)
                                      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.
</TABLE>


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
funds for his or her services, which includes an annual retainer and fees for
serving as Board or Committee Chair. 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 director task forces or subcommittees. Independent Board Members do not
receive any employee benefits such as pension or retirement benefits or health
insurance.


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 most recently completed calendar
year. No Board Member of the fund receives pension or retirement benefits or
health insurance from the fund or any fund in the DWS fund complex.


                                      I-11
<PAGE>

PART I: APPENDIX I-C - BOARD MEMBER COMPENSATION

To be updated when 12/31/2009 data is available.

                                      I-12
<PAGE>

PART I: APPENDIX I-D - PORTFOLIO MANAGEMENT


FUND OWNERSHIP OF PORTFOLIO MANAGERS

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


DWS HIGH INCOME FUND


<TABLE>
<CAPTION>
                                DOLLAR RANGE OF      DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER      FUND SHARES OWNED        FUND SHARES OWNED
<S>                           <C>                   <C>
Gary Sullivan
</TABLE>


DWS STRATEGIC INCOME FUND



<TABLE>
<CAPTION>
                                DOLLAR RANGE OF      DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER      FUND SHARES OWNED        FUND SHARES OWNED
<S>                           <C>                   <C>
Gary Sullivan
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND



<TABLE>
<CAPTION>
                                DOLLAR RANGE OF      DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER      FUND SHARES OWNED        FUND SHARES OWNED
<S>                           <C>                   <C>
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</TABLE>


CONFLICTS OF INTEREST


In addition to managing the assets of each fund, a portfolio manager may have
responsibility for managing other client accounts of the Advisor or its
affiliates. The tables below show, per portfolio manager, the number and asset
size of (1) SEC registered investment companies (or series thereof) other than
each 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 a portfolio manager. Total assets attributed to a
portfolio manager in the tables below include total assets of each account
managed, although a portfolio manager may only manage a portion of such
account's assets. The tables also show the number of performance based fee
accounts, as well as the total assets of the accounts for which the advisory
fee is based on the performance of the account. This information is provided as
of each fund's most recent fiscal year end.


                                      I-13
<PAGE>

DWS HIGH INCOME FUND


OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:


<TABLE>
<CAPTION>
                        NUMBER OF     TOTAL ASSETS OF     NUMBER OF INVESTMENT
                       REGISTERED        REGISTERED         COMPANY ACCOUNTS       TOTAL ASSETS OF
NAME OF                INVESTMENT        INVESTMENT        WITH PERFORMANCE-      PERFORMANCE-BASED
PORTFOLIO MANAGER       COMPANIES        COMPANIES             BASED FEE            FEE ACCOUNTS
<S>                   <C>            <C>                 <C>                     <C>
Gary Sullivan
</TABLE>


DWS STRATEGIC INCOME FUND


OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:


<TABLE>
<CAPTION>
                           NUMBER OF     TOTAL ASSETS OF     NUMBER OF INVESTMENT
                          REGISTERED        REGISTERED         COMPANY ACCOUNTS       TOTAL ASSETS OF
NAME OF                   INVESTMENT        INVESTMENT        WITH PERFORMANCE-      PERFORMANCE-BASED
PORTFOLIO MANAGER          COMPANIES        COMPANIES             BASED FEE            FEE ACCOUNTS
<S>                      <C>            <C>                 <C>                     <C>
Gary Sullivan
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND


OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:


<TABLE>
<CAPTION>
                           NUMBER OF     TOTAL ASSETS OF     NUMBER OF INVESTMENT
                          REGISTERED        REGISTERED         COMPANY ACCOUNTS       TOTAL ASSETS OF
NAME OF                   INVESTMENT        INVESTMENT        WITH PERFORMANCE-      PERFORMANCE-BASED
PORTFOLIO MANAGER          COMPANIES        COMPANIES             BASED FEE            FEE ACCOUNTS
<S>                      <C>            <C>                 <C>                     <C>
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</TABLE>


DWS HIGH INCOME FUND


OTHER POOLED INVESTMENT VEHICLES MANAGED:


<TABLE>
<CAPTION>
                                                             NUMBER OF POOLED
                        NUMBER OF                           INVESTMENT VEHICLE     TOTAL ASSETS OF
                         POOLED        TOTAL ASSETS OF         ACCOUNTS WITH        PERFORMANCE-
NAME OF                INVESTMENT     POOLED INVESTMENT        PERFORMANCE-           BASED FEE
PORTFOLIO MANAGER       VEHICLES           VEHICLES              BASED FEE            ACCOUNTS
<S>                   <C>            <C>                   <C>                    <C>
Gary Sullivan
</TABLE>

                                      I-14
<PAGE>

DWS STRATEGIC INCOME FUND


OTHER POOLED INVESTMENT VEHICLES MANAGED:


<TABLE>
<CAPTION>
                                                                NUMBER OF POOLED
                           NUMBER OF                           INVESTMENT VEHICLE     TOTAL ASSETS OF
                            POOLED        TOTAL ASSETS OF         ACCOUNTS WITH        PERFORMANCE-
NAME OF                   INVESTMENT     POOLED INVESTMENT        PERFORMANCE-           BASED FEE
PORTFOLIO MANAGER          VEHICLES           VEHICLES              BASED FEE            ACCOUNTS
<S>                      <C>            <C>                   <C>                    <C>
Gary Sullivan
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND


OTHER POOLED INVESTMENT VEHICLES MANAGED:


<TABLE>
<CAPTION>
                                                                NUMBER OF POOLED
                           NUMBER OF                           INVESTMENT VEHICLE     TOTAL ASSETS OF
                            POOLED        TOTAL ASSETS OF         ACCOUNTS WITH        PERFORMANCE-
NAME OF                   INVESTMENT     POOLED INVESTMENT        PERFORMANCE-           BASED FEE
PORTFOLIO MANAGER          VEHICLES           VEHICLES              BASED FEE            ACCOUNTS
<S>                      <C>            <C>                   <C>                    <C>
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</TABLE>


DWS HIGH INCOME FUND


OTHER ACCOUNTS MANAGED:


<TABLE>
<CAPTION>
                                                           NUMBER OF OTHER     TOTAL ASSETS OF
                                          TOTAL ASSETS      ACCOUNTS WITH       PERFORMANCE-
NAME OF                   NUMBER OF         OF OTHER         PERFORMANCE-         BASED FEE
PORTFOLIO MANAGER      OTHER ACCOUNTS       ACCOUNTS          BASED FEE           ACCOUNTS
<S>                   <C>                <C>              <C>                 <C>
Gary Sullivan
</TABLE>

                                      I-15
<PAGE>

DWS STRATEGIC INCOME FUND


OTHER ACCOUNTS MANAGED:


<TABLE>
<CAPTION>
                                                              NUMBER OF OTHER     TOTAL ASSETS OF
                                             TOTAL ASSETS      ACCOUNTS WITH       PERFORMANCE-
NAME OF                      NUMBER OF         OF OTHER         PERFORMANCE-         BASED FEE
PORTFOLIO MANAGER         OTHER ACCOUNTS       ACCOUNTS          BASED FEE           ACCOUNTS
<S>                      <C>                <C>              <C>                 <C>
Gary Sullivan
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND


OTHER ACCOUNTS MANAGED:


<TABLE>
<CAPTION>
                                                              NUMBER OF OTHER     TOTAL ASSETS OF
                                             TOTAL ASSETS      ACCOUNTS WITH       PERFORMANCE-
NAME OF                      NUMBER OF         OF OTHER         PERFORMANCE-         BASED FEE
PORTFOLIO MANAGER         OTHER ACCOUNTS       ACCOUNTS          BASED FEE           ACCOUNTS
<S>                      <C>                <C>              <C>                 <C>
William Chepolis
Matthew F. MacDonald
Thomas Picciochi
Robert Wang
</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 each 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 each fund
and other client accounts.


                                      I-16
<PAGE>

PART I: APPENDIX I-E - AFFILIATED SERVICE PROVIDER COMPENSATION


DWS HIGH INCOME FUND


<TABLE>
<CAPTION>
                          NET AMOUNT       AMOUNT WAIVED     NET AMOUNT PAID TO     AMOUNT WAIVED BY
                         PAID TO DIMA       BY DIMA FOR       DIMA FOR GENERAL      DIMA FOR GENERAL
                         FOR ADVISORY         ADVISORY         ADMINISTRATIVE        ADMINISTRATIVE
FISCAL YEAR ENDED          SERVICES           SERVICES            SERVICES              SERVICES
<S>                   <C>                 <C>               <C>                    <C>
2009                   $                         $               $                         $
2008                   $    9,074,749            $0              $717,615/2/               $0
2007                   $11,626,365/1/            $0              $         -               $-
</TABLE>



<TABLE>
<CAPTION>
                       NET AMOUNT PAID TO     AMOUNT WAIVED BY
                        DISC FOR TRANSFER     DISC FOR TRANSFER
FISCAL YEAR ENDED        AGENCY SERVICES       AGENCY SERVICES
<S>                   <C>                    <C>
2009                       $                         $
2008                       $1,719,187                $0
2007                       $2,158,370                $0
</TABLE>


DWS STRATEGIC INCOME FUND



<TABLE>
<CAPTION>
                         NET AMOUNT       AMOUNT WAIVED     NET AMOUNT PAID TO     AMOUNT WAIVED BY
                        PAID TO DIMA       BY DIMA FOR       DIMA FOR GENERAL      DIMA FOR GENERAL
                        FOR ADVISORY         ADVISORY         ADMINISTRATIVE        ADMINISTRATIVE
FISCAL YEAR ENDED         SERVICES           SERVICES            SERVICES              SERVICES
<S>                   <C>                <C>               <C>                    <C>
2009                   $                     $                  $                         $
2008                   $   1,982,133         $31,203            $191,128/2/               $0
2007                   $2,134,764/1/         $ 3,054            $         -               $-
</TABLE>



<TABLE>
<CAPTION>
                       NET AMOUNT PAID TO     AMOUNT WAIVED BY
                        DISC FOR TRANSFER     DISC FOR TRANSFER
FISCAL YEAR ENDED        AGENCY SERVICES       AGENCY SERVICES
<S>                   <C>                    <C>
2009                        $                      $
2008                        $525,649               $13,773
2007                        $512,071               $   395
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND



<TABLE>
<CAPTION>
                         NET AMOUNT       AMOUNT WAIVED     NET AMOUNT PAID TO     AMOUNT WAIVED BY
                        PAID TO DIMA       BY DIMA FOR       DIMA FOR GENERAL      DIMA FOR GENERAL
                        FOR ADVISORY         ADVISORY         ADMINISTRATIVE        ADMINISTRATIVE
FISCAL YEAR ENDED         SERVICES           SERVICES            SERVICES              SERVICES
<S>                   <C>                <C>               <C>                    <C>
2009                   $                        $              $                          $
2008                   $   7,733,635            $0             $1,020,660/2/              $0
2007                   $9,515,313/1/            $0             $           -              $-
</TABLE>

                                      I-17
<PAGE>


<TABLE>
<CAPTION>
                       NET AMOUNT PAID TO     AMOUNT WAIVED BY
                        DISC FOR TRANSFER     DISC FOR TRANSFER
FISCAL YEAR ENDED        AGENCY SERVICES       AGENCY SERVICES
<S>                   <C>                    <C>
2009                       $                       $
2008                       $2,070,380              $5,852
2007                       $2,578,055              $  153
</TABLE>


/1/ Includes a 10% Administrative Services fee.

/2/ For the period May 1, 2008 through September 30, 2008.

To the extent DWS Strategic Income Fund invests in other mutual funds advised
by the Advisor and its affiliates ("Underlying Funds"), the Advisor has agreed
not to impose its advisory fees on assets invested in such Underlying Funds. In
the case of an investment in DWS Floating Rate Plus Fund, the Advisor has also
agreed to apply a management fee credit to the fund equal to the difference
between DWS Floating Rate Plus Fund's management fee and the fund's management
fee, if positive, as applied to the amount of assets invested by the fund in
DWS Floating Rate Plus Fund.

For DWS Strategic Income Fund, the Advisor has contractually agreed through
[_________] to waive and/or reimburse fund expenses to the extent necessary to
maintain the fund's total operating expenses at [___%, ___%, ___% and ___%] for
Class A, Class B, Class C and Class S shares, respectively. The agreement may
only be terminated with the consent of the fund's Board and does not extend to
extraordinary expenses, taxes, brokerage and interest expense.

For DWS Strategic Government Securities Fund, the Advisor has contractually
agreed through [_________] to waive and/or reimburse fund expenses to the
extent necessary to maintain the fund's total operating expenses at [___%] for
Class B shares. The agreement may only be terminated with the consent of the
fund's Board and does not extend to extraordinary expenses, taxes, brokerage
and interest expense.


                                      I-18
<PAGE>

PART I: APPENDIX I-F - SALES CHARGES

The following tables show the aggregate amount of underwriting commissions paid
to DIDI, the amount in commissions it paid out to brokers and the amount of
underwriting commissions retained by DIDI for the noted fiscal period(s).


CLASS A INITIAL SALES CHARGE:


<TABLE>
<CAPTION>
                                                                                        AGGREGATE        AGGREGATE
                                                      AGGREGATE      AGGREGATE         COMMISSIONS      COMMISSIONS
                                            FISCAL      SALES       COMMISSIONS    PAID TO AFFILIATED    RETAINED
                                             YEAR    COMMISSIONS   PAID TO FIRMS          FIRMS           BY DIDI
<S>                                        <C>      <C>           <C>             <C>                  <C>
DWS High Income Fund                        2009       $              $                  $               $
                                            2008       $447,000       $291,000           $22,000         $134,000
                                            2007       $819,000       $470,000           $40,000         $309,000
DWS Strategic Income Fund                   2009       $              $                  $               $
                                            2008       $ 74,000       $ 35,000           $ 4,000         $ 35,000
                                            2007       $ 86,000       $ 36,000           $ 4,000         $ 46,000
DWS Strategic Government Securities Fund    2009       $              $                  $               $
                                            2008       $190,000       $123,000           $15,000         $ 52,000
                                            2007       $195,000       $136,000           $25,000         $ 34,000
</TABLE>


CDSC PAID TO DIDI ON:



<TABLE>
<CAPTION>
                                              FISCAL
                                               YEAR     CLASS A SHARES     CLASS B SHARES     CLASS C SHARES
<S>                                          <C>       <C>                <C>                <C>
DWS High Income Fund                          2009          $                 $                  $
                                              2008          $4,192            $209,059           $39,434
                                              2007          $8,654            $316,308           $16,408
DWS Strategic Income Fund                     2009          $                 $                  $
                                              2008          $  847            $ 31,787           $ 3,980
                                              2007          $  552            $ 44,987           $17,509
DWS Strategic Government Securities Fund      2009          $                 $                  $
                                              2008          $1,968            $ 73,489           $ 2,910
                                              2007          $3,614            $144,364           $ 3,471
</TABLE>



                                      I-19
<PAGE>

PART I: APPENDIX I-G - DISTRIBUTION PLAN AGREEMENTS

Expenses of each fund paid in connection with the Rule 12b-1 Plans for each
class of shares that has adopted a Rule 12b-1 Plan are set forth below for the
most recent calendar year.


12B-1 COMPENSATION TO UNDERWRITER AND FIRMS:


<TABLE>
<CAPTION>
                                                          12B-1 DISTRIBUTION     12B-1 SHAREHOLDER     12B-1 COMPENSATION
                                                                 FEES              SERVICES FEES         PAID TO FIRMS
<S>                                          <C>         <C>                    <C>                   <C>
DWS High Income Fund                          Class A              $                     $                     $
                                              Class B              $                     $                     $
                                              Class C              $                     $                     $
DWS Strategic Income Fund                     Class A              $                     $                     $
                                              Class B              $                     $                     $
                                              Class C              $                     $                     $
DWS Strategic Government Securities Fund      Class A              $                     $                     $
                                              Class B              $                     $                     $
                                              Class C              $                     $                     $
</TABLE>


OTHER EXPENSES PAID BY UNDERWRITER UNDER 12B-1 PLANS:



<TABLE>
<CAPTION>
                                                         ADVERTISING,
                                                      SALES, LITERATURE                MARKETING   POSTAGE
                                                       AND PROMOTIONAL    PROSPECTUS   AND SALES     AND     IMPUTED
                                                          MATERIALS        PRINTING     EXPENSES   MAILING   INTEREST
<S>                                        <C>       <C>                 <C>          <C>         <C>       <C>
DWS High Income Fund                        Class A  $                   $            $           $         $
                                            Class B  $                   $            $           $         $
                                            Class C  $                   $            $           $         $
DWS Strategic Income Fund                   Class A  $                   $            $           $         $
                                            Class B  $                   $            $           $         $
                                            Class C  $                   $            $           $         $
DWS Strategic Government Securities Fund    Class A  $                   $            $           $         $
                                            Class B  $                   $            $           $         $
                                            Class C  $                   $            $           $         $
</TABLE>



                                      I-20
<PAGE>

PART I: APPENDIX I-H - PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS


PORTFOLIO TURNOVER RATES


<TABLE>
<CAPTION>
FUND                                          2009      2008
<S>                                          <C>      <C>
DWS High Income Fund                         %            61%
DWS Strategic Income Fund                    %           185%
DWS Strategic Government Securities Fund     %           186%
</TABLE>


BROKERAGE COMMISSIONS



<TABLE>
<CAPTION>
                                              FISCAL     BROKERAGE COMMISSIONS
                                               YEAR          PAID BY FUND
<S>                                          <C>        <C>
DWS High Income Fund                          2009             $
                                              2008             $      0
                                              2007             $      0
DWS Strategic Income Fund                     2009             $
                                              2008             $ 51,000
                                              2007             $ 39,000
DWS Strategic Government Securities Fund      2009             $
                                              2008             $297,000
                                              2007             $ 91,000
</TABLE>


BROKERAGE COMMISSIONS PAID TO AFFILIATED BROKERS



<TABLE>
<CAPTION>
                                              FISCAL           BROKERAGE COMMISSIONS
                                               YEAR      PAID BY FUND TO AFFILIATED BROKERS
<S>                                          <C>        <C>
DWS High Income Fund                          2009                       $
                                              2008                       $0
                                              2007                       $0
DWS Strategic Income Fund                     2009                       $
                                              2008                       $0
                                              2007                       $0
DWS Strategic Government Securities Fund      2009                       $
                                              2008                       $0
                                              2007                       $0
</TABLE>


Each fund is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the 1940 Act) that each fund held as of
the end of its most recent fiscal year.


Listed below are the regular broker dealers of each fund whose securities each
fund acquired during the past fiscal year. Also listed is the dollar value of
securities held by each fund as of the end of the most recent fiscal year end.


                                      I-21
<PAGE>

DWS HIGH INCOME FUND


<TABLE>
<CAPTION>
NAME OF REGULAR BROKER OR DEALER OR PARENT
(ISSUER)                                       SECURITIES OF REGULAR BROKER DEALERS
<S>                                           <C>
                                                                $
                                                                $
                                                                $
</TABLE>


DWS STRATEGIC INCOME FUND



<TABLE>
<CAPTION>
NAME OF REGULAR BROKER OR DEALER OR PARENT
(ISSUER)                                       SECURITIES OF REGULAR BROKER DEALERS
<S>                                           <C>
                                                                $
                                                                $
                                                                $
</TABLE>


DWS STRATEGIC GOVERNMENT SECURITIES FUND



<TABLE>
<CAPTION>
NAME OF REGULAR BROKER OR DEALER OR PARENT
(ISSUER)                                       SECURITIES OF REGULAR BROKER DEALERS
<S>                                           <C>
                                                                $
                                                                $
                                                                $
</TABLE>


TRANSACTIONS FOR THIRD PARTY RESEARCH SERVICES


For the most recent fiscal year, each fund allocated the following amount of
transactions, and related commissions, to broker-dealer firms that have been
deemed by the Advisor to provide third party research. The provision of
research was not necessarily a factor in the placement of business with such
firms.


<TABLE>
<CAPTION>
                                                                          COMMISSIONS PAID
                                              AMOUNT OF TRANSACTIONS       ON TRANSACTIONS
FUND                                            WITH RESEARCH FIRMS      WITH RESEARCH FIRMS
<S>                                          <C>                        <C>
DWS High Income Fund                                     $                        $
DWS Strategic Income Fund                                $                        $
DWS Strategic Government Securities Fund                 $                        $
</TABLE>



                                      I-22
<PAGE>

PART I: APPENDIX I-I - INVESTMENT PRACTICES AND TECHNIQUES


DWS HIGH INCOME FUND

Advanced Refunded Bonds
Asset Segregation
Asset-Backed Securities
Bank Loans
Brady Bonds
Borrowing
Cash Management Vehicles
Common Stocks
Convertible Securities
Credit Enhancement
Depository Receipts
Derivatives
Direct Debt Instruments
Dollar Roll Transactions
Eurodollar Obligations
Fixed Income Securities
Foreign Currencies
Foreign Investment(s)
High Yield Fixed Income Securities - Junk Bonds

Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Investment Company Securities
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Securities
Repurchase Agreements
Securities as a Result of Exchanges or Workouts
Short Sales Against the Box
Short-Term Securities
Sovereign Debt
Stand-by Commitments
US Government Securities
When-Issued and Delayed Delivery Securities
Zero Coupon Securities and Deferred Interest Bonds

DWS STRATEGIC INCOME FUND

Advance Refunded Bonds
Asset Segregation
Asset-Backed Securities
Bank Loans
Brady Bonds
Borrowing
Cash Management Vehicles
Common Stocks
Convertible Securities
Credit Enhancement
Depository Receipts
Derivatives
Direct Debt Instruments
Dollar Roll Transactions
Eurodollar Obligations
Fixed Income Securities
Foreign Currencies
Foreign Investment(s)
High Yield Fixed Income Securities - Junk Bonds

iGAP Overlay Strategy
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Investment Company Securities
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Securities
Repurchase Agreements
Securities as a Result of Exchanges or Workouts
Short Sales Against the Box
Short-Term Securities
Sovereign Debt
Stand-by Commitments
US Government Securities
When-Issued and Delayed Delivery Securities
Zero Coupon Securities and Deferred Interest Bonds

DWS STRATEGIC GOVERNMENT SECURITIES FUND

Advance Refunded Bonds
Asset Segregation
Asset-Backed Securities

Bank Loans
Brady Bonds
Borrowing

                                      I-23
<PAGE>

Cash Management Vehicles
Convertible Securities
Credit Enhancement
Derivatives
Dollar Roll Transactions
Fixed Income Securities
Foreign Currencies
Foreign Investment(s)
iGAP Overlay Strategy
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Investment Company Securities
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Securities
Repurchase Agreements
Short Sales Against the Box
Short-Term Securities
Sovereign Debt
US Government Securities
When-Issued and Delayed Delivery Securities
Zero Coupon Securities and Deferred Interest Bonds

                                      I-24
<PAGE>

PART I: APPENDIX I-J - ADDITIONAL INFORMATION


<TABLE>
<CAPTION>
FUND                                          CLASS                   CUSIP NUMBER
<S>                                           <C>                     <C>
 DWS High Income Fund                         Class A                 23337M107
 Fiscal Year End: 9/30                        Class B                 23337M206
                                              Class C                 23337M305
                                              Institutional Class     23337M404
 DWS Strategic Income Fund                    Class A                 23337K101
 Fiscal Year End: 10/31                       Class B                 23337K200
                                              Class C                 23337K309
                                              Class S                 23337K507
 DWS Strategic Government Securities Fund     Class A                 23338C108
 Fiscal Year End: 10/31                       Class B                 23338C207
                                              Class C                 23338C306
                                              Class S                 23338C405
                                              Institutional Class     23338C504
</TABLE>



                                      I-25
<PAGE>


STATEMENT OF ADDITIONAL INFORMATION (SAI) - PART II



<TABLE>
<CAPTION>
                                                                                             PAGE
<S>                                                                                        <C>
Part II...................................................................................    II-1
  Management of the Funds.................................................................    II-1
   Board Members..........................................................................    II-6
  Purchase and Redemption of Shares.......................................................   II-10
   Purchases..............................................................................   II-11
   Redemptions............................................................................   II-15
  Distribution and Service Agreements and Plans...........................................   II-24
  Investments.............................................................................   II-30
   General Investment Practices and Techniques............................................   II-30
  Portfolio Transactions..................................................................   II-30
  Portfolio Holdings Information..........................................................   II-32
  Net Asset Value.........................................................................   II-33
  Proxy Voting Guidelines.................................................................   II-37
  Miscellaneous...........................................................................   II-37
  Ratings Of Investments..................................................................   II-37
  Part II: Appendix II-A - Board Members and Officers.....................................   II-44
  Part II: Appendix II-B - Portfolio Management Compensation..............................   II-47
  Part II: Appendix II-C - Fee Rates of Service Providers.................................   II-53
  Part II: Appendix II-D - Financial Services Firms' Compensation.........................   II-66
  Part II: Appendix II-E - Firms With Which Deutsche Asset Management Has Revenue Sharing    II-70
  Arrange-
ments.....................................................................................
  Part II: Appendix II-F - Class A Sales Charge Schedule..................................   II-73
  Part II: Appendix II-G - Investment Practices and Techniques............................   II-75
  Part II: Appendix II-H - Taxes..........................................................  II-123
  Part II: Appendix II-I - Proxy Voting Guidelines........................................  II-137
</TABLE>


<PAGE>

PART II


Part II of this SAI includes policies, investment techniques and information
that apply to the DWS funds. Unless otherwise noted, the use of the term "fund"
applies to all funds in the DWS funds complex.




MANAGEMENT OF THE FUNDS


INVESTMENT ADVISOR. DIMA, with headquarters at 345 Park Avenue, New York, New
York, is the investment advisor for each fund. Under the oversight of the
Board, DIMA on behalf of a fund makes the investment decisions, buys and sells
securities and conducts research that leads to these purchase and sale
decisions. DIMA manages the fund's daily investment and business affairs
subject to the policies established by the Board. DIMA and its predecessors
have more than 80 years of experience managing mutual funds.


DIMA is an indirect, wholly-owned subsidiary of Deutsche Bank AG, a
multi-national financial services company with limited liability organized
under the laws of the Federal Republic of Germany. As a result, DIMA, which is
part of DeAM, 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. DWS Investments is part of the Asset Management division of Deutsche
Bank AG and, within the US, represents the retail asset management activities
of Deutsche Bank AG, Deutsche Bank Trust Company Americas, DIMA and DWS Trust
Company.



DIMA provides investment advisory services to many individuals and
institutions, including insurance companies, corporations, and financial and
banking organizations, as well as providing investment advice to open- and
closed-end registered investment companies.


DeAM is the marketing name in the US for the asset management activities of
Deutsche Bank AG, DIMA, Deutsche Bank Trust Company Americas and DWS Trust
Company. DeAM is a global asset management organization that offers a wide
range of investing expertise and resources, including hundreds of portfolio
managers and analysts and an office network that reaches the world's major
investment centers. This well-resourced global investment platform brings
together a wide variety of experience and investment insight, across
industries, regions, asset classes and investing styles.


In some instances, the investments for a fund may be managed by the same
individuals who manage one or more other mutual funds advised by DIMA that have
similar names, objectives and investment styles. A fund may differ from these
other mutual funds in size, cash flow patterns, distribution arrangements,
expenses and tax matters. Accordingly, the holdings and performance of a fund
may be expected to vary from those of other mutual funds.


Certain investments may be appropriate for a fund and also for other clients
advised by DIMA. Investment decisions for a 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. Frequently, 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, a particular security may be bought for one or more clients when one
or more other clients are selling the security. 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 DIMA to be equitable to each. In some cases, this procedure could
have an adverse effect on the price or amount of the securities purchased or
sold by a fund. Purchase and sale orders for a fund may be combined with those
of other clients of DIMA in the interest of achieving the most favorable net
results to a fund.


DIMA, its parent or its subsidiaries, or affiliates may have deposit, loan and
other commercial banking relationships with the issuers of obligations which
may be purchased on behalf of a fund, including outstanding loans to such
issuers which could be repaid in whole or in part with the proceeds of
securities so purchased. Such affiliates deal, trade and invest for their own
accounts in such obligations and are among the leading dealers of various types
of such obligations. DIMA has informed a fund that, in making its investment
decisions, it does not obtain or use material inside information in its
possession or in the possession of any of its affiliates. In making investment
recommendations for a fund, DIMA will not inquire or take into consideration
whether an


                                      II-1
<PAGE>

issuer of securities proposed for purchase or sale by a fund is a customer of
DIMA, its parent or its subsidiaries or affiliates. Also, in dealing with its
customers, the Advisor, its parent, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of such customers are
held by any fund managed by DIMA or any such affiliate.


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


From time to time, DIMA, Deutsche Bank AG or their affiliates may at their sole
discretion invest their own assets in shares of a fund for such purposes it
deems appropriate, including investments designed to assist in the management
of a fund. Any such investment may be hedged by DIMA, Deutsche Bank AG or their
affiliates and, in that event, the return on such investment, net of the effect
of the hedge, would be expected to differ from the return of a fund. DIMA,
Deutsche Bank AG or their affiliates have no obligation to make any investment
in a fund and the amount of any such investment may or may not be significant
in comparison to the level of assets of a fund. In the event that such an
investment is made, except as otherwise required under the 1940 Act, DIMA,
Deutsche Bank AG or their affiliates would be permitted to redeem the
investment at such time that they deem appropriate.



CONSULTANTS. DWS Health Care Fund and DWS Health Care VIP: Thomas E. Bucher,
CFA provides consulting services to DIMA in connection with the investment
management services it provides to the fund. Mr. Bucher is employed by Deutsche
Asset Management International GmbH, Mainzer Landstrasse 178-190, 60325
Frankfurt am Main, Germany. Deutsche Asset Management International GmbH is an
investment advisor registered with the U.S. Securities and Exchange Commission.
Deutsche Asset Management International GmbH is an affiliate of DIMA and a
subsidiary of Deutsche Bank AG.


TERMS OF THE INVESTMENT MANAGEMENT AGREEMENTS. Pursuant to the Investment
Management Agreements, DIMA provides continuing investment management of the
assets of a fund. In addition to the investment management of the assets of a
fund, the Advisor determines the investments to be made for each 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 a fund's policies as stated in its prospectus and SAI, or as adopted by a
fund's Board. DIMA will also monitor, to the extent not monitored by a fund's
administrator or other agent, a fund's compliance with its investment and tax
guidelines and other compliance policies.



DIMA provides assistance to a fund's Board in valuing the securities and other
instruments held by a fund, to the extent reasonably required by valuation
policies and procedures that may be adopted by a fund.


Pursuant to the Investment Management Agreement, (unless otherwise provided in
the agreement or as determined by a fund's Board and to the extent permitted by
applicable law), DIMA pays the compensation and expenses of all the Board
members, officers, and executive employees of a fund, including a fund's share
of payroll taxes, who are affiliated persons of DIMA.


The Investment Management Agreement provides that a fund, except as noted
below, is generally responsible for expenses that include, but are not limited
to: 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 a fund, a fund's custodian, or other agents of a
fund; taxes and governmental fees; fees and expenses of a fund's accounting
agent, custodian, sub-custodians, depositories, transfer agents, dividend
reimbursing agents and registrars; payment for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if any;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities or other instruments of a fund; and litigation expenses and other
extraordinary expenses not incurred in the ordinary course of a fund's
business.



DWS S&P 500 Plus Fund pays DIMA a single fee (Unitary Fee) under the Investment
Management Agreement and Unitary Fee Agreement (UFA) that covers not only
DIMA's investment management services, but also all of the fund's day-to-day
expenses in the ordinary course of business, except as noted below. DIMA is
responsible under the UFA for the payment of all of the fund's day-to-day
operating expenses other than distribution fees and expenses (i.e., sales
charges and 12b-1 fees), brokerage and other portfolio trading expenses and
taxes, as well as extraordinary expenses, as determined by the Board. DIMA will
pay, among other expenses, the fees of the fund's custodian, administrator,
transfer agent and other service providers to the fund.



                                      II-2
<PAGE>

For Money Market Portfolio, DWS Dreman Mid Cap Value Fund, DWS Dreman Small Cap
Value Fund, and DWS Strategic Value Fund, the Investment Management Agreement
also provides that DIMA shall render administrative services (not otherwise
provided by third parties) necessary for a fund's operation as an open-end
investment company including, but not limited to, preparing reports and notices
to the Board and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Registrant (such as the Registrant's transfer agent, pricing agents, custodian,
accountants and others); preparing and making filings with the SEC and other
regulatory agencies; assisting in the preparation and filing of the
Registrant's federal, state and local tax returns; preparing and filing the
Registrant's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of securities and the calculation
of net asset value; monitoring the registration of shares of the Registrant
under applicable federal and state securities laws; maintaining the
Registrant's books and records to the extent not otherwise maintained by a
third party; assisting in establishing accounting policies of the Registrant;
assisting in the resolution of accounting and legal issues; establishing and
monitoring the Registrant's operating budget; processing the payment of the
Registrant's bills; assisting the Registrant in, and otherwise arranging for,
the payment of distributions and dividends; and otherwise assisting the
Registrant in the conduct of its business, subject to the direction and control
of the Board.


On behalf of Money Market Portfolio, DWS Dreman Mid Cap Value Fund, DWS Dreman
Small Cap Value Fund, and DWS Strategic Value Fund, DIMA may enter into
arrangements with affiliates and third party service providers to perform
various administrative, back-office and other services relating to client
accounts. Such service providers may be located in the US or in non-US
jurisdictions. Pursuant to a sub-administration agreement between DIMA and State
Street Bank & Trust Company (SSB), DIMA has delegated certain administrative
functions for each of these funds to SSB under the Investment Management
Agreement. The costs and expenses of such delegation are borne by DIMA, not by a
fund.


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

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


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 the Board
Members who are not parties to such agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and either by a vote of the Board or of a majority of the outstanding
voting securities of a fund.



Under the Investment Management Agreement, a fund, except as otherwise noted,
pays DIMA a management fee calculated daily based on the prior day's net assets
and then aggregated for a particular month. For Money Market Portfolio, a
series of Cash Account Trust, DWS Dreman Mid Cap Value Fund, DWS Dreman Small
Cap Value Fund, and DWS Strategic Value Fund, the management fee paid to DIMA
is calculated and payable monthly based on the average daily net assets for the
particular month. The annual management fee rate for each fund, except for DWS
S&P 500 Plus Fund, is set forth in PART II - APPENDIX II-C.


Under the Investment Management Agreement between DWS S&P 500 Plus Fund and
DIMA, a fund pays DIMA a Unitary Fee calculated daily and payable monthly equal
to a base fee rate that beginning January 1, 2010 will be adjusted based upon
the performance of a fund relative to a benchmark as further described in PART
II - APPENDIX II-C.



The management fee or Unitary Fee is payable monthly, provided that a fund will
make such interim payments as may be requested by DIMA not to exceed 75% of the
amount of the fee then accrued on the books of a fund and unpaid.


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


                                      II-3
<PAGE>

SUB-ADVISORS (APPLICABLE ONLY TO THOSE FUNDS THAT HAVE SUB-ADVISORY
ARRANGEMENTS AS DESCRIBED IN PART I). Each Sub-Advisor serves as a sub-advisor
to a fund pursuant to the terms of a sub-advisor agreement between it and DIMA
(Sub-Advisory Agreement).


Deutsche Asset Management International GmbH (DeAMi), Mainzer Landstrasse
178-190, 60325 Frankfurt am Main, Germany, serves as a Sub-Advisor of all or a
portion of the assets of certain funds. DeAMi is an investment advisor
registered with the SEC and is an affiliate of DIMA and a subsidiary of
Deutsche Bank AG.


Dreman Value Management, L.L.C. (Dreman), 520 East Cooper Avenue Suite 230-4,
Aspen, Colorado 81611, serves as a Sub-Advisor of all the assets of certain
funds. Dreman was formed in April 1977 and is an investment advisor registered
with the SEC. DVM is controlled by David Dreman.


Northern Trust Investments, N.A. (NTI), 50 South LaSalle Street, Chicago, IL
60603, serves as a Sub-Advisor of all the assets of certain funds. NTI is an
investment advisor registered with the SEC. NTI is a subsidiary of The Northern
Trust Company (TNTC). TNTC is an Illinois state chartered banking organization
and a member of the Federal Reserve System. Formed in 1889, TNTC administers
and manages assets for individuals, personal trusts, defined contribution and
benefit plans and other institutional and corporate clients. TNTC is the
principal subsidiary of Northern Trust Corporation, a company that is regulated
by the Board of Governors of the Federal Reserve System as a financial holding
company under the U.S. Bank Holding Company Act of 1956, as amended.


RREEF America L.L.C. (RREEF), 875 North Michigan Avenue, 41st Floor, Chicago,
Illinois 60611, serves as a Sub-Advisor of all or a portion of the assets of
certain funds. RREEF is an investment advisor registered with the SEC. RREEF is
an affiliate of DIMA and a subsidiary of Deutsche Bank AG. RREEF has provided
real estate investment management services to institutional investors since
1975 and has been an investment advisor of real estate securities since 1993.


Aberdeen Asset Management Inc. (AAMI), 1735 Market Street, Philadelphia, PA
19103, serves as a Sub-Advisor of a portion of the assets for DWS Lifecycle
Long Range Fund. AAMI is an investment advisor registered with the SEC. AAMI is
a direct wholly owned subsidiary of Aberdeen Asset Management PLC, the parent
company of an asset management group formed in 1983. AAMI provides a full range
of international investment advisory services to institutional and retail
clients.

Turner Investment Partners, Inc. (Turner), 1205 Westlakes Drive, Suite 100,
Berwyn, PA 19312, serves as a Sub-Advisor to DWS Turner Mid Cap VIP. Turner is
an investment advisor registered with the SEC and is controlled by Robert E.
Turner and Mark D. Turner.



TERMS OF THE SUB-ADVISORY AGREEMENTS. Pursuant to the terms of the applicable
Sub-Advisory Agreement, a Sub-Advisor makes the investment decisions, buys and
sells securities, and conducts the research that leads to these purchase and
sale decisions for a fund. A Sub-Advisor is also responsible for selecting
brokers and dealers to execute portfolio transactions and for negotiating
brokerage commissions and dealer charges on behalf of a fund. Under the terms
of the Sub-Advisory Agreement, a Sub-Advisor manages the investment and
reinvestment of a fund's assets and provides such investment advice, research
and assistance as DIMA may, from time to time, reasonably request.


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


A Sub-Advisory Agreement continues from year to year only as long as such
continuance is specifically approved at least annually (a) by a majority of the
Board Members who are not parties to such agreement or interested persons of
any such party, and (b) by the shareholders or the Board of the Registrant. A
Sub-Advisory Agreement may be terminated at any time upon 60 days' written
notice by DIMA or by the Board of the Registrant or by majority vote of the
outstanding shares of a fund, and will terminate automatically upon assignment
or upon termination of a fund's Investment Management Agreement.


Under the Sub-Advisory Agreements between DIMA and the Sub-Advisors, DIMA, not
the fund, pays each Sub-Advisor a sub-advisory fee based on the percentage of
the assets overseen by the Sub-Advisor or based on a percentage of the fee
received by DIMA from a fund. The Sub-Advisor fee is paid directly by DIMA at
specific rates negotiated between DIMA and the Sub-Advisor. No fund is
responsible for paying the Sub-Advisor.



                                      II-4
<PAGE>


SUB-SUBADVISORS (APPLICABLE ONLY TO THOSE FUNDS THAT HAVE SUB-SUBADVISORY
ARRANGEMENTS AS DESCRIBED IN PART I). Each Sub-Subadvisor serves as a
sub-subadvisor with respect to a fund pursuant to the terms of a sub-subadvisor
agreement between it and the Sub-Advisor (Sub-Subadvisory Agreement).



RREEF Global Advisors Limited (RGAL), 1 Great Winchester Street, London, United
Kingdom, EC2N 2DB, serve as Sub-Subadvisor to a fund. RGAL is an investment
advisor registered with the SEC. In addition, RGAL is an affiliate of DIMA and
indirect, wholly owned subsidiaries of Deutsche Bank AG.


Deutsche Asset Management (Hong Kong) Limited (DeAM Hong Kong), 48/F Cheung
Kong Center, 2 Queen's Road Central, Hong Kong, China, serve as Sub-Subadvisors
to a fund. DeAM Hong Kong is an investment advisor registered with the SEC. In
addition, DeAM Hong Kong is an affiliate of DIMA and indirect, wholly owned
subsidiaries of Deutsche Bank AG.


Deutsche Investments Australia Limited (DIAL), Level 16, 126 Phillip Street,
Sydney NSW 200, Australia, serve as Sub-Subadvisors to a fund. DIAL is an
investment advisor registered with the SEC. In addition, DIAL is an affiliate
of DIMA and indirect, wholly owned subsidiaries of Deutsche Bank AG.


TERMS OF THE SUB-SUBADVISORY AGREEMENT. Pursuant to the terms of the applicable
Sub-Subadvisory Agreement and under the oversight of the Board, DIMA and the
Sub-Advisor, the Sub-Subadvisors provide investment management services with
respect to a fund's assets related to specific foreign markets and provides
such investment advice, research and assistance as the Sub-Advisor may, from
time to time, reasonably request. The Sub-Advisor allocates, and reallocates as
it deems appropriate, each of a fund's assets among the Sub-Subadvisors. A
Sub-Subadvisor is also responsible for selecting brokers and dealers to execute
portfolio transactions and for negotiating brokerage commissions and dealer
charges on behalf of a fund. Under the terms of the Sub-Subadvisory Agreement,
a Sub-Subadvisor manages the investment and reinvestment of a portion of a
fund's assets.


Each Sub-Subadvisory Agreement provides that the Sub-Subadvisor shall not be
subject to any liability for any act or omission in the course of providing
investment management services to a fund, except a loss resulting from willful
misconduct, bad faith or gross negligence on the part of the Sub-Subadvisor in
the performance of its duties or from reckless disregard by the Sub-Subadvisor
of its obligations and duties under the Sub-Subadvisory Agreement.


A Sub-Subadvisory Agreement continues from year to year only as long as such
continuance is specifically approved at least annually (a) by a majority of the
Board Members who are not parties to such agreement or interested persons of
any such party, and (b) by the shareholders or the Board of the
Trust/Corporation. A Sub-Subadvisory Agreement may be terminated at any time
upon 60 days' written notice by the Board of the Trust/Corporation or by
majority vote of the outstanding shares of a fund, and will terminate
automatically upon assignment or upon termination of a fund's Sub-Advisory
Agreement.


Under the Sub-Subadvisory Agreements, the Sub-Advisor, not a fund, pays each
Sub-Subadvisor a sub-subadvisory fee based on the percentage of the assets
overseen by the Sub-Subadvisor from the fee received by the Sub-Advisor from
DIMA. The Sub-Subadvisor fee is paid directly by the Sub-Advisor at specific
rates negotiated between the Sub-Advisor and the Sub-Subadvisor. No fund is
responsible for paying the Sub-Subadvisor.


AGREEMENT TO INDEMNIFY INDEPENDENT BOARD MEMBERS 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 (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 Board


                                      II-5
<PAGE>

Members of the Affected Funds, against certain liabilities the Independent
Board Members may incur from the matters alleged in any Enforcement Actions or
Private Litigation or arising from or similar to the matters alleged in the
Enforcement Actions or Private Litigation, and advance expenses that may be
incurred by the Independent Board Members in connection with any Enforcement
Actions or Private Litigation. 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 Board
Members ultimately would not be entitled to indemnification or (2) for any
liability of the Independent Board Members or their shareholders to which the
Independent Board Member would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
Independent Board Member'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 Board
Members 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.


BOARD MEMBERS


BOARD MEMBERS AND OFFICERS' IDENTIFICATION AND BACKGROUND. The identification
and background of the Board Members and Officers of the Registrant are set
forth in PART II - APPENDIX II-A.


BOARD COMMITTEES AND COMPENSATION. Information regarding the Committees of the
Board, as well as compensation paid to the Independent Board Members and to
Board Members who are not officers of the Registrant, for certain specified
periods, is set forth in PART I - APPENDIX I-B AND PART I - APPENDIX II-C.



ADMINISTRATOR, FUND ACCOUNTING AGENT, TRANSFER AGENT AND SHAREHOLDER SERVICE
AGENT, AND CUSTODIAN



ADMINISTRATOR. For all funds except Money Market Portfolio, DWS Dreman Mid Cap
Value Fund, DWS Dreman Small Cap Value Fund, and DWS Strategic Value Fund. DIMA
serves as a fund's administrator pursuant to an Administrative Services
Agreement.



For its services under the Administrative Services Agreement, the Administrator
receives a fee at the rate set forth in PART II - APPENDIX II-C. For all funds
except Money Market Portfolio, DWS Dreman Mid Cap Value Fund, DWS Dreman Small
Cap Value Fund and DWS Strategic Value Fund, the Administrator will pay
Accounting Agency fees out of the Administrative Services fee.


Under the Administrative Services Agreement, the Administrator is obligated on
a continuous basis to provide such administrative services as the Board of a
fund reasonably deems necessary for the proper administration of a fund. The
Administrator provides a fund with personnel; arranges for the preparation and
filing of a fund's tax returns; prepares and submits reports and meeting
materials to the Board and the shareholders; prepares and files updates to a
fund's prospectus and statement of additional information as well as other
reports required to be filed by the SEC; maintains a fund's records; provides a
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 a fund; assists in
the resolution of accounting issues that may arise with respect to a fund;
establishes and monitors a fund's operating expense budgets; reviews and
processes a fund's bills; assists in determining the amount of dividends and
distributions available to be paid by a 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 Administrator also performs certain
fund accounting services under the Administrative Services Agreement.


The Administrative Services Agreement provides that the Administrator will not
be liable under the Administrative Services Agreement except for willful
misfeasance, bad faith or negligence in the performance of its duties or from
the reckless disregard by it of its duties and obligations thereunder. Pursuant
to an agreement between the Administrator and SSB, the Administrator has
delegated certain administrative functions to SSB. The costs and expenses of
such delegation are borne by the Administrator, not by a fund.


Pursuant to the Advisor's procedures, approved by the Board, proof of claim
forms are routinely filed on behalf of a fund by a third party service
provider, with certain limited exceptions. The Board receives periodic reports
regarding the implementation of these procedures.


                                      II-6
<PAGE>


FUND ACCOUNTING AGENT. For Money Market Portfolio, DWS Dreman Mid Cap Value
Fund, DWS Dreman Small Cap Value Fund, and DWS Strategic Value Fund, DIFA, One
Beacon Street, Boston, Massachusetts 02108, a subsidiary of DIMA, is
responsible for determining net asset value per share and maintaining the
portfolio and general accounting records for a fund pursuant to a Fund
Accounting Agreement. For its services under a Fund Accounting Agreement, DIFA
receives a fee at the rate set forth in PART II - APPENDIX II-C.



Pursuant to an agreement between DIFA and SSB, DIFA has delegated certain fund
accounting functions to SSB under the Fund Accounting Agreement. The costs and
expenses of such delegation are borne by DIFA, not by a fund.



TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. DISC, 210 W. 10th Street, Kansas
City, Missouri 64105-1614, an affiliate of the Advisor, is each fund's transfer
agent, dividend-paying agent and shareholder service agent pursuant to the
Transfer Agency and Services Agreement. 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 a
fund. For its services under the Transfer Agency and Services Agreement, DISC
receives a fee at the rate set forth in PART II - APPENDIX II-C. Each fund, or
the Advisor (including any affiliate of the Advisor), or both, may pay
unaffiliated third parties for providing recordkeeping and other administrative
services with respect to accounts of participants in retirement plans or other
beneficial owners of shares whose interests are generally held in an omnibus
account.



CUSTODIAN. Under its custody agreement with a fund, the Custodian (i) maintains
separate accounts in the name of a fund, (ii) holds and transfers portfolio
securities on account of a fund, (iii) accepts receipts and makes disbursements
of money on behalf of a fund, and (iv) collects and receives all income and
other payments and distributions on account of a fund's portfolio securities.
The Custodian has entered into agreements with foreign subcustodians approved
by the Board pursuant to Rule 17f-5 under the 1940 Act.


SSB, 225 Franklin Street, Boston, MA, 02110, as Custodian, may use Deutsche
Bank AG or its affiliates, as subcustodian (DB Subcustodian) in certain
countries. To the extent a fund holds any securities in the countries in which
SSB as Custodian uses a 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 as Custodian (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.


The Custodian's fee may be reduced by certain earnings credits in favor of a
fund.



FUND LEGAL COUNSEL. Provides legal services to the funds.


BOARD LEGAL COUNSEL. Serves as legal counsel to the Independent Board Members.



PRINCIPAL UNDERWRITER AND DISTRIBUTION AGREEMENT. Pursuant to a distribution
agreement (Distribution Agreement) with a fund, DIDI, 222 South Riverside
Plaza, Chicago, Illinois 60606, an affiliate of the Advisor, is the principal
underwriter and distributor for each class of shares of a fund and acts as
agent of a fund in the continuous offering of its shares. The Distribution
Agreement remains in effect for a class from year to year only if its
continuance is approved for the class at least annually by a vote of the Board,
including the Board members who are not interested persons of a fund and who
have no direct or indirect financial interest in the Distribution Agreement.


The Distribution Agreement automatically terminates in the event of its
assignment and may be terminated for a class at any time without penalty by a
fund or by DIDI upon 60 days' notice. Termination by a fund with respect to a
class may be by vote of (i) a majority of the Board members who are not
interested persons of a fund and who have no direct or indirect financial
interest in the Distribution Agreement, or (ii) a "majority of the outstanding
voting securities" of the class of a fund, as defined under the 1940 Act. All
material amendments must be approved by the Board in the manner described above
with respect to the continuation of the Distribution Agreement. The provisions
concerning continuation, amendment and termination of a Distribution Agreement
are on a series by series and class by class basis.


Under the Distribution Agreement, DIDI uses reasonable efforts to sell shares
of a fund and and may appoint various financial services firms to sell shares
of a fund. DIDI bears all of its expenses of providing services pursuant to the
Distribution Agreement, including the payment of any commissions, concessions,
and distribution fees to


                                      II-7
<PAGE>

financial services firms. A fund pays the cost of the registration of its
shares for sale under the federal securities laws and the registration or
qualification of its shares for sale under the securities laws of the various
states. A fund also pays the cost for the prospectus and shareholder reports to
be typeset and printed for existing shareholders, and DIDI, as principal
underwriter, pays for the printing and distribution of copies thereof used in
connection with the offering of shares to prospective investors. DIDI also pays
for supplementary sales literature and advertising costs. DIDI receives any
sales charge upon the purchase of shares of a class with an initial sales
charge and pays commissions, concessions and distribution fees to firms for the
sale of a fund's shares. DIDI also receives any contingent deferred sales
charges paid with respect to the redemption of any shares having such a charge.
DIDI receives no compensation from a fund as principal underwriter and
distributor except with respect to certain fund classes in amounts authorized
by a Rule 12b-1 Plan adopted for a class by a fund (see Distribution and
Service Agreements and Plans).


SHAREHOLDER AND ADMINISTRATIVE SERVICES. Shareholder and administrative
services are provided to certain fund classes under a shareholder services
agreement (Services Agreement) with DIDI. The Services Agreement continues in
effect for each class from year to year so long as such continuance is approved
for the class at least annually by a vote of the Board of the applicable fund,
including the Board members who are not interested persons of a fund and who
have no direct or indirect financial interest in the Services Agreement. The
Services Agreement automatically terminates in the event of its assignment and
may be terminated for a class at any time without penalty by a fund or by DIDI
upon 60 days' notice. Termination by a fund with respect to a class may be by a
vote of (i) the majority of the Board members of a fund who are not interested
persons of a fund and who have no direct or indirect financial interest in the
Services Agreement, or (ii) a "majority of the outstanding voting securities"
of the class of such fund, as defined under the 1940 Act. The Services
Agreement may not be amended for a class to increase materially the fee to be
paid by a fund without approval of a majority of the outstanding voting
securities of such class of a fund, and all material amendments must in any
event be approved by the Board in the manner described above with respect to
the continuation of the Services Agreement.


Under the Services Agreement, DIDI provides, and may appoint various financial
services firms to provide, information and services to investors in certain
classes of a fund. Firms appointed by DIDI provide such office space and
equipment, telephone facilities and personnel as is necessary or beneficial for
providing information and services to shareholders in the applicable classes of
a fund. Such services and assistance may include, but are not limited to,
establishing and maintaining accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding a fund,
providing assistance to clients in changing dividend and investment options,
account designations and addresses and such other administrative services as
may be agreed upon from time to time and permitted by applicable statute, rule
or regulation.


DIDI bears all of its expenses of providing those services pursuant to the
Services Agreement, including the payment of any service fees to financial
services firms appointed by DIDI to provide such services and DIDI receives
compensation from a fund for its services under the Services Agreement in
amounts authorized by a Rule 12b-1 Plan adopted for a class by a fund (see
Distribution and Service Agreements and Plans).


DIDI may itself provide some of the above distribution and shareholder and
administrative services and may retain any portion of the fees received under
the Distribution Agreement and/or the Services Agreement not paid to financial
services firms to compensate itself for such distribution and shareholder and
administrative functions performed for a fund. Firms to which DIDI may pay
commissions, concessions, and distribution fees or service fees or other
compensation may include affiliates of DIDI.


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


                                      II-8
<PAGE>

Scudder, Kemper and Deutsche fund groups, and all of the arrangements were
terminated prior to the start of the regulatory investigations that began in
the summer of 2003. No current DeAM employee approved these trading
arrangements. Under the terms of the settlements, DAMI and DIMA neither
admitted nor denied any wrongdoing.


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


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


In addition, DeAM is subject to certain further undertakings relating to the
governance of the mutual funds, including that at least 75% of the members of
the Boards of Trustees/Directors overseeing the DWS funds continue to be
independent of DeAM; the Chairmen of the DWS funds' Boards of Trustees 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.


                                      II-9
<PAGE>

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/  Directors, officers, and
other parties. Each DWS fund's investment advisor has agreed to indemnify the
applicable DWS funds in connection with these lawsuits, or other lawsuits or
regulatory actions that may be filed making similar allegations.


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



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




PURCHASE AND REDEMPTION OF SHARES

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



The Board and DIDI each may suspend (in whole or in part) or terminate the
offering of shares of a fund at any time for any reason and may limit the
amount of purchases by, and refuse to sell to, any person. During the period of
such suspension, the Board or DIDI potentially may permit certain persons (for
example, persons who are already shareholders the fund) to continue to purchase
additional shares of a fund and to have dividends reinvested.


Orders will be confirmed at a price based on the net asset value of a fund next
determined after receipt in good order by DIDI of the order accompanied by
payment in the case of a purchase order. Except as described below, orders
received by certain dealers or other financial services firms prior to the
close of a fund's business day will be confirmed at a price based on the net
asset value determined on that day (trade date).



USE OF FINANCIAL SERVICES FIRMS. Dealers and other financial services firms
provide varying arrangements for their clients to purchase and redeem a fund's
shares, including different minimum investments, and may assess transaction or
other fees. 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. Firms may arrange with their clients for other investment
or administrative services. Such firms may independently establish and charge
additional amounts to their clients for such services. Firms also may hold a
fund's shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Shareholder Service Agent will have no


                                     II-10
<PAGE>

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 a fund through the Shareholder Service Agent for
record-keeping and other expenses relating to these nominee accounts. 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 a fund through the
Shareholder Service Agent for these services.


A fund has authorized one or more financial service institutions, including
certain members of the Financial Industry Regulatory Authority (FINRA) other
than DIDI (financial institutions), to accept purchase and redemption orders
for a fund's shares. Such financial institutions may also designate other
parties, including plan administrator intermediaries, to accept purchase and
redemption orders on a fund's behalf. Orders for purchases or redemptions will
be deemed to have been received by a fund when such financial institutions or,
if applicable, their authorized designees accept the orders. Subject to the
terms of the contract between a fund and the financial institution, ordinarily
orders will be priced at a fund's net asset value next computed after
acceptance by such financial institution or its authorized designees. Further,
if purchases or redemptions of a fund's shares are arranged and settlement is
made at an investor's election through any other authorized financial
institution, that financial institution may, at its discretion, charge a fee
for that service.


TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent and DIDI provide
retirement plan services and documents and 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.


Materials 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. DIDI may pay commissions to dealers and other financial services firms
in connection with shares sold to retirement plans. For further information
about such compensation, see Compensation Schedules #1 and #2 as set forth in
PART II - APPENDIX II-D. Additional fees and transaction policies and
procedures may apply to such plans. Investors should consult their own tax
advisors before establishing a retirement plan.



PURCHASES

A fund may offer only certain of the classes of shares referred to in the
subsections below. Thus, the information provided below in regard to the
purchase of certain classes of shares is only applicable to funds offering such
classes of shares.



PURCHASE OF CLASS A SHARES. The public offering price of Class A shares is the
net asset value plus a sales charge based on investment amount, as set forth in
the relevant prospectus and the "DWS Sales Charge and Dealer Commission
Schedule" set forth in PART II - APPENDIX II-F.



CLASS A SHARES REDUCED SALES CHARGES

QUANTITY DISCOUNTS. An investor or the investor's dealer or other financial
services firm must notify the Shareholder Service Agent or DIDI whenever a
quantity discount or reduced sales charge is applicable to a purchase. In order
to qualify for a lower sales charge, all orders from an organized group will
have to be placed through a single dealer or other firm and identified as
originating from a qualifying purchaser.


COMBINED PURCHASES. A fund's Class A shares may be purchased at the rate
applicable to the sales charge discount bracket attained by combining same day
investments in Class A shares of any DWS funds that bear a sales charge.


CUMULATIVE DISCOUNT. Class A shares of a fund may also be purchased at the rate
applicable to the discount bracket attained by adding to the cost of shares
being purchased, the value of all Class A shares of DWS funds that bear a sales
charge (computed at the maximum offering price at the time of the purchase for
which the discount is applicable) already owned by the investor or


                                     II-11
<PAGE>

his or her immediate family member (including the investor's spouse or life
partner and children or stepchildren age 21 or younger).


LETTER OF INTENT. The reduced sales charges for Class A shares, as shown in the
relevant prospectus and the "DWS Sales Charge and Dealer Commission Schedule"
set forth in PART II - APPENDIX II-F, also apply to the aggregate amount of
purchases of Class A shares of DWS funds that bear a sales charge made by any
purchaser within a 24-month period under a written Letter of Intent (Letter)
provided to DIDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than
actually paid, the appropriate number of escrowed shares are redeemed and the
proceeds used toward satisfaction of the obligation to pay the increased sales
charge. The Letter for an employer-sponsored employee benefit plan maintained
on the subaccount record keeping system available through ADP, Inc. (or
ExpertPlan for Flex Plans) under an alliance between ADP, Inc. (or ExpertPlan
for Flex Plans) and DIDI and its affiliates may have special provisions
regarding payment of any increased sales charge resulting from a failure to
complete the intended purchase under the Letter. A shareholder may include the
value (at the maximum offering price, which is determined by adding the maximum
applicable sales load charged to the net asset value) of all Class A shares of
such DWS funds held of record as of the initial purchase date under the Letter
as an "accumulation credit" toward the completion of the Letter, but no price
adjustment will be made on such shares.


RETIREMENT PLANS ON FLEX SYSTEM. For purposes of the Combined Purchases,
Cumulative Discount and Letter of Intent features described above,
employer-sponsored employee benefit plans using the Flex subaccount record
keeping system available through ExpertPlan under an alliance with DIDI and its
affiliates may include: (a) Money Market funds as "DWS funds," (b) all classes
of shares of any DWS fund and (c) the value of any other plan investments, such
as guaranteed investment contracts and employer stock, maintained on such
subaccount record keeping system.

CLASS A NAV SALES. Class A shares may be sold at net asset value without a
sales charge to:


(1)    a current or former director or trustee of Deutsche or DWS mutual funds;



(2)    an employee (including the employee's spouse or life partner and
       children or stepchildren age 21 or younger) of Deutsche Bank AG or its
       affiliates or of a subadvisor to any fund in the DWS family of funds or
       of a broker-dealer authorized to sell shares of a fund or service agents
       of a fund;


(3)    certain professionals who assist in the promotion of DWS funds pursuant
       to personal services contracts with DIDI, for themselves or immediate
       members of their families;


(4)    any trust, pension, profit-sharing or other benefit plan for only such
       persons listed under the preceding paragraphs (a) and (b);


(5)    persons who purchase such shares through bank trust departments that
       process such trades through an automated, integrated mutual fund
       clearing program provided by a third party clearing firm;


(6)    selected employees (including their spouses or life partners and
       children or stepchildren age 21 or younger) of banks and other financial
       services firms that provide administrative services related to order
       placement and payment to facilitate transactions in shares of a fund for
       their clients pursuant to an agreement with DIDI or one of its
       affiliates. Only those employees of such banks and other firms who as
       part of their usual duties provide services related to transactions in
       fund shares qualify;


(7)    unit investment trusts sponsored by Ranson & Associates, Inc. and
       unitholders of unit investment trusts sponsored by Ranson & Associates,
       Inc. or its predecessors through reinvestment programs described in the
       prospectuses of such trusts that have such programs;


(8)    through certain investment advisors registered under the Investment
       Advisers Act of 1940 and other financial services firms acting solely as
       agent for their clients, that adhere to certain standards established by
       DIDI, including a requirement that such shares be sold for the benefit
       of their clients participating in an investment advisory program or
       agency commission program under which such clients pay


                                     II-12
<PAGE>

       a fee to the investment advisor or other firm for portfolio management
       or agency brokerage services. Such shares are sold for investment
       purposes and on the condition that they will not be resold except
       through redemption or repurchase by a fund;


(9)    employer-sponsored employee benefit plans using the Flex subaccount
       recordkeeping system (Flex Plans) made available through ExpertPlan
       under an alliance with DIDI and its affiliates, established prior to
       October 1, 2003, provided that the Flex Plan is a participant-directed
       plan that has not less than 200 eligible employees;


(10)   investors investing $1 million or more ($250,000 or more for DWS
       California Tax-Free Income Fund, DWS GNMA Fund, DWS Intermediate Tax/AMT
       Free Fund DWS Managed Municipal Bond Fund, DWS Massachusetts Tax-Free
       Fund DWS New York Tax-Free Income Fund, DWS Short-Term Municipal Bond
       Fund, DWS Short Duration Plus Fund, DWS Strategic High Yield Tax-Free
       Fund, DWS Strategic Government Securities Fund, and DWS Strategic Income
       Fund), either as a lump sum or through the Combined Purchases, Letter of
       Intent and Cumulative Discount features referred to above (collectively,
       the Large Order NAV Purchase Privilege). The Large Order NAV Purchase
       Privilege is not available if another net asset value purchase privilege
       is available;


(11)   defined contribution investment only plans with a minimum of $1 million
       in plan assets regardless of the amount allocated to the DWS funds;


In addition, Class A shares may be sold at net asset value without a sales
charge in connection with:


(12)   the acquisition of assets or merger or consolidation with another
       investment company, and under other circumstances deemed appropriate by
       DIDI and consistent with regulatory requirements;


(13)   a direct "roll over" of a distribution from a Flex Plan or from
       participants in employer sponsored employee benefit plans maintained on
       the OmniPlus subaccount record keeping system made available through
       ADP, Inc. under an alliance between ADP, Inc. and DIDI and its
       affiliates into a DWS Investments IRA;


(14)   reinvestment of fund dividends and distributions; and

(15)   exchanging an investment in Class A shares of another fund in the DWS
       family of funds for an investment in a fund.


Class A shares also may be purchased at net asset value without a sales charge
in any amount by members of the plaintiff class in the proceeding known as
Howard and Audrey Tabankin, et al. v. Kemper Short-Term Global Income Fund, et
al., Case No. 93 C 5231 (N.D. IL). This privilege is generally non-transferable
and continues for the lifetime of individual class members and has expired for
non-individual class members. To make a purchase at net asset value under this
privilege, the investor must, at the time of purchase, submit a written request
that the purchase be processed at net asset value pursuant to this privilege
specifically identifying the purchaser as a member of the "Tabankin Class."
Shares purchased under this privilege will be maintained in a separate account
that includes only shares purchased under this privilege. For more details
concerning this privilege, class members should refer to the Notice of (i)
Proposed Settlement with Defendants; and (ii) Hearing to Determine Fairness of
Proposed Settlement, dated August 31, 1995, issued in connection with the
aforementioned court proceeding. For sales of fund shares at net asset value
pursuant to this privilege, DIDI may in its discretion pay dealers and other
financial services firms a concession, payable quarterly, at an annual rate of
up to 0.25% of net assets attributable to such shares maintained and serviced
by the firm. A firm becomes eligible for the concession based upon assets in
accounts attributable to shares purchased under this privilege in the month
after the month of purchase and the concession continues until terminated by
DIDI. The privilege of purchasing Class A shares of a fund at net asset value
under this privilege is not available if another net asset value purchase
privilege also applies.


PURCHASE OF CLASS B SHARES. Class B shares of a fund are offered at net asset
value. No initial sales charge is imposed, which allows the full amount of the
investor's purchase payment to be invested in Class B shares for his or her
account. Class B shares are subject to a contingent deferred sales charge of
4.00% that declines over time (for shares sold within six years of purchase)
and Rule 12b-1 fees, as described in the relevant prospectus (see DWS Sales
Charge and Dealer Commission Schedule set forth in PART II - APPENDIX II-F, and
the discussion of Rule 12b-1 Plans under Distribution and Service Agreements
and Plans below). Class B shares automatically convert to Class A shares after
six years.


                                     II-13
<PAGE>


As described in the prospectus, effective March 1, 2010, Class B shares will be
closed to new purchases, except for exchanges and the reinvestment of dividends
or other distributions.


PURCHASE OF CLASS C SHARES. Class C shares of a fund are offered at net asset
value. No initial sales charge is imposed, which allows the full amount of the
investor's purchase payment to be invested in Class C shares for his or her
account. Class C shares are subject to a contingent deferred sales charge of
1.00% (for shares sold within one year of purchase) and Rule 12b-1 fees, as
described in the relevant prospectus (see DWS Sales Charge and Dealer
Commission Schedule set forth in PART II - APPENDIX II-F, and the discussion of
Rule 12b-1 Plans under Distribution and Service Agreements and Plans below).


PURCHASE OF CLASS R SHARES. Class R shares of a fund are offered at net asset
value. No initial sales charge is imposed, which allows the full amount of the
investor's purchase payment to be invested in Class R shares for his or her
account. Class R shares are subject to Rule 12b-1 fees, as described in the
relevant prospectus (see DWS Sales Charge and Dealer Commission Schedule set
forth in PART II - APPENDIX II-H, and the discussion of Rule 12b-1 Plans under
Distribution and Service Agreements and Plans below).



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


PURCHASE OF INSTITUTIONAL CLASS SHARES. Institutional Class shares of a fund
are offered at net asset value without a sales charge to certain eligible
investors as described in the section entitled "Buying and Selling Shares" in a
fund's prospectus.


Investors may invest in Institutional Class shares by setting up an account
directly with the Shareholder Service Agent or through an authorized service
agent. Investors who establish shareholder accounts directly with the
Shareholder Service Agent should submit purchase and redemption orders as
described in the relevant prospectus.


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


MULTI-CLASS SUITABILITY FOR CLASSES A, B AND C. DIDI has established the
following procedures regarding the purchase of Class A, Class B and Class C
shares. Orders to purchase Class B shares of $100,000 or more and orders to
purchase Class C shares of $500,000 or more (certain funds have a $250,000
maximum for Class C purchases, see the applicable fund's prospectus) will be
declined with the exception of orders received from financial representatives
acting for clients whose shares are held in an omnibus account and
employer-sponsored employee benefit plans using the subaccount record keeping
system (System) maintained for DWS Investments-branded plans on record keeping
systems made available through ExpertPlan under an alliance between ExpertPlan
and DIDI and its affiliates (DWS Investments Flex Plans). The foregoing Class C
order limit of $500,000 or more is $250,000 or more for the certain funds, see
the relevant prospectus for additional information.



The following provisions apply to DWS Investments Flex Plans.


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


(2)    Class C Share DWS Investments Flex Plans. Orders to purchase Class C
       shares for a DWS Investments Flex Plan, regardless of when such plan was
       established on the System, will be invested instead in Class A shares at
       net asset value when the


                                     II-14
<PAGE>

       combined subaccount value in DWS funds or other eligible assets held by
       the plan is $1,000,000 or more. This provision will be imposed for the
       first purchase after eligible plan assets reach the $1,000,000
       threshold. A later decline in assets below the $1,000,000 threshold will
       not affect the plan's ability to continue to purchase Class A shares at
       net asset value.


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




PURCHASE PRIVILEGES FOR DWS AFFILIATED INDIVIDUALS. Current or former Board
members of the DWS funds, employees, their spouses or life partners and
children or step-children age 21 or younger, of Deutsche Bank AG or its
affiliates or a sub-adviser to any DWS fund or a broker-dealer authorized to
sell shares of a fund are generally eligible to purchase shares in the class of
a fund with the lowest expense ratio, usually the Institutional Class shares.
If a fund does not offer Institutional Class shares, these individuals are
eligible to buy Class A shares at NAV. Each fund also reserves the right to
waive the minimum account balance requirement for employee and director
accounts. Fees generally charged to IRA accounts will be charged to accounts of
employees and directors.



MONEY MARKET FUNDS (except DWS Cash Investment Trust Class A, B and C Shares of
DWS Money Market Prime Series). Shares of a fund are sold at net asset value
(normally, $1.00) directly from a fund or through selected financial services
firms, such as broker-dealers and banks. Each fund seeks to have its investment
portfolio as fully invested as possible at all times in order to achieve
maximum income. Since each fund will be investing in instruments that normally
require immediate payment in Federal Funds (monies credited to a bank's account
with its regional Federal Reserve Bank), as described in the applicable
prospectus, each fund has adopted procedures for the convenience of its
shareholders and to ensure that each fund receives investable funds.


VARIABLE INSURANCE FUNDS. Shares of DWS Variable Series I, DWS Variable Series
II and DWS Investments VIT Fund are continuously offered to separate accounts
of participating insurance companies at the net asset value per share next
determined after a proper purchase request has been received by the insurance
company. The insurance companies offer to variable annuity and variable life
insurance contract owners units in its separate accounts which directly
correspond to shares in a fund. Each insurance company submits purchase and
redemption orders to a fund based on allocation instructions for premium
payments, transfer instructions and surrender or partial withdrawal requests
which are furnished to the insurance company by such contract owners. Contract
owners can send such instructions and requests to the insurance companies in
accordance with procedures set forth in the prospectus for the applicable
variable insurance product offered by the insurance company.


PURCHASES IN-KIND. This section is applicable only to the following funds: DWS
High Income Plus Fund, DWS Mid Cap Growth Fund, DWS Small Cap Growth Fund, DWS
Equity 500 Index VIP and DWS Small Cap Index VIP. A 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 a 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 a fund. In
addition, securities accepted in payment for shares must: (i) meet the
investment objective and policies of the acquiring fund; (ii) be acquired by
the applicable fund for investment and not for resale; (iii) be liquid
securities which are not restricted as to transfer either by law or liquidity
of market; and (iv) 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
shareholder will be charged the costs associated with receiving or delivering
the securities. These costs include security movement costs and taxes and
registration costs. A fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.


REDEMPTIONS

A fund may offer only certain of the classes of shares referred to in the
subsections below. Thus, the information provided below in regard to the
redemption of certain classes of shares is only applicable to funds offering
such classes of shares.


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.


                                     II-15
<PAGE>

Redemption requests must be unconditional. Redemption requests (and a stock
power for certificated shares) must be duly endorsed by the account holder. As
specified in the relevant 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.


WIRES. The ability to send wires is limited by the business hours and holidays
of the firms involved. A fund is not responsible for the efficiency of the
federal wire system or the account holder's financial services firm or bank.
The account holder is responsible for any charges imposed by the account
holder's firm or bank. To change the designated account to receive wire
redemption proceeds, send a written request to the Shareholder Service Agent
with signatures guaranteed as described above or contact the firm through which
fund shares were purchased.



CONTINGENT DEFERRED SALES CHARGE (CDSC). The following example will illustrate
the operation of the CDSC for Class A (when applicable), Class B and Class C
shares, to the extent applicable. Assume that an investor makes a single
purchase of $10,000 of a fund's Class B shares and that 16 months later the
value of the shares has grown by $1,000 through reinvested dividends and by an
additional $1,000 of share appreciation to a total of $12,000. If the investor
were then to redeem the entire $12,000 in share value, the CDSC would be
payable only with respect to $10,000 because neither the $1,000 of reinvested
dividends nor the $1,000 of share appreciation is subject to the charge. The
charge would be at the rate of 3.00% ($300) because the redemption was in the
second year after the purchase was made.



The rate of the CDSC is determined by the length of the period of ownership.
Investments are tracked on a monthly basis. The period of ownership for this
purpose begins the first day of the month in which the order for the investment
is received. For example, an investment made in March of the year of investment
will be eligible for the second year's charge if redeemed on or after the first
day of March of the following year. In the event no specific order is requested
when redeeming shares subject to a CDSC, the redemption will be made first from
shares representing reinvested dividends and then from the earliest purchase of
shares. DIDI receives any CDSC directly. The CDSC will not be imposed upon
redemption of reinvested dividends or share appreciation.

The Class A CDSC for shares purchased through the Large Order NAV Purchase
Privilege will be waived in the event of:


(1)    redemptions by a participant-directed qualified retirement plan
       described in Code Section 401(a), a participant-directed non-qualified
       deferred compensation plan described in Code Section 457 or a
       participant-directed qualified retirement plan described in Code Section
       403(b)(7) which is not sponsored by a K-12 school district;


(2)    redemptions by employer-sponsored employee benefit plans using the
       subaccount record keeping system made available through ADP, Inc. (or
       ExpertPlan for Flex Plans) under an alliance between ADP, Inc. (or
       ExpertPlan for Flex Plans) and DIDI and its affiliates;


(3)    redemption of shares of a shareholder (including a registered joint
       owner) who has died;


(4)    redemption of shares of a shareholder (including a registered joint
       owner) who after purchase of the shares being redeemed becomes totally
       disabled (as evidenced by a determination by the federal Social Security
       Administration);


(5)    redemptions under a fund's Automatic Withdrawal Plan at a maximum of 12%
       per year of the net asset value of the account;


(6)    redemptions of shares whose dealer of record at the time of the
       investment notifies DIDI that the dealer waives the discretionary
       commission applicable to such Large Order NAV Purchase; and


(7)    redemptions for certain loan advances, hardship provisions or returns of
       excess contributions from retirement plans.


The Class B CDSC will be waived for the circumstances set forth in items (3),
(4), (5) and (7) above for Class A shares. In addition, this CDSC will be
waived:


(a)      for redemptions made pursuant to any IRA systematic withdrawal based on
         the shareholder's life expectancy including, but not limited to,
         substantially equal periodic payments described in Code Section
         72(t)(2)(A)(iv) prior to age 59 1/2;


(b)      for redemptions to satisfy required minimum distributions after age 70
         1/2 from an IRA account (with


                                     II-16
<PAGE>

         the maximum amount subject to this waiver being based only upon the
         shareholder's DWS Investments IRA accounts); and


(c)      in connection with the following redemptions of shares held by
         employer-sponsored employee benefit plans maintained on the subaccount
         record keeping system made available by ADP, Inc. under an alliance
         between ADP, Inc. and DIDI and its affiliates: (1) to satisfy
         participant loan advances (note that loan repayments constitute new
         purchases for purposes of the CDSC and the conversion privilege), (2)
         in connection with retirement distributions (limited at any one time to
         12% of the total value of plan assets invested in a fund), (3) in
         connection with distributions qualifying under the hardship provisions
         of the Internal Revenue Code, (4) representing returns of excess
         contributions to such plans and (5) in connection with direct "roll
         over" distributions from a Flex Plan into a DWS Investments IRA under
         the Class A net asset value purchase privilege.


The Class C CDSC will be waived for the circumstances set forth in items (2),
(3), (4), (5) and (7) above for Class A shares and for the circumstances set
forth in items (a) and (b) above for Class B shares. In addition, this CDSC
will be waived for:


(i)      redemption of shares by an employer-sponsored employee benefit plan
         that offers funds in addition to DWS funds and whose dealer of record
         has waived the advance of the first year administrative service and
         distribution fees applicable to such shares and agrees to receive such
         fees quarterly; and


(ii)     redemption of shares purchased through a dealer-sponsored asset
         allocation program maintained on an omnibus record-keeping system
         provided the dealer of record had waived the advance of the first year
         administrative services and distribution fees applicable to such shares
         and has agreed to receive such fees quarterly.


REDEMPTIONS IN-KIND. A 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 a fund and valued as
they are for purposes of computing a fund's net asset value. A shareholder may
incur transaction expenses in converting these securities to cash. Please see
the prospectus for any requirements that may be applicable to certain funds to
provide cash up to certain amounts. For the following funds, this right may
only be exercised upon the consent of the shareholder: Money Market Portfolio
and Government & Agency Securities Portfolio, each a series of Cash Account
Trust; Cash Reserves Fund Institutional, a series of DWS Institutional Funds;
DWS Money Market Series, a series of DWS Money Market Trust; and Treasury
Portfolio, a series of Investors Cash Trust.



CHECKWRITING FOR CLASS A, B AND C SHARES (applicable to DWS Short Duration Plus
Fund, DWS Intermediate Tax/AMT Free Fund and DWS Massachusetts Tax-Free Fund
only). The Checkwriting Privilege is not offered to new investors. The
Checkwriting Privilege is available for shareholders of DWS Intermediate
Tax/AMT Free Fund and DWS Short Term Bond Fund (which was acquired by DWS Short
Duration Plus Fund) who previously elected this privilege prior to August 19,
2002, and to shareholders of DWS Massachusetts Tax-Free Fund who were
shareholders of the Scudder Massachusetts Limited Term Tax Free Fund prior to
July 31, 2000. Checks may be used to pay any person, provided that each check
is for at least $100 and not more than $5 million. By using the checks, the
shareholder will receive daily dividend credit on his or her shares until the
check has cleared the banking system. Investors who purchased shares by check
may write checks against those shares only after they have been on a fund's
book for 10 calendar days. Shareholders who use this service may also use other
redemption procedures. No shareholder may write checks against certificated
shares. A fund pays the bank charges for this service. However, each fund will
review the cost of operation periodically and reserve the right to determine if
direct charges to the persons who avail themselves of this service would be
appropriate. Each fund, State Street Bank and Trust Company and the Transfer
Agent reserve the right at any time to suspend or terminate the Checkwriting
procedure.



MONEY MARKET FUNDS ONLY

The following sections relate to Money Market Funds (except DWS Cash Investment
Trust Class A, B and C Shares of DWS Money Market Prime Series).


REDEMPTION BY CHECK/ACH DEBIT DISCLOSURE. A fund will accept Automated Clearing
House (ACH) debit entries for accounts that have elected the checkwriting
redemption privilege (see Redemptions by Draft below). Please consult the
prospectus for the availability of the checkwriting privilege for a specific
fund. An example of an ACH debit is a transaction in which you have given your
insurance company, mortgage company, credit card company, utility company,
health club, etc., the right to


                                     II-17
<PAGE>

withdraw your monthly payment from your fund account or the right to convert
your mailed check into an ACH debit. Sometimes, you may give a merchant from
whom you wish to purchase goods the right to convert your check to an ACH
debit. You may also authorize a third party to initiate an individual payment
in a specific amount from your account by providing your account information
and authorization to such third party via the Internet or telephone. You
authorize a fund upon receipt of an ACH debit entry referencing your account
number, to redeem fund shares in your account to pay the entry to the third
party originating the debit. A fund will make the payment on the basis of the
account number that you provide to your merchant and will not compare this
account number with the name on the account. A fund, the Shareholder Service
Agent or any other person or system handling the transaction are not required
to determine if there is a discrepancy between the name and the account number
shown on the transfer instructions.


The payment of any ACH debit entry will be subject to sufficient funds being
available in the designated account; a fund will not be able to honor an ACH
debit entry if sufficient funds are not available. ACH debit entry transactions
to your fund account should not be initiated or authorized by you in amounts
exceeding the amount of Shares of a fund then in the account and available for
redemption. A fund may refuse to honor ACH debit entry transactions whenever
the right of redemption has been suspended or postponed, or whenever the
account is otherwise impaired. Your fund account statement will show any ACH
debit entries in your account; you will not receive any other separate notice.
(Merchants are permitted to convert your checks into ACH debits only with your
prior consent.)


You may authorize payment of a specific amount to be made from your account
directly by a fund to third parties on a continuing periodic basis. To arrange
for this service, you should contact the person or company you will be paying.
Any preauthorized transfers will be subject to sufficient funds being available
in the designated account. A preauthorized transfer will continue to be made
from the account in the same amount and frequency as initially established
until you terminate the preauthorized transfer instructions with the person or
company whom you have been paying. If regular preauthorized payments may vary
in amount, the person or company you are going to pay should tell you ten (10)
days before each payment will be made and how much the payment will be. If you
have told a fund in advance to make regular payments out of your account, you
may stop any of these payments by writing or calling the Shareholder Service
Agent at the address and telephone number listed in the next paragraph in time
for the Shareholder Service Agent to receive your request three (3) business
days or more before the payment is scheduled to be made. If you call, a fund
may also require that you put your request in writing so that a fund will
receive it within 14 days after you call. If you order a fund to stop one of
these payments three (3) business days or more before the transfer is scheduled
and a fund does not do so, a fund will be liable for your loss or damages but
not in an amount exceeding the amount of the payment. A stop payment order will
stop only the designated periodic payment. If you wish to terminate the
periodic preauthorized transfers, you should do so with the person or company
to whom you have been making payments.


IN CASE OF ERRORS OR QUESTIONS ABOUT YOUR ACH DEBIT ENTRY TRANSACTIONS please
telephone (800-621-1048 but for Class S shares use 800-728-3337 and for
Institutional class shares use 800-730-1313) or write (DWS Investments Service
Company, P.O. Box 219151, Kansas City, MO 64121-9151) the Shareholder Service
Agent as soon as possible if you think your statement is wrong or shows an
improper transfer or if you need more information about a transfer listed on
the statement. Our business days are Monday through Friday except holidays. The
Shareholder Service Agent must hear from you no later than 60 days after a fund
sent you the first fund account statement on which the problem or error
appeared. If you do not notify the Shareholder Service Agent within sixty (60)
days after a fund sends you the account statement, you may not get back any
money you have lost, and you may not get back any additional money you lose
after the sixty (60) days if a fund or the Shareholder Service Agent could have
stopped someone from taking that money if you had notified the Shareholder
Service Agent in time.


Tell us your name and account number, describe the error or the transfer you
are unsure about, and explain why you believe it is an error or why you need
more information. Tell us the dollar amount of the suspected error. If you tell
the Shareholder Service Agent orally, the Shareholder Service Agent may require
that you send your complaint or questions in writing within ten (10) business
days. The Shareholder Service Agent will determine whether an error occurred
within ten (10) business days after it hears from you and will correct any
error promptly. If the Shareholder Service Agent needs more time, however, it
may take up to 45 days (90 days for certain types of transactions) to
investigate your complaint or question. If the Shareholder Service Agent
decides to do this, your account will be credited with escrowed fund shares
within ten (10) business days for the amount you


                                     II-18
<PAGE>

think is in error so that you will have the use of the money during the time it
takes the Shareholder Service Agent to complete its investigation. If the
Shareholder Service Agent asks you to put your complaint or questions in
writing and the Shareholder Service Agent does not receive it within ten (10)
business days, your account may not be credited. The Shareholder Service Agent
will tell you the results within three (3) business days after completing its
investigation. If the Shareholder Service Agent determines that there was no
error, the Shareholder Service Agent will send you a written explanation. You
may ask for copies of documents that were used by the Shareholder Service Agent
in the investigation.


In the event a fund or the Shareholder Service Agent does not complete a
transfer from your account on time or in the correct amount according to a
fund's agreement with you, a fund may be liable for your losses or damages. A
fund will not be liable to you if (i) there are not sufficient funds available
in your account, (ii) circumstances beyond our control (such as fire or flood
or malfunction of equipment) prevent the transfer, (iii) you or another
shareholder have supplied a merchant with incorrect account information, or
(iv) a merchant has incorrectly formulated an ACH debit entry. In any case, a
fund's liability shall not exceed the amount of the transfer in question.


A fund or the Shareholder Service Agent will disclose information to third
parties about your account or the transfers you make: (1) where it is necessary
for completing the transfers, (2) in order to verify the existence or condition
of your account for a third party such as a credit bureau or a merchant, (3) in
order to comply with government agencies or court orders or (4) if you have
given a fund written permission.


The acceptance and processing of ACH debit entry transactions is established
solely for your convenience and a fund reserves the right to suspend, terminate
or modify your ability to redeem fund shares by ACH debit entry transactions at
any time. ACH debit entry transactions are governed by the rules of the
National Automated Clearing House Association (NACHA) Operating Rules and any
local ACH operating rules then in effect, as well as Regulation E of the
Federal Reserve Board.


REDEMPTIONS BY DRAFT. Upon request, shareholders of certain Money Market Funds
will be provided with drafts to be drawn on a fund (Redemption Checks). Please
consult the prospectus for the availability of the checkwriting redemption
privilege for a specific Money Market Fund. These Redemption Checks may be made
payable to the order of any person for not more than $5 million. When a
Redemption Check is presented for payment, a sufficient number of full and
fractional shares in the shareholder's account will be redeemed as of the next
determined net asset value to cover the amount of the Redemption Check. This
will enable the shareholder to continue earning dividends until a fund receives
the Redemption Check. A shareholder wishing to use this method of redemption
must complete and file an Account Application which is available from a fund or
firms through which shares were purchased. Redemption Checks should not be used
to close an account since the account normally includes accrued but unpaid
dividends. A fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that
distribute shares of a fund. In addition, firms may impose minimum balance
requirements in order to offer this feature. Firms may also impose fees to
investors for this privilege or establish variations of minimum check amounts.


Unless more than one signature is required pursuant to the Account Application,
only one signature will be required on Redemption Checks. Any change in the
signature authorization must be made by written notice to the Shareholder
Service Agent. Shares purchased by check or through certain ACH transactions
may not be redeemed by Redemption Check until the shares have been on a fund's
books for at least 10 days. Shareholders may not use this procedure to redeem
shares held in certificate form. A fund reserves the right to terminate or
modify this privilege at any time.


A fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to
redeem fund shares in excess of the value of a fund account or in an amount
less than the minimum Redemption Check amount specified in the prospectus; when
a Redemption Check is presented that would require redemption of shares that
were purchased by check or certain ACH transactions within 10 days; or when
"stop payment" of a Redemption Check is requested.


SPECIAL REDEMPTION FEATURES. Certain firms that offer Shares of the Money
Market Funds also provide special redemption features through charge or debit
cards and checks that redeem fund shares. Various firms have different charges
for their services. Shareholders should obtain information from their firm with
respect to any


                                     II-19
<PAGE>

special redemption features, applicable charges, minimum balance requirements
and special rules of the cash management program being offered.


EXCHANGES

A fund may offer only certain of the classes of shares referred to in the
subsections below. Thus, the information provided below in regard to the
exchange of certain classes of shares is only applicable to funds offering such
classes of shares.


GENERAL. Shareholders may request a taxable exchange of their shares for shares
of the corresponding class of other DWS funds without imposition of a sales
charge, subject to the provisions below. If you exchange shares that have a
CDSC, the CDSC is not imposed on the exchange; however, the later redemption of
the acquired shares would be subject to the CDSC schedule of the acquired fund
(which, for Class A shares only, may differ from the schedule for a fund you
are exchanging out of), based on original cost and purchase date of the shares
you exchanged out of.


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


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 800-621-1048 (for Class S shares use 800-728-3337 and for Institutional
class shares use 800-730-1313).


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


MULTI-CLASS CONVERSIONS. For purposes of conversion to Class A shares, shares
purchased through the reinvestment of dividends and other distributions paid
with respect to Class B shares in a shareholder's fund account will be
converted to Class A shares on a pro rata basis.



EXCHANGES INVOLVING INSTITUTIONAL SHARES. The following persons may, subject to
certain limitations, exchange the DWS Money Market Fund shares of DWS Money
Market Prime Series, for shares of the institutional class of other DWS funds,
and may exchange shares of the institutional class of other DWS funds for DWS
Money Market Fund shares: (1) a current or former director or trustee of the
Deutsche or DWS mutual funds; and (2) an employee, the employee's spouse or
life partner and children or stepchildren age 21 or younger of Deutsche Bank or
its affiliates or a subadvisor to any fund in the DWS family of funds or a
broker-dealer authorized to sell shares of a fund.



CLASS A TO CLASS S IN THE SAME FUND EXCHANGE PRIVILEGE: Investors who have
invested in Class A shares through a comprehensive or "wrap" fee program, or
other fee-based program sponsored by a broker-dealer, bank or registered
investment adviser may become eligible to invest in Class S shares. Subject to
the discretion of DWS Investments Distributors, Inc., such shareholders may
exchange their Class A shares for Class S shares of equal aggregate value of
the same fund. No sales charge or other charges will apply to any such
exchanges. Investors should contact their selling and/or servicing agents to
learn more about the details of this exchange feature.


COMPENSATION OF FINANCIAL INTERMEDIARIES

INCENTIVE PLAN FOR DWS INVESTMENTS DISTRIBUTORS PERSONNEL. DIDI has adopted an
Incentive Plan (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 a fund. Each fund is assigned to one of three product categories -
"Strategic," "Tactical" or "all other funds" - taking into consideration, among
other things, the following criteria, where applicable:


o     a fund's consistency with DWS Investments' branding and long-term
      strategy


o     a fund's competitive performance


o     a fund's Morningstar rating


o     The length of time a fund's Portfolio Managers have managed a
      fund/Strategy


                                     II-20
<PAGE>

o     Market size for the fund category


o     a fund's size, including sales and redemptions of a 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 in the
Strategic and Tactical categories represents management's judgment based on the
above criteria. In addition, management may consider a fund's profile over the
course of several review periods before making a change to its category
assignment. These category assignments will be posted quarterly to the DWS
funds' Web site at www.dws-investments.com, approximately one month after the
end of each quarter. DWS Investments Wholesalers receive the highest
compensation for Strategic funds, less for Tactical funds and the lowest for
all other funds. The level of compensation among these categories may differ
significantly.


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 Strategic or Tactical funds over all other 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 a fund into account when considering
purchasing a fund or evaluating any recommendations relating to fund shares.



FINANCIAL SERVICES FIRMS' COMPENSATION. DIDI may pay compensation to financial
intermediaries in connection with the sale of fund shares as described in PART
II - APPENDIX II-D. In addition, financial intermediaries may receive
compensation for post-sale administrative services from DIDI or directly from a
fund as described in PART II - APPENDIX II-D.



COMPENSATION FOR RECORDKEEPING SERVICES. Certain financial institutions,
including affiliates of DIDI, may receive compensation from a fund for
recordkeeping and other expenses relating to nominee accounts or for providing
certain services to their client accounts. Generally, payments by a fund to
financial institutions for providing such services are not expected to exceed
0.25% of shareholder assets for which such services are provided. Normally,
compensation for these financial institutions is paid by the Transfer Agent,
which is in turn reimbursed by the applicable fund. To the extent that record
keeping compensation in excess of the amount reimbursed by a fund is owed to a
financial institution, the Transfer Agent, Distributor or Advisor may pay
compensation from their own resources (see Financial Intermediary Support
Payments below).


COMPENSATION FOR RECORDKEEPING SERVICES: VARIABLE INSURANCE FUNDS. Technically,
the shareholders of DWS Variable Series I, DWS Variable Series II and DWS
Investments VIT Funds are the participating insurance companies that offer
shares of the funds as investment options for holders of certain variable
annuity contracts and variable life insurance policies. Effectively, ownership
of fund shares is passed through to insurance company contract and policy
holders. The holders of the shares of a fund on the records of a fund are the
insurance companies and no information concerning fund holdings of specific
contract and policy holders is maintained by a fund. The insurance companies
place orders for the purchase and redemption of fund shares with a fund
reflecting the investment of premiums paid, surrender and transfer requests and
other matters on a net basis; they maintain all records of the transactions and
holdings of fund shares and distributions thereon for individual contract and
policy holders; and they prepare and mail to contract and policy holders
confirmations and periodic account statements reflecting such transactions and
holdings.


A fund may compensate certain insurance companies for record keeping and other
administrative services performed with regard to holdings of Class B shares as
an expense of the Class B shares up to 0.15%. These fees are included within
the "Other Expenses" category in the fee table for each portfolio in the Class
B Shares Prospectus (see How Much Investors Pay in the applicable fund's
prospectus). In addition, the Advisor may, from time to time, pay from its own
resources certain insurance companies for record keeping and other
administrative services related to Class A and Class B shares of the Portfolios
held by such insurance companies on behalf of their contract and policy holders
(see Financial Intermediary Support Payments below).


FINANCIAL INTERMEDIARY SUPPORT PAYMENTS. In light of recent regulatory
developments, the Advisor, the Distributor and their affiliates have undertaken
to furnish certain additional information below regarding the level


                                     II-21
<PAGE>

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 a fund serviced and maintained by the financial advisor,
..10% to .25% of sales of a fund attributable to the financial advisor, a flat
fee of $4,000 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 a fund or of any particular share
class of a 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 a 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. (or ExpertPlans for Flex Plans) 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 firms listed in PART II -
APPENDIX II-E will receive revenue sharing payments at different points during
the coming year as described above.



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


                                     II-22
<PAGE>

particular share class of a fund or of other funds. These payment arrangements,
however, will not change the price that an investor pays for fund shares or the
amount that a fund receives to invest on behalf of an investor and will not
increase fund expenses. You may wish to take such payment arrangements into
account when considering and evaluating any recommendations relating to fund
shares and you should discuss this matter with your financial advisor and
review your financial advisor's disclosures.


It is likely that broker-dealers that execute portfolio transactions for a 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 a 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.



DIVIDENDS (FOR ALL FUNDS EXCEPT MONEY FUNDS). A fund, other than a money fund,
intends to distribute, at least annually: (i) substantially all of its
investment company taxable income (computed without regard to the
dividends-paid deduction), which includes any excess of net realized short-term
capital gains over net realized long-term capital losses; and (ii) the entire
excess of net realized long-term capital gains over net realized short-term
capital losses. However, if a fund determines that it is in the interest of its
shareholders, a fund may decide to retain all or part of its net realized
long-term capital gains for reinvestment, after paying the related federal
taxes. In such a case, shareholders will generally be treated for federal
income tax purposes as having received their share of such gains, but will then
be able to claim a credit against their federal income tax liability for the
federal income tax a fund pays on such gain. If a fund does not distribute the
amount of ordinary income and/or capital gain required to be distributed by an
excise tax provision of the Code, a fund may be subject to that excise tax on
the undistributed amounts. In certain circumstances, a fund may determine that
it is in the interest of shareholders to distribute less than the required
amount.


A fund has a schedule for paying out any earnings to shareholders (see
Understanding Distributions and Taxes in each fund's prospectus).

Additional distributions may also be made in November or December (or treated
as made on December 31) if necessary to avoid an excise tax imposed under the
Code. Both types of distributions will be made in shares of a fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent.


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


Dividends paid by a fund with respect to each class of its shares will be
calculated in the same manner, at the same time and on the same day.


The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and C shares than for other share classes primarily
as a result of the distribution services fee applicable to Class B and C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.


Income dividends and capital gain dividends (see Taxation of US Shareholders -
Dividends and Distributions), if any, of a fund will be credited to shareholder
accounts in full and fractional shares of the same class of that fund at net
asset value on the reinvestment date, unless shareholders indicate to the
Shareholder Service Agent, in writing, that they wish to receive them in cash
or in shares of other DWS funds as provided in the fund's prospectus.
Shareholders must maintain the required minimum account balance in the fund
distributing the dividends in order to use this privilege of investing
dividends of a fund in shares of another DWS fund. A 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 a
fund in the aggregate amount of $10 or less are automatically reinvested in
shares of that fund and class unless the shareholder requests in writing that a
check be issued for that particular distribution.


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 generally taxable, whether
made in shares or cash.



                                     II-23
<PAGE>


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 income tax
purposes. Early each year, a fund issues to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.


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


DIVIDENDS (MONEY FUNDS). Dividends are declared daily and paid monthly.
Shareholders will receive dividends in additional shares unless they elect to
receive cash, as provided in a fund's prospectus. Dividends will be reinvested
monthly in shares of a fund at net asset value on the last business day of the
month. A fund will pay shareholders that redeem their entire accounts all
unpaid dividends at the time of the redemption not later than the next dividend
payment date.


Each money fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of a money fund generally
consists of (a) accrued interest income plus or minus amortized discount or
premium, (b) plus or minus all short-term realized gains and losses on
investments and (c) minus accrued expenses allocated to the applicable fund.
Expenses of each money fund are accrued each day. Dividends are reinvested
monthly and shareholders will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for Individual Retirement Accounts and other fiduciary accounts
for which SSB acts as trustee will be sent quarterly.


Distributions of a fund's pro rata share of a fund's net realized long-term
capital gains in excess of net realized short-term capital losses, if any, and
any undistributed net realized short-term capital gains in excess of net
realized long-term capital losses are normally declared and paid annually at
the end of the fiscal year in which they were earned to the extent they are not
offset by any capital loss carryforwards.

If the shareholder elects to receive dividends or distributions in cash, checks
will be mailed monthly, within five business days of the reinvestment date, to
the shareholder or any person designated by the shareholder. A fund reinvests
dividend checks (and future dividends) in shares of a fund if checks are
returned as undeliverable. Dividends and other distributions in the aggregate
amount of $10 or less are automatically reinvested in shares of a fund unless
the shareholder requests that such policy not be applied to the shareholder's
account.


Dividends and distributions are treated the same for federal income tax
purposes, whether made in shares or cash.




DISTRIBUTION AND SERVICE AGREEMENTS AND PLANS


I. RETAIL FUNDS


A fund may offer only certain of the classes of shares referred to in the
subsections below. Thus, the information provided below in regard to certain
classes of shares is only applicable to funds offering such classes of shares.


RULE 12B-1 PLANS. Certain funds, as described in the applicable prospectuses,
have adopted plans pursuant to Rule 12b-1 under the 1940 Act (each a Rule 12b-1
Plan) on behalf of their Class A, B, C and R shares, as applicable, that
authorize payments out of class assets for distribution and/or shareholder and
administrative services as described in more detail below. Because Rule 12b-1
fees are paid out of class assets on an ongoing basis, they will, over time,
increase the cost of an investment and may cost more than other types of sales
charges.


Rule 12b-1 Plans provide alternative methods for paying sales charges and
provide compensation to DIDI or intermediaries for post-sale servicing, which
may help funds grow or maintain asset levels to provide operational
efficiencies and economies of scale. Each Rule 12b-1 Plan is approved and
reviewed separately for each applicable class in accordance with Rule 12b-1
under the 1940 Act, which regulates the manner in which an investment company
may, directly or indirectly, bear the expenses of distributing its shares. A
Rule 12b-1 Plan may not be amended to increase the fee to be paid by a fund
with respect to a class without approval by a majority of the outstanding
voting securities of such class.



                                     II-24
<PAGE>


If a Rule 12b-1 Plan is terminated in accordance with its terms, the obligation
of the applicable class to make payments to DIDI pursuant to the Rule 12b-1
Plan will cease and a fund will not be required to make any payments not
previously accrued past the termination date. Thus, there is no legal
obligation for a class to pay any expenses incurred by DIDI other than fees
previously accrued and payable under a Rule 12b-1 Plan, if for any reason the
Rule 12b-1 Plan is terminated in accordance with its terms. Because the Rule
12b-1 Plans are compensation plans, future fees under a Rule 12b-1 Plan may or
may not be sufficient to cover DIDI for its expenses incurred. On the other
hand, under certain circumstances, DIDI might collect in the aggregate over
certain periods more in fees under the applicable Rule 12b-1 Plan than it has
expended over that same period in providing distribution services for a fund.
For example, if Class B shares of a fund were to appreciate (resulting in
greater asset base against which Rule 12b-1 fees are charged) and sales of a
fund's Class B shares were to decline (resulting in lower expenditures by DIDI
under the Rule 12b-1 Plan), fees payable could exceed expenditures. Similarly,
fees paid to DIDI could exceed DIDI's expenditures over certain periods shorter
than the life of the Rule 12b-1 Plan simply due to the timing of expenses
incurred by DIDI that is not matched to the timing of revenues received (e.g.,
a sales commission may be paid by DIDI related to an investment in Class B
shares in year 1, while the Rule 12b-1 fee to DIDI related to that investment
may accrue during year 1 through year 6 prior to conversion of the Class B
shares investment to Class A shares). Under these or other circumstances where
DIDI's expenses are less than the Rule 12b-1 fees, DIDI will retain its full
fees and make a profit.


CLASS B, CLASS C AND CLASS R SHARES

FEES FOR DISTRIBUTION SERVICES. For its services under the Distribution
Agreement, DIDI receives a fee from a fund under its Rule 12b-1 Plan, payable
monthly, at the annual rate of 0.75% of average daily net assets of a fund
attributable to its Class B shares. This fee is accrued daily as an expense of
Class B shares. Under the Distribution Agreement, DIDI also receives any
contingent deferred sales charges paid with respect to Class B shares. DIDI
currently compensates firms for sales of Class B shares at a commission rate of
3.75%.


For its services under the Distribution Agreement, DIDI receives a fee from a
fund under its Rule 12b-1 Plan, payable monthly, at the annual rate of 0.75% of
average daily net assets of a fund attributable to Class C shares. This fee is
accrued daily as an expense of Class C shares. DIDI currently advances to firms
the first year distribution fee at a rate of 0.75% of the purchase price of
Class C shares. DIDI does not advance the first year distribution fee to firms
for sales of Class C shares to employer-sponsored employee benefit plans using
the OmniPlus subaccount record keeping system made available through ADP, Inc.
under an alliance between ADP, Inc. and DIDI and its affiliates. For periods
after the first year, DIDI currently pays firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. This fee
continues until terminated by DIDI or the applicable fund. Under the
Distribution Agreement, DIDI also receives any contingent deferred sales
charges paid with respect to Class C shares.


For its services under the Distribution Agreement, DIDI receives a fee from a
fund under its Rule 12b-1 Plan, payable monthly, at the annual rate of 0.25% of
average daily net assets of a fund attributable to Class R shares. This fee is
accrued daily as an expense of Class R shares. DIDI currently pays firms for
sales of Class R shares a distribution fee, payable quarterly, at an annual
rate of 0.25% of net assets attributable to Class R shares maintained and
serviced by the firm. This fee continues until terminated by DIDI or the
applicable fund.



CLASS A, CLASS B, CLASS C AND CLASS R SHARES

FEES FOR SHAREHOLDER SERVICES. For its services under the Services Agreement,
DIDI receives a shareholder services fee from a fund under a Rule 12b-1 Plan,
payable monthly, at an annual rate of up to 0.25% of the average daily net
assets of Class A, B, C and R shares of a fund, as applicable.


With respect to Class A and Class R Shares of a fund, DIDI pays each firm a
service fee, payable quarterly, at an annual rate of up to 0.25% of the net
assets in fund accounts that it maintains and services attributable to Class A
and Class R Shares of a fund, generally commencing with the month after
investment. With respect to Class B and Class C Shares of a fund, DIDI
currently advances to firms the first-year service fee at a rate of up to 0.25%
of the purchase price of such shares. DIDI does not advance the first year
service fee to firms for sales of Class C shares to employer-sponsored employee
benefit plans using the OmniPlus subaccount record keeping system made
available through ADP, Inc. under an alliance between ADP, Inc. and DIDI and
its affiliates. For periods after the first year, DIDI currently intends to pay
firms a service fee at a rate of up to 0.25% (calculated monthly and paid
quarterly) of the net assets attributable to Class B and Class C shares of a
fund maintained and serviced by the firm.


                                     II-25
<PAGE>

Firms to which service fees may be paid include affiliates of DIDI. In addition
DIDI may, from time to time, pay certain firms from it own resources additional
amounts for ongoing administrative services and assistance provided to their
customers and clients who are shareholders of a fund.


DIDI also may provide some of the above services and may retain any portion of
the fee under the Services Agreement not paid to firms to compensate itself for
shareholder or administrative functions performed for a fund. Currently, the
shareholder services fee payable to DIDI is payable at an annual rate of up to
0.25% of net assets based upon fund assets in accounts for which a firm
provides administrative services and at the annual rate of 0.15% of net assets
based upon fund assets in accounts for which there is no firm of record (other
than DIDI) listed on a fund's records. The effective shareholder services fee
rate to be charged against all assets of each fund while this procedure is in
effect will depend upon the proportion of fund assets that is held in accounts
for which a firm of record provides shareholder services. The Board of each
fund, in its discretion, may approve basing the fee to DIDI at the annual rate
of 0.25% on all fund assets in the future.


II. MONEY MARKET FUNDS (EXCEPT DWS CASH INVESTMENT TRUST CLASS A, B AND C
SHARES, WHICH ARE ADDRESSED UNDER RETAIL FUNDS ABOVE)


RULE 12B-1 PLANS. Certain Money Market Funds have adopted for certain classes
of shares a plan pursuant to Rule 12b-1 under the 1940 Act (each a Rule 12b-1
Plan) that provides for fees payable as an expense of the class that are used
by DIDI to pay for distribution services for those classes. Additionally, in
accordance with the Rule 12b-1 Plan for certain classes, shareholder and
administrative services are provided to the applicable fund for the benefit of
the relevant classes under a fund's Services Agreement with DIDI. With respect
to certain classes, shareholder and administrative services may be provided
outside of a Rule 12b-1 Plan either by DIDI pursuant to the Services Agreement
or by financial services firms under a Shareholder Services Plan. Because Rule
12b-1 fees are paid out of fund assets on an ongoing basis, they will, over
time, increase the cost of an investment and may cost more than other types of
sales charges.


The Rule 12b-1 Plans provide alternative methods for paying for distribution
services and provide compensation to DIDI or financial services firms for
post-sales servicing, which may help funds grow or maintain asset levels to
provide operational efficiencies and economies of scale. Each Rule 12b-1 Plan
is approved and reviewed separately for each such class in accordance with Rule
12b-1 under the 1940 Act, which regulates the manner in which an investment
company may, directly or indirectly, bear the expenses of distributing its
shares. A Rule 12b-1 Plan may not be amended to increase the fee to be paid by
a fund with respect to a class without approval by a majority of the
outstanding voting securities of such class of a fund.


If a Rule 12b-1 Plan is terminated in accordance with its terms, the obligation
of the applicable fund to make payments to DIDI pursuant to the Rule 12b-1 Plan
will cease and a fund will not be required to make any payments not previously
accrued past the termination date. Thus, there is no legal obligation for a
fund to pay any expenses incurred by DIDI other than fees previously accrued
and payable under a Rule 12b-1 Plan, if for any reason the Rule 12b-1 Plan is
terminated in accordance with its terms. Because the Rule 12b-1 Plans are
compensation plans, future fees under a Rule 12b-1 Plan may or may not be
sufficient to cover DIDI for its expenses incurred. On the other hand, under
certain circumstances, DIDI might collect in the aggregate over certain periods
more in fees under the applicable Rule 12b-1 Plan than it has expended over
that same period.


DISTRIBUTION AND SHAREHOLDER SERVICES

Service Shares - Cash Account Trust. The Distribution Agreement authorizes the
fund to pay DIDI, as an expense of the Service Shares classes of the Money
Market Portfolio, the Government & Agency Securities Portfolio and the
Tax-Exempt Portfolio of Cash Account Trust, a distribution services fee,
payable monthly, at an annual rate of 0.60% of average daily net assets of the
Service Shares of the applicable fund. This fee is paid pursuant to a Rule
12b-1 Plan. DIDI normally pays firms a fee for distribution and administrative
services, payable monthly, at a maximum annual rate of up to 0.60% of average
daily net assets of Service Shares held in accounts that they maintain and
service.


Premier Shares - Tax-Exempt California Money Market Fund. The Distribution
Agreement authorizes the fund to pay DIDI, as an expense of the Premier Shares
class of the Tax-Exempt California Money Market Fund, a distribution services
fee, payable monthly, at an annual rate of 0.33% of average daily net assets of
the Premier Shares of the fund. This fee is paid pursuant to a Rule 12b-1 Plan.
DIDI normally pays firms a fee for distribution and administrative services,
payable monthly, at a maximum annual rate of up to 0.33% of average daily net
assets of Premier Shares held in accounts that they maintain and service.


                                     II-26
<PAGE>


Tax-Exempt New York Money Market Fund - NY Tax Free Money Fund. The
Distribution Agreement authorizes the fund to pay DIDI, as an expense of
Tax-Exempt New York Money Market Fund shares, a class of NY Tax Free Money
fund, a series of DWS Advisor funds, a distribution services fee, payable
monthly, at an annual rate of 0.50% of average daily net assets of the
Tax-Exempt New York Money Market Fund shares of the fund. This fee is paid
pursuant to a Rule 12b-1 Plan. DIDI normally pays firms a fee for distribution
and administrative services, payable monthly, at a maximum annual rate of up to
0.50% of average daily net assets of Tax-Exempt New York Money Market Fund
shares held in accounts that they maintain and service.


Premium Reserve Money Market Shares - Cash Account Trust. The Services
Agreement authorizes the fund to pay DIDI, as an expense of the Premium Reserve
Money Market Shares class of the Money Market Portfolio of Cash Account Trust,
an administrative service fee, payable monthly, at an annual rate of 0.25% of
average daily net assets of the Premium Reserve Money Market Shares of the
fund. A portion of this administrative service fee (0.10% of the 0.25% fee) is
paid pursuant to a Rule 12b-1 Plan. The Premium Money Market Reserve Shares pay
the full amount authorized by the Plan as part of its 0.25% administrative
service rate. DIDI normally pays firms a fee for administrative services,
payable monthly, at a maximum annual rate of up to 0.25% of average daily net
assets of Premium Reserve Money Market Shares held in accounts that they
maintain and service.


Institutional Money Market Shares-Cash Account Trust. The Services Agreement
authorizes the fund to pay DIDI, as an expense of the Institutional Money
Market Shares class of the Money Market Portfolio of Cash Account Trust, an
administrative service fee, payable monthly, at an annual rate of 0.15% of
average daily net assets of the Institutional Money Market Shares of the fund.
A portion of this administrative service fee (0.075% of the 0.15% fee) is paid
pursuant to a Rule 12b-1 Plan. Currently, the fee is limited to 0.02% but may
be increased to the full 0.15% level by the Board. Currently, one-half of the
0.02% administrative service fee rate that is being paid by the Institutional
Money Market Shares is paid pursuant to the Rule 12b-1 Plan. DIDI normally pays
firms a fee for administrative services, payable monthly, at a maximum annual
rate of up to 0.15% (currently, limited to 0.02%) of average daily net assets
of Institutional Money Market Shares held in accounts that they maintain and
service.

Premier Money Market Shares - Cash Account Trust and Investors Cash Trust. The
Distribution Agreement authorizes a fund to pay DIDI, as an expense of the
Premier Money Market Shares classes of the Money Market Portfolio, the
Government & Agency Securities Portfolio and the Tax-Exempt Portfolio of Cash
Account Trust and of the Treasury Portfolio of Investors Cash Trust, a
distribution services fee, payable monthly, at an annual rate of 0.25% of
average daily net assets of the Premier Money Market Shares of the applicable
fund. This fee is paid pursuant to a Rule 12b-1 Plan. DIDI normally pays firms
a fee for distribution services, payable monthly, at a maximum annual rate of
up to 0.25% of average daily net assets of Premier Money Market Shares held in
accounts that they maintain and service. The Services Agreement authorizes a
fund to pay DIDI, as an expense of the Premier Money Market Shares of the
aforementioned funds, an administrative service fee, payable monthly, at an
annual rate of 0.25% of average daily net assets of the Premier Money Market
Shares of the applicable fund. This administrative service fee is not paid
pursuant to a Rule 12b-1 Plan. DIDI normally pays firms a fee for
administrative services, payable monthly, at a maximum annual rate of up to
0.25% of average daily net assets of Premier Money Market Shares held in
accounts that they maintain and service.


Davidson Cash Equivalent Shares - Cash Account Trust. The Distribution
Agreement authorizes a fund to pay DIDI, as an expense of the Davidson Cash
Equivalent Shares and the Davidson Cash Equivalent Plus Shares classes of the
Money Market Portfolio, the Government & Agency Securities Portfolio and the
Tax-Exempt Portfolio of Cash Account Trust, a distribution services fee,
payable monthly, at an annual rate of 0.30% in the case of the Davidson Cash
Equivalent Shares and 0.25% in the case of the Davidson Cash Equivalent Plus
Shares of average daily net assets of the applicable class of a fund. This fee
is paid pursuant to a Rule 12b-1 Plan. DIDI normally pays the sole
sub-distributor for the classes, D.A. Davidson & Co., a fee for distribution
services, payable monthly, at a maximum annual rate of up to 0.30% of average
daily net assets of those accounts in the Davidson Cash Equivalent Shares that
it maintains and services and 0.25% of average daily net assets in the case of
those accounts in the Davidson Cash Equivalent Plus Shares that it maintains
and services. The Services Agreement authorizes a fund to pay DIDI, as an
expense of the aforementioned classes, an administrative service fee, payable
monthly, at an annual rate of 0.25% in the case of the Davidson Cash Equivalent
Shares and 0.25% (currently limited to 0.20%) in the case of the Davidson Cash
Equivalent Plus Shares of average daily net assets of



                                     II-27
<PAGE>


those shares of a fund. This administrative service fee is not paid pursuant to
a Rule 12b-1 Plan. DIDI normally pays the sole sub-distributor a fee for
administrative services, payable monthly, at a maximum annual rate of up to
0.25% of average daily net assets of those accounts in the Davidson Cash
Equivalent Shares that it maintains and services and 0.20% of average daily net
assets in the case of those accounts in the Davidson Cash Equivalent Plus
Shares that it maintains and services. The Davidson Cash Equivalent Plus Shares
class is limited to the Money Market Portfolio and the Government & Agency
Securities Portfolio.


Capital Assets Funds - Cash Account Trust. The Distribution Agreement
authorizes a fund to pay DIDI, as an expense of the Capital Assets Funds Shares
and the Capital Assets Funds Preferred Shares classes of the Money Market
Portfolio, the Government & Agency Securities Portfolio and the Tax-Exempt
Portfolio of Cash Account Trust, a distribution services fee, payable monthly,
at an annual rate of 0.33% in the case of the Capital Assets Funds Shares and
0.20% in the case of the Capital Assets Funds Preferred Shares of average daily
net assets of the applicable class of a fund. This fee is paid pursuant to a
Rule 12b-1 Plan. DIDI normally pays the sole sub-distributor for the classes,
RIDGE Clearing and Outsourcing Services, Inc., a fee for distribution services,
payable monthly, at a maximum annual rate of up to 0.33% of average daily net
assets of those accounts in the Capital Assets Funds Shares that it maintains
and services and 0.20% of average daily net assets in the case of those
accounts in the Capital Assets Funds Preferred Shares that it maintains and
services. The Services Agreement authorizes a fund to pay DIDI, as an expense
of the aforementioned classes, an administrative service fee, payable monthly,
at an annual rate of 0.25% in the case of the Capital Assets Funds Shares and
0.10% in the case of the Capital Assets Funds Preferred Shares of average daily
net assets of the applicable class of a fund. This administrative service fee
is not paid pursuant to a Rule 12b-1 Plan. DIDI normally pays the sole
sub-distributor a fee for administrative services, payable monthly, at a
maximum annual rate of up to 0.25% of average daily net assets of those
accounts in the Capital Assets Funds Shares that it maintains and services and
0.10% of average daily net assets in the case of those accounts in the Capital
Assets Funds Preferred Shares that it maintains and services. The Capital
Assets Funds Preferred Shares class is limited to the Money Market Portfolio.


Managed Shares - Cash Account Trust. The Services Agreement currently
authorizes a fund to pay DIDI, as an expense of the Government Cash Managed
Shares class of the Government & Agency Securities Portfolio of Cash Account
Trust and the Tax-Exempt Cash Managed Shares class of the Tax-Exempt Portfolio
of Cash Account Trust, an administrative service fee, payable monthly, at an
annual rate of 0.15% of average daily net assets of the Managed Shares of a
fund. This fee is paid pursuant to a Rule 12b-1 Plan. The Rule 12b-1 Plan
authorizes the payment of up to 0.25% of average daily net assets of those
shares of a fund and, at the discretion of the Board, the administrative
service fee may be increased from the current level to a maximum of 0.25% of
average daily net assets. DIDI normally pays firms a fee for administrative
services, payable monthly, at a maximum annual rate of up to 0.15% of average
daily net assets of Managed Shares held in accounts that they maintain and
service.


Institutional Shares - Investors Cash Trust. The Services Agreement authorizes
the fund to pay DIDI, as an expense of the Institutional Shares class of the
Treasury Portfolio of Investors Cash Trust, an administrative service fee,
payable monthly, at an annual rate of 0.05% of average daily net assets of the
Institutional Shares of the fund, which may be increased to 0.10% in the
discretion of the Board. This fee is not paid pursuant to a Rule 12b-1 Plan.
DIDI normally pays firms a fee for administrative services, payable monthly, at
a maximum annual rate of up to 0.05% of average daily net assets of
Institutional Shares held in accounts that they maintain and service.


Tax-Free Investment Class - Cash Account Trust and Investment Class - Investors
Cash Trust. The Distribution Agreement authorizes a fund to pay DIDI, as an
expense of the Tax-Free Investment Class of the Tax-Exempt Portfolio of Cash
Account Trust and the Investment Class of the Treasury Portfolio of Investors
Cash Trust (collectively, Investment Class), a distribution services fee,
payable monthly, at an annual rate of 0.25% of average daily net assets of the
Investment Class shares of the applicable fund. This fee is paid pursuant to a
Rule 12b-1 Plan. DIDI normally pays firms a fee for distribution services,
payable monthly, at a maximum annual rate of up to 0.25% of average daily net
assets of shares of the Investment Class held in accounts that they maintain
and service. The Services Agreement authorizes a fund to pay DIDI, as an
expense of the Investment Class of the aforementioned funds, an administrative
service fee, payable monthly, at an annual rate of 0.07% of average daily net
assets of the Investment Class shares of the applicable fund. This
administrative service fee is not paid pursuant to Rule 12b-1 Plan. DIDI
normally pays firms a fee for administrative services, payable monthly, at a
maximum annual rate of up to 0.07% of average daily net assets of shares of the
Investment Class held in accounts that they maintain and service.



                                     II-28
<PAGE>


Cash Reserve Prime Shares - Cash Reserve Fund, Inc. The Distribution Agreement
authorizes the fund to pay DIDI, as an expense of the Cash Reserve Prime Shares
class of the Prime Series of Cash Reserve Fund Inc., a distribution services
fee, payable monthly, at an annual rate of 0.25% of average daily net assets of
the Cash Reserve Prime Shares of the fund. This fee is paid pursuant to a Rule
12b-1 Plan. DIDI normally pays firms a fee for distribution services, payable
monthly, at a maximum annual rate of up to 0.25% of average daily net assets of
shares of the Cash Reserve Prime Shares held in accounts that they maintain and
service. The Distribution Agreement also authorizes the fund to pay DIDI, as an
expense of the Cash Reserve Prime Shares, an administrative service fee,
payable monthly, at an annual rate of 0.07% of average daily net assets of the
Cash Reserve Prime Shares of the fund. This administrative service fee is not
paid pursuant to a Rule 12b-1 Plan. DIDI normally pays firms a fee for
administrative services, payable monthly, at a maximum annual rate of up to
0.07% of average daily net assets of shares of the Cash Reserve Prime Shares
held in accounts that they maintain and service.


Shareholder Services Plan for Cash Management Fund - Institutional and Cash
Reserves Fund - Institutional, each a series of DWS Institutional Funds, and NY
Tax Free Money Fund Investment Class and Tax-Free Money Fund Investment Premier
Shares, each a series and class of DWS Advisor Funds. Each fund has adopted for
the classes specified (Class) a shareholder service plan (Plan). Under the
Plan, which is not a Rule 12b-1 Plan, a fund may pay financial services firms a
service fee at an annual rate of up to 0.25 of 1% of the average daily net
assets of shares of the Class held in accounts that the firm maintains and
services. The service fee is accrued daily as an expense of the Class. A fund
together with DIDI may enter into agreements with firms pursuant to which the
firms provide personal service and/or maintenance of shareholder accounts
including, but not limited to, establishing and maintaining shareholder
accounts and records, distributing monthly statements, processing purchase and
redemption transactions, automatic investment in fund shares of client account
cash balances, answering routine client inquiries regarding a fund, assistance
to clients in changing dividend options, account designations and addresses,
aggregating trades of all the firm's clients, providing account information to
clients in client sensitive formats and such other services as a fund may
reasonably request. Service fees are not payable for advertising, promotion or
other distribution services.

The Plan continues in effect from year to year so long as its continuance is
approved at least annually by the vote of a majority of (a) the Board, and (b)
the Board Members who are not "interested persons" of a fund and who have no
direct or indirect financial interest in the operation of the Plan, or any
related agreements. The Plan may be terminated with respect to the Class at any
time by vote of the Board, including a vote by the Board Members who are not
"interested persons" of a fund and who have no direct or indirect financial
interest in the operation of the Plan, or any related agreements. The Plan may
not be amended to increase materially the amount of service fees provided for
in the Plan unless the amendment is approved in the manner provided for annual
continuance of the Plan discussed above. If the Plan is terminated or not
renewed, a fund will not be obligated to make any payments of service fees that
accrued after the termination date.



III. DWS VARIABLE SERIES I AND DWS VARIABLE SERIES II


RULE 12B-1 PLAN. Each fund of DWS Variable Series I and DWS Variable Series II
that has authorized the issuance of Class B shares has adopted a distribution
plan under Rule 12b-1 (Plan) that provides for fees payable as an expense of
the Class B shares. Under the Plan, a fund may make quarterly payments as
reimbursement to DIDI for distribution and shareholder servicing related
expenses incurred or paid by the Distributor or a participating insurance
company. No such payment shall be made with respect to any quarterly period in
excess of an amount determined for such period at the annual rate of 0.25% of
the average daily net assets of Class B shares during that quarterly period.
The fee is payable by a fund, on behalf of Class B shares, of up to 0.25% of
the average daily net assets attributable to Class B shares of the fund.
Because 12b-1 fees are paid out of fund assets on an ongoing basis, they will,
over time, increase the cost of investment and may cost more than other types
of sales charges. The Plan and any Rule 12b-1 related agreement that is entered
into by a fund or the Distributor in connection with the Plan will continue in
effect for a period of more than one year only so long as continuance is
specifically approved at least annually by a vote of a majority of the Board,
and of a majority of the Board Members who are not interested persons (as
defined in the 1940 Act) of a fund, cast in person at a meeting called for the
purpose of voting on the Plan, or the Rule 12b-1 related agreement, as
applicable. In addition, the Plan and any Rule 12b-1 related agreement may be
terminated as to Class B shares of a fund at any time, without penalty, by vote
of a majority of the outstanding Class B shares of that fund or by vote of a
majority of the Board Members who are not interested persons of a fund and



                                     II-29
<PAGE>


who have no direct or indirect financial interest in the operation of the Plan
or any Rule 12b-1 related agreement. The Plan provides that it may not be
amended to increase materially the amount that may be spent for distribution of
Class B shares of a fund without the approval of Class B shareholders of that
fund.



IV. DWS INVESTMENTS VIT FUNDS


RULE 12B-1 PLAN. DWS Equity 500 Index VIP and DWS Small Cap Index VIP of DWS
Investments VIT Funds have each adopted a distribution plan under Rule 12b-1
(Plan) that provides for fees payable as an expense of the Class B shares and,
in the case of the DWS Equity 500 Index VIP, the Class B-2 shares. Under the
Plan, a fund may make payments to DIDI for remittance directly or indirectly to
a participating dealer, shareholder service agent, life insurance company or
other applicable party a fee in an amount not to exceed the annual rate of
0.25% of the average daily net assets of the Class B shares or Class B-2
shares, as applicable, under a participation agreement, service agreement,
sub-distribution agreement or other similar agreement which provides for Class
B shares or Class B-2 shares. DIDI is authorized pursuant to the Plan to pay
for anything reasonably designed to enhance sales or retention of shareholders
and for the provision of services to shareholders of the Class B shares or
Class B-2 shares. Because 12b-1 fees are paid out of fund assets on an ongoing
basis, they will, over time, increase the cost of investment in Class B or
Class B-2 shares, and may cost more than other types of sales charges. The Plan
and any Rule 12b-1 related agreement that is entered into by a fund or the
Distributor in connection with the Plan will continue in effect for a period of
more than one year only so long as continuance is specifically approved at
least annually by a vote of a majority of the Board, and of a majority of the
Board Members who are not interested persons (as defined in the 1940 Act) of a
fund, cast in person at a meeting called for the purpose of voting on the Plan,
or the Rule 12b-1 related agreement, as applicable. In addition, the Plan and
any Rule 12b-1 related agreement may be terminated as to Class B shares or
Class B-2 shares of a fund at any time, without penalty, by vote of a majority
of the outstanding Class B shares or Class B-2 shares, as applicable, of that
fund or by vote of a majority of the Board Members who are not interested
persons of a fund and who have no direct or indirect financial interest in the
operation of the Plan or any Rule 12b-1 related agreement. The Plan provides
that it may not be amended to increase materially the amount that may be spent
for distribution of Class B shares or Class B-2 shares of a fund without the
approval of the shareholders of such class.


INVESTMENTS


GENERAL INVESTMENT PRACTICES AND TECHNIQUES

PART II - APPENDIX II-G includes a description of the investment practices and
techniques which a fund may employ in pursuing its investment objective, as
well as the associated risks. Descriptions in this SAI of a particular
investment practice or technique in which a fund may engage are meant to
describe the spectrum of investments that the Advisor (and/or sub-advisor or
sub-subadvisor, if applicable) in its discretion might, but is not required to,
use in managing a fund. The Advisor (and/or sub-advisor or sub-subadvisor, if
applicable) 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 a fund's performance.



IT IS POSSIBLE THAT CERTAIN INVESTMENT PRACTICES AND TECHNIQUES MAY NOT BE
PERMISSIBLE FOR A FUND BASED ON ITS INVESTMENT RESTRICTIONS, AS DESCRIBED
HEREIN, AND IN A FUND'S PROSPECTUS.



PORTFOLIO TRANSACTIONS

The Advisor is generally responsible for placing 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 a fund's
investments, references in this section to the "Advisor" should be read to mean
the Subadvisor, except as noted below.


The policy of the Advisor in placing orders for the purchase and sale of
securities for a fund is to seek best execution, taking into account such
factors, among others, as price; commission (where applicable); the
broker-dealer's ability to ensure that securities will be delivered on
settlement date; the willingness of the broker-dealer to commit its capital and
purchase a thinly traded security for its own inventory; whether the
broker-dealer specializes in block orders or large program trades; the
broker-dealer's knowledge of the market and the security; the broker-dealer's
ability to maintain confidentiality; the broker-dealer's ability to provide
access to new issues; the broker-dealer's ability to provide support when
placing a difficult trade; the financial condition of the broker-dealer; and


                                     II-30
<PAGE>

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 a 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 fund will not necessarily be used by the Advisor
specifically to service that 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


                                     II-31
<PAGE>

research services a commission for executing a portfolio transaction for a fund
in excess of what another broker or dealer may charge, 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.


The Advisor 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 a 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, a fund, in other cases it is believed that the ability to
engage in volume transactions will be beneficial to a fund.


The Advisor and its affiliates and each fund's management team manage other
mutual funds and separate accounts, some of which use short sales of securities
as a part of its investment strategy. The simultaneous management of long and
short portfolios creates potential conflicts of interest including the risk
that short sale activity could adversely affect the market value of the long
positions (and vice versa), the risk arising from sequential orders in long and
short positions, and the risks associated with receiving opposing orders at the
same time. The Advisor 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. The Advisor 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 Subadvisor, the
Subadvisor 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 Board, the affiliated broker will be able to obtain a price and
execution at least as favorable as those obtained from other qualified brokers
and if, in the transaction, the affiliated broker charges the funds a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions.



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


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




PORTFOLIO HOLDINGS INFORMATION

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


Each fund's procedures permit non-public portfolio holdings information to be
shared with Deutsche Asset Management and its affiliates (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


                                     II-32
<PAGE>

the duty not to trade on non-public information, imposed by law or contract, or
by a 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 (Authorized Third Parties).


Prior to any disclosure of a fund's non-public portfolio holdings information
to Authorized Third Parties, a person authorized by the Board must make a good
faith determination in light of the facts then known that a fund has a
legitimate business purpose for providing the information, that the disclosure
is in the best interest of a 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 a fund or DeAM for disclosing non-public holdings information.
Periodic reports regarding these procedures will be provided to the Board.


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 a 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, small, mid and large cap stocks, 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
Board exercise control over such policies. In addition, separate account
clients of DeAM have access to their portfolio holdings and are not subject to
a fund's portfolio holdings disclosure policy. The portfolio holdings of some
of the funds subadvised by DeAM and some of the separate accounts managed by
DeAM may substantially overlap with the portfolio holdings of a fund.

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


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



NET ASSET VALUE

APPLICABLE TO FUNDS OTHER THAN MONEY MARKET FUNDS. The net asset value per
share of a fund is normally computed as of the close of regular trading on the
New York Stock Exchange (Exchange) on each day the Exchange is open for trading
(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 (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
foreign exchange or OTC market (which


                                     II-33
<PAGE>

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 as of the Value Time 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 a fund asset are not readily available or if the
Advisor believes that the value of a fund asset as determined in accordance
with Board-approved procedures is determined by the Advisor to be unreliable,
the value of the fund asset is taken to be an amount which, in the opinion of a
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 Board and
overseen primarily by a fund's Pricing Committee.


The following paragraph applies to: DWS Life Compass Retirement Fund, DWS Life
Compass 2015 Fund, DWS Life Compass 2020 Fund, DWS Life Compass 2030 Fund, DWS
Life Compass 2040 Fund, DWS Alternative Asset Allocation Plus Fund, DWS Select
Alternative Asset Allocation Fund and DWS Alternative Asset Allocation Plus
VIP. The net asset value of each Underlying DWS Fund is determined based upon
the nature of the securities as set forth in the prospectus and statement of
additional information of such Underlying DWS Fund. Shares of each Underlying
DWS Fund in which the fund may invest are valued at the net asset value per
share of each Underlying DWS Fund as of the close of regular trading on the
Exchange on each day the Exchange is open for trading. The net asset value per
share of the Underlying DWS Funds will be calculated and reported to the fund
by each Underlying DWS Fund's accounting agent.


The following additional paragraphs apply to: DWS Equity 500 Index Fund and DWS
S&P 500 Index Fund (feeder funds). Each feeder fund pursues its investment
objective by investing substantially all of its assets in a master portfolio -
the DWS Equity 500 Index Portfolio (Portfolio), which has the same investment
objective and is subject to the same investment risks as the feeder fund.



Net asset value per share of a feeder fund is determined as of the Value Time
separately for each class of shares by dividing the value of the total assets
of the



                                     II-34
<PAGE>


feeder fund (i.e., the value of the feeder fund's investment in the Portfolio
and any other assets) attributable to the shares of that class, less all
liabilities attributable to that class, by the total number of shares of that
class outstanding.


As of the Value Time, the Portfolio determines its net value (i.e., the value
of the Portfolio's portfolio instruments and any other assets less all
liabilities) using the valuation procedures for securities and other assets
described above.


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


Applicable to money market funds other than DWS Money Market Series, Cash
Management Fund-Institutional and Cash Reserves Fund-Institutional. The net
asset value (NAV) per share of a fund is calculated on each day (Valuation Day)
on which the fund is open for business as of the time described in the fund's
prospectus. A fund is open for business each day the New York Stock Exchange
(Exchange) is open for trading, and the fund may, but is not required to,
accept certain types of purchase and redemption orders (not including
exchanges) on days that the Exchange is not open or beyond an early Exchange
closing time, as described in the fund's prospectus. 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. Although there is no guarantee, a
fund's NAV per share will normally be $1.00.



A fund values its portfolio instruments at amortized cost, which does not take
into account unrealized capital gains or losses. This involves initially
valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
fund would receive if it sold the instrument.


The Board has established procedures reasonably designed to stabilize a fund's
NAV per share at $1.00. Under the procedures, the Advisor will monitor and
notify the Board of circumstances where a fund's NAV per share calculated by
using market valuations may deviate from the $1.00 per share calculated using
amortized cost. If there were any deviation that the Board believed would
result in a material dilution or unfair result for investors or existing
shareholders, the Board would promptly consider what action, if any, should be
initiated. Such actions could include selling assets prior to maturity to
realize capital gains or losses; shortening the average maturity of the a
fund's portfolio; adjusting the level of dividends; redeeming shares in kind;
or valuing assets based on market valuations. For example, if a fund's net
asset value per share (computed using market values) declined, or was expected
to decline, below $1.00 (computed using amortized cost), the fund might
temporarily reduce or suspend dividend payments in an effort to maintain the
net asset value at $1.00 per share. As a result of such reduction or suspension
of dividends or other action by the Board, an investor would receive less
income during a given period than if such a reduction or suspension had not
taken place. Such action could result in investors receiving no dividend for
the period during which they hold their shares and receiving, upon


                                     II-35
<PAGE>


redemption, a price per share lower than that which they paid. On the other
hand, if a fund's net asset value per share (computed using market values) were
to increase, or were anticipated to increase above $1.00 (computed using
amortized cost), a fund might supplement dividends in an effort to maintain the
net asset value at $1.00 per share.


Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. In accordance with
procedures approved by the Board, in the event market quotations are not
readily available for certain portfolio assets the fair value of such portfolio
assets will be determined in good faith by a fund's Pricing Committee (or, in
some cases, the Board's Valuation Committee) based upon input from the Advisor
or other third parties.


Applicable to the following money market funds (each, a fund): DWS Money Market
Series, Cash Management Fund-Institutional, Cash Reserves Fund-Institutional
and Prime Series. Each of these funds pursues its investment objective by
investing substantially all of its assets in a master portfolio - the Cash
Management Portfolio (Portfolio), which has the same investment objective and
is subject to the same investment risks as a fund. The net asset value (NAV)
per share of a fund is calculated on each day (Valuation Day) on which a fund
is open for business as of the time described in a fund's prospectus. The fund
is open for business each day the New York Stock Exchange (Exchange) is open
for trading, and the fund may, but is not required to, accept certain types of
purchase and redemption orders (not including exchanges) on days that the
Exchange is not open or beyond an early Exchange closing time, as described in
a fund's prospectus. 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 (i.e., the value of a fund's investment in the
Portfolio and any other assets) attributable to the shares of that class, less
all liabilities attributable to that class, by the total number of shares of
that class outstanding. Although there is no guarantee, a fund's NAV per share
will normally be $1.00.

On each Valuation Day, the Portfolio determines its net value (i.e., the value
of the Portfolio's portfolio instruments and any other assets less all
liabilities). The Portfolio values its portfolio instruments at amortized cost,
which does not take into account unrealized capital gains or losses. This
involves initially valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than
the price the Portfolio would receive if it sold the instrument.


Each investor in the Portfolio, including a fund, may add to or reduce its
investment in the Portfolio on each Valuation Day. At the close of each such
Valuation Day, the value of each investor's beneficial interest in the
Portfolio will be determined by multiplying the net value of the Portfolio, as
determined by amortized cost, by the percentage, effective for that day, which
represents that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or withdrawals, which are to be effected as of the
close of business on that day, will then be effected. The percentage of the
aggregate beneficial interests in the Portfolio held by each investor in the
Portfolio, including a fund will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of the investor's
investment in the Portfolio 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
such investor's investment in the Portfolio effected as of the close of
business on such day, and (ii) the denominator of which is the aggregate net
value of the Portfolio, as determined by amortized cost, 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 Portfolio by
all investors, including a fund, in the Portfolio. The percentage so determined
for a fund will then be applied to determine the value of a fund's interest in
the Portfolio as of the close of the following Valuation Day.


The Board has established procedures reasonably designed to stabilize a fund's
NAV per share at $1.00. Under the procedures, the Advisor will monitor and
notify the Board of circumstances where a fund's NAV per share calculated based
on valuing the fund's investment in the Portfolio and the fund's other assets
using market valuations may deviate from the $1.00 per share calculated based
on valuing a fund's investment in the Portfolio and



                                     II-36
<PAGE>


a fund's other assets using amortized cost. If there were any deviation that
the Board believed would result in a material dilution or unfair result for
investors or existing shareholders, the Board would promptly consider what
action, if any, should be initiated. Such actions could include selling assets
prior to maturity to realize capital gains or losses; shortening average
maturity of the investment portfolio; adjusting the level of dividends;
redeeming shares in kind; or valuing assets based on market valuations. For
example, if a fund's net asset value per share (computed using market values)
declined, or was expected to decline, below $1.00 (computed using amortized
cost), the fund might temporarily reduce or suspend dividend payments in an
effort to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board, an investor
would receive less income during a given period than if such a reduction or
suspension had not taken place. Such action could result in investors receiving
no dividend for the period during which they hold their shares and receiving,
upon redemption, a price per share lower than that which they paid. On the
other hand, if a fund's net asset value per share (computed using market
values) were to increase, or were anticipated to increase above $1.00 (computed
using amortized cost), a fund might supplement dividends in an effort to
maintain the net asset value at $1.00 per share. Because a fund invests
substantially all of its assets in the Portfolio, certain of these actions
could be implemented at the Portfolio level at the discretion of its Board.


Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for the instruments. In accordance with
procedures approved by the Board, in the event market quotations are not
readily available for certain portfolio assets the fair value of such portfolio
assets will be determined in good faith by the Portfolio's Pricing Committee
(or, in some cases, the Board's Valuation Committee) based upon input from the
Advisor or other third parties.



PROXY VOTING GUIDELINES

Each fund has delegated proxy voting responsibilities to the Advisor, subject
to the Board's general oversight. A fund has delegated proxy voting to the
Advisor with the direction that proxies should be voted consistent with the
fund's best economic interests. The Advisor has adopted its own Proxy Voting
Policies and Procedures (Policies), and Proxy Voting Guidelines (Guidelines)
for this purpose. The Policies address, among other things, conflicts of
interest that may arise between the interests of a fund, and the interests of
the Advisor and its affiliates, including a fund's principal underwriter. The
Policies are included in PART II - APPENDIX II-I.


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).




MISCELLANEOUS

A fund's prospectuses and this SAI omit certain information contained in the
Registration Statement which a fund has filed with the SEC under the Securities
Act of 1933 and reference is hereby made to the Registration Statement for
further information with respect to a fund and the securities offered hereby.
This Registration Statement and its amendments are available for inspection by
the public at the SEC in Washington, D.C.



RATINGS OF INVESTMENTS


BONDS 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 LONG-TERM 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


                                     II-37
<PAGE>

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.


CON.: Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally.


NOTE: Moody's applies numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.


MOODY'S INVESTORS SERVICE, INC.'S PREFERRED STOCK RATINGS

Because of the fundamental differences between preferred stocks and bonds,
Moody's employs a variation of our familiar bond rating symbols in the quality
ranking of preferred stock.


These symbols, presented below, are designed to avoid comparison with bond
quality in absolute terms. It should always be borne in mind that preferred
stock occupies a junior position to bonds within a particular capital structure
and that these securities are rated within the universe of preferred stocks.


AAA: An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend
impairment within the universe of preferred stocks.


AA: An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance the earnings and asset
protection will remain relatively well maintained in the foreseeable future.


A: An issue rated a is considered to be an upper-medium-grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classifications, earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.


BAA: An issue rated baa is considered to be a medium-grade preferred stock,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present, but may be questionable over any great length of
time.


BA: An issue rated ba is considered to have speculative elements. Its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.


B: An issue rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of
the issue over any long period of time may be small.


                                     II-38
<PAGE>

CAA: An issue rated caa is likely to be in arrears on dividend payments. This
rating designation does not purport to indicate the future status of payments.


CA: An issue rated ca is speculative in a high degree and is likely to be in
arrears on dividends with little likelihood of eventual payments.


C: This is the lowest-rated class of preferred or preference stock. Issues so
rated can thus be regarded as having extremely poor prospects of ever attaining
any real investment standing.


NOTE: As in the case of bond ratings, Moody's applies to preferred stock
ratings the numerical modifiers 1, 2, and 3 in rating classifications aa
through b. 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 INVESTORS SERVICE, INC.'S SHORT-TERM RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.


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.


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


PRIME-3 OR P-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.


NOT PRIME: Do not fall within any of the Prime rating categories.


MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL SHORT-TERM RATINGS

There are four rating categories for state and municipal short-term obligations
that define an investment grade situation: MIG 1, MIG 2, MIG 3, and MIG 4 (or
VMIG 1, VMIG 2, VMIG 3, and VMIG 4 in the case of an issue having a variable
rate demand feature).


MIG 1 OR VMIG 1: Judged to be of the best quality.


MIG 2 OR VMIG 2: Judged to be of the high quality, with margins or protection
ample although not as large as in the preceding group.


MIG 3 OR VMIG 3: Judged to be of favorable quality, with all security elements
accounted for but lacking the strength of the preceding grades. Liquidity and
cash flow protection may be narrow and market access for refinancing is likely
to be less well established.


MIG4 OR VMIG 4: Judged to be of adequate quality.


SG: Denotes speculative quality.


STANDARD & POOR'S RATINGS SERVICES LONG-TERM RATINGS


INVESTMENT GRADE

AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to meet its financial commitment on the debt is extremely
strong.


AA: Debt rated AA has a very strong capacity to meet its financial commitment
and differs from the higher rated issues only in small degree.


                                     II-39
<PAGE>

A: Debt rated A has a strong capacity to meet its financial commitment,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.


BBB: Debt rated BBB has an adequate capacity to meet its financial commitment.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to meet its financial commitment.


SPECULATIVE GRADE

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


BB: Debt rated BB has less vulnerability to nonpayment 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 its financial commitment.


B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet its financial commitment. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to meet its
financial commitment.


CCC: Debt rated CCC is currently vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet its
financial commitment. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to meet its financial
commitment.


CC: Debt rated CC is currently high vulnerability to default.


C: Debt rated C is currently highly vulnerable to nonpayment, obligations that
have payment arrearages allowed by the terms of the documents, or obligations
of an issuer that is the subject of a bankruptcy petition or similar action
which have not experienced a payment default. Among others, the C rating may be
assigned to subordinated debt, preferred stock or other obligations on which
cash payments have been suspended in accordance with the instrument's terms.

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


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


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


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


STANDARD & POOR'S RATINGS SERVICES SHORT-TERM RATINGS

A-1: This highest category indicates a strong capacity to meet its financial
commitment. Those obligors determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.


A-2: Capacity to meet its financial commitment is satisfactory. However, its
ability to meet its financial commitment is somewhat more susceptible to
adverse effects of changes in circumstances and economic conditions.


A-3: Issues carrying this designation have adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to meet its financial commitment.


B: Obligations are regarded as having significant speculative characteristics.
Ratings of `B-1', `B-2' and `B-3' may be assigned to indicate finer
distinctions within the `B' category. 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.


                                     II-40
<PAGE>

B-1: Obligations are regarded as having significant speculative
characteristics, but the obligor has a relatively stronger capacity to meet its
financial commitments over the short-term compared to other speculative-grade
obligors.


B-2: An obligation is regarded as having significant speculative
characteristics, and the obligor has an average speculative-grade capacity to
meet its financial commitments over the short-term compared to other
speculative-grade obligors.


B-3: An obligation is regarded as having significant speculative
characteristics, and the obligor has a relatively weaker capacity to meet its
financial commitments over the short-term compared to other speculative-grade
obligors.


C: An obligation 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: An 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 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 or the taking of a similar action if
payments on an obligation are jeopardized.


STANDARD & POOR'S RATINGS SERVICES MUNICIPAL SHORT-TERM RATINGS

SP-1: Reflects a very strong or strong capacity to pay principal and interest.
Notes issued with "overwhelming safety characteristics" will be rated "SP-1+".


SP-2: Reflects a satisfactory capacity to pay principal and interest.


SP-3: Reflects a speculative capacity to pay principal and interest.


DUAL RATINGS

S&P assigns "dual" ratings to all debt issues that have a put option or demand
feature as part of their structure. The first rating addresses the likelihood
of repayment of principal and interest as due, and the second rating addresses
only the demand feature. The long-term rating symbols are used for bonds to
denote the long-term maturity and the short-term rating symbols for the put
option (for example, `AAA/A-1+'). With U.S. municipal short-term demand debt,
S&P note rating symbols are used with the short-term issue credit rating
symbols (for example, `SP-1+/A-1+').


FITCH INVESTORS SERVICE, INC. LONG-TERM RATINGS


INVESTMENT GRADE

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


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


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


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


SPECULATIVE

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


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


                                     II-41
<PAGE>

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


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


CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.


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


FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS

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


F2: Good Credit Quality. Issues assigned this rating have a satisfactory
capacity for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 categories.


F3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the capacity for timely payment is adequate; however, near-term
adverse changes could cause these securities to be rated below investment
grade.


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


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


D: Default. Denotes actual or imminent payment default.

FITCH INVESTORS SERVICE, INC. MUNICIPAL SHORT-TERM RATINGS

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


STANDARD & POOR'S DIVIDEND RANKINGS FOR COMMON STOCKS

The investment process involves assessment of various factors - such as product
and industry position, corporate resources and financial policy - with results
that make some common stocks more highly esteemed than others. In this
assessment, Standard & Poor believes that earnings and dividend performance is
the end result of the interplay of these factors and that, over the long run,
the record of this performance has a considerable bearing on relative quality.
The rankings, however, do not pretend to reflect all of the factors, tangible
or intangible, that bear on stock quality.


Relative quality of bonds or other debt, that is, degrees of protection for
principal and interest, called creditworthiness, cannot be applied to common
stocks, and therefore rankings are not to be confused with bond quality ratings
which are arrived at by a necessarily different approach.


Growth and stability of earnings and dividends are deemed key elements in
establishing Standard & Poor's earnings and dividend rankings for common
stocks, which are designed to capsulize the nature of this record in a single
symbol. It should be noted, however, that the process also takes into
consideration certain adjustments and modifications deemed desirable in
establishing such rankings.


The point of departure in arriving at these rankings is a computerized scoring
system based on per-share earnings and dividend records of the most recent ten
years - a period deemed long enough to measure significant time segments of
secular growth, to capture indications of basic change in trend as they
develop, and to encompass the full peak-to-peak range of the business cycle.
Basic scores are computed for earnings and dividends, then adjusted as
indicated by a set of predetermined modifiers for growth, stability within
long-term trend, and cyclicality. Adjusted scores for earnings and dividends
are then combined to yield a final score.


Further, the ranking system makes allowance for the fact that, in general,
corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate


                                     II-42
<PAGE>

sales volume) are set for the various rankings, but the system provides for
making exceptions where the score reflects an outstanding earnings-dividend
record.


The final score for each stock is measured against a scoring matrix determined
by analysis of the scores of a large and representative sample of stocks. The
range of scores in the array of this sample has been aligned with the following
ladder of rankings:


<TABLE>
<S>  <C>               <C>  <C>               <C> <C>
A+   Highest           B+   Average           C   Lowest
A    High              B    Below Average     D   In Reorganization
A-   Above Average     B-   Lower
</TABLE>


NR signifies no ranking because of insufficient data or because the stock is
not amenable to the ranking process.


The positions as determined above may be modified in some instances by special
considerations, such as natural disasters, massive strikes, and non-recurring
accounting adjustments. A ranking is not a forecast of future market price
performance, but is basically an appraisal of past performance of earnings and
dividends, and relative current standing. These rankings must not be used as
market recommendations; a high-score stock may at times be so overpriced as to
justify its sale, while a low-score stock may be attractively priced for
purchase. Rankings based upon earnings and dividend records are no substitute
for complete analysis. They cannot take into account potential effects of
management changes, internal company policies not yet fully reflected in the
earnings and dividend record, public relations standing, recent competitive
shifts, and a host of other factors that may be relevant to investment status
and decision.


                                     II-43
<PAGE>

PART II: APPENDIX II-A - BOARD MEMBERS AND OFFICERS


IDENTIFICATION AND BACKGROUND

The following table presents certain information regarding the Board Members of
the Trust/Corporation. 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/Corporation 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/Corporation. Because the fund does not hold an annual
meeting of shareholders, each Board Member will hold office for an
indeterminate period.


INDEPENDENT BOARD MEMBERS


<TABLE>
<CAPTION>
                                                                                                             NUMBER OF
NAME, YEAR OF BIRTH, POSITION                                                                                FUNDS IN DWS
WITH THE TRUST/CORPORATION       BUSINESS EXPERIENCE AND                                                     FUND COMPLEX
AND LENGTH OF TIME SERVED(1)   DIRECTORSHIPS DURING THE PAST 5 YEARS                                       OVERSEEN


<S>                              <C>                                                                         <C>
Paul K. Freeman (1950)           Consultant, World Bank/Inter-American Development Bank; Governing                125
Chairperson since 2009, and      Council of the Independent Directors Council (governance, executive
Board Member since 1993          committees); formerly: Project Leader, 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 Management            125
Board Member since 1999          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: Association of           125
Board Member since 1990          Public Television Stations; Becton Dickinson and Company(2) (medical
                                 technology company); Belo Corporation(2) (media company); Public
                                 Radio International; PRX, The Public Radio Exchange; The PBS
                                 Foundation; former Directorships: Boston Museum of Science;
                                 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 Fellow,              125
Board Member since 1987          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 of private           125
Board Member since 1996          equity funds); Directorships: Progressive Holding Corporation (kitchen
                                 goods importer and distributor); Natural History, Inc. (magazine
                                 publisher); Box Top Media Inc. (advertising); The Kennel Shop (retailer)
</TABLE>


                                      II-44
<PAGE>


<TABLE>
<CAPTION>
                                                                                                           NUMBER OF
NAME, YEAR OF BIRTH, POSITION                                                                              FUNDS IN DWS
WITH THE TRUST/CORPORATION       BUSINESS EXPERIENCE AND                                                   FUND COMPLEX
AND LENGTH OF TIME SERVED(1)   DIRECTORSHIPS DURING THE PAST 5 YEARS                                     OVERSEEN


<S>                              <C>                                                                       <C>
Kenneth C. Froewiss              Adjunct Professor of Finance, NYU Stern School of Business                     125
(1945) Board Member since        (September 2009 - present; Clinical Professor from 1997-September
2001                             2009); Member, Finance Committee, Association for Asian Studies
                                 (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-
                                 present); prior thereto, Managing Director, J.P. Morgan (investment
                                 banking firm) (until 1996)
Richard J. Herring               Jacob Safra Professor of International Banking and Professor, Finance          125
(1946) Board Member since        Department, The Wharton School, University of Pennsylvania (since July
1990                             1972); Co-Director, Wharton 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                Managing Director, Diamond Management & Technology Consultants,                125
(1944) Board Member since        Inc. (global management consulting firm) (2001-present); Directorship:
2004                             Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior
                                 Partner, Arthur Andersen LLP (accounting) (1966-2001); Trustee, Ravinia
                                 Festival
Rebecca W. Rimel (1951)          President and Chief Executive Officer, The Pew Charitable Trusts               125
Board Member since 1995          (charitable organization) (1994 to present); Trustee, Thomas Jefferson
                                 Foundation (charitable organization) (1994 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. (1946)    Private investor since October 2003; Trustee of 20 open-end mutual             125
Board Member since 1993          funds managed by Sun Capital Advisers, Inc. (since October 1998);
                                 formerly: Pension & Savings Trust Officer, Sprint Corporation(2)
                                 (telecommunications) (November 1989-September 2003)
Jean Gleason Stromberg           Retired; formerly: Consultant (1997-2001); Director, US Government             125
(1943) Board Member since        Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P.
1997                             (law firm) (1978-1996); 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 firm)            128
Board Member since 1999          (1983 to present); Director, The Phoenix Boys Choir Association
</TABLE>


OFFICERS(4)



<TABLE>
<CAPTION>
NAME, YEAR OF BIRTH, POSITION
WITH THE TRUST/CORPORATION         BUSINESS EXPERIENCE AND
AND LENGTH OF TIME SERVED(5)     DIRECTORSHIPS DURING THE PAST 5 YEARS
<S>                                <C>

Michael G. Clark(6) (1965)       Managing Director(3), Deutsche Asset Management (2006-present); President of DWS
President, 2006-present            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(7) (1962)          Director(3), Deutsche Asset Management
Vice President and Secretary,
1999-present
</TABLE>


                                      II-45
<PAGE>


<TABLE>
<CAPTION>
NAME, YEAR OF BIRTH, POSITION
WITH THE TRUST/CORPORATION            BUSINESS EXPERIENCE AND
AND LENGTH OF TIME SERVED(5)        DIRECTORSHIPS DURING THE PAST 5 YEARS

<S>                                   <C>

Paul H. Schubert(6) (1963)          Managing Director(3), Deutsche Asset Management (since July 2004); formerly:
Chief Financial Officer, 2004-        Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of
present Treasurer, 2005-              Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global
present                               Asset Management (1994-1998)
Caroline Pearson(7) (1962)          Managing Director(3), Deutsche Asset Management
Assistant Secretary, 1997-
present
Rita Rubin(8) (1970)                Vice President and Counsel, Deutsche Asset Management (since October 2007);
Assistant Secretary, 2009-            formerly, Vice President, Morgan Stanley Investment Management (2004-2007);
present                               Attorney, Shearman & Sterling LLP (2004); Vice President and Associate General
                                      Counsel, UBS Global Asset Management (2001-2004)
Paul Antosca(7) (1957)              Director(3), Deutsche Asset Management (since 2006); formerly: Vice President, The
Assistant Treasurer, 2007-            Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
persent
Jack Clark (7) (1967                Director(3), Deutsche Asset Management (since 2007); formerly: Vice President, State
Assistant Treasurer,2007-             Street Corporation (2002-2007)
present
Diane Kenneally(7) (1966)           Director(3), Deutsche Asset Management
Assistant Treasurer,2007-
present
Jason Vazquez(8) (1972)             Vice President, Deutsche Asset Management (since 2006); formerly: AML Operations
Anti-Money Laundering                 Manager for Bear Stearns (2004-2006); Supervising Compliance Principal and
Compliance Officer, 2007-             Operations Manager for AXA Financial (1999-2004)
present
Robert Kloby(8) (1962)              Managing Director(3), Deutsche Asset Management
Chief Compliance Officer,
2006-present
J. Christopher Jackson(8)(1951)     Director(3), Deutsche Asset Management (2006-present); formerly: Director, Senior
Chief Legal Officer, 2006-            Vice President, General Counsel, and Assistant Secretary, Hansberger Global Investors,
present                               Inc. (1996-2006); Director, National Society of Compliance 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)    Executive title, not a board directorship.

(4)    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.

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

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

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

(8)    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.


<TABLE>
<S>                 <C>
Paul H. Schubert:   Vice President
Jason Vazquez:      Vice President and AML Compliance Officer
Caroline Pearson:   Secretary
</TABLE>





                                     II-46
<PAGE>

PART II: APPENDIX II-B - PORTFOLIO MANAGEMENT COMPENSATION


FOR FUNDS ADVISED BY DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC. OR ITS
AFFILIATES

Each fund is managed by a team of investment professionals who each play an
important role in a fund's management process. Team members work together to
develop investment strategies and select securities for a fund. 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 investors by
bringing together many disciplines and leveraging its extensive resources. Team
members with primary responsibility for management of a fund, as well as team
members who have other ongoing management responsibilities for a fund, are
identified in each fund's prospectus, as of the date of a fund's prospectus.
Composition of the team may change over time, and shareholders and investors
will be notified of changes affecting individuals with primary fund management
responsibility.


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 function, 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 no limited to, Deutsche Bank AG 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 AG, 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 Deutsche Bank AG 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 a 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 a 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.


                                     II-47
<PAGE>

CONFLICTS

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 a fund and also for other clients
   advised by the Advisor, including other client accounts managed by a fund's
   portfolio management team. Investment decisions for a 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 a 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 a fund. Purchase and sale orders for a fund may be combined with those
   of other clients of the Advisor in the interest of achieving the most
   favorable net results to a 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 a fund may manage
   other mutual funds and separate accounts on a long only or 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 and other potential conflicts of
   interest. Included in these procedures are specific guidelines developed to
   provide 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 in addition
to managing asset management accounts, such wide ranging 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.
The Advisor may take investment positions in securities in which other clients
or related persons within the Firm have different investment positions. There
may be instances in which the Advisor is purchasing or selling for its client
accounts, or pursuing an outcome in the context of a workout or restructuring
with respect to, securities in which the Firm is undertaking the same or
differing strategy in other businesses or other



                                     II-48
<PAGE>


client 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, including the Fund. 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 a fund's Board.



FOR FUND ADVISED BY ABERDEEN (AAMI)


COMPENSATION

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 Portfolio'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.


CONFLICTS

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 a fund. AAMI have 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 a fund and other client
accounts.


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


                                     II-49
<PAGE>

o  Certain investments may be appropriate for a fund and also for other clients
   advised by AAMI, including other client accounts managed by a fund's
   portfolio management team. Investment decisions for a 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 a fund 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 a fund. Purchase
   and sale orders for a fund may be combined with those of other clients of
   AAMI in the interest of achieving the most favorable net results to a 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 AAMI have 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 have in place supervisory oversight processes to
   periodically monitor performance deviations for accounts with like
   strategies.


FOR FUNDS ADVISED BY DREMAN


COMPENSATION

Each fund has been advised that the subadvisor has implemented a highly
competitive compensation plan which seeks to attract and retain exceptional
investment professionals who have demonstrated that they can consistently
outperform their respective fund's benchmark. The compensation plan is
comprised of both a fixed component and a variable component. The variable
component is determined by assessing the investment professional's performance
measured utilizing both quantitative and qualitative factors.


The sub-advisor's investment professionals are each paid a fixed base salary
that is determined based on their job function and responsibilities. The base
salary is deemed to be competitive with the marketplace and specifically with
salaries in the financial services industry by utilizing various salary surveys
compiled for the financial services industry, specifically, investment advisory
firms. The variable component of the subadvisor's compensation plan which takes
the form of a cash bonus combined with employee retention bonus units payable
over time is designed to reward and retain investment professionals including
portfolio managers and research analysts for their contributions to a fund's
performance relative to its benchmark.


Investment professionals may receive equity in the form of units or fractional
units of membership interest in the subadvisor or they may receive employee
retention bonus units which enable them to participate in the growth of the
firm. Investment professionals also participate in the subadvisor's profit
sharing, defined contribution plan that allows the subadvisor to contribute up
to twenty percent of an employee's total compensation, subject to various
regulatory limitations, to each employee's profit sharing account. The
subadvisor maintains both a qualified and non-qualified profit sharing plan
which benefits employees of the firm including both portfolio managers and
research analysts. Contributions to the sub-advisor's profit sharing plan vest
over a specified term. Finally all employees of the subadvisor including
investment professionals receive additional fringe benefits in the form of
subsidized medical, dental, vision, group-term, and life insurance coverage.


                                     II-50
<PAGE>

The basis for determining the variable component of an investment
professional's total compensation is determined through a subjective process
which evaluates an investment professional performance against several
quantitative and qualitative factors including the following:


Quantitative factors:


(i)        Relative ranking of a fund's performance against its peers in the
           one, three and five year pre-tax investment performance categories.
           A fund's performance is evaluated against peers in its fund category
           and performance is ranked from one to four on a declining scale
           depending on the quartile in which the portfolio manager's absolute
           performance falls. The portfolio manager is rewarded on a graduated
           scale for outperforming relative to his peers.


(ii)       Relative performance of a fund's performance against the
           pre-determined indices for the product strategy against which the
           fund's performance is measured. The portfolio manager is rewarded on
           a graduated scale for outperforming relative to the fund's benchmark
           index.


(iii)      Performance of a fund is measured through attribution analysis
           models which analyzes the portfolio manager's contribution from both
           an asset allocation or sector allocation perspective and security
           selection perspective. This factor evaluates how the investment
           professional performs in linking performance with the client's
           investment objective including investment parameters and risk and
           return objectives. This factor may include some qualitative
           characteristics.


Qualitative factors:


(i)        Ability to work well with other members of the investment
           professional team and mentor junior members;


(ii)       Contributions to the organizational overall success with new product
           strategies; and


(iii)      Other factors such as contributing to the team in a leadership role
           and by being responsive to requests for assistance.


CONFLICTS


The sub-advisor manages clients' accounts using a contrarian value investment
strategy. For both its strategies the subadvisor utilizes a model portfolio and
rebalances client's accounts whenever changes are made to the model portfolio.
In addition the sub-advisor aggregates its trades and allocates the trades to
all clients' accounts in an equitable manner. The sub-advisor strongly believes
aggregating its orders protect all clients from being disadvantaged by price or
time execution. The model portfolio approach and the trade aggregation policy
of the subadvisor eliminates any potential or apparent conflicts of interest
that could arise when a portfolio manager has day-to-day portfolio management
responsibilities with respect to more than one fund or account. The subadvisor
does not receive any performance-based fees from any of its accounts with the
exception of hedge funds that are managed by an affiliated firm. However, the
hedge funds are treated like any other client account and trades done for the
fund are generally aggregated with trades done for its regular client accounts.



The sub-advisor's investment professionals are compensated in the same manner
for all client accounts irrespective of the type of account.


FOR FUNDS ADVISED BY NORTHERN TRUST (NTI)


COMPENSATION

As of March 31, 2008 the compensation for the index portfolio managers is based
on the competitive marketplace and consists of a fixed base salary plus a
variable annual cash incentive award. In addition, non-cash incentives, such as
stock options or restricted stock of Northern Trust Corporation, may be awarded
from time to time. The annual incentive award is discretionary and is based on
a quantitative and qualitative evaluation of each portfolio manager's
investment performance and contribution to his or her respective team plus the
financial performance of the investment


                                     II-51
<PAGE>

business unit and Northern Trust Corporation as a whole. The annual incentive
award is not based on performance of the portfolio/funds or the amount of
assets held in a fund. Moreover, no material differences exist between the
compensation structure for mutual fund accounts and other types of accounts.


CONFLICTS

NTI's portfolio managers are often responsible for managing one or more funds,
as well as other accounts, including separate accounts and other pooled
investment vehicles. A portfolio manager may manage a separate account or other
pooled investment vehicle that may have a materially higher or lower fee
arrangement. The side-by-side management of these accounts may raise potential
conflicts of interest relating to cross trading, the allocation of investment
opportunities and the aggregation and allocation of trades. In addition, while
portfolio managers generally only manage accounts with similar investment
strategies, it is possible that due to varying investment restrictions among
accounts that certain investments are made for some accounts and not others or
conflicting investment positions are taken among accounts. The portfolio
managers have a fiduciary responsibility to manage all client accounts in a
fair and equitable manner. NTI seeks to provide best execution of all
securities transactions and aggregate and then allocate securities to client
accounts in a fair and timely manner. To this end, NTI has developed policies
and procedures designed to mitigate and manage the potential conflicts of
interest that may arise from side-by-side management. In addition, NTI has
adopted policies limiting the circumstances under which cross-trades may be
affected. NTI conducts periodic reviews of trades for consistency with these
policies.


FOR FUND ADVISED BY TURNER


COMPENSATION

Turner's investment professionals receive a base salary commensurate with their
level of experience. Turner's goal is to maintain competitive base salaries
through review of industry standards, market conditions, and salary surveys.
Bonus compensation, which is a multiple of base salary, is based on the
performance of each individual's sector and portfolio assignments relative to
appropriate market benchmarks. In addition, each employee is eligible for
equity ownership and equity owners share the firm's profits. Most of the
members of the Investment Team and all portfolio managers are equity owners of
Turner. This compensation and ownership structure provides incentive to attract
and retain highly qualified people, as each member of the firm has the
opportunity to share directly in the accomplishments of the business.


The objective performance criteria noted above accounts for 90% of the bonus
calculation. The remaining 10% is based upon subjective, "good will" factors
including teamwork, interpersonal relations, the individual's contribution to
overall success of the firm, media and client relations, presentation skills,
and professional development. Portfolio managers/analysts are reviewed on an
annual basis. The Chief Investment Officer is responsible for setting base
salaries, bonus targets, and making all subjective judgments related to an
investment professionals' compensation. The CIO is also responsible for
identifying investment professionals that should be considered for equity
ownership on an annual basis.


CONFLICTS

As is typical for many money managers, potential conflicts of interest may
arise related to Turner's management of accounts including the Portfolio where
not all accounts are able to participate in a desired Initial Public Offering
(IPO), or other limited opportunity, relating to use of soft dollars and other
brokerage practices, related to the voting of proxies, employee personal
securities trading related to the side by side management of accounts with
performance based fees and accounts with fixed fees, and relating to a variety
of other circumstances. In all cases, however, Turner believes it has written
policies and procedures in place reasonably designed to prevent violations of
the federal securities laws and to prevent material conflicts of interest from
arising. Please also see Turner's Form ADV, Part II for a description of some
of its policies and procedures in this regard.


                                     II-52
<PAGE>


PART II: APPENDIX II-C - FEE RATES OF SERVICE PROVIDERS


FEES PAYABLE TO DIMA FOR INVESTMENT MANAGEMENT SERVICES.

The management fee for each fund is accrued daily and paid monthly, at the
annual percentage rate of daily net assets indicated below:


<TABLE>
<CAPTION>
FUND NAME                                       MANAGEMENT FEE RATE

<S>                                        <C>
Tax-Free Income Funds
DWS California Tax-Free Income Fund        First $250 million 0.450%
                                           Next $750 million 0.420%
                                           Next $1.5 billion 0.400%
                                           Next $2.5 billion 0.380%
                                           Next $2.5 billion 0.350%
                                           Next $2.5 billion 0.330%
                                           Next $2.5 billion 0.310%
                                           Thereafter 0.300%
DWS Strategic High Yield Tax-Free Fund     First $300 million 0.565%
                                           Next $200 million 0.515%
                                           Next $500 million 0.490%
                                           Thereafter 0.470%
DWS Intermediate Tax/AMT Free Fund         0.315%
DWS Managed Municipal Bond Fund            First $250 million 0.365%
                                           Next $750 million 0.345%
                                           Next $1.5 billion 0.325%
                                           Next $2.5 billion 0.315%
                                           Next $2.5 billion 0.295%
                                           Next $2.5 billion 0.275%
                                           Next $2.5 billion 0.255%
                                           Thereafter 0.235%
DWS Massachusetts Tax Free Fund            First $250 million 0.450%
                                           Next $750 million 0.420%
                                           Next $1.5 billion 0.400%
                                           Next $2.5 billion 0.380%
                                           Next $2.5 billion 0.350%
                                           Next $2.5 billion 0.330%
                                           Next $2.5 billion 0.310%
                                           Thereafter 0.300%
DWS New York Tax-Free Income Fund          First $250 million 0.450%
                                           Next $750 million 0.420%
                                           Next $1.5 billion 0.400%
                                           Next $2.5 billion 0.380%
                                           Next $2.5 billion 0.350%
                                           Next $2.5 billion 0.330%
                                           Next $2.5 billion 0.310%
                                           Thereafter 0.300%
DWS Short-Term Municipal Bond Fund         First $500 million 0.400%
                                           Next $500 million 0.385%
                                           Next $1.0 billion 0.370%
                                           Thereafter 0.355%
</TABLE>

                                      II-53
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                 MANAGEMENT FEE RATE

<S>                                   <C>
Taxable Income Funds
DWS Core Fixed Income Fund            First $1.5 billion 0.400%
                                      Next $1.75 billion 0.385%
                                      Next $1.75 billion 0.370%
                                      Thereafter 0.355%
DWS Core Plus Income Fund             First $250 million 0.465%
                                      Next $750 million 0.435%
                                      Next $1.5 billion 0.415%
                                      Next $2.5 billion 0.395%
                                      Next $2.5 billion 0.365%
                                      Next $2.5 billion 0.345%
                                      Next $2.5 billion 0.325%
                                      Thereafter 0.315%
DWS Floating Rate Plus Fund           First $1 billion 0.650%
                                      Next $1.5 billion 0.635%
                                      Next $2.5 billion 0.610%
                                      Next $2.5 billion 0.585%
                                      Next $2.5 billion 0.560%
                                      Thereafter 0.550%
DWS GNMA Fund                         First $5.0 billion 0.315%
                                      Next $1.0 billion 0.300%
                                      Thereafter 0.285%
DWS High Income Fund                  First $250 million 0.480%
                                      Next $750 million 0.450%
                                      Next $1.5 billion 0.430%
                                      Next $2.5 billion 0.410%
                                      Next $2.5 billion 0.380%
                                      Next $2.5 billion 0.360%
                                      Next $2.5 billion 0.340%
                                      Thereafter 0.320%
DWS High Income Plus Fund             First $1.0 billion 0.500%
                                      Next $1.5 billion 0.490%
                                      Next $2.5 billion 0.480%
                                      Next $5.0 billion 0.470%
                                      Thereafter 0.460%
DWS Inflation Protected Plus Fund     First $1.5 billion 0.400%
                                      Next $500 million 0.375%
                                      Next $1.0 billion 0.360%
                                      Next $1.0 billion 0.345%
                                      Next $1.0 billion 0.330%
                                      Next $1.0 billion 0.315%
                                      Thereafter 0.300%
DWS Short Duration Fund               First $500 million 0.400%
                                      Next $500 million 0.385%
                                      Next $1.0 billion 0.370%
                                      Thereafter 0.355%
</TABLE>

                                      II-54
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                          MANAGEMENT FEE RATE

<S>                                       <C>
DWS Short Duration Plus Fund              First $1.5 billion - 0.365%
                                          Next $500 million 0.340%
                                          Next $1.0 billion 0.315%
                                          Next $1.0 billion 0.300%
                                          Next $1.0 billion 0.285%
                                          Next $1.0 billion 0.270%
                                          Thereafter 0.255%
DWS Strategic Income Fund                 First $250 million 0.480%
                                          Next $750 million 0.450%
                                          Next $1.5 billion 0.430%
                                          Next $2.5 billion 0.410%
                                          Next $2.5 billion 0.380%
                                          Next $2.5 billion 0.360%
                                          Next $2.5 billion 0.340%
                                          Thereafter 0.320%
DWS Strategic Government Securities       First $250 million 0.350%
Fund                                      Next $750 million 0.330%
                                          Next $1.5 billion 0.310%
                                          Next $2.5 billion 0.300%
                                          Next $2.5 billion 0.280%
                                          Next $2.5 billion 0.260%
                                          Next $2.5 billion 0.240%
                                          Thereafter 0.220%
Multi-Category/Asset Allocation Funds
DWS Alternative Asset Allocation Plus        0.200%(1)(5)
Fund
DWS Balanced Fund                         First $1.5 billion 0.370%
                                          Next $500 million 0.345%
                                          Next $1.5 billion 0.310%
                                          Next $2.0 billion 0.300%
                                          Next $2.0 billion 0.290%
                                          Next $2.5 billion 0.280%
                                          Next $2.5 billion 0.270%
                                          Thereafter 0.260%
DWS LifeCompass Protect 2017 Fund         0.600%(1)
DWS LifeCompass Retirement Fund           0.000%(1)
DWS LifeCompass 2015 Fund                 0.000%(1)
DWS LifeCompass 2020 Fund                 0.000%(1)
DWS LifeCompass 2030 Fund                 0.000%(1)
DWS LifeCompass 2040 Fund                 0.000%(1)
DWS Lifecycle Long Range Fund             First $250 million 0.600%
                                          Next $750 million 0.575%
                                          Thereafter 0.550%
DWS Select Alternative Allocation         0.00%(1)
Fund
DWS Target 2010 Fund                      0.400%
DWS Target 2011 Fund                      0.400%
</TABLE>

                                      II-55
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                   MANAGEMENT FEE RATE

<S>                                     <C>
DWS Target 2012 Fund                    0.400%
DWS Target 2013 Fund                    0.400%
DWS Target 2014 Fund                    0.400%
Value Funds
DWS Commodity Securities Fund           First $500 million 0.950%
                                        Next $500 million 0.900%
                                        Thereafter 0.850%
DWS Disciplined Market Neutral Fund     First $1.0 billion 1.250%
                                        Next $1.0 billion 1.200%
                                        Next $1.0 billion 1.150%
                                        Thereafter 1.100%
DWS Dreman Mid Cap Value Fund           First $250 million 0.750%
                                        Next $250 million 0.720%
                                        Next $2.0 billion 0.700%
                                        Next $1.5 billion 0.680%
                                        Thereafter 0.660%(1)
DWS Dreman Small Cap Value Fund         First $250 million 0.750%
                                        Next $750 million 0.720%
                                        Next $1.5 billion 0.700%
                                        Next $2.5 billion 0.680%
                                        Next $2.5 billion 0.650%
                                        Next $2.5 billion 0.640%
                                        Next $2.5 billion 0.630%
                                        Thereafter 0.620%(3)
DWS Growth & Income Fund                First $250 million 0.365%
                                        Next $750 million 0.360%
                                        Next $1.5 billion 0.355%
                                        Next $5.0 billion 0.345%
                                        Next $5.0 billion 0.335%
                                        Next $5.0 billion 0.325%
                                        Thereafter 0.300%
DWS Large Cap Value Fund                First $1.5 billion 0.425%
                                        Next $500 million 0.400%
                                        Next $1 billion 0.375%
                                        Next $1 billion 0.350%
                                        Next $1 billion 0.325%
                                        Thereafter 0.300
DWS RREEF Real Estate Securities        First $100 million 0.565%
Fund                                    Next $100 million 0.465%
                                        Next $100 million 0.415%
                                        Thereafter 0.365%
DWS Small Cap Core Fund                 First $500 million 0.665%
                                        Next $500 million 0.615%
                                        Thereafter 0.565%
</TABLE>

                                      II-56
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                     MANAGEMENT FEE RATE

<S>                                   <C>
DWS Strategic Value Fund              First $250 million 0.750%
                                      Next $750 million 0.720%
                                      Next $1.5 billion 0.700%
                                      Next $2.5 billion 0.680%
                                      Next $2.5 billion 0.650%
                                      Next $2.5 billion 0.640%
                                      Next $2.5 billion 0.630%
                                      Thereafter 0.620%(3)
Index-Related Funds
DWS EAFE Equity Index Fund            0.250%
DWS Equity 500 Index Fund             0.000%(1)
DWS Equity 500 Index Portfolio        0.050%
DWS S&P 500 Index Fund                0.000%(4)
DWS U.S. Bond Index Fund              0.150%
Growth Funds
DWS Blue Chip Fund                    First $250 million 0.480%
                                      Next $750 million 0.450%
                                      Next $1.5 billion 0.430%
                                      Next $2.5 billion 0.410%
                                      Next $2.5 billion 0.380%
                                      Next $2.5 billion 0.360%
                                      Next $2.5 billion 0.340%
                                      Thereafter 0.320%
DWS Capital Growth Fund               First $250 million 0.495%
                                      Next $750 million 0.465%
                                      Next $1.5 billion 0.445%
                                      Next $2.5 billion 0.425%
                                      Next $2.5 billion 0.395%
                                      Next $2.5 billion 0.375%
                                      Next $2.5 billion 0.355%
                                      Thereafter 0.335%
DWS Communications Fund               First $100 million 1.000%
                                      Next $100 million 0.900%
                                      Next $100 million 0.850%
                                      Next $200 million 0.800%
                                      Next $500 million 0.730%
                                      Next $500 million 0.680%
                                      Thereafter 0.650%
DWS Disciplined Long/Short Growth     First $1.0 billion 1.00%
Fund                                  Next $1.0 billion 0.950%
                                      Next $1.0 billion 0.900%
                                      Thereafter 0.850%
DWS Gold & Precious Metals Fund       First $500 million 0.835%
                                      Thereafter 0.785%
DWS Health Care Fund                  First $500 million 0.765%
                                      Thereafter 0.715%
</TABLE>

                                      II-57
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                  MANAGEMENT FEE RATE
<S>                                   <C>
DWS Large Company Growth Fund         First $1.5 billion 0.615%
                                      Next $500 million 0.565%
                                      Thereafter 0.515%
DWS Mid Cap Growth Fund               First $500 million 0.650%
                                      Next $1 billion 0.600%
                                      Next $2.5 billion 0.550%
                                      Next $2.5 billion 0.540%
                                      Next $2.5 billion 0.530%
                                      Next $2.5 billion 0.520%
                                      Thereafter 0.510%
DWS Small Cap Growth Fund             0.650%
DWS Technology Fund                   First $250 million 0.480%
                                      Next $750 million 0.450%
                                      Next $1.5 billion 0.430%
                                      Next $2.5 billion 0.410%
                                      Next $2.5 billion 0.380%
                                      Next $2.5 billion 0.360%
                                      Next $2.5 billion 0.340%
                                      Thereafter 0.320%
Global Income Funds
DWS Emerging Markets Fixed Income     0.590%
Fund
DWS Global Bond Fund                  0.410%
Global Growth Funds
DWS Climate Change Fund               1.000%
DWS Emerging Markets Equity Fund      First $250 million 1.015%
                                      Next $500 million 0.990%
                                      Thereafter 0.965%
DWS Europe Equity Fund                First $250 million 0.665%
                                      Next $750 million 0.635%
                                      Next $1.5 billion 0.615%
                                      Next $2.5 billion 0.595%
                                      Next $2.5 billion 0.565%
                                      Next $2.5 billion 0.555%
                                      Next $2.5 billion 0.545%
                                      Thereafter 0.535%
DWS Global Opportunities Fund         First $500 million 0.915%
                                      Next $500 million 0.865%
                                      Thereafter 0.815%
DWS Global Thematic Fund              First $500 million 0.915%
                                      Next $500 million 0.865%
                                      Next $500 million 0.815%
                                      Next $500 million 0.765%
                                      Thereafter 0.715%
</TABLE>

                                      II-58
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                      MANAGEMENT FEE RATE
<S>                                       <C>
DWS International Fund                    First $2.5 billion 0.565%
                                          Next $2.5 billion 0.545%
                                          Next $5 billion 0.525%
                                          Next $5 billion 0.515%
                                          Thereafter 0.465%
DWS Diversified International Equity      First $1.5 billion 0.700%
Fund                                      Next $1.75 billion 0.685%
                                          Next $1.75 billion 0.670%
                                          Thereafter 0.655%
DWS International Value Opportunities     First $500 million 0.800%
Fund                                      Next $500 million 0.780%
                                          Next $1.0 billion 0.760%
                                          Thereafter 0.740%
DWS Latin America Equity Fund             First $400 million 1.165%
                                          Thereafter 1.065%
DWS RREEF Global Real Estate              First $500 million 1.000%
Securities Fund                           Next $500 million 0.985%
                                          Next $1 billion 0.960%
                                          Thereafter 0.945%
DWS RREEF Global Infrastructure           0.900%
Fund
Insurance/Annuity Funds
DWS Bond VIP                              First $250 million 0.390%
                                          Next $750 million 0.365%
                                          Thereafter 0.340%
DWS Capital Growth VIP                    First $250 million 0.390%
                                          Next $750 million 0.365%
                                          Thereafter 0.340%
DWS Global Opportunities VIP              First $500 million 0.890%
                                          Next $500 million 0.875%
                                          Next $1.0 billion 0.860%
                                          0.845% thereafter
DWS Growth & Income VIP                   First $250 million 0.390%
                                          Next $750 million 0.365%
                                          Thereafter 0.340%
DWS Health Care VIP                       First $250 million 0.665%
                                          Next $750 million 0.640%
                                          Next $1.5 billion 0.615%
                                          Next $2.5 billion 0.595%
                                          Next $2.5 billion 0.565%
                                          Next $2.5 billion 0.555%
                                          Next $2.5 billion 0.545%
                                          Thereafter 0.535%
DWS International VIP                     First $500 million 0.790%
                                          Thereafter 0.640%
DWS Equity 500 Index VIP                  First $1 billion 0.200%
                                          Next $1 billion 0.175%
                                          Thereafter 0.150%
</TABLE>

                                      II-59
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                     MANAGEMENT FEE RATE
<S>                                       <C>
DWS Small Cap Index VIP                   0.350    %
DWS Alternative Asset Allocation Plus     0.200%(1)
VIP
DWS Balanced VIP                          First $250 million 0.370%
                                          Next $750 million 0.345%
                                          Thereafter 0.310%
DWS Blue Chip VIP                         First $250 million 0.550%
                                          Next $750 million 0.520%
                                          Next $1.5 billion 0.500%
                                          Next $2.5 billion 0.480%
                                          Next $2.5 billion 0.450%
                                          Next $2.5 billion 0.430%
                                          Next $2.5 billion 0.410%
                                          Thereafter 0.390%
DWS Conservative Allocation VIP           First $500 million 0.065%
                                          Next $500 million 0.055%
                                          Next $500 million 0.045%
                                          Next $1.0 billion 0.035%
                                          Thereafter 0.025%
DWS Core Fixed Income VIP                 First $250 million 0.500%
                                          Next $750 million 0.470%
                                          Next $1.5 billion 0.450%
                                          Next $2.5 billion 0.430%
                                          Next $2.5 billion 0.400%
                                          Next $2.5 billion 0.380%
                                          Next $2.5 billion 0.360%
                                          Thereafter 0.340%
DWS Diversified International Equity      First $1.5 billion 0.650%
VIP                                       Next $1.75 billion 0.635%
                                          Next $1.75 billion 0.620%
                                          Thereafter 0.605%
DWS Dreman Small Mid Cap Value VIP        First $250 million 0.650%
                                          Next $750 million 0.620%
                                          Next $1.5 billion 0.600%
                                          Next $2.5 billion 0.580%
                                          Next $2.5 billion 0.550%
                                          Next $2.5 billion 0.540%
                                          Next $2.5 billion 0.530%
                                          Thereafter 0.520%
DWS Global Thematic VIP                   First $250 million 0.915%
                                          Next $500 million 0.865%
                                          Next $750 million 0.815%
                                          Next $1.5 billion 0.765%
                                          Thereafter 0.715%
</TABLE>

                                      II-60
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                  MANAGEMENT FEE RATE
<S>                                    <C>
DWS Government & Agency Securities     First $250 million 0.450%
VIP                                    Next $750 million 0.430%
                                       Next $1.5 billion 0.410%
                                       Next $2.5 billion 0.400%
                                       Next $2.5 billion 0.380%
                                       Next $2.5 billion 0.360%
                                       Next $2.5 billion 0.340%
                                       Thereafter 0.320%
DWS Growth Allocation VIP              First $500 million 0.065%
                                       Next $500 million 0.055%
                                       Next $500 million 0.045%
                                       Next $1.0 billion 0.035%
                                       Thereafter 0.025%
DWS High Income VIP                    First $250 million 0.500%
                                       Next $750 million 0.470%
                                       Next $1.5 billion 0.450%
                                       Next $2.5 billion 0.430%
                                       Next $2.5 billion 0.400%
                                       Next $2.5 billion 0.380%
                                       Next $2.5 billion 0.360%
                                       Thereafter 0.340%
DWS Large Cap Value VIP                First $250 million 0.650%
                                       Next $750 million 0.625%
                                       Next $1.5 billion 0.600%
                                       Next $2.5 billion 0.575%
                                       Next $2.5 billion 0.550%
                                       Next $2.5 billion 0.525%
                                       Next $2.5 billion 0.500%
                                       Thereafter 0.475%
DWS Mid Cap Growth VIP                 First $250 million 0.665%
                                       Next $750 million 0.635%
                                       Next $1.5 billion 0.615%
                                       Next $2.5 billion 0.595%
                                       Next $2.5 billion 0.565%
                                       Next $2.5 billion 0.555%
                                       Next $2.5 billion 0.545%
                                       Thereafter 0.535%
DWS Moderate Allocation VIP            First $500 million 0.065%
                                       Next $500 million 0.055%
                                       Next $500 million 0.045%
                                       Next $1.0 billion 0.035%
                                       Thereafter 0.025%
DWS Money Market VIP                   First $500 million 0.285%
                                       Next $500 million 0.270%
                                       Next $1.0 billion 0.255%
                                       Thereafter 0.240%
DWS Small Cap Growth VIP               First $250 million 0.550%
                                       Next $750 million 0.525%
                                       Thereafter 0.500%
</TABLE>

                                      II-61
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                      MANAGEMENT FEE RATE
<S>                                    <C>
DWS Strategic Income VIP               First $250 million 0.550%
                                       Next $750 million 0.520%
                                       Next $1.5 billion 0.500%
                                       Next $2.5 billion 0.480%
                                       Next $2.5 billion 0.450%
                                       Next $2.5 billion 0.430%
                                       Next $2.5 billion 0.410%
                                       Thereafter 0.390%
DWS Strategic Value VIP                First $250 million 0.665%
                                       Next $750 million 0.635%
                                       Next $1.5 billion 0.615%
                                       Next $2.5 billion 0.595%
                                       Next $2.5 billion 0.565%
                                       Next $2.5 billion 0.555%
                                       Next $2.5 billion 0.545%
                                       Thereafter 0.535%
DWS Technology VIP                     First $250 million 0.665%
                                       Next $750 million 0.635%
                                       Next $1.5 billion 0.615%
                                       Next $2.5 billion 0.595%
                                       Next $2.5 billion 0.565%
                                       Next $2.5 billion 0.555%
                                       Next $2.5 billion 0.545%
                                       Thereafter 0.535%
DWS Turner Mid Cap Growth VIP          First $250 million 0.715%
                                       Next $250 million 0.700%
                                       Next $500 million 0.685%
                                       Thereafter 0.670%
Money Market Funds
Cash Account Trust - Government &      First $500 million 0.120%
Agency Securities Portfolio            Next $500 million 0.100%
                                       Next $1.0 billion 0.075%
                                       Next $1.0 billion 0.060%
                                       Thereafter 0.050%(1)
Cash Account Trust - Money Market      First $500 million 0.220%
Portfolio                              Next $500 million 0.200%
                                       Next $1.0 billion 0.175%
                                       Next $2.0 billion 0.160%
                                       Thereafter 0.150%(3) (6)
Cash Account Trust - Tax- Exempt       First $500 million 0.120%
Portfolio                              Next $500 million 0.100%
                                       Next $1.0 billion 0.075%
                                       Next $1.0 billion 0.060%
                                       Thereafter 0.050%(6)
Cash Management Fund Institutional     0.00%(1)
Cash Management Portfolio              First $3 billion 0.150%
                                       Next $4.5 billion 0.1325%
                                       Thereafter 0.120%
</TABLE>

                                      II-62
<PAGE>


<TABLE>
<CAPTION>
FUND NAME                                     MANAGEMENT FEE RATE
<S>                                    <C>
Cash Reserve Fund, Inc. - Prime        0.00%(7)
Series
Cash Reserves Fund Institutional       0.00%(7)
Central Cash Management Fund           0.00%
DWS Money Market Series                0.000%(7)
DWS Money Market Prime Series          First $215 million 0.400%
                                       Next $335 million 0.275%
                                       Next $250 million 0.200%
                                       Next $800 million 0.150%
                                       Next $800 million 0.140%
                                       Next $800 million 0.130%
                                       Thereafter 0.120%
Investors Cash Trust - Treasury        0.050%
Portfolio
NY Tax Free Money Fund                 0.120%
Tax-Exempt California Money Market     First $500 million 0.120%
Fund                                   Next $500 million 0.100%
                                       Next $1.0 billion 0.075%
                                       Next $1.0 billion 0.060%
                                       Thereafter 0.050%
Tax Free Money Fund Investment         0.150%
Daily Assets Fund Institutional        0.100%
</TABLE>


(1)   Shareholders of a fund also indirectly bear their pro rata share of the
      operating expenses, including the management fee paid to DIMA, of the
      underlying DWS Funds in which a fund invests.

(2)   In the event that the fund's assets are completely and irreversibly
      allocated to its fixed income component, the management fee rate will
      decrease to 0.300%

(3)   The fund's management fee rate includes administrative services provided
      by DIMA which are necessary for the Fund's operation as an open-end
      investment company.

(4)   The fund invests substantially all its assets in DWS Equity 500 Index
      Portfolio (Master Fund). DIMA receives a management fee from the Master
      Fund. In the event that the fund withdraws its investment in the Master
      Fund, DIMA would become responsible for directly managing the assets of
      the fund. In such event, the fund would pay DIMA a management fee at an
      annual rate of 0.05% or 0.15% of the daily net assets of DWS Equity 500
      Index Fund or DWS S&P 500 Index Fund, respectively.

(5)   The fund currently invests substantially all its assets in other DWS
      Funds. As a result, shareholders of the fund also indirectly bear their
      pro rata share of the operating expenses, including the management fee
      paid to DIMA, of the underlying DWS Funds in which the fund invests. In
      the future, the fund may invest some or all of its assets in other
      securities that are not considered DWS Funds (Other Assets). If the
      fund's assets were invested in Other Assets, the management fee paid to
      DIMA would equal the sum of (a) 0.200% of the daily assets invested in
      DWS Funds and (b) 1.200% of the daily assets invested in Other Assets.

(6)   The fund's management fee is computed based on the combined average daily
      net assets of the Government & Agency Securities Portfolio, Money Market
      Portfolio and Tax-Exempt Portfolio, each a series of Cash Account Trust,
      and allocated among each fund based upon relative net assets. DIMA has
      agreed to reduce its management fee for Government & Agency Securities
      Portfolio such that after the allocation of the fee to each series of
      Cash Account Trust, the amount payable by Government & Agency Securities
      Portfolio will be limited to 0.05% of its average daily net assets.

(7)   The fund invests substantially all its assets in Cash Management
      Portfolio (the Master Fund). DIMA receives a management fee from the
      Master Fund. In the event that the Fund withdraws its investment in the



                                     II-63
<PAGE>

      Master Fund, DIMA would become responsible for directly managing the
      assets of the fund. In such event, the fund would pay DIMA a management
      fee directly and for DWS Money Market Series the management fee rate
      would be as follows: (a) first $1.5 billion 0.165%; (b) next $1.75
      billion 0.150%; (c) next $1.75 billion 0.135%; and (d) thereafter
      0.120%


UNITARY FEE. For DWS S&P 500 Plus Fund only, for the period between January 1,
2009 and December 31, 2009, the fund will pay to DIMA a Unitary Fee, calculated
each day and payable monthly, equal to an annual rate of 0.50% of the fund's
average daily net assets.


Beginning on January 1, 2010, the Unitary Fee will continue to be calculated
daily and paid monthly, but will equal an annual rate of 0.50% (Base Fee),
adjusted as described below, of the fund's average daily net assets for the
previous 365-day period (Performance Period). The Base Fee will be adjusted to
as high as 1.00% or as low as zero, depending on how the fund's investment
performance (based on the total return of Class S shares, which do not bear
Rule 12b-1 fees) for the Performance Period compares with a benchmark equal to
the sum of the investment record of the S&P 500 Index plus 0.50% (Performance
Benchmark) over the Performance Period. If the fund's investment performance
equals the Performance Benchmark, then DIMA will earn the Base Fee of 0.50%. If
the fund's investment performance falls below the Performance Benchmark, then
the Unitary Fee will decrease by the difference between them, but not below
zero. If the fund's investment performance exceeds the Performance Benchmark,
then the Unitary Fee will increase by the difference between them, but not
above 1.00%. In effect, the Unitary Fee after January 1, 2010 will equal the
amount by which the investment performance of the Class S shares of the fund
exceeds the performance of the S&P 500 Index over a given Performance Period,
subject to a cap of 1.00% and a floor of zero. The chart below provides
examples of the Unitary Fee that the fund would pay to DIMA assuming various
returns on Class S shares:


<TABLE>
<CAPTION>
INVESTMENT PERFORMANCE DURING
PERFORMANCE PERIOD                              UNITARY FEE
<S>                                            <C>
Exceeds the S&P 500 Index by 1.00% or more     1.00%
Exceeds the S&P 500 Index by 0.75%             0.75%
Exceeds the S&P 500 Index by 0.50%             0.50%
Exceeds the S&P 500 Index by 0.25%             0.25%
Equals or is less than the S&P 500 Index       0.00%
</TABLE>


Therefore, if the fund's Class S investment performance is at or below the S&P
500 Index, the shareholders of the fund will neither pay the Unitary Fee nor
bear the fund's day-to-day operating expenses (with the exceptions noted above,
such as Rule 12b-1 fees). To the extent Class A, Class B, Class C and Class R
shares of the fund have higher expenses than Class S shares, using Class S
shares as the measuring class for purposes of calculating the performance
adjustment to the Unitary Fee could result in Class A, Class B, Class C and
Class R shares bearing a larger positive performance adjustment and a smaller
negative performance adjustment than would be the case if each such class's own
performance were considered.


FEE PAYABLE TO DIMA FOR ADMINISTRATIVE SERVICES. Money Market Portfolio, DWS
Dreman Mid Cap Value Fund, DWS Dreman Small Cap Value Fund and DWS Strategic
Value Fund, do not pay DIMA a separate administrative services fee. Each fund,
except those noted below, pays DIMA an administrative services fee, computed
daily and paid monthly, of 0.100% of a fund's average daily net assets. DWS
Equity 500 Index Portfolio and Cash Management Portfolio each pay DIMA an
administrative services, computed daily and paid monthly, of 0.030% of a fund's
average daily net assets.


FEES PAYABLE TO DIFA FOR FUND ACCOUNTING SERVICES. Currently, DIFA receives no
fee for its services to Money Market Portfolio, a series Cash Account Trust,
DWS Dreman Small Cap Value Fund, and DWS Strategic Value Fund; however, subject
to Board approval, DIFA may seek payment from a fund for fund accounting
services in the future.


DIFA receives an annual fee from DWS Dreman Mid Cap Value Fund for fund
accounting services equal to 0.015% of its average daily net assets.


                                     II-64
<PAGE>

FEE PAYABLE TO DISC FOR TRANSFER AGENCY AND SHAREHOLDER SERVICES. DISC receives
an annual service fee for each account of a fund, based on the type of account.
For open retail accounts, the fee is a flat fee ranging from $20.99 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 DISC each month. A fee is charged for any account which at any time
during the month had a share balance in a fund. Smaller fees are also charged
for closed accounts for which information must be retained on DISC's system for
up to 18 months after closing for tax reporting purposes.


Certain out-of-pocket expenses incurred by DISC, including expenses of printing
and mailing routine fund disclosure documents, costs of record retention and
transaction processing costs are reimbursed by a fund or are paid directly by a
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 a fund with the prior
approval of the Board.



                                     II-65
<PAGE>

PART II: APPENDIX II-D - FINANCIAL SERVICES FIRMS' COMPENSATION

GENERAL. DIDI may pay compensation to financial intermediaries in connection
with the sale of fund shares as described below. In addition, financial
intermediaries may receive compensation for post-sale administrative services
from DIDI or directly from a fund as described below.


In addition to the discounts or commissions described herein and in the
prospectus, DIDI, the Advisor or its affiliates may pay or allow additional
discounts, commissions or promotional incentives, in the form of cash, to firms
that sell shares of a 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 a fund, or other funds
underwritten by DIDI (see Financial Intermediary Support Payments under Part
II: Purchase and Redemption of Shares).


Banks and other financial services firms may provide administrative services
related to order placement and payment to facilitate transactions in shares of
a 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.


RETAIL FUNDS: CLASS A, B, C AND R



CLASS A SHARES: The fund receives the entire net asset value of all its Class A
shares sold. DIDI, as principal underwriter, retains the sales charge on sales
of Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount is set
forth in the sales charge tables set forth in APPENDIX II-F. Upon notice to all
dealers, DIDI may re-allow to dealers up to the full applicable Class A sales
charge during periods and for transactions specified in such notice and such
re-allowances may be based upon attainment of minimum sales levels. During
periods when 90% or more of the sales charge is re-allowed, such dealers may be
deemed to be underwriters as that term is defined in the 1933 Act.



DIDI may at its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of a fund in
accordance with the Large Order NAV Purchase Privilege and one of the
compensation schedules up to the following amounts:



<TABLE>
<CAPTION>
                       COMPENSATION SCHEDULE #1:                                    COMPENSATION SCHEDULE #2:
              RETAIL SALES AND DWS INVESTMENTS FLEX PLAN(1)                     DWS INVESTMENTS RETIREMENT PLAN(2)
                                              AS A PERCENTAGE OF                                     AS A PERCENTAGE OF
AMOUNT OF SHARES SOLD                           NET ASSET VALUE            AMOUNT OF SHARES SOLD      NET ASSET VALUE
<S>                                    <C>                                <C>                       <C>
$250,000 but less than $50,000,000               0.50%(3)                      Over $3 million         0.00%-0.50%
$1 million to $3 million                         0.85%(4)                           -                        -
                                                 1.00% (equity)
Over $3 million to $50 million                   0.50%                         Over $3 million         0.00%-0.50%
Over $50 million                                 0.25%                               -                        -
</TABLE>


(1) For purposes of determining the appropriate commission percentage to be
    applied to a particular sale under the foregoing schedule, DIDI will
    consider the cumulative amount invested by the purchaser in a fund and
    other funds including purchases pursuant to the "Combined Purchases,"
    "Letter of Intent" and "Cumulative Discount" features referred to below.

(2) Compensation Schedules 2 applies to employer sponsored employee benefit
    plans using the OmniPlus subaccount record keeping system made available
    through ADP, Inc. under an alliance with DIDI and its affiliates.

(3) Applicable to the following funds: DWS California Tax-Free Income Fund,
    DWS GNMA Fund, DWS Intermediate Tax/AMT Free Fund, DWS Managed Municipal
    Bond Fund, DWS Massachusetts Tax-Free Income Fund, DWS New York Tax-Free
    Income Fund and DWS Strategic High Yield Tax-Free Fund.

(4) Applicable for income funds except those noted in footnote (3) above.



As indicated under "Purchases" under Part II "Purchase and Redemption of
Shares," Class A shares may be sold at net asset value without a sales charge
to certain professionals who assist in the promotion of DWS mutual funds
pursuant to personal services contracts with DIDI, for themselves or members of
their families. DIDI in its discretion may compensate financial services firms
for sales of Class A shares under this privilege at a commission rate of 0.50%
of the amount of Class A shares purchased.


                                     II-66
<PAGE>

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


COMPENSATION FOR CLASS R SHARES. For sales of Class R shares, DIDI currently
pays firms a distribution fee, payable quarterly, at an annual rate of 0.25%
based on net assets attributable to Class R shares maintained and serviced by
the firm.


SERVICE FEES FOR CLASS A, B, C AND R SHARES: With respect to Class A and Class
R Shares of a fund, DIDI pays each firm a service fee, payable quarterly, at an
annual rate of up to 0.25% of the net assets in fund accounts that it maintains
and services attributable to Class A and Class R Shares of a fund, commencing
with the month after investment. With respect to Class B and Class C Shares of
a fund, DIDI currently advances to firms the first-year service fee at a rate
of up to 0.25% of the purchase price of such shares. DIDI does not advance the
first year service fee to firms for sales of Class C shares to
employer-sponsored employee benefit plans using the OmniPlus subaccount record
keeping system made available through ADP, Inc. under an alliance with DIDI and
its affiliates. For periods after the first year, DIDI currently intends to pay
firms a service fee at a rate of up to 0.25% (calculated monthly and paid
quarterly) of the net assets attributable to Class B and Class C shares of a
fund maintained and serviced by the firm (see Retail Funds: Class A, B, C and R
under Part II: Distribution and Service Agreements and Plans).


RETAIL FUNDS: INSTITUTIONAL AND CLASS S SHARES


COMPENSATION FOR INSTITUTIONAL AND CLASS S SHARES. There are no sales charges
for Institutional and Class S shares of the fund.


MONEY MARKET FUNDS (EXCEPT DWS CASH INVESTMENT TRUST CLASS A, B AND C SHARES)


DWS MONEY MARKET FUND: For DWS Money Market Fund, a series of DWS Money Market
Prime Series, DIDI may in its discretion pay compensation, in amounts not to
exceed 0.50% of net asset value, to firms in connection with the sales of fund
shares to employee benefit plans in excess of $3 million using the OmniPlus
subaccount record keeping system maintained by ADP, Inc. for DWS Retirement
Plans under an alliance with DIDI and its affiliates.


SERVICE SHARES-CASH ACCOUNT TRUST: For the Service Shares classes of the Money
Market Portfolio, the Government & Agency Securities Portfolio and the
Tax-Exempt Portfolio of Cash Account Trust, DIDI normally pays firms a fee for
distribution and administrative services, payable monthly, at a maximum annual
rate of up to 0.60% of average daily net assets of Service Shares held in
accounts that they maintain and service.


PREMIER SHARES-TAX-EXEMPT CALIFORNIA MONEY MARKET FUND: For the Premier Shares
class of the Tax-Exempt California Money Market Fund, DIDI normally pays firms
a fee for distribution and administrative services, payable monthly, at a
maximum annual rate of up to 0.33% of average daily net assets of Premier
Shares held in accounts that they maintain and service.


TAX-EXEMPT NEW YORK MONEY MARKET FUND: For Tax-Exempt New York Money Market
Fund shares, a class of NY Tax Free Money Fund, a series of DWS Advisor Funds,
DIDI normally pays firms a fee for distribution and administrative services,
payable monthly, at a maximum annual rate of up to 0.50% of average daily net
assets of Tax-Exempt New York Money Market Fund shares held in accounts that
they maintain and service.


                                     II-67
<PAGE>

PREMIUM RESERVE MONEY MARKET SHARES-CASH ACCOUNT TRUST: For the Premium Reserve
Money Market Shares class of the Money Market Portfolio of Cash Account Trust,
DIDI normally pays firms a fee for administrative services, payable monthly, at
a maximum annual rate of up to 0.25% of average daily net assets of Premium
Reserve Money Market Shares held in accounts that they maintain and service.


INSTITUTIONAL MONEY MARKET SHARES-CASH ACCOUNT TRUST: For the Institutional
Money Market Shares class of the Money Market Portfolio of Cash Account Trust,
DIDI normally pays firms a fee for administrative services, payable monthly, at
a maximum annual rate of up to 0.15% (currently, limited to 0.02%) of average
daily net assets of Institutional Money Market Shares held in accounts that
they maintain and service.


PREMIER MONEY MARKET SHARES-CASH ACCOUNT TRUST AND INVESTORS CASH TRUST: For
the Premier Money Market Shares classes of the Money Market Portfolio, the
Government & Agency Securities Portfolio and the Tax-Exempt Portfolio of Cash
Account Trust and of the Treasury Portfolio of Investors Cash Trust, DIDI
normally pays firms a fee for distribution services, payable monthly, at a
maximum annual rate of up to 0.25% of average daily net assets of Premier Money
Market Shares held in accounts that they maintain and service and DIDI normally
pays firms a fee for administrative services, payable monthly, at a maximum
annual rate of up to 0.25% of average daily net assets of Premier Money Market
Shares held in accounts that they maintain and service.


DAVIDSON CASH EQUIVALENT SHARES-CASH ACCOUNT TRUST: For the Davidson Cash
Equivalent Shares and the Davidson Cash Equivalent Plus Shares classes of the
Money Market Portfolio, the Government & Agency Securities Portfolio and the
Tax-Exempt Portfolio of Cash Account Trust, DIDI normally pays the sole
sub-distributor for the classes, D.A. Davidson & Co., a fee for distribution
services, payable monthly, at a maximum annual rate of up to 0.30% of average
daily net assets of those accounts in the Davidson Cash Equivalent Shares that
it maintains and services and 0.25% of average daily net assets in the case of
those accounts in the Davidson Cash Equivalent Plus Shares that it maintains
and services and DIDI normally pays the sole sub-distributor a fee for
administrative services, payable monthly, at a maximum annual rate of up to
0.25% of average daily net assets of those accounts in the Davidson Cash
Equivalent Shares that it maintains and services and 0.20% of average daily net
assets in the case of those accounts in the Davidson Cash Equivalent Plus
Shares that it maintains and services. The Davidson Cash Equivalent Plus Shares
class is limited to the Money Market Portfolio and the Government & Agency
Securities Portfolio.


CAPITAL ASSETS FUNDS-CASH ACCOUNT TRUST: For the Capital Assets Funds Shares
and the Capital Assets Funds Preferred Shares classes of the Money Market
Portfolio, the Government & Agency Securities Portfolio and the Tax-Exempt
Portfolio of Cash Account Trust, DIDI normally pays the sole sub-distributor
for the classes, RIDGE Clearing and Outsourcing Services, Inc., a fee for
distribution services, payable monthly, at a maximum annual rate of up to 0.33%
of average daily net assets of those accounts in the Capital Assets Funds
Shares that it maintains and services and 0.20% of average daily net assets in
the case of those accounts in the Capital Assets Funds Preferred Shares that it
maintains and services and DIDI normally pays the sole sub-distributor a fee
for administrative services, payable monthly, at a maximum annual rate of up to
0.25% of average daily net assets of those accounts in the Capital Assets Funds
Shares that it maintains and services and 0.10% of average daily net assets in
the case of those accounts in the Capital Assets Funds Preferred Shares that it
maintains and services. The Capital Assets Funds Preferred Shares class is
limited to the Money Market Portfolio.


MANAGED SHARES-CASH ACCOUNT TRUST: For the Government Cash Managed Shares class
of the Government & Agency Securities Portfolio of Cash Account Trust and the
Tax-Exempt Cash Managed Shares class of the Tax-Exempt Portfolio of Cash
Account Trust, DIDI normally pays firms a fee for administrative services,
payable monthly, at a maximum annual rate of up to 0.15% of average daily net
assets of Managed Shares held in accounts that they maintain and service.


INSTITUTIONAL SHARES-INVESTORS CASH TRUST: For the Institutional Shares class
of the Treasury Portfolio of Investors Cash Trust, DIDI normally pays firms a
fee for administrative services, payable monthly, at a maximum annual rate of
up to 0.05% of average daily net assets of Institutional Shares held in
accounts that they maintain and service.


                                     II-68
<PAGE>

TAX-FREE INVESTMENT CLASS-CASH ACCOUNT TRUST AND INVESTMENT CLASS-INVESTORS
CASH TRUST: For the Tax-Free Investment Class of the Tax-Exempt Portfolio of
Cash Account Trust and the Investment Class of the Treasury Portfolio of
Investors Cash Trust (collectively, "Investment Class"), DIDI normally pays
firms a fee for distribution services, payable monthly, at a maximum annual
rate of up to 0.25% of average daily net assets of shares of the Investment
Class held in accounts that they maintain and service and DIDI normally pays
firms a fee for administrative services, payable monthly, at a maximum annual
rate of up to 0.07% of average daily net assets of shares of the Investment
Class held in accounts that they maintain and service.


CASH RESERVE PRIME SHARES-PRIME SERIES: For the Cash Reserve Prime Shares class
of the Prime Series of Cash Reserve Fund Inc., DIDI normally pays firms a fee
for distribution services, payable monthly, at a maximum annual rate of up to
0.25% of average daily net assets of shares of the Cash Reserve Prime Shares
held in accounts that they maintain and service and DIDI normally pays firms a
fee for administrative services, payable monthly, at a maximum annual rate of
up to 0.07% of average daily net assets of shares of the Cash Reserve Prime
Shares held in accounts that they maintain and service.


SHAREHOLDER SERVICES PLAN FOR CASH MANAGEMENT FUND - INSTITUTIONAL, CASH
RESERVES FUND - INSTITUTIONAL, NY TAX FREE MONEY FUND INVESTMENT CLASS AND
TAX-FREE MONEY FUND INVESTMENT PREMIER SHARES: Cash Management Fund -
Institutional and Cash Reserves Fund - Institutional, each a series of DWS
Institutional Funds, and NY Tax Free Money Fund Investment Class and Tax-Free
Money Fund Investment Premier Shares, each a series and class of DWS Adviser
Funds, pursuant to a shareholder service plan, may pay financial services firms
a service fee at an annual rate of up to 0.25 of 1% of the average daily net
assets of shares of the applicable fund and class held in accounts that the
firm maintains and services.


DWS VARIABLE SERIES I, DWS VARIABLE SERIES II AND DWS INVESTMENTS VIT FUNDS:


For each fund of DWS Variable Series I, DWS Variable Series II and DWS
Investments VIT Funds that has authorized the issuance of Class B shares
(including Class B-2 shares of DWS Equity 500 Index VIP), each fund has adopted
a distribution plan under Rule 12b-1 (Plan) that provides for fees for
distribution and shareholder servicing activities payable through DIDI to
participating insurance companies as an expense of the Class B shares or Class
B-2 shares in an amount of up to 0.25% of the average daily net assets of Class
B shares or Class B-2 shares held by the insurance company.


                                     II-69
<PAGE>

PART II: APPENDIX II-E - FIRMS WITH WHICH DEUTSCHE ASSET MANAGEMENT HAS REVENUE
SHARING ARRANGEMENTS



CHANNEL: BROKER-DEALERS AND FINANCIAL ADVISORS

AIG Advisors Group
Ameriprise
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
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 Advisors, LLC
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
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.


                                     II-70
<PAGE>

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

                                     II-71
<PAGE>

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


                                     II-72
<PAGE>

PART II: APPENDIX II-F - CLASS A SALES CHARGE SCHEDULE

CLASS A PURCHASES. The public offering price of Class A shares for purchasers
choosing the initial sales charge alternative is the net asset value plus a
sales charge, as set forth below.



INTERNATIONAL/GLOBAL FUNDS: Climate Change, Emerging Markets Equity, Europe
Equity, Global Opportunities, Global Thematic, Latin America Equity,
International, Diversified International Equity, International Value
Opportunities, RREEF Global Infrastructure, RREEF Global Real Estate; GROWTH
FUNDS: Blue Chip, Capital Growth, Communications, Gold & Precious Metals,
Health Care, Large Company Growth, Mid Cap Growth, Small Cap Growth,
Technology; VALUE FUNDS: Commodity Securities, Disciplined Market Neutral,
Disciplined Long/Short Value, Dreman Concentrated Value, Dreman Strategic
Value, Dreman Mid Cap Value, Dreman Small Cap Value, Growth & Income, Large Cap
Value, RREEF Real Estate Securities, Small Cap Core, Small Cap Value, Equity
Income; MULTICATEGORY/ASSET ALLOCATION FUNDS: Alternative Asset Allocation
Plus, Balanced, LifeCompass Retirement, LifeCompass 2015, LifeCompass 2020,
LifeCompass 2030, LifeCompass 2040, LifeCompass Protect 2017; INDEX-RELATED
FUNDS: S&P 500 Plus:


<TABLE>
<CAPTION>
                                                                     SALES CHARGE
                                         AS A PERCENTAGE      AS A PERCENTAGE OF       ALLOWED TO DEALERS AS A
AMOUNT OF PURCHASE                     OF OFFERING PRICE*      NET ASSET VALUE**     PERCENTAGE OF OFFERING PRICE

<S>                                   <C>                    <C>                    <C>
Less than $50,000                             5.75%                  6.10%                       5.20%
$50,000 but less than $100,000                4.50%                  4.71%                       4.00%
$100,000 but less than $250,000               3.50%                  3.63%                       3.00%
$250,000 but less than $500,000               2.60%                  2.67%                       2.25%
$500,000 but less than $1 million             2.00%                  2.04%                       1.75%
$1 million and over                            .00***                 .00***                      .00****
</TABLE>


INTERNATIONAL/GLOBAL FUNDS: Emerging Markets Fixed Income Fund, Global Bond;
INCOME FUNDS: Core Fixed Income, High Income, High Income Plus, Core Plus
Income, Floating Rate Plus; INDEX RELATED FUNDS: S&P 500 Index:


<TABLE>
<CAPTION>
                                                                     SALES CHARGE
                                         AS A PERCENTAGE      AS A PERCENTAGE OF       ALLOWED TO DEALERS AS A
AMOUNT OF PURCHASE                     OF OFFERING PRICE*      NET ASSET VALUE**     PERCENTAGE OF OFFERING PRICE

<S>                                   <C>                    <C>                    <C>
Less than $100,000                            4.50%                  4.71%                       4.00%
$100,000 but less than $250,000               3.50%                  3.63%                       3.00%
$250,000 but less than $500,000               2.60%                  2.67%                       2.25%
$500,000 but less than $1 million             2.00%                  2.04%                       1.75%
$1 million and over                           0.00***                0.00***                     0.00****
</TABLE>


INCOME FUNDS: Inflation Protected Plus and Short Duration



<TABLE>
<CAPTION>
                                                                     SALES CHARGE
                                         AS A PERCENTAGE      AS A PERCENTAGE OF       ALLOWED TO DEALERS AS A
AMOUNT OF PURCHASE                     OF OFFERING PRICE*      NET ASSET VALUE**     PERCENTAGE OF OFFERING PRICE

<S>                                   <C>                    <C>                    <C>
Less than $100,000                            2.75%                  2.83%                       2.25%
$100,000 but less than $250,000               2.50%                  2.56%                       2.00%
$250,000 but less than $500,000               2.00%                  2.04%                       1.75%
$500,000 but less than $1 million             1.50%                  1.52%                       1.25%
$1 million and over                           0.00***                0.00***                     0.00****
</TABLE>




                                     II-73
<PAGE>


TAX-FREE INCOME FUNDS: California Tax Free Income, New York Tax Free Income,
Massachusetts Tax Free Income, GNMA, Strategic High Yield Tax-Free, Managed
Municipal Bond and Intermediate Tax/AMT Free. INCOME FUNDS: Short Duration
Plus, Strategic Income and Strategic Government Securities.


<TABLE>
<CAPTION>
                                                          SALES CHARGE
                              AS A PERCENTAGE      AS A PERCENTAGE OF       ALLOWED TO DEALERS AS A
AMOUNT OF PURCHASE          OF OFFERING PRICE*      NET ASSET VALUE**     PERCENTAGE OF OFFERING PRICE

<S>                        <C>                    <C>                    <C>
Less than $100,000                 2.75%                  2.83%                       2.25%
$100,000 but less than $250,000    2.50%                  2.56%                       2.00%
$250,000 and over                  0.00***                0.00***                     0.00***
</TABLE>


MULTICATEGORY ASSET ALLOCATION FUNDS: Target 2010, Target 2011, Target 2012,
Target 2013, Target 2014. These funds do not have a share class but are similar
in structure to Class A shares.


<TABLE>
<CAPTION>
                                                                     SALES CHARGE
                                         AS A PERCENTAGE      AS A PERCENTAGE OF       ALLOWED TO DEALERS AS A
AMOUNT OF PURCHASE                     OF OFFERING PRICE*      NET ASSET VALUE**     PERCENTAGE OF OFFERING PRICE

<S>                                   <C>                    <C>                    <C>
Less than $100,000                            5.00%                  5.26%                       4.50%
$100,000 but less than $250,000               4.00%                  4.17%                       3.60%
$250,000 but less than $500,000               3.00%                  3.09%                       2.70%
$500,000 but less than $1 million             2.00%                  2.04%                       1.80%
$1 million and over                           0.00***                0.00***                     0.00****
</TABLE>


*     The offering price includes the sales charge.
**    Rounded to the nearest one-hundredth percent.
***   Redemption of shares may be subject to a contingent deferred sales
      charge.
****  Commission is payable by DIDI.


TAX FREE INCOME FUNDS: Short Term Municipal Bond


<TABLE>
<CAPTION>
                                                                        SALES CHARGE
                                            AS A PERCENTAGE      AS A PERCENTAGE OF       ALLOWED TO DEALERS AS A
AMOUNT OF PURCHASE                        OF OFFERING PRICE*      NET ASSET VALUE**     PERCENTAGE OF OFFERING PRICE

<S>                                      <C>                    <C>                    <C>
Less than $100,000                               2.00%                  2.04%                       1.50%
$100,000 but less than $250,000                  1.75%                  1.78%                       1.25%
$250,000 but less than $500,000                  1.50%                  1.52%                       1.00%
$500,000 but less than $1 million                1.25%                  1.26%                       1.00%
$1 million but less than $5 million              0.00***                0.00***                     1.00****
$5 million but less than $50 million             0.00***                0.00***                     0.50****
$50 million and over                             0.00***                0.00***                     0.25****
</TABLE>



*     The offering price includes the sales charge.
**    Rounded to the nearest one-hundredth percent.
***   Redemption of shares may be subject to a contingent deferred sales
      charge.
****  Commission is payable by DIDI.

                                     II-74
<PAGE>


PART II: APPENDIX II-G - INVESTMENT PRACTICES AND TECHNIQUES

ADJUSTABLE RATE SECURITIES. The interest rates paid on the adjustable rate
securities in which a fund invests generally are readjusted at periodic
intervals, usually by reference to a predetermined interest rate index.
Adjustable rate securities include US Government securities and securities of
other issuers. Some adjustable rate securities are backed by pools of mortgage
loans. There are three main categories of interest rate indices: those based on
US Treasury securities, those derived from a calculated measure such as a cost
of funds index and those based on a moving average of mortgage rates. Commonly
used indices include the one-year, three-year and five-year constant maturity
Treasury rates, the three-month Treasury bill rate, the 180-day Treasury bill
rate, rates on longer-term Treasury securities, the 11th District Federal Home
Loan Bank Cost of Funds, the National Median Cost of Funds, the one-month,
three-month, six-month or one-year London Interbank Offered Rate (LIBOR), the
prime rate of a specific bank or commercial paper rates. As with fixed-rates
securities, changes in market interest rates and changes in the issuer's
creditworthiness may affect the value of adjustable rate securities.


Some indices, such as the one-year constant maturity Treasury rate, closely
mirror changes in market interest rate levels. Others, such as the 11th
District Home Loan Bank Cost of Funds index (Cost of Funds Index), tend to lag
behind changes in market rate levels and tend to be somewhat less volatile. 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 for a longer period of time than other market interest rates,
which may result in a higher level of principal prepayments on adjustable rate
securities which adjust in accordance with the Cost of Funds index than
adjustable rate securities which adjust in accordance with other indices. In
addition, dislocations in the member institutions of the 11th District Federal
Home Loan Bank in recent years have caused and may continue to cause the Cost
of Funds index 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
in the method used to calculate the Cost of Funds index.


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


During periods of declining interest rates, the coupon rates may readjust
downward, resulting in lower yields to a fund. Further, because of this
feature, the value of adjustable rate securities is unlikely to rise during
periods of declining interest rates to the same extent as fixed-rate
instruments. Interest rate declines may result in accelerated prepayment of
adjustable rate securities, and the proceeds from such prepayments must be
reinvested at lower prevailing interest rates.


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


ASSET-BACKED SECURITIES. A fund may invest in securities generally referred to
as asset-backed securities. Asset-backed securities are securities that
directly or indirectly represent interests in, or are secured by and payable
from, an underlying pool of assets such as (but not limited to) first lien
mortgages, motor vehicle installment sale contracts, other installment sale
contracts, home equity loans, leases of various types of real and personal
property, and receivables from revolving credit (i.e., credit card) agreements
and trade receivables. Such assets are securitized through the use of trusts
and special purpose corporations. 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



                                     II-75
<PAGE>

of the underlying assets. Payments of principal and interest may be dependent
upon the cash flow generated by the underlying assets backing the securities
and, in certain cases, may be supported by some form of credit enhancement (for
more information, see Credit Enhancement). The degree of credit enhancement
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquency or
loss in excess of that anticipated or failure of the credit enhancement could
adversely affect the return on an investment in such a security. The value of
the securities also may change because of changes in interest rates or changes
in the market's perception of the creditworthiness of the servicing agent for
the loan pool, the originator of the loans or the financial institution
providing the credit enhancement. Additionally, since the deterioration of
worldwide economic and liquidity conditions that became acute in 2008,
asset-backed securities have been subject to greater liquidity risk.
Asset-backed securities are ultimately dependent upon payment of loans and
receivables by individuals, businesses and other borrowers, and a fund
generally has no recourse against the entity that originated the loans.


Because asset-backed securities may not have the benefit of a security interest
in the underlying assets, asset-backed securities present certain additional
risks that are not present with mortgage-backed securities. For example, 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. Furthermore, 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 yield characteristics of the asset-backed securities in which a 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 a 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 a 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. Because prepayment of principal
generally occurs during a period of declining interest rates, a fund may
generally have to reinvest the proceeds of such prepayments at lower interest
rates. Therefore, asset-backed securities may have less potential for capital
appreciation in periods of falling interest rates than other income-bearing
securities of comparable maturity.


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


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


                                     II-76
<PAGE>

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


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


ASSET-INDEXED SECURITIES. A fund may purchase asset-indexed securities which
are debt securities usually issued by companies in precious metals related
businesses such as mining, the principal amount, redemption terms, or interest
rates of which are related to the market price of a specified precious metal.
Market prices of asset-indexed securities will relate primarily to changes in
the market prices of the precious metals to which the securities are indexed
rather than to changes in market rates of interest. However, there may not be a
perfect correlation between the price movements of the asset-indexed securities
and the underlying precious metals. Asset-indexed securities typically bear
interest or pay dividends at below market rates (and in certain cases at
nominal rates). The purchase of asset-indexed securities also exposes a fund to
the credit risk of the issuer of the asset-indexed securities.


ASSET SEGREGATION. Certain investment transactions expose a 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 a fund engages in such transactions, a 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 a fund
segregates sufficient cash or other liquid assets or otherwise "covers" its
obligations under such transactions, a 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 a fund.


In some cases (e.g., with respect to futures and forwards that are
contractually required to "cash-settle"), a 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, a 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.


A 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 regulations 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 a 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 a 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 a fund that may be at risk
with respect to certain derivative transactions.


                                     II-77
<PAGE>

AUCTION RATE SECURITIES. Auction rate securities in which certain municipal
funds may invest consist of auction rate municipal securities and auction rate
preferred securities issued by closed-end investment companies that invest
primarily in municipal securities. Provided that the auction mechanism is
successful, auction rate securities usually normally permit the holder to sell
the securities in an auction at par value at specified intervals. The dividend
is reset by a "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. If an auction fails, the dividend rate of the securities rate
adjusts to a maximum rate, specified in the issuer's offering documents and, in
the case of closed-end funds, relevant charter documents. Security holders that
submit sell orders in a failed auction may not be able to sell any or all of
the shares for which they have submitted sell orders. Security holders may sell
their shares at the next scheduled auction, subject to the same risk that the
subsequent auction will not attract sufficient demand for a successful auction
to occur. Broker-dealers may also try to facilitate secondary trading in the
auction rate securities, although such secondary trading may be limited and may
only be available for shareholders willing to sell at a discount. Since
February 2008, many municipal issuers and closed-end funds have experienced,
and continue to experience, failed auctions of their auction rate securities.
Repeated auction failures have significantly affected the liquidity of auction
rate securities, shareholders of such securities have generally continued to
receive dividends at the above-mentioned maximum rate. There is no assurance
that auctions will resume or that any market will develop for auction rate
securities. Valuations of such securities is highly speculative, however,
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 a 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 Code. A 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 1940 Act.


BANK LOANS. Bank loans are typically senior debt obligations of borrowers
(issuers) and, as such, are considered to hold a senior position in the capital
structure of the borrower. These may include loans that hold the most senior
position, that hold an equal ranking with other senior debt, or loans that are,
in the judgment of the Advisor, in the category of senior debt of the borrower.
This capital structure position generally gives the holders of these loans a
priority claim on some or all of the borrower's assets in the event of a
default. In most cases, these loans are either partially or fully
collateralized by the assets of a corporation, partnership, limited liability
company or other business entity, or by cash flow that the Advisor believes has
a market value at the time of acquisition that equals or exceeds the principal
amount of the loan. These loans are often issued in connection with
recapitalizations, acquisitions, leveraged buy-outs and refinancings. It is
important to note that Moody's and S&P may rate bank loans higher than high
yield bonds of the same issuer to reflect their more senior position. A fund
may invest in both fixed- and floating-rate loans.


Bank loans may include restrictive covenants which must be maintained by the
borrower. Such covenants, in addition to the timely payment of interest and
principal, may include mandatory prepayment provisions arising from free cash
flow, restrictions on dividend payments and usually state that a borrower must
maintain specific minimum financial ratios as well as establishing limits on
total debt. A breach of covenant, which is not waived by the agent, is normally
an event of acceleration, i.e., the agent has the right to call the outstanding
bank loan. In addition, loan covenants may include mandatory prepayment
provisions stemming from free cash flow. Free cash flow is cash that is in
excess of capital expenditures plus debt service requirements of principal and
interest. The free cash flow shall be applied to prepay the bank loan in an
order of maturity described in the loan documents.


When a fund has an interest in certain types of bank loans, a fund may have an
obligation to make additional loans upon demand by the borrower. These
commitments may have the effect of requiring a fund to increase its investment
in a borrower at a time when it would not otherwise have done so. A fund
intends to reserve against such contingent obligations by segregating
sufficient assets in high quality short-term liquid investments or borrowing to
cover such obligations.


                                     II-78
<PAGE>

Under a bank loan, the borrower generally must pledge as collateral assets
which may include one or more of the following: cash; accounts receivable;
inventory; property, plant and equipment; common and preferred stock in its
subsidiaries; trademarks, copyrights, patent rights; and franchise value. A
fund may also receive guarantees as a form of collateral. In some instances, a
bank loan may be secured only by stock in a borrower or its affiliates. A fund
may also invest in bank loans not secured by any collateral. The market value
of the assets serving as collateral (if any) will, at the time of investment,
in the opinion of the Advisor, equal or exceed the principal amount of the bank
loan. The valuations of these assets may be performed by an independent
appraisal. If the agent becomes aware that the value of the collateral has
declined, the agent may take action as it deems necessary for the protection of
its own interests and the interests of the other lenders, including, for
example, giving the borrower an opportunity to provide additional collateral or
accelerating the loan. There is no assurance, however, that the borrower would
provide additional collateral or that the liquidation of the existing
collateral would satisfy the borrower's obligation in the event of nonpayment
of scheduled interest or principal, or that such collateral could be readily
liquidated.


In a typical interest in a bank loan, the agent administers the loan and has
the right to monitor the collateral. The agent is also required to segregate
the principal and interest payments received from the borrower and to hold
these payments for the benefit of the lenders. A fund normally looks to the
agent to collect and distribute principal of and interest on a bank loan.
Furthermore, a fund looks to the agent to use normal credit remedies, such as
to foreclose on collateral; monitor credit loan covenants; and notify the
lenders of any adverse changes in the borrower's financial condition or
declarations of insolvency. In the event of a default by the borrower, it is
possible, though unlikely, that a fund could receive a portion of the
borrower's collateral. If a fund receives collateral other than cash, such
collateral will be liquidated and the cash received from such liquidation will
be available for investment as part of a fund's portfolio. At times a fund may
also negotiate with the agent regarding the agent's exercise of credit remedies
under a bank loan. The agent is compensated for these services by the borrower
as is set forth in the loan agreement. Such compensation may take the form of a
fee or other amount paid upon the making of the bank loan and/or an ongoing fee
or other amount.


The loan agreement in connection with bank loans sets forth the standard of
care to be exercised by the agents on behalf of the lenders and usually
provides for the termination of the agent's agency status in the event that it
fails to act properly, becomes insolvent, enters FDIC receivership, or if not
FDIC insured, enters into bankruptcy or if the agent resigns. In the event an
agent is unable to perform its obligations as agent, another lender would
generally serve in that capacity.


Loan agreements frequently require the borrower to make full or partial
prepayment of a loan when the borrower engages in asset sales or a securities
issuance. Prepayments on bank loans may also be made by the borrower at its
election. The rate of such prepayments may be affected by, among other things,
general business and economic conditions, as well as the financial status of
the borrower. Prepayment would cause the actual duration of a bank loan to be
shorter than its stated maturity. This should, however, allow a fund to
reinvest in a new loan and recognize as income any unamortized loan fees. This
may result in a new facility fee payable to a fund. Because interest rates paid
on bank loans periodically fluctuate with the market, it is expected that the
prepayment and a subsequent purchase of a new bank loan by a fund will not have
a material adverse impact on the yield of the portfolio. A fund generally holds
bank loans to maturity unless it has become necessary to adjust a fund's
portfolio in accordance with the Advisor's view of current or expected economic
or specific industry or borrower conditions.


A fund may be required to pay and may receive various fees and commissions in
the process of purchasing, selling and holding bank loans. The fee may include
any, or a combination of, the following elements: arrangement fees, non-use
fees, facility fees, letter of credit fees and ticking fees. Arrangement fees
are paid at the commencement of a loan as compensation for the initiation of
the transaction. A non-use fee is paid based upon the amount committed but not
used under the loan. Facility fees are on-going annual fees paid in connection
with a loan. Letter of credit fees are paid if a loan involves a letter of
credit. Ticking fees are paid from the initial commitment indication until loan
closing. The amount of fees is negotiated at the time of transaction.


If legislation or state or federal regulators impose additional requirements or
restrictions on the ability of financial institutions to make loans that are
considered highly leveraged transactions, the availability of bank loans for
investment by a fund may be adversely affected. In addition, such requirements
or restrictions could reduce or eliminate sources of financing for certain
borrowers. This would increase the risk of default. If legislation or federal
or state regulators


                                     II-79
<PAGE>

require financial institutions to dispose of bank loans that are considered
highly leveraged transactions or subject such bank loans to increased
regulatory scrutiny, financial institutions may determine to sell such bank
loans. Such sales by affected financial institutions may not be at desirable
prices, in the opinion of the Advisor. If a fund attempts to sell a bank loan
at a time when a financial institution is engaging in such a sale, the price a
fund could get for the bank loan may be adversely affected.


Loan Participations and Assignments. A fund's investments in bank loans are
expected in most instances to be in the form of participations in bank loans
(Participations) and assignments of portions of bank loans (Assignments) from
third parties. Large loans to corporations or governments may be shared or
syndicated among several lenders, usually banks. A fund may participate in such
syndicates, or can buy part of a loan, becoming a direct lender. Large loans to
corporations or governments may be shared or syndicated among several lenders,
usually banks. A fund may participate in such syndicates, or can buy part of a
loan, becoming a direct lender. However, in all cases, a fund will not purchase
bank loans where Deutsche Bank, or an affiliate, serves as an agent bank.


When a fund buys an Assignment, it is essentially becoming a party to the bank
agreement. The vast majority of all trades are Assignments and would therefore
generally represent the preponderance of bank loans held by a fund. When a fund
is a purchaser of an Assignment, it typically succeeds to all the rights and
obligations under the loan agreement of the assigning lender and becomes a
lender under the loan agreement with the same rights and obligations as the
assigning lender. Because Assignments are arranged through private negotiations
between potential assignees and potential assignors, however, the rights and
obligations acquired by a fund as the purchaser of an Assignment may differ
from, and may be more limited than, those held by the assigning lender.


In certain cases, a fund may buy bank loans on a participation basis, if for
example, a fund did not want to become party to the bank agreement. With
respect to any given bank loan, the rights of a fund when it acquires a
Participation may be more limited than the rights of the original lenders or of
investors who acquire an Assignment. Participations typically will result in a
fund having a contractual relationship only with the lender and not with the
borrower. A fund will have the right to receive payments of principal, interest
and any fees to which it is entitled only from the lender selling the
Participation and only upon receipt by the lender of the payments from the
borrower. In connection with purchasing Participations, a fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the bank loan, nor any rights of set-off against the
borrower, and a fund may not directly benefit from any collateral supporting
the bank loan in which it has purchased the Participation. As a result, a fund
will assume the credit risk of both the borrower and the lender that is selling
the Participation. In the event of the insolvency of the lender selling a
Participation, a fund may be treated as a general creditor of the lender and
may not benefit from any set-off between the lender and the borrower.


In the case of loan Participations where a bank or other lending institution
serves as financial intermediary between a fund and the borrower, if the
Participation does not shift to a fund the direct debtor-creditor relationship
with the borrower, SEC interpretations require a fund, in some circumstances,
to treat both the lending bank or other lending institution and the borrower as
issuers for purposes of a fund's investment policies. Treating a financial
intermediary as an issuer of indebtedness may restrict a fund's ability to
invest in indebtedness related to a single financial intermediary, or a group
of intermediaries engaged in the same industry, even if the underlying
borrowers represent many different companies and industries.


A fund may pay a fee or forego a portion of interest payments to the lender
selling a Participation or Assignment under the terms of such Participation or
Assignment. In the case of loans administered by a bank or other financial
institution that acts as agent for all holders, if assets held by the agent for
the benefit of a purchaser are determined to be subject to the claims of the
agent's general creditors, the purchaser might incur certain costs and delays
in realizing payment on the loan or loan Participation and could suffer a loss
of principal or interest.


Participations and Assignments involve credit risk, interest rate risk, and
liquidity risk, as well as the potential liability associated with being a
lender. If a fund purchases a Participation, it may only be able to enforce its
rights through the participating lender, and may assume the credit risk of both
the lender and the borrower. Investments in loans


                                     II-80
<PAGE>

through direct Assignment of a financial institution's interests with respect
to a loan may involve additional risks. For example, if a loan is foreclosed, a
fund could benefit from becoming part owner of any collateral, however, a fund
would bear the costs and liabilities associated with owning and disposing of
the collateral.


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


BANK AND SAVINGS AND LOAN OBLIGATIONS. These obligations include negotiable
certificates of deposit, bankers' acceptances, deposit notes, fixed time
deposits or other short-term bank obligations. Certificates of deposit are
negotiable certificates evidencing the obligations of a bank to repay funds
deposited with it for a specified period of time. a fund may invest in
certificates of deposit of large domestic banks and their foreign branches,
large US regulated subsidiaries of large foreign banks (i.e., banks which at
the time of their most recent annual financial statements show total assets in
excess of $1 billion), and of smaller banks, in certain instances. Although a
fund recognizes that the size of a bank is important, this fact alone is not
necessarily indicative of its creditworthiness.


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


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


For purposes of a 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. A 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 obligations of foreign banks may entail risks that are different
in some respects from those of investments in obligations of US domestic banks
because of differences in political, regulatory and economic systems and
conditions. These risks include the possibility that these obligations may be
less marketable than comparable obligations of United States banks, and the
selection of these obligations may be more difficult because there may be less
publicly available information concerning foreign banks. Other 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 to pursue legal
remedies and obtain or enforce 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.


BORROWING. Under the 1940 Act, a fund is required to maintain continuous asset
coverage of 300% with respect to permitted borrowings and to sell (within three
days) sufficient portfolio holdings to restore such coverage if it should
decline to less than 300% due to market fluctuations or otherwise, even if such
liquidation of a fund's holdings may be disadvantageous from an investment
standpoint.


                                     II-81
<PAGE>

BRADY BONDS. Brady Bonds are securities created through the exchange of
existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructurings under a
debt restructuring plan introduced by former US Secretary of the Treasury,
Nicholas F. Brady (Brady Plan). Brady Bonds may be collateralized or
uncollateralized and are issued in various currencies (but primarily the
dollar). Dollar-denominated, collateralized Brady Bonds, which may be
fixed-rate bonds or floating-rate bonds, are generally collateralized in full
as to principal by US Treasury zero coupon bonds having the same maturity as
the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at that time
and is adjusted at regular intervals thereafter. Brady Bonds are often viewed
as having three or four valuation components: the collateralized repayment of
principal at final maturity; the collateralized interest payments; the
uncollateralized interest payments; and any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constitute the residual
risk). In light of the residual risk of Brady Bonds and the history of defaults
of countries issuing Brady Bonds, with respect to commercial bank loans by
public and private entities, investments in Brady Bonds may be viewed as
speculative.


CASH MANAGEMENT VEHICLES. A 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 a 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. A 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.


COMMERCIAL PAPER. A fund may invest in commercial paper issued by major
corporations under the Securities Act in reliance on the exemption from
registration afforded by Section 3(a)(3) thereof. Such commercial paper may be
issued only to finance current transactions and must mature in nine months or
less. Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers, and individual investor participation in
the commercial paper market is very limited. A fund also may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the 1933 Act (Section
4(2) paper). Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to institutional investors such
as a fund who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other
institutional investors like a fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) paper, thus
providing liquidity.


COMMON STOCK. Common stock is issued by companies to raise cash for business
purposes and represents a proportionate interest in the issuing companies.
Therefore, a fund may participate in the success or failure of any company in
which it holds stock. The market values of common stock can fluctuate
significantly, reflecting the business performance of the issuing company,
investor perception and general economic or financial market movements. Despite
the risk of price volatility, however, common stocks have historically offered
a greater potential for long-term gain on investment, compared to other classes
of financial assets, such as bonds or cash equivalents, although there can be
no assurance that this will be true in the future.


CONVERTIBLE SECURITIES. A fund may invest in convertible securities; that is,
bonds, notes, debentures, preferred stocks and other securities that are
convertible (by the holder or by the issuer) into common stock. Investments in
convertible securities can provide an opportunity for capital appreciation
and/or income through interest and dividend payments by virtue of their
conversion or exchange features.


The convertible securities in which a fund may invest include fixed-income or
zero coupon debt securities, which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock. The
exchange ratio for any particular convertible security may be adjusted from
time to time due to stock splits, dividends,


                                     II-82
<PAGE>

spin-offs, other corporate distributions or scheduled changes in the exchange
ratio. A convertible security may be called for redemption or conversion by the
issuer after a particular date and under certain circumstances (including a
specified price) established upon issue. If a convertible security held by a
fund is called for redemption or conversion, a fund could be required to tender
it for redemption, convert it into the underlying common stock, or sell it to a
third party, which may have an adverse effect on a fund's ability to achieve
its investment objectives. Convertible securities and convertible preferred
stocks, until converted, have general characteristics similar to both debt and
equity securities. Although to a lesser extent than with debt securities
generally, the market values of convertible securities tend to decline as
interest rates increase and, conversely, tend to increase as interest rates
decline. In addition, because of the conversion or exchange feature, the market
values of convertible securities typically change as the market values of the
underlying common stocks change, and, therefore, also tend to follow movements
in the general market for equity securities. A unique feature of convertible
securities is that, as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis,
and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock, although typically not
as much as the underlying common stock. While no securities investments are
without risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.


As debt securities, convertible securities are investments that provide for a
stream of income (or in the case of zero coupon securities, accretion of
income) with generally higher yields than common stocks. Convertible securities
generally offer lower yields than non-convertible securities of similar quality
because of their conversion or exchange features.


Of course, like all debt securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may
default on their obligations.


Convertible securities are generally subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities. Convertible securities may be issued as fixed
income obligations that pay current income or as zero coupon notes and bonds,
including Liquid Yield Option Notes (LYONs).


CREDIT ENHANCEMENT. 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
enhancement. Such credit enhancement 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. A fund may pay any
additional fees for such credit enhancement, although the existence of credit
enhancement 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 enhancement 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


                                     II-83
<PAGE>

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
enhancement 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.


Certain of a fund's other investments may be credit-enhanced by a guaranty,
letter of credit, or insurance from a third party. Any bankruptcy,
receivership, default, or change in the credit quality of the third party
providing the credit enhancement may adversely affect the quality and
marketability of the underlying security and could cause losses to a fund and
affect a fund's share price.


CUSTODIAL RECEIPTS. Custodial receipts 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.
Receipts that are interests in the principal component are 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. In the case of Treasury Investment Growth Receipts
(TIGRs) and Certificates of Accrual on Treasury Securities (CATS), the IRS has
reached this conclusion for the purpose of applying the tax diversification
requirements applicable to regulated investment companies such as a fund. TIGRs
and CATS are not considered US Government securities by the staff of the 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 a
fund. The Advisor is not aware of any binding legislative, judicial or
administrative authority on this issue.


Custodial receipts include Treasury Receipts (TRs), TIGRs and CATS. TIGRs and
CATS are interests in private proprietary accounts while TRs and STRIPS (see US
Government Securities) are interests in accounts sponsored by the US Treasury.
Receipts are sold as zero coupon securities; for more information (see Zero
Coupon Securities).


DEPOSITARY RECEIPTS. A fund may invest in sponsored or unsponsored American
Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs), International Depositary Receipts (IDRs) and other
types of Depositary Receipts (which, together with ADRs, EDRs, GDRs and IDRs
are hereinafter referred to as Depositary Receipts). Depositary Receipts
provide indirect investment in securities of foreign issuers. Prices of
unsponsored Depositary Receipts may be more volatile than if they were
sponsored by the issuer of the underlying securities. Depositary Receipts may
not necessarily be denominated in the same currency as the underlying
securities into which they may be converted. In addition, the issuers of
unsponsored Depositary Receipts are not obligated to disclose material
information regarding the underlying securities or their issuer in the United
States and, therefore, there may not be a correlation between such information
and the market value of the Depositary Receipts. ADRs are Depositary Receipts
that are bought and sold in the United States and are typically issued by a US
bank or trust company which evidence ownership of underlying securities by a
foreign corporation. GDRs, IDRs and other types of Depositary Receipts are
typically issued by foreign banks or trust companies, although they may also be
issued by United States banks or trust companies, and evidence ownership of
underlying securities issued by either a foreign or a United States
corporation. Generally, Depositary Receipts in registered form are designed for
use in the United States securities markets and Depositary Receipts in bearer
form are designed for use in securities markets outside the United States.
Depositary Receipts, including those denominated in US dollars will be subject
to foreign currency exchange rate risk. However, by investing in US
dollar-denominated ADRs rather than directly in foreign issuers' stock, a fund
avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs. However, certain
Depositary Receipts may not be listed on an exchange and therefore may be
illiquid securities.


DERIVATIVES. A fund may use instruments referred to as derivatives
(derivatives). Derivatives are financial instruments the value of which is
derived from another security, a commodity (such as gold or oil), a currency or
an index (a measure of value or rates, such as the S&P 500 Index or the prime
lending rate). Derivatives often allow a fund to increase or decrease the level
of risk to which a fund is exposed more quickly and efficiently than direct
investments in the underlying asset or instruments.


                                     II-84
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A fund may, to the extent consistent with its investment objective and
policies, purchase and sell (write) exchange-listed and over-the-counter (OTC)
put and call options on securities, equity and fixed-income indices and other
instruments, purchase and sell futures contracts and options thereon, enter
into various transactions such as swaps, caps, floors, and collars, and may
enter into currency forward contracts, currency futures contracts, currency
swaps or options on currencies, or various other currency transactions. In
addition, a fund may invest in structured notes. The types of derivatives
identified above are not intended to be exhaustive and a fund may use types of
derivatives and/or employ derivatives strategies not otherwise described in
this Statement of Additional Information or a fund's prospectuses.


OTC derivatives are purchased from or sold to securities dealers, financial
institutions or other parties (Counterparties) pursuant to an agreement with
the Counterparty. As a result, a significant risk of OTC derivatives is
counterparty risk. The Advisor monitors the creditworthiness of OTC derivative
counterparties and periodically reports to the Board with respect to the
creditworthiness of OTC derivative counterparties.


A fund may use derivatives (subject to certain limits imposed by a fund's
investment objective and policies (see Investment Restrictions) and the 1940
Act, or by the requirements for a fund to qualify as a regulated investment
company for tax purposes (see Taxes) (i) to seek to achieve returns, (ii) to
attempt to protect against possible changes in the market value of securities
held in or to be purchased for a fund's portfolio resulting from securities
markets or currency exchange rate fluctuations, (iii) to protect a fund's
unrealized gains in the value of its portfolio securities, (iv) to facilitate
the sale of such securities for investment purposes, (v) to manage the
effective maturity or duration of a fund's portfolio, (vi) to establish a
position in the derivatives markets as a substitute for purchasing or selling
particular securities, (vii) for funds that invest in foreign securities, to
increase exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one currency to another (not necessarily the US
dollar), or (viii) for any other purposes permitted by law.


A fund may decide not to employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If the Advisor
incorrectly forecasts interest rates, market values or other economic factors
in using a derivatives strategy for a fund, a fund might have been in a better
position if it had not entered into the transaction at all. Also, suitable
derivatives may not be available in all circumstances. The use of these
strategies involves certain special risks, including a possible imperfect
correlation, or even no correlation, between price movements of derivatives and
price movements of related investments. While some strategies involving
derivatives can reduce risk of loss, they can also reduce the opportunity for
gain or even result in losses by offsetting favorable price movements in
related investments or otherwise, due to the possible inability of a fund to
purchase or sell a portfolio security at a time that otherwise would be
favorable or the possible need to sell a portfolio security at a
disadvantageous time because a fund is required to maintain asset coverage or
offsetting positions in connection with transactions in derivatives (refer to
Asset Segregation for more information relating to asset segregation and cover
requirements for derivatives instruments), and the possible inability of a fund
to close out or liquidate its derivatives positions.


General Characteristics of Options. A put option gives the purchaser of the
option, upon payment of a premium, the right to sell, and the writer the
obligation to buy, the underlying security, commodity, index, currency or other
instrument at the exercise price. For instance, a fund's purchase of a put
option on a security might be designed to protect its holdings in the
underlying instrument (or, in some cases, a similar instrument) against a
substantial decline in the market value by giving a fund the right to sell such
instrument at the option exercise price. A call option, upon payment of a
premium, gives the purchaser of the option the right to buy, and the seller the
obligation to sell, the underlying instrument at the exercise price. A fund's
purchase of a call option on a security, commodity, index, currency or other
instrument might be intended to protect a fund against an increase in the price
of the underlying instrument that it intends to purchase in the future by
fixing the price at which it may purchase such instrument. If a fund sells or
"writes" a call option, the premium that it receives may partially offset, to
the extent of the option premium, a decrease in the value of the underlying
securities or instruments in its portfolio or may increase a fund's income. The
sale of put options can also provide income and might be used to protect a fund
against an increase in the price of the underlying instrument or provide, in
the opinion of portfolio management, an acceptable entry point with regard to
the underlying instrument.


A fund may write call options only if they are "covered." A written call option
is covered if a fund owns the security or instrument underlying the call or has
an absolute right to acquire that security or instrument without additional
cash consideration (or if additional cash consideration is required, liquid
assets in the amount of a fund's obligation


                                     II-85
<PAGE>

are segregated according to the procedures and policies adopted by the Board).
For a call option on an index, the option is covered if a fund segregates
liquid assets equal to the contract value to the extent required by SEC
guidelines. A call option is also covered if a fund holds a call on the same
security, index or instrument as the written call option where the exercise
price of the purchased call (long position) is (i) equal to or less than the
exercise price of the call written, or (ii) greater than the exercise price of
the call written provided that liquid assets equal to the difference between
the exercise prices are segregated to the extent required by SEC guidelines
(see Asset Segregation). Exchange listed options are issued and cleared by a
regulated intermediary such as the Options Clearing Corporation (OCC). The OCC
ensures that the obligations of each option it clears are fulfilled. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries. OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, or cash
delivery for the net amount, if any, by which the option is "in-the-money"
(i.e., where the value of the underlying instrument exceeds, in the case of a
call option, or is less than, in the case of a put option, the exercise price
of the option) at the time the option is exercised. Frequently, rather than
taking or making delivery of the underlying instrument through the process of
exercising the option, listed options are closed by entering into offsetting
purchase or sale transactions that do not result in ownership of the new
option.


As noted above, OTC options are purchased from or sold to Counterparties
through direct bilateral agreement with the Counterparty. In contrast to
exchange listed options, which generally have standardized terms and
performance mechanics, all the terms of an OTC option, including such terms as
method of settlement, term, exercise price, premium, guarantees and security,
are set by negotiation of the parties. Unless the parties provide for it, there
is no central clearing or guaranty function in an OTC option. As a result, if
the Counterparty fails to make or take delivery of the security, currency or
other instrument underlying an OTC option it has entered into with a fund or
fails to make a cash settlement payment due in accordance with the terms of
that option, a fund will lose any premium it paid for the option as well as any
anticipated benefit of the transaction.


There are several risks associated with transactions in options. Options on
particular securities or instruments may be more volatile than a direct
investment in the underlying security or instrument. Additionally, there are
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
options transaction not to achieve its objective. Disruptions in the markets
for the securities underlying options purchased or sold by a fund could result
in losses on the options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as well. As a
result, a fund as purchaser or writer of an option will be unable to close out
its positions until options trading resumes, and it may be faced with losses if
trading in the security reopens at a substantially different price. In
addition, the OCC or other options markets may impose exercise restrictions. If
a prohibition on exercise is imposed at a time when trading in the option has
also been halted, a fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by a fund has
expired, a fund could lose the entire value of its option.


During the option period, the covered call writer has, in return for the
premium on the option, given up the opportunity to profit from a price increase
in the underlying security or instrument above the exercise price, but as long
as its obligations as a writer continues, has retained the risk of loss should
the price of the underlying security or instrument decline. The writer of an
option has no control over the time when it may be required to fulfill its
obligations as a writer of the option. In writing put options, there is a risk
that a fund may be required to buy the underlying security or instrument at a
disadvantageous price if the put option is exercised against a fund. If a put
or call option purchased by a fund is not sold when it has remaining value, and
if the market price of the underlying security or instrument remains, in the
case of a put, equal to or greater than the exercise price, or in the case of a
call, less than or equal to the exercise price, a fund will lose the premium
that it paid for the option. Also, where a put or call option is purchased as a
hedge against price movements in the underlying security or instrument, the
price of the put or call option may move more or less than the price of the
underlying security or instrument.


A fund's ability to close out its position as a purchaser or seller of an OTC
option or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange;
(iii) trading halts, suspensions or other restrictions imposed with respect to
particular classes


                                     II-86
<PAGE>

or series of options or underlying securities including reaching daily price
limits; (iv) interruption of the normal operations of the OCC or an exchange;
(v) inadequacy of the facilities of an exchange or OCC to handle current
trading volume; or (vi) a decision by one or more exchanges to discontinue the
trading of options (or a particular class or series of options), in which event
the relevant market for that option on that exchange would cease to exist,
although outstanding options on that exchange would generally continue to be
exercisable in accordance with their terms.


Special risks are presented by internationally traded options. Because of the
differences in trading hours between the US and various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when US markets are
closed. As a result, option premiums may not reflect the current prices of the
underlying interests in the US.


General Characteristics of Futures Contracts and Options on Futures Contracts.
A futures contract is an agreement between two parties to buy or sell a
financial instrument or commodity for a set price on a future date. Futures are
generally bought and sold on the commodities exchanges where they are listed
with payment of initial and variation margin as described below. A futures
contract generally obligates the purchaser to take delivery from the seller the
specific type of financial instrument or commodity underlying the contract at a
specific future time for a set price. The purchase of a futures contract
enables a fund, during the term of the contract, to lock in the price at which
it may purchase a security, currency or commodity and protect against a rise in
prices pending the purchase of portfolio securities. A futures contract
generally obligates the seller to deliver to the buyer the specific type of
financial instrument underlying the contract at a specific future time for a
set price. The sale of a futures contract enables a fund to lock in a price at
which it may sell a security, currency or commodity and protect against
declines in the value of portfolio securities. Options on futures contracts are
similar to options on securities except that 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 and obligates the seller to deliver such
position.


Although most futures contracts call for actual delivery or acceptance of the
underlying financial instrument or commodity, the contracts are usually closed
out before the settlement date without making, or taking, actual delivery.
Futures contracts on financial indices, currency exchange instruments and
certain other instruments provide for the delivery of an amount of cash equal
to a specified dollar amount times the difference between the underlying
instruments value (i.e., the index) at the open or close of the last trading
day of the contract and futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of underlying financial instrument and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of underlying financial instrument or commodity and the same delivery
date. If the offsetting sale price exceeds the purchase price, the purchaser
would realize a gain, whereas if the purchase price exceeds the offsetting sale
price, the purchaser would realize a loss. There can be no assurance that a
fund will be able to enter into a closing transaction.


When a purchase or sale of a futures contract is made, a fund is required to
deposit with the financial intermediary as security for its obligations under
the contract an "initial margin" consisting of cash, US Government Securities
or other liquid assets typically ranging from approximately less than 1% to 15%
of the contract amount. The initial margin is set by the exchange on which the
contract is traded and may, from time to time, be modified. In addition,
brokers may establish margin deposit requirements in excess of those required
by the exchange. The margin deposits made are marked to market daily and a fund
may be required to make subsequent deposits of cash, US Government securities
or other liquid assets, called "variation margin" or "maintenance margin,"
which reflects the price fluctuations of the futures contract. The purchase of
an option on a futures contract involves payment of a premium for the option
without any further obligation on the part of a fund. The sale of an option on
a futures contract involves receipt of a premium for the option and the
obligation to deliver (by physical or cash settlement) the underlying futures
contract. If a fund exercises an option on a futures contract it will be
obligated to post initial margin (and potential subsequent variation margin)
for the resulting futures position just as it would for any position.


                                     II-87
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Pursuant to a claim filed with the Commodity Futures Trading Commission (CFTC)
on behalf of a fund, neither the registrant nor a fund is deemed to be a
"commodity pool operator" under the Commodity Exchange Act. Therefore, a fund
is not subject to registration and regulation under the Commodity Exchange Act.
The Advisor is not deemed to be a "commodity pool operator" with respect to its
services as Advisor.


There are several risks associated with futures contracts and options on
futures contracts. The prices of financial instruments or commodities subject
to futures contracts (and thereby the futures contract prices) may correlate
imperfectly with the behavior of the cash price of a fund's securities or other
assets (and the currencies in which they are denominated). Also, prices of
futures contracts may not move in tandem with the changes in prevailing
interest rates, market movements and/or currency exchange rates against which a
fund seeks a hedge. Additionally, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which a fund may
invest. In the event a liquid market does not exist, it may not be possible to
close out a futures position and, in the event of adverse price movements, a
fund would continue to be required to make daily payments of variation margin.
The absence of a liquid market in futures contracts might cause a fund to make
or take delivery of the instruments or commodities underlying futures contracts
at a time when it may be disadvantageous to do so. The inability to close out
positions and futures positions could also have an adverse impact on a fund's
ability to effectively hedge its positions.


The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the relatively low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. Thus, a purchase or
sale of a futures contract may result in losses in excess of the amount
invested in the contract.


Futures contracts and options thereon which are purchased or sold on non-US
commodities exchanges may have greater price volatility than their US
counterparts. Furthermore, non-US commodities exchanges may be less regulated
and under less governmental scrutiny than US exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on non-US exchanges.


In the event of the bankruptcy of a broker through which a fund engages in
transactions in futures or options thereon, a fund could experience delays
and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss on all or part of its margin deposits with the
broker.


Currency Transactions. Currency transactions include forward currency
contracts, exchange listed currency futures, exchange listed and OTC options on
currencies, and currency swaps. A forward currency contract involves a
privately negotiated obligation to purchase or sell (with delivery generally
required) a specific currency at a future date, which may be any fixed number
of days from the date of the contract agreed upon by the parties, at a price
set at the time of the contract. Forward contracts are generally traded in an
interbank market directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the contract
to maturity and complete the contemplated currency exchange. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below.


"Transaction hedging" is entering into a currency transaction with respect to
specific assets or liabilities of a fund, which will generally arise in
connection with the purchase or sale of its portfolio securities or the receipt
of income therefrom. Entering into a forward contract for the purchase or sale
of an amount of foreign currency involved in an underlying security transaction
may "lock in" the US dollar price of the security. Forward contracts may also
be used in anticipation of future purchases and sales of securities, even if
specific securities have not yet been selected. "Position hedging" is entering
into a currency transaction with respect to portfolio security positions
denominated or generally quoted in that currency. Position hedging may protect
against a decline in the value of existing investments denominated in the
foreign currency. While such a transaction would generally offset both positive
and negative currency fluctuations, such currency transactions would not offset
changes in security values caused by other factors.


A fund may also "cross-hedge" currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which a fund has or to which a fund expects to
have portfolio exposure. This type of investment technique will generally
reduce or eliminate exposure to the currency


                                     II-88
<PAGE>

that is sold, and increase the exposure to the currency that is purchased. As a
result, a fund will assume the risk of fluctuations in the value of the
currency purchased at the same time that it is protected against losses from a
decline in the hedged currency.


To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, a fund may also engage in "proxy
hedging." Proxy hedging is often used when the currency to which a fund is
exposed is difficult to hedge or to hedge against the dollar. Proxy hedging
entails entering into a commitment or option to sell a currency whose changes
in value are generally considered to be correlated to a currency or currencies
in which some or all of a fund's securities are or are expected to be
denominated. Proxy hedges may result in losses if the currency used to hedge
does not perform similarly to the currency in which the hedged securities are
denominated.


Currency hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to a fund if the currency being hedged fluctuates in value to a degree
or in a direction that is not anticipated. Further, there is the risk that the
perceived correlation between various currencies may not be present or may not
be present during the particular time that a fund is engaging in proxy hedging.



Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to a fund if it
is unable to deliver or receive currency or funds in settlement of obligations
and could also cause hedges it has entered into to be rendered useless,
resulting in full currency exposure as well as incurring transaction costs.
Currency exchange rates, bid/ask spreads and liquidity may fluctuate based on
factors that may, or may not be, related to that country's economy.


Swap Agreements and Options on Swap Agreements. A fund may engage in swap
transactions, including, but not limited to, swap agreements on interest rates,
currencies, indices, credit and event linked swaps, total return and other
swaps and related caps, floors and collars. Swap agreements are two party
contracts ranging from a few weeks to more than one year. In a standard swap
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on a predetermined financial instrument or
instruments, which may be adjusted for an interest factor. The gross return to
be exchanged or "swapped" between the parties is generally calculated with
respect to a "notional amount" which is generally equal to the return on or
increase in value of a particular dollar amount invested at a particular
interest rate in such financial instrument or instruments.


"Interest rate swaps" involve the exchange by a fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional
amount of principal. A "currency swap" is an agreement to exchange cash flows
on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.


A "credit default swap" is a contract between a buyer and a seller of
protection against a pre-defined credit event. The buyer of protection pays the
seller a fixed regular fee provided that no event of default on an underlying
reference obligation has occurred. If an event of default occurs, the seller
must pay the buyer the full notional value, or "par value," of the reference
obligation in exchange for the reference obligation. Credit default swaps are
used as a means of "buying" credit protection, i.e., attempting to mitigate the
risk of default or credit quality deterioration in some portion of a fund's
holdings, or "selling" credit protection, i.e., attempting to gain exposure to
an underlying issuer's credit quality characteristics without directly
investing in that issuer. When a fund is a seller of credit protection, it


                                     II-89
<PAGE>

effectively adds leverage to its portfolio because, in addition, to its net
assets, a fund would be subject to investment exposure on the notional amount
of the swap. A fund will only sell credit protection with respect to securities
in which it would be authorized to invest directly.


If a fund is a buyer of a credit default swap and no event of default occurs, a
fund will lose its investment and recover nothing. However, if a fund is a
buyer and an event of default occurs, a fund will receive the full notional
value of the reference obligation that may have little or no value. As a
seller, a fund receives a fixed rate of income through the term of the contract
(typically between six months and three years), provided that there is no
default event. If an event of default occurs, the seller must pay the buyer the
full notional value of the reference obligation.


Credit default swaps involve greater risks than if a fund had invested in the
reference obligation directly. In addition to the risks applicable to
derivatives generally, credit default swaps involve special risks because they
are difficult to value, are highly susceptible to liquidity and credit risk,
and generally pay a return to the party that has paid the premium only in the
event of an actual default by the issuers of the underlying obligation (as
opposed to a credit downgrade or other indication of financial difficulty).


A fund may use credit default swaps to gain exposure to particular issuers or
particular markets through investments in portfolios of credit default swaps,
such as Dow Jones CDX.NA.HY certificates. By investing in certificates
representing interests in a basket of credit default swaps, a fund is taking
credit risk with respect to an entity or group of entities and providing credit
protection to the swap counterparties.


"Total return" swaps are contracts in which one party agrees to make periodic
payments to another party based on the change in market value of the assets
underlying the contract, which may include a specific security, basket of
securities or securities indices during the specified period, in return for
periodic payments based on a fixed or variable interest rate or the total
return of other underlying assets. Total return swap agreements may be used to
obtain exposure to a security or market without owning or taking physical
custody of such security or investing directly in such market. Total return
swaps may add leverage to a fund because, in addition to its net assets, a fund
would be subject to investment exposure on the notional amount of the swap.


Swaps typically involve a small investment of cash relative to the magnitude of
risks assumed. As a result, swaps can be highly volatile and may have a
considerable impact on a fund's performance. Depending on how they are used,
swaps may increase or decrease the overall volatility of a fund's investments
and its share price and yield. A 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 instrument, with a fund receiving or
paying, as the case may be, only the net amount of the two payments.


A fund bears the risk of loss of the amount expected to be received under a
swap in the event of the default or bankruptcy of a Counterparty. In addition,
if the Counterparty's creditworthiness declines, the value of a swap will
likely decline, potentially resulting in losses for a fund. A fund may also
suffer losses if it is unable to terminate outstanding swaps (either by
assignment or other disposition) or reduce its exposure through offsetting
transactions (i.e., by entering into an offsetting swap with the same party or
similarly creditworthy party).


A fund may also enter into swap options. A swap option is a contract that gives
a counterparty the right (but not the obligation) in return for payment of a
premium, to enter into a new swap agreement or to shorten, extend, cancel or
otherwise modify an existing swap agreement, at some future time on specified
terms. Depending on the terms, a fund will generally incur greater risk when it
writes a swap option than when it purchases a swap option. When a fund
purchases a swap option, it risks losing the amount of the premium it has paid
should it decide to let the option expire.


Structured Notes. Structured notes are derivative debt securities, the interest
rate or principal of which is determined by reference to changes in value of a
specific security, reference rate, or index. Indexed securities, similar to
structured notes, are typically, but not always, debt securities whose value at
maturity or coupon rate is determined by reference to other securities. The
performance of a structured note or indexed security is based upon the
performance of the underlying instrument.


                                     II-90
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The terms of a structured note may provide that, in certain circumstances, no
principal is due on maturity and, therefore, may result in loss of investment.
Structured notes may be indexed positively or negatively to the performance of
the underlying instrument such that the appreciation or deprecation of the
underlying instrument will have a similar effect to the value of the structured
note at maturity at the time of any coupon payment. In addition, changes in the
interest rate and value of the principal at maturity may be fixed at a specific
multiple of the change in value of the underlying instrument, making the value
of the structured note more volatile than the underlying instrument. In
addition, structured notes may be less liquid and more difficult to price
accurately than less complex securities or traditional debt securities.


Commodity-Linked Derivatives. A fund may invest in instruments with principal
and/or coupon payments linked to the value of commodities, commodity futures
contracts, or the performance of commodity indices such as "commodity-linked"
or "index-linked" notes. These instruments are sometimes referred to as
"structured notes" because the terms of the instrument may be structured by the
issuer of the note and the purchaser of the note, such as a fund.


The values of commodity-linked notes will rise and fall in response to changes
in the underlying commodity or related index or investment. These notes expose
a fund economically to movements in commodity prices, but a particular note has
many features of a debt obligation. These notes also are subject to credit and
interest rate risks that in general affect the value of debt securities.
Therefore, at the maturity of the note, a fund may receive more or less
principal than it originally invested. A fund might receive interest payments
on the note that are more or less than the stated coupon interest rate
payments.


Commodity-linked notes may involve leverage, meaning that the value of the
instrument will be calculated as a multiple of the upward or downward price
movement of the underlying commodity future or index. The prices of
commodity-linked instruments may move in different directions than investments
in traditional equity and debt securities in periods of rising inflation. Of
course, there can be no guarantee that a fund's commodity-linked investments
would not be correlated with traditional financial assets under any particular
market conditions.


Commodity-linked notes may be issued by US and foreign banks, brokerage firms,
insurance companies and other corporations. These notes, in addition to
fluctuating in response to changes in the underlying commodity assets, will be
subject to credit and interest rate risks that typically affect debt
securities.


Commodity-linked notes may be wholly principal protected, partially principal
protected or offer no principal protection. With a wholly principal protected
instrument, a fund will receive at maturity the greater of the par value of the
note or the increase in value of the underlying index. Partially protected
instruments may suffer some loss of principal up to a specified limit if the
underlying index declines in value during the term of the instrument. For
instruments without principal protection, there is a risk that the instrument
could lose all of its value if the index declines sufficiently. The Advisor's
decision on whether and to what extent to use principal protection depends in
part on the cost of the protection. In addition, the ability of a fund to take
advantage of any protection feature depends on the creditworthiness of the
issuer of the instrument.


Commodity-linked notes are generally hybrid instruments which are excluded from
regulation under the CEA and the rules thereunder. Additionally, from time to
time a fund may invest in other hybrid instruments that do not qualify for
exemption from regulation under the CEA.


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


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DIRECT DEBT INSTRUMENTS. Direct debt instruments are interests in amounts owed
by a corporate, governmental or other borrower to lenders (direct loans), to
suppliers of goods or services (trade claims or other receivables) or to other
parties. When a fund participates in a direct loan it will be lending money
directly to an issuer. Direct loans generally do not have an underwriter or
agent bank, but instead, are negotiated between a company's management team and
a lender or group of lenders. Direct loans typically offer better security and
structural terms than other types of high yield securities. Direct debt
obligations are often the most senior obligations in an issuer's capital
structure or are well-collateralized so that overall risk is lessened. Trade
claims are unsecured rights of payment arising from obligations other than
borrowed funds. Trade claims include vendor claims and other receivables that
are adequately documented and available for purchase from high-yield
broker-dealers. Trade claims typically sell at a discount. In addition to the
risks otherwise associated with low-quality obligations, trade claims have
other risks, including the possibility that the amount of the claim may be
disputed by the obligor. Trade claims normally would be considered illiquid and
pricing can be volatile. Direct debt instruments involve a risk of loss in case
of default or insolvency of the borrower. A fund will rely primarily upon the
creditworthiness of the borrower and/or the collateral for payment of interest
and repayment of principal. The value of a fund's investments may be adversely
affected if scheduled interest or principal payments are not made. Because most
direct loans will be secured, there will be a smaller risk of loss with direct
loans than with an investment in unsecured high yield bonds or trade claims.
Investment in the indebtedness of borrowers whose creditworthiness is poor
involves substantially greater risks and may be highly speculative. Borrowers
that are in bankruptcy or restructuring may never pay off their indebtedness or
may pay only a small fraction of the amount owed. Investments in direct debt
instruments also involve interest rate risk and liquidity risk. However,
interest rate risk is lessened by the generally short-term nature of direct
debt instruments and their interest rate structure, which typically floats. To
the extent the direct debt instruments in which a fund invests are considered
illiquid, the lack of a liquid secondary market (1) will have an adverse impact
on the value of such instruments, (2) will have an adverse impact on a fund's
ability to dispose of them when necessary to meet a fund's liquidity needs or
in response to a specific economic event, such as a decline in creditworthiness
of the issuer, and (3) may make it more difficult for a fund to assign a value
to these instruments for purposes of valuing a fund's portfolio and calculating
its net asset value. In order to lessen liquidity risk, a fund anticipates
investing primarily in direct debt instruments that are quoted and traded in
the high yield market. Trade claims may also present a tax risk to a fund.


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


A dollar roll involves costs to a fund. For example, while a fund receives a
fee as consideration for agreeing to repurchase the security, a fund forgoes
the right to receive all principal and interest payments while the counterparty
holds the security. These payments to the counterparty may exceed the fee
received by a fund, in which case the use of this technique will result in a
lower return than would have been realized without the use of dollar rolls.
Further, although a fund can estimate the amount of expected principal
prepayment over the term of the dollar roll, a variation in the actual amount
of prepayment could increase or decrease the cost of the dollar roll. A
"covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position which matures
on or before the forward settlement date of the dollar roll transaction. A fund
may enter into both covered and uncovered rolls.


The entry into dollar rolls involves potential risks of loss that are different
from those related to the securities underlying the transactions. A fund will
be exposed to counterparty risk. For example, if the counterparty becomes
insolvent, a fund's right to purchase from the counterparty might be
restricted. Additionally, the value of such securities may change adversely
before a fund is able to purchase them. Similarly, a fund may be required to
purchase securities in connection with a dollar roll at a higher price than may
otherwise be available on the open market. Since, as noted above, the


                                     II-92
<PAGE>

counterparty is required to deliver a similar, but not identical security to a
fund, the security that a fund is required to buy under the dollar roll may be
worth less than the identical security. Finally, there can be no assurance that
a fund's use of the cash that it receives from a dollar roll will provide a
return that exceeds transaction costs associated with the dollar roll.


EURODOLLAR OBLIGATIONS. Eurodollar bank obligations are US dollar-denominated
certificates of deposit and time deposits issued outside the US capital markets
by foreign branches of US banks and US branches of foreign banks. Eurodollar
obligations are subject to the same risks that pertain to domestic issues,
notably credit risk, market risk and liquidity risk. Additionally, Eurodollar
obligations are subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from flowing across its borders. Other risks include: adverse
political and economic developments; the extent and quality of government
regulation of financial markets and institutions; the imposition of foreign
withholding taxes, and the expropriation or nationalization of foreign issues.


FIXED INCOME SECURITIES. Fixed income securities, including corporate debt
obligations, generally expose a fund to the following 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 a
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 a fund); (4) prepayment risk or call risk (the
likelihood that, during periods of falling interest rates, securities with high
stated interest rates will be prepaid, or "called" prior to maturity, requiring
a 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).


In periods of declining interest rates, the yield (income from a fixed income
security held by a fund over a stated period of time) of a fixed income
security may tend to be higher than prevailing market rates, and in periods of
rising interest rates, the yield of a fixed income security may tend to be
lower than prevailing market rates. In addition, when interest rates are
falling, the inflow of net new money to a fund will likely be invested in
portfolio instruments producing lower yields than the balance of a fund's
portfolio, thereby reducing the yield of a fund. In periods of rising interest
rates, the opposite can be true. The net asset value of a fund can generally be
expected to change as general levels of interest rates fluctuate. The value of
fixed income securities in a 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.


Corporate debt obligations generally offer less current yield than securities
of lower quality, but lower-quality securities generally have less liquidity,
greater credit and market risk, and as a result, more price volatility.


FOREIGN CURRENCIES. Because investments in foreign securities usually will
involve currencies of foreign countries, and because a fund may hold foreign
currencies and forward contracts, futures contracts and options on foreign
currencies and foreign currency futures contracts, the value of the assets of a
fund as measured in US dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations,
and a fund may incur costs and experience conversion difficulties and
uncertainties in connection with conversions between various currencies.
Fluctuations in exchange rates may also affect the earning power and asset
value of the foreign entity issuing the security.


The strength or weakness of the US dollar against these currencies is
responsible for part of a fund's investment performance. If the dollar falls in
value relative to the Japanese yen, for example, the dollar value of a Japanese
stock held in the portfolio will rise even though the price of the stock
remains unchanged. Conversely, if the dollar rises in value relative to the
yen, the dollar value of the Japanese stock will fall. Many foreign currencies
have experienced significant devaluation relative to the dollar.


Although a fund values its assets daily in terms of US dollars, it may not
convert its holdings of foreign currencies into US dollars on a daily basis.
Investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they realize a profit
based on the difference (the spread) between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a


                                     II-93
<PAGE>

fund at one rate, while offering a lesser rate of exchange should a fund desire
to resell that currency to the dealer. A fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
options or forward or futures contracts to purchase or sell foreign currencies.



FOREIGN INVESTMENT. Foreign securities are normally denominated and traded in
foreign currencies. As a result, the value of a 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 a 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 a 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 (see Taxes). 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 a fund's
ability to invest in securities of certain issuers organized under the laws of
those foreign countries.


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.


                                     II-94
<PAGE>

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, a 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 a fund's securities in such markets may
not be readily available. A fund may suspend redemption of its shares for any
period during which an emergency exists.


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.


Supranational Entities. Supranational entities are international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and
related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), The Asian Development Bank and
the InterAmerican Development Bank. Obligations of supranational entities are
backed by the guarantee of one or more foreign governmental parties which
sponsor the entity.


FUNDING AGREEMENTS. Funding agreements are contracts issued by insurance
companies that provide investors the right to receive a variable rate of
interest and the full return of principal at maturity. Funding agreements also
include a put option that allows a fund to terminate the agreement at a
specified time prior to maturity. Funding agreements generally offer a higher
yield than other variable securities with similar credit ratings. The primary
risk of a funding agreement is the credit quality of the insurance company that
issues it.


GOLD OR PRECIOUS METALS. Gold and other precious metals held by or on behalf of
a fund may be held on either an allocated or an unallocated basis inside or
outside the US. Placing gold or precious metals in an allocated custody account
gives a fund a direct interest in specified gold bars or precious metals,
whereas an unallocated deposit does not and instead gives a fund a right only
to compel the counterparty to deliver a specific amount of gold or precious
metals, as applicable. Consequently, a fund could experience a loss if the
counterparty to an unallocated depository arrangement becomes bankrupt or fails
to deliver the gold or precious metals as requested. An allocated gold or
precious metals custody account also involves the risk that the gold or
precious metals will be stolen or damaged while in transit. Both allocated and
unallocated arrangements require a fund as seller to deliver, either by book
entry or physically, the gold or precious metals sold in advance of the receipt
of payment. These custody risks would apply to a wholly-owned subsidiary of a
fund to the extent the subsidiary holds gold or precious metals.


In addition, in order to qualify for the special tax treatment accorded
regulated investment companies and their shareholders, a fund must, among other
things, derive at least 90% of its income from certain specified sources
(qualifying income). Capital gains from the sale of gold or other precious
metals will not constitute qualifying income. As a result, a fund may not be
able to sell or otherwise dispose of all or a portion of its gold or precious
metal holdings without realizing significant adverse tax consequences,
including the failure to qualify as a regulated investment company under
Subchapter M of the Code. Rather than incur those tax consequences, a fund may
choose to hold some amount of gold or precious metal that it would otherwise
sell.


HEDGE FUNDS. A fund may seek exposure to alternative asset classes or
strategies through investment in hedge funds. A fund may substitute derivative
instruments, including warrants and swaps, whose values are tied to the value
of underlying hedge funds in lieu of a direct investment in hedge funds. A
derivative instrument whose value is tied


                                     II-95
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to one or more hedge funds or hedge fund indices will be subject to the market
and other risks associated with the underlying assets held by the hedge fund.
Hedge funds are not subject to the provisions of the 1940 Act or the reporting
requirements of the Securities Exchange Act of 1934, as amended, and their
advisors may not be subject to the Investment Advisers Act of 1940, as amended.
Investments in hedge funds are illiquid and may be less transparent than an
investment in a registered mutual fund. There are no market quotes for
securities of hedge funds and hedge funds generally value their interests no
more frequently than monthly or quarterly, in some cases. An investment in a
derivative instrument based on a hedge fund may be subject to some or all of
the structural risks associated with a direct investment in a hedge fund.


HIGH YIELD FIXED INCOME SECURITIES - JUNK BONDS. A fund may purchase debt
securities which are rated below investment-grade (junk bonds), that is, rated
below Ba by Moody's or below BB by S&P and unrated securities judged to be of
equivalent quality as determined by the Advisor. These securities usually
entail greater risk (including the possibility of default or bankruptcy of the
issuers of such securities), generally involve greater volatility of price and
risk to principal and income, and may be less liquid, than securities in the
higher rating categories. The lower the ratings of such debt securities, the
more their risks render them like equity securities. Securities rated D may be
in default with respect to payment of principal or interest. Investments in
high yield securities are described as "speculative" by ratings agencies.
Securities ranked in the lowest investment grade category may also be
considered speculative by certain ratings agencies. See the Appendix to this
SAI for a more complete description of the ratings assigned by ratings
organizations and their respective characteristics.


Issuers of such high yielding securities often are highly leveraged and may not
have available to them more traditional methods of financing. Therefore, the
risk associated with acquiring the securities of such issuers generally is
greater than is the case with higher rated securities. For example, during an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet
their interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss from default by the
issuer is significantly greater for the holders of high yield securities
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer. Prices and yields of high yield securities will
fluctuate over time and, during periods of economic uncertainty, volatility of
high yield securities may adversely affect a fund's net asset value. In
addition, investments in high yield zero coupon or pay-in-kind bonds, rather
than income-bearing high yield securities, may be more speculative and may be
subject to greater fluctuations in value due to changes in interest rates.


A fund may have difficulty disposing of certain high yield securities because
they may have a thin trading market. Because not all dealers maintain markets
in all high yield securities, a fund anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. The lack
of a liquid secondary market may have an adverse effect on the market price and
a fund's ability to dispose of particular issues and may also make it more
difficult for a fund to obtain accurate market quotations for purposes of
valuing a fund's assets. Market quotations generally are available on many high
yield issues only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. Adverse
publicity and investor perceptions may decrease the values and liquidity of
high yield securities. These securities may also involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Even though such securities do not pay current interest in cash,
a fund nonetheless is required to accrue interest income on these investments
and to distribute the interest income on a current basis. Thus, a fund could be
required at times to liquidate other investments in order to satisfy its
distribution requirements.


Credit quality in the high-yield securities market can change suddenly and
unexpectedly, and even recently issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security.


Prices for below investment-grade securities may be affected by legislative and
regulatory developments. Also, Congress has from time to time considered
legislation which would restrict or eliminate the corporate tax deduction for
interest payments on these securities and regulate corporate restructurings.
Such legislation may significantly depress the prices of outstanding securities
of this type.


                                     II-96
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iGAP OVERLAY STRATEGY. In addition to a fund's main investment strategy, the
Advisor seeks to enhance returns by employing a global tactical asset
allocation (GTAA) overlay strategy. The GTAA strategy, which the Advisor calls
iGAP (integrated Global Alpha Platform), is a total return strategy designed to
add value by benefiting from mispricings within global bond (and in some cases,
equity) and currency markets. The iGAP strategy combines diverse macro
investment views from various investment teams within Deutsche Asset
Management. Since 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 bonds (and in some cases, equities) and currencies (and in some
cases, commodities) designed to generate excess returns that have little
correlation to major markets. The bond and currency positions are then
implemented by the iGAP portfolio managers using futures and forward contracts.
The iGAP portfolio managers consider factors such as liquidity, cost, margin
requirement and credit quality when selecting the appropriate derivative
instrument.


The success of the iGAP strategy depends, in part, on the Advisor's ability to
analyze the correlation between various global markets and asset classes. If
the Advisor's correlation analysis proves to be incorrect, losses to a fund may
be significant and may substantially exceed the intended level of market
exposure for the iGAP strategy.


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. 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. Certain securities may be
deemed to be illiquid as a result of the Advisor's receipt from time to time of
material, non-public information about an issuer, which may limit the Advisor's
ability to trade such securities for the account of any of its clients,
including a fund. In some instances, these trading restrictions could continue
in effect for a substantial period of time. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. An investment in illiquid securities is subject
to the risk that should a fund desire to sell any of these securities when a
ready buyer is not available at a price that is deemed to be representative of
their value, the value of a fund's net assets could be adversely affected.


Mutual funds do not typically hold a significant amount of these restricted or
other illiquid securities because of the potential for delays on resale and
uncertainty in valuation. A mutual fund might also have to register such
restricted securities in order to dispose of them, resulting in additional
expense and delay. A fund selling its securities in a registered offering may
be deemed to be an "underwriter" for purposes of Section 11 of the 1933 Act. In
such event, a fund may be liable to purchasers of the securities under Section
11 if the registration statement prepared by the issuer, or the prospectus
forming a part of it, is materially inaccurate or misleading, although a fund
may have a due diligence defense. 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.


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An investment in Rule 144A Securities will be considered illiquid and therefore
subject to a fund's limit on the purchase of illiquid securities unless a
fund's Board or its delegates determines that the Rule 144A Securities are
liquid. In reaching liquidity decisions, a fund's Board and its delegates may
consider, inter alia, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security; and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).


Investing in Rule 144A Securities could have the effect of increasing the level
of illiquidity in a fund to the extent that qualified institutional buyers are
unavailable or uninterested in purchasing such securities from a fund. A fund's
Board has adopted guidelines and delegated to the Advisor the daily function of
determining and monitoring the liquidity of Rule 144A Securities, although a
fund's Board will retain ultimate responsibility for any liquidity
determinations.


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


INDEXED SECURITIES. A fund may invest in indexed securities, the value of which
is linked to currencies, interest rates, commodities, indices or other
financial indicators (reference instruments). Most indexed securities have
maturities of three years or less.


Indexed securities differ from other types of debt securities in which a fund
may invest in several respects. First, the interest rate or, unlike other debt
securities, the principal amount payable at maturity of an indexed security may
vary based on changes in one or more specified reference instruments, such as
an interest rate compared with a fixed interest rate or the currency exchange
rates between two currencies (neither of which need be the currency in which
the instrument is denominated). The reference instrument need not be related to
the terms of the indexed security. For example, the principal amount of a US
dollar denominated indexed security may vary based on the exchange rate of two
foreign currencies. An indexed security may be positively or negatively
indexed; that is, its value may increase or decrease if the value of the
reference instrument increases. Further, the change in the principal amount
payable or the interest rate of an indexed security may be a multiple of the
percentage change (positive or negative) in the value of the underlying
reference instrument(s).


Investment in indexed securities involves certain risks. In addition to the
credit risk of the security's issuer and the normal risks of price changes in
response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of reference
instruments. Further, in the case of certain indexed securities in which the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero, and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Also, indexed securities may
be more volatile than the reference instruments underlying the indexed
securities. Finally, a fund's investments in certain indexed securities may
generate taxable income in excess of the interest paid on the securities to a
fund, which may cause a fund to sell investments to obtain cash to make income
distributions (including at a time when it may not be advantageous to do so).


INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL BONDS. Industrial Development and
Pollution Control Bonds (which are types of private activity bonds), although
nominally issued by municipal authorities, are generally not secured by the
taxing power of the municipality, but are secured by the revenues of the
authority derived from payments by the industrial user. Consequently, the
credit quality of these securities depends upon the ability of the user of the
facilities financed by the bonds and any guarantor to meet its financial
obligations. Under federal tax legislation, certain types of Industrial
Development Bonds and Pollution Control Bonds may no longer be issued on a
tax-exempt basis, although previously issued bonds of these types and certain
refundings of such bonds are not affected.


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INFLATION-INDEXED BONDS. A fund may purchase inflation-indexed securities
issued by the US Treasury, US government agencies and instrumentalities other
than the US Treasury, and entities other than the US Treasury or US government
agencies and instrumentalities.


Inflation-indexed bonds are fixed income securities or other instruments whose
principal value is periodically adjusted according to the rate of inflation.
Two structures are common. The US Treasury and some other issuers use a
structure that accrues inflation on either a current or lagged basis into the
principal value of the bond. Most other issuers pay out the Consumer Price
Index accruals as part of a semi-annual coupon.


Inflation-indexed securities issued by the US Treasury have maturities of
approximately five, ten or twenty years, although it is possible that
securities with other maturities will be issued in the future. The US Treasury
securities pay interest on a semi-annual basis, equal to a fixed percentage of
the inflation-adjusted principal amount. For example, if a fund purchased an
inflation-indexed bond with a par value of $1,000 and a 3% real rate of return
coupon (payable 1.5% semi-annually), and the rate of inflation over the first
six months was 1%, the mid-year par value of the bond would be $1,010 and the
first semi-annual interest payment would be $15.15 ($1,010 times 1.5%). If the
rate of inflation during the second half of the year resulted in the whole
year's inflation equaling 3%, the end of year par value of the bond would be
$1,030 and the second semi-annual interest payment would be $15.45 ($1,030
times 1.5%).


If the periodic adjustment rate measuring inflation falls, the principal value
of inflation-indexed bonds will be adjusted downward, and, consequently, the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal on
maturity (as adjusted for inflation) is guaranteed in the case of US Treasury
inflation-indexed bonds, even during a period of deflation, although the
inflation-adjusted principal received could be less than the inflation-adjusted
principal that had accrued to the bond at the time of purchase. However, the
current market value of the bonds is not guaranteed and will fluctuate. A fund
may also invest in other inflation related bonds that may or may not provide a
similar guarantee. If a guarantee of principal is not provided, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal. In addition, if a fund purchases inflation-indexed bonds offered by
foreign issuers, the rate of inflation measured by the foreign inflation index
may not be correlated to the rate of inflation in the US.


The value of inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates, in turn, are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if the rate of inflation rises at a faster rate than nominal
interest rates, real interest rates might decline, leading to an increase in
value of inflation-indexed bonds. In contrast, if nominal interest rates
increased at a faster rate than inflation, real interest rates might rise,
leading to a decrease in value of inflation-indexed bonds. There can be no
assurance, however, that the value of inflation-indexed bonds will be directly
correlated to changes in interest rates. In the event of sustained deflation,
it is possible that the amount of semiannual interest payments, the
inflation-adjusted principal of the security and the value of the stripped
components, will decrease. If any of these possibilities are realized, a fund's
net asset value could be negatively affected.


While these securities are expected to provide protection from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.


The periodic adjustment of US inflation-indexed bonds is generally linked to
the Consumer Price Index for Urban Consumers (CPI-U), which is calculated
monthly by the US Bureau of Labor Statistics. The CPI-U is a measurement of
changes in the cost of living, made up of components such as housing, food,
transportation and energy. Inflation-indexed bonds issued by a foreign
government are generally adjusted to reflect a comparable inflation index
calculated by the applicable government. There can be no assurance that the
CPI-U or any foreign inflation index will accurately measure the real rate of
inflation in the prices of goods and services. Moreover, there can be no
assurance that the rate of inflation in a foreign country will be correlated to
the rate of inflation in the US. Finally, income distributions of a fund are
likely to fluctuate more than those of a conventional bond fund.


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The taxation of inflation-indexed US Treasury securities is similar to the
taxation of conventional bonds. Both interest payments and the difference
between original principal and the inflation-adjusted principal will be treated
as interest income subject to taxation. Interest payments are taxable when
received or accrued. The inflation adjustment to the principal is subject to
tax in the year the adjustment is made, not at maturity of the security when
the cash from the repayment of principal is received. If an upward adjustment
has been made (which typically should happen), investors in non-tax-deferred
accounts will pay taxes on this amount currently. Decreases in the indexed
principal can be deducted only from current or previous interest payments
reported as income.


Inflation-indexed US Treasury securities therefore have a potential cash flow
mismatch to an investor, because investors must pay taxes on the
inflation-adjusted principal before the repayment of principal is received. It
is possible that, particularly for high income tax bracket investors,
inflation-indexed US Treasury securities would not generate enough income in a
given year to cover the tax liability they could create. This is similar to the
current tax treatment for zero-coupon bonds and other discount securities. If
inflation-indexed US Treasury securities are sold prior to maturity, capital
losses or gains are realized in the same manner as traditional bonds.


Inflation-indexed securities are designed to offer a return linked to
inflation, thereby protecting future purchasing power of the money invested in
them. However, inflation-indexed securities provide this protected return only
if held to maturity. In addition, inflation-indexed securities may not trade at
par value. Real interest rates (the market rate of interest less the
anticipated rate of inflation) change over time as a result of many factors,
such as what investors are demanding as a true value for money. When real rates
do change, inflation-indexed securities prices will be more sensitive to these
changes than conventional bonds, because these securities were sold originally
based upon a real interest rate that is no longer prevailing. Should market
expectations for real interest rates rise, the price of inflation-indexed
securities held by a fund may fall, resulting in a decrease in the share price
of a fund.


INTERFUND BORROWING AND LENDING PROGRAM. The DWS funds have received exemptive
relief from the SEC, which permits the funds to participate in an interfund
lending program. The interfund lending program allows the participating funds
to borrow money from and loan money to each other for temporary or emergency
purposes. The program is subject to a number of conditions designed to ensure
fair and equitable treatment of all participating funds, including the
following: (1) no fund may borrow money through the program unless it receives
a more favorable interest rate than a rate approximating the lowest interest
rate at which bank loans would be available to any of the participating funds
under a loan agreement; and (2) no fund may lend money through the program
unless it receives a more favorable return than that available from an
investment in repurchase agreements and, to the extent applicable, money market
cash sweep arrangements. In addition, a fund may participate in the program
only if and to the extent that such participation is consistent with a fund's
investment objectives and policies (for instance, money market funds would
normally participate only as lenders and tax exempt funds only as borrowers).
Interfund loans and borrowings have a maximum duration of seven days. Loans may
be called on one day's notice. A fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed. Any delay
in repayment to a lending fund could result in a lost investment opportunity or
additional costs. The program is subject to the oversight and periodic review
of the Board.


INVERSE FLOATERS. A 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 a 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. A fund may enter into shortfall and
forbearance agreements by which a 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. A 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 in the credit
markets. An inverse floater may exhibit greater price volatility than a
fixed-rate obligation of similar credit quality. When a fund holds inverse
floating rate securities, an increase in market interest rates will adversely
affect the income received from such securities and the net asset value of a
fund's shares.


                                     II-100
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INVESTING IN EMERGING MARKETS. The world's industrialized markets generally
include but are not limited to the following: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, the United Kingdom, and the United States; the world's
emerging markets generally include but are not limited to the following:
Argentina, Botswana, Bolivia, Brazil, Bulgaria, Chile, China, Colombia, Costa
Rica, the Czech Republic, Ecuador, Egypt, Greece, Hungary, India, Indonesia,
Israel, the Ivory Coast, Jordan, Korea, Malaysia, Mexico, Morocco, Nicaragua,
Nigeria, Pakistan, Peru, Philippines, Poland, Romania, Russia, Slovakia,
Slovenia, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey,
Uruguay, Venezuela, Vietnam and Zimbabwe.


Investment in securities of issuers based in underdeveloped emerging markets
entails all of the risks of investing in securities of non-US issuers but to a
heightened degree. These heightened risks include: (1) greater risks of
expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability; (2) the smaller size of the market for such
securities and a low or nonexistent volume of trading, resulting in lack of
liquidity and in price volatility; and (3) certain national policies which may
restrict a fund's investment opportunities including restrictions on investing
in issuers or industries deemed sensitive to relevant national interests.


In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive than in
the United States. At times, such markets have been unable to keep pace with
the volume of securities transactions, making it difficult to conduct such
transactions. The inability of a fund to make intended securities purchases due
to settlement problems could cause a fund to miss attractive investment
opportunities. Inability to dispose of a security due to settlement problems
could result either in losses to a fund due to subsequent declines in the value
of the security or, if a fund has entered into a contract to sell the security,
could result in possible liability to the purchaser.


INVESTMENT COMPANY SECURITIES. A fund may acquire securities of other
investment companies to the extent that such investments are 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 investment companies which seek to track the
composition and performance of specific indexes or a specific portion of an
index. These index-based investment companies 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 that are traded on an exchange 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 (Reg. TM): 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 (Reg. TM): 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 (Reg. TM): 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.


                                     II-101
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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.


INVESTMENT-GRADE BONDS. A fund may purchase "investment-grade" bonds, which are
those rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated, judged to be of equivalent quality as determined by the Advisor.
Moody's considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics. To the extent that a fund invests in
higher-grade securities, a fund will not be able to avail itself of
opportunities for higher income which may be available at lower grades.


IPO RISK. Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and
may not have lengthy operating histories. A fund may engage in short-term
trading in connection with its IPO investments, which could produce higher
trading costs and adverse tax consequences.


LENDING OF PORTFOLIO SECURITIES. To generate additional income, a fund may lend
a percentage of 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, in exchange for collateral in the form of cash or US
government securities. By lending its investment securities, a fund attempts to
increase its net investment income through the receipt of interest on the loan.
Any gain or loss in the market price of the securities loaned that might occur
during the term of the loan would belong to a fund. A fund may lend its
investment securities so long as the terms, structure and the aggregate amount
of such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the SEC thereunder, which currently require
that (a) the borrower pledge and maintain with a 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 or the value of non-cash
collateral declines (i.e., the borrower "marks to the market" on a daily
basis), (c) the loan be made subject to termination by a fund at any time, and
(d) a fund receives a reasonable return on the loan (consisting of the return
achieved on investment of the cash collateral, less the rebate owed to
borrowers, plus distributions on the loaned securities and any increase in
their market value).


A fund may pay reasonable fees in connection with loaned securities, pursuant
to written contracts, including fees paid to a fund's custodian and fees paid
to a securities lending agent. Voting rights may pass with the loaned
securities, but if an event occurs that the Advisor determines to be a material
event affecting an investment on loan, the loan must be called and the
securities voted. Pursuant to an exemptive order granted by the SEC, cash
collateral received by a fund may be invested in a money market fund managed by
the Advisor (or one of its affiliates).


A fund is subject to all investment risks associated with the reinvestment of
any cash collateral received, including, but not limited to, interest rate,
credit and liquidity risk associated with such investments. To the extent the
value or return of a fund's investments of the cash collateral declines below
the amount owed to a borrower, a fund may incur losses that exceed the amount
it earned on lending the security. If the borrower defaults on its obligation
to return securities lent because of insolvency or other reasons, a fund could
experience delays and costs in recovering the securities lent or gaining access
to collateral. If a fund is not able to recover securities lent, a fund may
sell the collateral and purchase a replacement investment in the market,
incurring the risk that the value of the replacement security is greater than
the value of the collateral. However, loans will be made only to borrowers
selected by a fund's delegate after a commercially reasonable review of
relevant facts and circumstances, including the creditworthiness of the
borrower.


MAINTENANCE OF $1.00 NET ASSET VALUE, CREDIT QUALITY AND PORTFOLIO MATURITY
(FOR MONEY MARKET FUNDS ONLY). A fund effects purchases and redemptions at its
net asset value per share. In fulfillment of its responsibilities under Rule
2a-7 of the 1940 Act, the Board has approved policies reasonably designed,
taking into account current market conditions and a fund's investment
objective, to stabilize a fund's net asset value per share, and the Board will
periodically review the Advisor's operations under such policies at regularly
scheduled Board meetings. In addition to imposing limitations on the quality
and maturity of portfolio instruments held by a fund as described in the
prospectus, those


                                     II-102
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policies include a weekly monitoring by the Advisor of unrealized gains and
losses in a fund and, when necessary, in an effort to avoid a material
deviation of a fund's net asset value per share determined by reference to
market valuations from a fund's $1.00 price per share, taking corrective
action, such as adjusting the maturity of a fund, or, if possible, realizing
gains or losses to offset in part unrealized losses or gains. The result of
those policies may be that the yield on shares of a fund will be lower than
would be the case if the policies were not in effect. Such policies also
provide for certain action to be taken with respect to portfolio securities
which experience a downgrade in rating or suffer a default. There is no
assurance that a fund's net asset value per share will be maintained at $1.00.


MICRO-CAP COMPANIES. Micro-capitalization company stocks have customarily
involved more investment risk than large company stocks. There can be no
assurance that this will continue to be true in the future.
Micro-capitalization companies may have limited product lines, markets or
financial resources; may lack management depth or experience; and may be more
vulnerable to adverse general market or economic developments than large
companies. The prices of micro-capitalization company securities are often more
volatile than prices associated with large company issues, and can display
abrupt or erratic movements at times, due to limited trading volumes and less
publicly available information.


Also, because micro-capitalization companies normally have fewer shares
outstanding and these shares trade less frequently than large companies, it may
be more difficult for a fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices.


Some of the companies in which a fund may invest may distribute, sell or
produce products which have recently been brought to market and may be
dependent on key personnel. The securities of micro-capitalization companies
are often traded over-the-counter and may not be traded in the volumes typical
on a national securities exchange. Consequently, in order to sell this type of
holding, a fund may need to discount the securities from recent prices or
dispose of the securities over a long period of time.


MINING AND EXPLORATION RISKS. The business of mining by its nature involves
significant risks and hazards, including environmental hazards, industrial
accidents, labor disputes, discharge of toxic chemicals, fire, drought,
flooding and natural acts. The occurrence of any of these hazards can delay
production, increase production costs and result in liability to the operator
of the mines. A mining operation may become subject to liability for pollution
or other hazards against which it has not insured or cannot insure, including
those in respect of past mining activities for which it was not responsible.


Exploration for gold and other precious metals is speculative in nature,
involves many risks and frequently is unsuccessful. There can be no assurance
that any mineralisation discovered will result in an increase in the proven and
probable reserves of a mining operation. If reserves are developed, it can take
a number of years from the initial phases of drilling and identification of
mineralisation until production is possible, during which time the economic
feasibility of production may change. Substantial expenditures are required to
establish ore reserves properties and to construct mining and processing
facilities. As a result of these uncertainties, no assurance can be given that
the exploration programs undertaken by a particular mining operation will
actually result in any new commercial mining.


MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent direct or
indirect participations in or obligations collateralized by and payable from
mortgage loans secured by real property, which may include subprime mortgages.
A fund may invest in mortgage-backed securities issued or guaranteed by (i) US
Government agencies or instrumentalities such as the Government National
Mortgage Association (GNMA) (also known as Ginnie Mae), the Federal National
Mortgage Association (FNMA) (also known as Fannie Mae) and the Federal Home
Loan Mortgage Corporation (FHLMC) (also known as Freddie Mac) or (ii) other
issuers, including private companies.


GNMA is a government-owned corporation that is an agency of the US Department
of Housing and Urban Development. It guarantees, with the full faith and credit
of the United States, full and timely payment of all monthly principal and
interest on its mortgage-backed securities. Until recently, FNMA and FHLMC were
government-sponsored corporations owned entirely by private stockholders. Both
issue mortgage-related securities that contain guarantees as to timely payment
of interest and principal but that are not backed by the full faith and credit
of the US government. 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 US Treasury was authorized to increase the size of
home loans that FNMA and FHLMC could


                                     II-103
<PAGE>

purchase in certain residential areas and, until 2009, to lend FNMA and FHLMC
emergency funds and to purchase the companies' stock. In September 2008, the US
Treasury announced that FNMA and FHLMC had been placed in conservatorship by
the Federal Housing Finance Agency (FHFA), a newly created independent
regulator created under the Federal Housing Finance Regulatory Reform Act of
2008 (Reform Act). In addition to placing the companies in conservatorship, the
US Treasury announced three additional steps that it intended to take with
respect to FNMA and FHLMC. First, the US 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 US 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
US Treasury established a new secured lending credit facility that is available
to FNMA and FHLMC until December 2009. Third, the US 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
US Treasury initiatives discussed above with respect to the debt and
mortgage-backed securities issued by FNMA and FHLMC will be successful.


FHFA, as conservator or receiver for FNMA and FHLMC, has the power to repudiate
any contract entered into by FNMA or FHLMC prior to FHFA's appointment as
conservator or receiver, as applicable, if FHFA determines, in its sole
discretion, that performance of the contract is burdensome and that repudiation
of the contract promotes the orderly administration of FNMA's or FHLMC's
affairs. The Reform Act requires FHFA to exercise its right to repudiate any
contract within a reasonable period of time after its appointment as
conservator or receiver. FHFA, in its capacity as conservator, has indicated
that it has no intention to repudiate the guaranty obligations of FNMA or FHLMC
because FHFA views repudiation as incompatible with the goals of the
conservatorship. However, in the event that FHFA, as conservator or if it is
later appointed as receiver for FNMA or FHLMC, were to repudiate any such
guaranty obligation, the conservatorship or receivership estate, as applicable,
would be liable for actual direct compensatory damages in accordance with the
provisions of the Reform Act. Any such liability could be satisfied only to the
extent of FNMA's or FHLMC's assets available therefor.


In the event of repudiation, the payments of interest to holders of FNMA or
FHLMC mortgage-backed securities would be reduced if payments on the mortgage
loans represented in the mortgage loan groups related to such mortgage-backed
securities are not made by the borrowers or advanced by the servicer. Any
actual direct compensatory damages for repudiating these guaranty obligations
may not be sufficient to offset any shortfalls experienced by such
mortgage-backed security holders. Further, in its capacity as conservator or
receiver, FHFA has the right to transfer or sell any asset or liability of FNMA
or FHLMC without any approval, assignment or consent. Although FHFA has stated
that it has no present intention to do so, if FHFA, as conservator or receiver,
were to transfer any such guaranty obligation to another party, holders of FNMA
or FHLMC mortgage-backed securities would have to rely on that party for
satisfaction of the guaranty obligation and would be exposed to the credit risk
of that party.


In addition, certain rights provided to holders of mortgage-backed securities
issued by FNMA and FHLMC under the operative documents related to such
securities may not be enforced against FHFA, or enforcement of such rights may
be delayed, during the conservatorship or any future receivership. The
operative documents for FNMA and FHLMC mortgage-backed securities may provide
(or with respect to securities issued prior to the date of the appointment of
the conservator may have provided) that upon the occurrence of an event of
default on the part of FNMA or FHLMC, in its capacity as guarantor, which
includes the appointment of a conservator or receiver, holders of such
mortgage-backed securities have the right to replace FNMA or FHLMC as trustee
if the requisite percentage of mortgage-backed securities holders consent. The
Reform Act prevents mortgage-backed security holders from enforcing such rights
if the event of default arises solely because a conservator or receiver has
been appointed. The Reform Act also provides that no person may exercise any
right or power to terminate, accelerate or declare an event of default under
certain contracts to which FNMA or FHLMC is a party, or obtain possession of or
exercise control over any property of FNMA or FHLMC, or affect any contractual
rights of FNMA or FHLMC, without the approval of FHFA, as conservator or
receiver, for a period of 45 or 90 days following the appointment of FHFA as
conservator or receiver, respectively.


The market value and yield of these mortgage-backed securities can vary due to
market interest rate fluctuations and early prepayments of underlying
mortgages. These securities represent ownership in a pool of federally insured
mortgage loans with a maximum maturity of 30 years. A decline in interest rates
may lead to a faster rate of repayment of the


                                     II-104
<PAGE>

underlying mortgages, and may expose a fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by a
fund, the prepayment right will tend to limit to some degree the increase in
net asset value of a fund because the value of the mortgage-backed securities
held by a fund may not appreciate as rapidly as the price of non-callable debt
securities. Mortgage-backed securities are subject to the risk of prepayment
and the risk that the underlying loans will not be repaid. Because principal
may be prepaid at any time, mortgage-backed securities may involve
significantly greater price and yield volatility than traditional debt
securities. At times, a fund may invest in securities that pay higher than
market interest rates by paying a premium above the securities' par value.
Prepayments of these securities may cause losses on securities purchased at a
premium. Unscheduled payments, which are made at par value, will cause a fund
to experience a loss equal to any unamortized premium.


When interest rates rise, mortgage prepayment rates tend to decline, thus
lengthening the life of a mortgage-related security and increasing the price
volatility of that security, affecting the price volatility of a fund's shares.
The negative effect of interest rate increases on the market-value of mortgage
backed securities is usually more pronounced than it is for other types of
fixed-income securities potentially increasing the volatility of a fund.


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


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


Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life. An
average life estimate is a function of an assumption regarding anticipated
prepayment patterns. The assumption is based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants
could produce somewhat different average life estimates with regard to the same
security. There can be no assurance that the average estimated life of
portfolio securities will be the actual average life of such securities.


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 obligations solely of Fannie Mae
and are not backed by the full faith and credit of the US government.


                                     II-105
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Each Fannie Mae Certificate will represent a pro rata interest in one or more
pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (1) fixed-rate level payment mortgage loans; (2) fixed-rate
growing equity mortgage loans; (3) fixed-rate graduated payment mortgage loans;
(4) variable rate mortgage loans; (5) other adjustable rate mortgage loans; and
(6) fixed-rate and adjustable mortgage loans secured by multifamily projects.


Freddie Mac Certificates. Freddie Mac is a federally chartered corporation of
the United States created pursuant to the Emergency Home Finance Act of 1970,
as amended (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
conventional mortgage loans (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.


Ginnie Mae Certificates. The National Housing Act of 1934, as amended (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 a fund invests will represent a pro rata
interest in one or more pools of the following types of mortgage loans: (1)
fixed-rate level payment mortgage loans; (2) fixed-rate graduated payment
mortgage loans; (3) fixed-rate growing equity mortgage loans; (4) fixed-rate
mortgage loans secured by manufactured (mobile) homes; (5) mortgage loans on
multifamily residential properties under construction; (6) mortgage loans on
completed multifamily projects; (7) fixed-rate mortgage loans as to which
escrowed funds are used to reduce the borrower's monthly payments during the
early years of the mortgage loans ("buy down" mortgage loans); (8) mortgage
loans that provide for adjustments in payments based on periodic changes in
interest rates or in other payment terms of the mortgage loans; and (9)
mortgage backed serial notes.


Multiple Class Mortgage-Backed Securities. A fund may invest in multiple class
mortgage-backed securities including collateralized mortgage obligations (CMOs)
and real estate mortgage investment conduits (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 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.


Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. These certificates are
obligations solely of Fannie Mae and are not backed by the full faith and
credit of the US government. In addition, Fannie Mae will be obligated to
distribute the principal balance of each class of REMIC Certificates in full,
whether or not sufficient funds are otherwise available.


                                     II-106
<PAGE>

Freddie Mac guarantees the timely payment of interest on Freddie Mac REMIC
Certificates and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
(PCs). These certificates are obligations solely of Freddie Mac and are not
backed by the full faith and credit of the US government. PCs represent
undivided interests in specified level payment residential mortgages or
participations therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal of certain
PCs.


CMOs and REMIC Certificates are issued in multiple classes. Each class of CMOs
or REMIC Certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Principal prepayments on the underlying
mortgage loans or the mortgage-backed securities 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-backed securities 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-backed securities
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-backed securities 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 (Z
Bonds), which only accrue interest at a specified rate until all other
certificates having an earlier final distribution date have been retired and
are converted thereafter to an interest-paying security, and planned
amortization class (PAC) certificates, which are parallel pay REMIC
Certificates that generally require that specified amounts of principal be
applied on each payment date to one or more classes of REMIC Certificates (PAC
Certificates), even though all other principal payments and prepayments of the
mortgage-backed securities are then required to be applied to one or more other
classes of the PAC Certificates. The scheduled principal payments for the PAC
Certificates generally have the highest priority on each payment date after
interest due has been paid to all classes entitled to receive interest
currently. Shortfalls, if any, are added to the amount payable on the next
payment date. The PAC Certificate payment schedule is taken into account in
calculating the final distribution date of each class of PAC. In order to
create PAC tranches, one or more tranches generally must be created that absorb
most of the volatility in the underlying mortgage-backed securities. These
tranches tend to have market prices and yields that are much more volatile than
other PAC classes.


The prices of certain CMOs and REMIC Certificates, depending on their structure
and the rate of prepayments, may be volatile. Some CMOs may also not be as
liquid as other securities. A 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.


Impact of Sub-Prime Mortgage Market. A 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, a fund's investments in certain fixed-income securities may decline in
value, their market value may be more difficult to determine, and a fund may
have more difficulty disposing of them.


                                     II-107
<PAGE>

MUNICIPAL LEASES, CERTIFICATES OF PARTICIPATION AND OTHER PARTICIPATION
INTERESTS. A municipal lease is an obligation in the form of a lease or
installment purchase contract that is issued by a state or local government to
acquire equipment and facilities. Income from such obligations is generally
exempt from state and local taxes in the state of issuance (as well as regular
Federal income tax). Municipal leases frequently involve special risks not
normally associated with general obligation or revenue bonds, such as
non-payment and the risk of bankruptcy of the issuer. 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, a
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 non-appropriation or foreclosure might prove
difficult, time consuming and costly, and result in an unsatisfactory or
delayed recoupment of a fund's original investment.


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


Certain municipal lease obligations and certificates of participation may be
deemed illiquid for the purpose of a fund's limitations on investments in
illiquid securities. Other municipal lease obligations and certificates of
participation acquired by a fund may be determined by the Advisor, pursuant to
guidelines adopted by the Board, to be liquid securities for the purpose of a
fund's limitation on investments in illiquid securities. In determining the
liquidity of municipal lease obligations and certificates of participation, the
Advisor will consider a variety of factors including: (1) dealer undertakings
to make a market in 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
security and market for the security (i.e., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of the transfer.)
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 a fund.


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


Each participation is backed by an irrevocable letter of credit or guarantee of
the selling bank that the Advisor has determined meets the prescribed quality
standards of a fund. Therefore, either the credit of the issuer of the
municipal obligation or the selling bank, or both, will meet the quality
standards of the particular fund. A fund has the right to sell the
participation back to the bank after seven days' notice for the full principal
amount of a fund's interest in the municipal obligation plus accrued interest,
but only (i) as required to provide liquidity to a fund, (ii) to maintain a
high quality investment portfolio or (iii) upon a default under the terms of
the municipal obligation. The selling bank will receive a fee from a fund in
connection with the arrangement.


                                     II-108
<PAGE>

Participation interests in municipal securities are subject to the same general
risks as participation interests in bank loans, as described in the Bank Loans
section above. Such risks include credit risk, interest rate risk, and
liquidity risk, as well as the potential liability associated with being a
lender. If a fund purchases a participation, it may only be able to enforce its
rights through the participating lender, and may assume the credit risk of both
the lender and the borrower.


MUNICIPAL SECURITIES. Municipal obligations are issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities and the District of Columbia to
obtain funds for various public purposes. The interest on these obligations is
generally exempt from regular federal income tax in the hands of most
investors. The two principal classifications of municipal obligations are
"notes" and "bonds."


Municipal notes are generally used to provide for short-term capital needs.
Municipal notes include: Tax Anticipation Notes, Revenue Anticipation Notes,
Bond Anticipation Notes, and Construction Loan Notes. Tax Anticipation Notes
are sold to finance working capital needs of municipalities. They are generally
payable from specific tax revenues expected to be received at a future date,
such as income, sales, property, use and business taxes. 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 are sold to provide interim financing until long-term bond
financing can be arranged. In most cases, the long-term bonds provide the funds
needed for the repayment of the notes. Construction Loan Notes are sold to
provide construction financing. After the projects are successfully completed
and accepted, many projects receive permanent financing through the Federal
Housing Administration under Fannie Mae (Federal National Mortgage Association)
or Ginnie Mae (Government National Mortgage Association). These notes are
secured by mortgage notes insured by the Federal Housing Authority; however,
the proceeds from the insurance may be less than the economic equivalent of the
payment of principal and interest on the mortgage note if there has been a
default. The obligations of an issuer of municipal notes are generally secured
by the anticipated revenues from taxes, grants or bond financing. An investment
in such instruments, however, presents a risk that the anticipated revenues
will not be received or that such revenues will be insufficient to satisfy the
issuer's payment obligations under the notes or that refinancing will be
otherwise unavailable. There are, of course, a number of other types of notes
issued for different purposes and secured differently from those described
above.


Municipal bonds, which meet longer-term capital needs and generally have
maturities of more than one year when issued, have two principal
classifications: "general obligation" bonds and "revenue" 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 the construction or improvement of schools, highways
and roads, water and sewer systems and a variety of other public purposes. The
basic security behind general obligation bonds is the issuer's pledge of its
full faith, 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 rate, amount or special assessments.


The principal security for a revenue bond is generally the net revenues derived
from a particular facility or group of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Revenue bonds
have been issued to fund 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 varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may also 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, rent-subsidized or collateralized mortgages, and the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a
state's ability (without obligation) to make up deficiencies in the debt
reserve fund. Lease rental bonds issued by a state or local authority for
capital projects are secured by annual lease rental payments from the state or
locality to the authority sufficient to cover debt service on the authority's
obligations.


Some issues of municipal bonds are payable from United States Treasury bonds
and notes or agency obligations held in escrow by a trustee, frequently a
commercial bank. The interest and principal on these US Government securities
are sufficient to pay all interest and principal requirements of the municipal
securities when due. Some escrowed Treasury securities are used to retire
municipal bonds at their earliest call date, while others are used to retire
municipal bonds at their maturity.


                                     II-109
<PAGE>

Securities purchased for a fund may include variable/floating rate instruments,
variable mode instruments, put bonds, and other obligations which have a
specified maturity date but also are payable before maturity after notice by
the holder (demand obligations). Demand obligations are considered for a fund's
purposes to mature at the demand date.


In addition, there are a variety of hybrid and special types of municipal
obligations as well as numerous differences in the security of municipal
obligations both within and between the two principal classifications (i.e.,
notes and bonds) discussed above.


An entire issue of municipal securities may be purchased by one or a small
number of institutional investors such as a fund. Thus, such an issue may not
be said to be publicly offered. Unlike the equity securities of operating
companies or mutual funds which must be registered under the 1933 Act prior to
offer and sale unless an exemption from such registration is available,
municipal securities, whether publicly or privately offered, may nevertheless
be readily marketable. A secondary market exists for municipal securities which
have been publicly offered as well as securities which have not been publicly
offered initially but which may nevertheless be readily marketable. Municipal
securities purchased for a fund are subject to the limitations on holdings of
securities which are not readily marketable based on whether it may be sold in
a reasonable time consistent with the customs of the municipal markets (usually
seven days) at a desirable price (or interest rate). A fund believes that the
quality standards applicable to its investments enhance marketability. In
addition, stand-by commitments, participation interests and demand obligations
also enhance marketability.


Provisions of the federal bankruptcy statutes relating to the adjustment of
debts of political subdivisions and authorities of states of the US provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or
consent of creditors, which proceedings could result in material and adverse
modification or alteration of the rights of holders of obligations issued by
such subdivisions or authorities.


Litigation challenging the validity under state constitutions of present
systems of financing public education has been initiated or adjudicated in a
number of states, and legislation has been introduced to effect changes in
public school finances in some states. In other instances there has been
litigation challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which litigation could
ultimately affect the validity of those municipal securities or the tax-free
nature of the interest thereon.


In some cases, municipalities may issue bonds relying on proceeds from
litigation settlements. These bonds may be further secured by debt service
reserve funds established at the time the bonds were issued. Bonds that are
supported in whole or in part by expected litigation proceeds are subject to
the risk that part or all of the expected proceeds may not be received. For
example, a damage award could be overturned or reduced by a court, or the terms
of a settlement or damage award may allow for reduced or discontinued payments
if certain conditions are met. As a result, bonds that rely on proceeds from
litigation settlements are subject to an increased risk of nonpayment or
default.


Letters of Credit. Municipal obligations, including certificates of
participation, commercial paper and other short-term obligations may be backed
by an irrevocable letter of credit of a bank which assumes the obligation for
payment of principal and interest in the event of default by the issuer.


Pre-Refunded Municipal Securities. Pre-refunded municipal securities are
subject to interest rate risk, market risk and limited liquidity. The principal
of and interest on municipal securities that have been pre-refunded are no
longer paid from the original revenue source for the securities. Instead, after
pre-refunding of the principal of and interest on these securities are
typically paid from an escrow fund consisting of obligations issued or
guaranteed by the US Government. The assets in the escrow fund are derived from
the proceeds of refunding bonds issued by the same issuer as the pre-refunded
municipal securities. Issuers of municipal securities use this advance
refunding technique to obtain more favorable terms with respect to securities
that are not yet subject to call or redemption by the issuer. For example,
advance refunding enables an issuer to refinance debt at lower market interest
rates, restructure debt to improve cash flow or eliminate restrictive covenants
in the indenture or other governing instrument for the pre-refunded municipal


                                     II-110
<PAGE>

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.


MUNICIPAL TRUST RECEIPTS. Municipal trust receipts (MTRs) are sometimes called
municipal asset-backed securities, floating rate trust certificates, or
municipal securities trust receipts. MTRs are typically structured by a bank,
broker-dealer or other financial institution by depositing municipal securities
into a trust or partnership, coupled with a conditional right to sell, or put,
the holder's interest in the underlying securities at par plus accrued interest
to a financial institution. MTRs may be issued as fixed or variable rate
instruments. These trusts are organized so that the purchaser of the MTR would
be considered to be investing for federal income tax purposes in the underlying
municipal securities. This structure is intended to allow the federal income
tax exempt status of interest generated by the underlying asset to pass through
to the purchaser. A fund's investments in MTRs are subject to similar risks as
other investments in municipal debt obligations, including interest rate risk,
credit risk, prepayment risk and security selection risk. Additionally,
investments in MTRs raise certain tax issues that may not be presented by
direct investments in municipal bonds. There is some risk that certain legal
issues could be resolved in a manner that could adversely impact the
performance of a fund. The Advisor expects that it would invest in MTRs for
which a legal opinion has been given to the effect that the income from an MTR
is tax-exempt for federal income tax purposes to the same extent as the
underlying bond(s), although it is possible that the IRS will take a different
position and there is a risk that the interest paid on such MTRs would be
deemed taxable.


OBLIGATIONS OF BANKS AND OTHER FINANCIAL INSTITUTIONS. A 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 a fund may invest include (but are not limited
to) certificates of deposit, bankers' acceptances, bank time deposits,
commercial paper, and other US dollar-denominated instruments issued or
supported by the credit of US or foreign financial institutions, including
banks.


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. a
fund may invest in US dollar-denominated 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, and potentially limited liquidity. 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 and may have limited
information availability.


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


                                     II-111
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PREFERRED STOCK. Preferred stock is an equity security, but possesses certain
attributes of debt securities. Holders of preferred stock normally have the
right to receive dividends at a fixed rate when and as declared by the issuer's
board of directors, but do not otherwise participate in amounts available for
distribution by the issuing corporation. 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. 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. Because of this preference, preferred stocks generally
entail less risk than common stocks. As a general rule, the market value of
preferred stocks with fixed dividend rates and no conversion rights moves
inversely with interest rates and perceived credit risk, with the price
determined by the dividend rate. Some preferred stocks are convertible into
other securities (e.g., common stock) at a fixed price and ratio or upon the
occurrence of certain events. The market price of convertible preferred stocks
generally reflects an element of conversion value. Because many preferred
stocks lack a fixed maturity date, these securities generally fluctuate
substantially in value when interest rates change; such fluctuations often
exceed those of long-term bonds of the same issuer. Some preferred stocks pay
an adjustable dividend that may be based on an index, formula, auction
procedure or other dividend rate reset mechanism. In the absence of credit
deterioration, adjustable rate preferred stocks tend to have more stable market
values than fixed rate preferred stocks.


All preferred stocks are also subject to the same types of credit risks as
corporate bonds. In addition, because preferred stock is subordinate to debt
securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by the Standard & Poor's Division of the
McGraw-Hill Companies (S&P) and Moody's Investors Service, Inc. (Moody's)
although there is no minimum rating which a preferred stock must have to be an
eligible investment for a fund.


PRIVATE ACTIVITY BONDS. Certain types of municipal securities, generally
referred to as industrial development bonds (and referred to under current tax
law as private activity bonds), are issued by or on behalf of public
authorities to obtain funds for privately-operated housing facilities, airport,
mass transit or port facilities, sewage disposal, solid waste disposal or
hazardous waste treatment or disposal facilities and certain local facilities
for water supply, gas or electricity. Other types of industrial development
bonds, the proceeds of which are used for the construction, equipment, repair
or improvement of privately operated industrial or commercial facilities, may
constitute municipal securities, although the current federal tax laws place
substantial limitations on the size of such issues. The interest from certain
private activity bonds owned by a fund (including a fund's distributions
attributable to such interest) may be a preference item for purposes of the
alternative minimum tax. The credit quality of such bonds depends upon the
ability of the user of the facilities financed by the bonds and any guarantor
to meet its financial obligations.


PRIVATIZED ENTERPRISES. A fund may invest in foreign securities which may
include securities issued by enterprises that have undergone or are currently
undergoing privatization. The governments of certain foreign countries have, to
varying degrees, embarked on privatization programs contemplating the sale of
all or part of their interests in state enterprises. A fund's investments in
the securities of privatized enterprises may include privately negotiated
investments in a government or state-owned or controlled company or enterprise
that has not yet conducted an initial equity offering, investments in the
initial offering of equity securities of a state enterprise or former state
enterprise and investments in the securities of a state enterprise following
its initial equity offering.


In certain jurisdictions, the ability of foreign entities, such as a fund, to
participate in privatizations may be limited by local law, or the price or
terms on which a fund may be able to participate may be less advantageous than
for local investors. Moreover, there can be no assurance that governments that
have embarked on privatization programs will continue to divest their ownership
of state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.


In the case of the enterprises in which a fund may invest, large blocks of the
stock of those enterprises may be held by a small group of stockholders, even
after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.


                                     II-112
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Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization of management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as an enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.


Prior to privatization, most of the state enterprises in which a fund may
invest enjoy the protection of and receive preferential treatment from the
respective sovereigns that own or control them. After making an initial equity
offering, these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
operate effectively in a competitive market and may suffer losses or experience
bankruptcy due to such competition.


PUT BONDS. A fund may invest in "put" bonds (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 option to
"put" the bond back to the issuer before 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.


REAL ESTATE INVESTMENT TRUSTS (REITS). A REIT invests primarily in
income-producing real estate or makes loans to persons involved in the real
estate industry. REITs are sometimes informally categorized into equity REITs,
mortgage REITs and hybrid REITs. Equity REITs buy real estate and pay investors
income from the rents received from the real estate owned by the REIT and from
any profits on the sale of its properties. Mortgage REITs lend money to
building developers and other real estate companies and pay investors income
from the interest paid on those loans. Hybrid REITs engage in both owning real
estate and making loans. Investment in REITs may subject a fund to risks
associated with the direct ownership of real estate, such as decreases in real
estate values, delays in completion of construction, overbuilding, increased
competition and other risks related to local or general economic conditions,
increases in operating costs and property taxes, changes in zoning laws,
casualty or condemnation losses, possible environmental liabilities, regulatory
limitations on rent and fluctuations in rental income. Equity REITs generally
experience these risks directly through fee or leasehold interests, whereas
mortgage REITs generally experience these risks indirectly through mortgage
interests, unless the mortgage REIT forecloses on the underlying real estate.
Changes in interest rates may also affect the value of a fund's investment in
REITs. For instance, during periods of declining interest rates, certain
mortgage REITs may hold mortgages that the mortgagors elect to prepay, which
prepayment may diminish the yield on securities issued by those REITs.


Certain REITs have relatively small market capitalizations, which may tend to
increase the volatility of the market price of their securities. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in operating and
financing a limited number of projects. REITs are also subject to heavy cash
flow dependency, defaults by borrowers or lessees and the possibility of
failing to qualify for tax-free pass-through of income under the Code, and to
maintain exemption from the registration requirements of the 1940 Act. By
investing in REITs indirectly through a fund, a shareholder will bear not only
his or her proportionate share of the expenses of a fund, but also, indirectly,
similar expenses of the REITs. In addition, REITs depend generally on their
ability to generate cash flow to make distributions to shareholders.


REPURCHASE AGREEMENTS. A fund may invest in repurchase agreements pursuant to
its investment guidelines. In a repurchase agreement, a fund acquires ownership
of a security (Obligation) and simultaneously commits to resell that security
to the seller, typically a bank or broker/dealer, at a specified time and
price.


A repurchase agreement provides a means for a fund to earn income on funds for
periods as short as overnight. The repurchase price may be higher than the
purchase price, the difference being income to a fund, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to a fund
together with the repurchase price upon repurchase. In either case, the income
to a fund is unrelated to the interest rate on the Obligation itself.
Obligations will be held by the custodian or in the Federal Reserve Book Entry
System.


                                     II-113
<PAGE>

It is not clear whether a court would consider the Obligation purchased by a
fund subject to a repurchase agreement as being owned by a fund or as being
collateral for a loan by a fund to the seller. In the event of the commencement
of bankruptcy or insolvency proceedings with respect to the seller of the
Obligation before repurchase of the Obligation under a repurchase agreement, a
fund may encounter delay and incur costs before being able to sell the
security. Delays may involve loss of interest or decline in price of the
Obligation. If the court characterizes the transaction as a loan and a fund has
not perfected a security interest in the Obligation, a fund may be required to
return the Obligation to the seller's estate and be treated as an unsecured
creditor of the seller. As an unsecured creditor, a fund would be at risk of
losing some or all of the principal and income involved in the transaction. As
with any unsecured debt obligation purchased for a fund, the Advisor seeks to
reduce the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligor, in this case the seller of the Obligation.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the Obligation, in which case a
fund may incur a loss if the proceeds to a fund of the sale to a third party
are less than the repurchase price. However, if the market value (including
interest) of the Obligation subject to the repurchase agreement becomes less
than the repurchase price (including interest), a fund will direct the seller
of the Obligation to deliver additional securities so that the market value
(including interest) of all securities subject to the repurchase agreement will
equal or exceed the repurchase price.


REVERSE REPURCHASE AGREEMENTS. A fund may enter into "reverse repurchase
agreements," which are repurchase agreements in which a fund, as the seller of
the securities, agrees to repurchase such securities at an agreed time and
price. Under a reverse repurchase agreement, a fund continues to receive any
principal and interest payments on the underlying security during the term of
the agreement. A fund segregates assets in an amount at least equal to its
obligation under outstanding reverse repurchase agreements. Such transactions
may increase fluctuations in the market value of fund assets and its yield.


SECURITIES AS A RESULT OF EXCHANGES OR WORKOUTS. Consistent with a fund's
investment objectives, policies and restrictions, a fund may hold various
instruments received in an exchange or workout of a distressed security (i.e.,
a low-rated debt security that is in default or at risk of becoming in
default). Such instruments may include, but are not limited to, equity
securities, warrants, rights, participation interests in sales of assets and
contingent-interest obligations.


SECURITIES WITH PUT RIGHTS. The right of a fund to exercise a put is
unconditional and unqualified. A put is not transferable by a fund, although a
fund may sell the underlying securities to a third party at any time. If
necessary and advisable, a fund may pay for certain puts either separately in
cash or by paying a higher price for portfolio securities that are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
for the same securities).


The ability of a fund to exercise a put will depend on the ability of a
counterparty to pay for the underlying securities at the time the put is
exercised. In the event that a counterparty should default on its obligation to
repurchase an underlying security, a fund might be unable to recover all or a
portion of any loss sustained from having to sell the security elsewhere.


The acquisition of a put will not affect the valuation by a fund of the
underlying security. The actual put will be valued at zero in determining net
asset value of a fund. Where a fund pays directly or indirectly for a put, its
cost will be reflected in realized gain or loss when the put is exercised or
expires. If the value of the underlying security increases, the potential for
unrealized or realized gain is reduced by the cost of the put.


SHORT SALES. When a fund takes a long position, it purchases a stock outright.
When a fund takes a short position, it sells at the current market price a
stock it does not own but has borrowed in anticipation that the market price of
the stock will decline. To complete, or close out, the short sale transaction,
a fund buys the same stock in the market and returns it to the lender. The
price at such time may be more or less than the price at which the security was
sold by a fund. Until the security is replaced, a fund is required to pay the
lender amounts equal to any dividends or interest, which accrue during the
period of the loan. To borrow the security, a fund may also be required to pay
a premium, which would increase the cost of the security sold. The proceeds of
the short sale will be retained by the broker, to the extent necessary to meet
the margin requirements, until the short position is closed out. A fund makes
money


                                     II-114
<PAGE>

when the market price of the borrowed stock goes down and a fund is able to
replace it for less than it earned by selling it short. Alternatively if the
price of the stock goes up after the short sale and before the short position
is closed, a fund will lose money because it will have to pay more to replace
the borrowed stock than it received when it sold the stock short.


A fund may not always be able to close out a short position at a particular
time or at an acceptable price. A lender may request that the borrowed
securities be returned to it on short notice, and a fund may have to buy the
borrowed securities at an unfavorable price. If this occurs at a time that
other short sellers of the same security also want to close out their
positions, a "short squeeze" can occur. A short squeeze occurs when demand is
greater than supply for the stock sold short. A short squeeze makes it more
likely that a fund will have to cover its short sale at an unfavorable price.
If that happens, a fund will lose some or all of the potential profit from, or
even incur a loss as a result of, the short sale.


Until a fund closes its short position or replaces the borrowed security, a
fund will designate liquid assets it owns (other than the short sales proceeds)
as segregated assets to the books of the broker and/or its custodian in an
amount equal to its obligation to purchase the securities sold short, as
required by the 1940 Act. The amount segregated in this manner will be
increased or decreased each business day equal to the change in market value of
a fund's obligation to purchase the security sold short. If the lending broker
requires a fund to deposit additional collateral (in addition to the short
sales proceeds that the broker holds during the period of the short sale),
which may be as much as 50% of the value of the securities sold short, the
amount of the additional collateral may be deducted in determining the amount
of cash or liquid assets a fund is required to segregate to cover the short
sale obligation pursuant to the 1940 Act. The amount segregated must be
unencumbered by any other obligation or claim than the obligation that is being
covered. A fund believes that short sale obligations that are covered, either
by an offsetting asset or right (acquiring the security sold short or having an
option to purchase the security sold short at exercise price that covers the
obligation), or by a fund's segregated asset procedures (or a combination
thereof), are not senior securities under the 1940 Act and are not subject to a
fund's borrowing restrictions. This requirement to segregate assets limits a
fund's leveraging of its investments and the related risk of losses from
leveraging. A fund also is required to pay the lender of the security any
dividends or interest that accrues on a borrowed security during the period of
the loan. Depending on the arrangements made with the broker or custodian, a
fund may or may not receive any payments (including interest) on collateral it
has deposited with the broker.


Short sales involve the risk that a fund will incur a loss by subsequently
buying a security at a higher price than the price at which a fund previously
sold the security short. Any loss will be increased by the amount of
compensation, interest or dividends, and transaction costs a fund must pay to a
lender of the security. In addition, because a fund's loss on a short sale
stems from increases in the value of the security sold short, the extent of
such loss, like the price of the security sold short, is theoretically
unlimited. By contrast, a fund's loss on a long position arises from decreases
in the value of the security held by a fund and therefore is limited by the
fact that a security's value cannot drop below zero.


The use of short sales, in effect, leverages a fund's portfolio, which could
increase a fund's exposure to the market, magnify losses and increase the
volatility of returns.


Although a fund's share price may increase if the securities in its long
portfolio increase in value more than the securities underlying its short
positions, a fund's share price may decrease if the securities underlying its
short positions increase in value more than the securities in its long
portfolio.


In addition, a fund's short selling strategies may limit its ability to fully
benefit from increases in the equity markets. Also, there is the risk that the
counterparty to a short sale may fail to honor its contractual terms, causing a
loss to a fund. The SEC and other (including non-U.S.) regulatory authorities
have imposed, and may in the future impose, restrictions on short selling,
either on a temporary or permanent basis, which may include placing limitations
on specific companies and/or industries with respect to which a fund may enter
into short positions. Any such restrictions may hinder a fund in, or prevent it
from, fully implementing its investment strategies, and may negatively affect
performance.


                                     II-115
<PAGE>

SHORT SALES AGAINST THE BOX. A fund may make short sales of common stocks if,
at all times when a short position is open, a fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without
payment of further consideration, into the shares of common stock sold short.
Short sales of this kind are referred to as short sales "against the box." The
broker/dealer that executes a short sale generally invests cash proceeds of the
sale until they are paid to a fund. Arrangements may be made with the
broker/dealer to obtain a portion of the interest earned by the broker on the
investment of short sale proceeds. A fund will segregate the common stock or
convertible or exchangeable preferred stock or debt securities in a special
account with the custodian. Uncertainty regarding the tax effects of short
sales of appreciated investments may limit the extent to which a fund may enter
into short sales against the box. A fund will incur transaction costs in
connection with short sales against the box.


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


Examples of short-term securities include:


o  Securities issued or guaranteed by the US government and its agencies and
   instrumentalities;


o  Commercial paper;


o  Certificates of deposit and euro dollar certificates of deposit;


o  Bankers' acceptances;


o  Short-term notes, bonds, debentures or other debt instruments; and


o  Repurchase agreements.


SMALL COMPANIES. The Advisor believes that many small companies often may have
sales and earnings growth rates that exceed those of larger companies, and that
such growth rates may, in turn, be reflected in more rapid share price
appreciation over time. Investing in smaller company stocks, however, involves
greater risk than is customarily associated with investing in larger, more
established companies. For example, smaller companies can have limited product
lines, markets, or financial and managerial resources. Smaller companies may
also be dependent on one or a few key persons, and may be more susceptible to
losses and risks of bankruptcy. Also, the securities of smaller companies may
be thinly traded (and therefore have to be sold at a discount from current
market prices or sold in small lots over an extended period of time or their
stock values may fluctuate more sharply than other securities). Transaction
costs in smaller company stocks may be higher than those of larger companies.


SOVEREIGN DEBT. Investments in sovereign debt can involve a high degree of
risk. The governmental entity that controls the repayment of sovereign debt may
not be able or willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow situation, the extent of its foreign
reserves, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of the debt service burden to the economy as a whole,
the governmental entity's policy toward the International Monetary Fund, and
the political constraints to which a governmental entity may be subject.
Governmental entities may also be dependent on expected disbursements from
foreign governments, multilateral agencies and others abroad to reduce
principal and interest arrearages on their debt. The commitment on the part of
these governments, agencies and others to make such disbursements may be
conditioned on a governmental entity's implementation of economic reforms
and/or economic performance and the timely service of such debtor's
obligations. Failure to implement such reforms, achieve such levels of economic
performance or repay principal or interest when due may result in the
cancellation of such third parties' commitments to lend funds to the
governmental entity, which may further impair such debtor's ability or
willingness to service its debts in a timely manner. Consequently, governmental
entities may default on their sovereign debt. Holders of sovereign


                                     II-116
<PAGE>

debt may be requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. There is no reliable bankruptcy
proceeding by which sovereign debt on which governmental entities have
defaulted may be collected in whole or in part.


SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE. Unlike other
open-end management investment companies (mutual funds) which directly acquire
and manage their own portfolio securities, a fund seeks to achieve its
investment objective by investing substantially all of its assets in a master
portfolio (Portfolio), a separate registered investment company with the same
investment objective as a fund. Therefore, an investor's interest in the
Portfolio's securities is indirect. In addition to selling a beneficial
interest to a fund, the Portfolio may sell beneficial interests to other mutual
funds, investment vehicles or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as a fund due to variations in sales commissions and
other operating expenses. Therefore, investors in a fund should be aware that
these differences may result in differences in returns experienced by investors
in the different funds that invest in the Portfolio. Such differences in
returns are also present in other mutual fund structures.


Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors). Also, the Portfolio may be required to sell
investments at a price or time not advantageous to the Portfolio in order to
meet such a redemption. Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the SEC, whenever a fund is
requested to vote on matters pertaining to the Portfolio, a fund will hold a
meeting of shareholders of a fund and will cast all of its votes in the same
proportion as the votes of a fund's shareholders.


Certain changes in the Portfolio's investment objectives, policies or
restrictions may require a fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, a fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of a fund. Notwithstanding the above, there are other means for
meeting redemption requests, such as borrowing.


A fund may withdraw its investment from the Portfolio at any time, if the Board
determines that it is in the best interests of the shareholders of a fund to do
so. Upon any such withdrawal, the Board would consider what action might be
taken, including the investment of all the assets of a fund in another pooled
investment entity having the same investment objective as a fund or the
retaining of an investment advisor to manage a fund's assets in accordance with
the investment policies described herein with respect to the Portfolio.


STAND-BY COMMITMENTS. A stand-by commitment is a right acquired by a fund, when
it purchases a municipal obligation from a broker, dealer or other financial
institution (seller), to sell up to the same principal amount of such
securities back to the seller, at a fund's option, at a specified price.
Stand-by commitments are also known as "puts." The exercise by a fund of a
stand-by commitment is subject to the ability of the other party to fulfill its
contractual commitment.


Stand-by commitments acquired by a fund may have the following features: (1)
they will be in writing and will be physically held by a fund's custodian; (2)
a fund's right to exercise them will be unconditional and unqualified; (3) they
will be entered into only with sellers which in the Advisor's opinion present a
minimal risk of default; (4) although stand-by commitments will not be
transferable, municipal obligations purchased subject to such commitments may
be sold to a third party at any time, even though the commitment is
outstanding; and (5) their exercise price will be (i) a fund's acquisition cost
(excluding any accrued interest which a fund paid on their acquisition), less
any amortized market premium or plus any amortized original issue discount
during the period a fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date.


                                     II-117
<PAGE>

A fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary or
advisable, a fund will pay for stand-by commitments, either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the commitments.


It is difficult to evaluate the likelihood of use or the potential benefit of a
stand-by commitment. Therefore, it is expected that the Advisor will determine
that stand-by commitments ordinarily have a "fair value" of zero, regardless of
whether any direct or indirect consideration was paid. However, if the market
price of the security subject to the stand-by commitment is less than the
exercise price of the stand-by commitment, such security will ordinarily be
valued at such exercise price. Where a fund has paid for a stand-by commitment,
its cost will be reflected as unrealized depreciation for the period during
which the commitment is held.


The IRS has issued a favorable revenue ruling to the effect that, under
specified circumstances, a regulated investment company will be the owner of
tax-exempt municipal obligations acquired subject to a put option. The IRS has
also issued private letter rulings to certain taxpayers (which do not serve as
precedent for other taxpayers) to the effect that tax-exempt interest received
by a regulated investment company with respect to such obligations will be
tax-exempt in the hands of the company and may be distributed to its
shareholders as exempt-interest dividends. The IRS has subsequently announced
that it will not ordinarily issue advance ruling letters as to the identity of
the true owner of property in cases involving the sale of securities or
participation interests therein if the purchaser has the right to cause the
security, or the participation interest therein, to be purchased by either the
seller or a third party. A fund intends to take the position that it owns any
municipal obligations acquired subject to a stand-by commitment and that
tax-exempt interest earned with respect to such municipal obligations will be
tax-exempt in its hands. There is no assurance that the IRS will agree with
such position in any particular case.


TAX-EXEMPT COMMERCIAL PAPER. Issues of tax-exempt commercial paper typically
represent short-term, unsecured, negotiable promissory notes. These obligations
are issued by state and local governments and their agencies to finance working
capital needs of municipalities or to provide interim construction financing
and are paid from general revenues of municipalities or are refinanced with
long-term debt. In most cases, tax-exempt commercial paper is backed by letters
of credit, lending agreements, note repurchase agreements or other credit
facility agreements offered by banks or other institutions.


TAX EXEMPT CUSTODIAL RECEIPTS. Tax-exempt custodial receipts (Receipts)
evidence ownership in an underlying bond that is deposited with a custodian for
safekeeping. Holders of the Receipts receive all payments of principal and
interest when paid on the bonds. Receipts can be purchased in an offering or
from a counterparty (typically an investment bank). To the extent that any
Receipt is illiquid, it is subject to a fund's limit on illiquid securities.


TAX EXEMPT PASS-THROUGH SECURITIES. Tax exempt pass-through certificates
represent an interest in a pool or group of fixed-rate long-term debt
obligations issued by or on behalf of primarily not-for-profit institutions,
the interest on which is exempt from federal income taxation, including
alternative minimum taxation. Such fixed-rate long-term debt obligations may be
private activity bonds issued by states, municipalities or public authorities
to provide funds, usually through a loan or lease arrangement, to a non-profit
corporation for the purpose of financing or refinancing the construction or
improvement of a facility to be used by the non-profit corporation.
Distributions on tax exempt pass-through certificates may be adversely affected
by defaults in or prepayment of the underlying debt obligations. Certain tax
exempt pass-through certificates are issued in several classes with different
levels of yields and credit protection. A fund may invest in lower classes of
tax exempt pass-through certificates that have less credit protection. Tax
exempt pass-through certificates have limited liquidity and certain transfer
restrictions may apply. There currently is no trading market for tax exempt
pass-through certificates and there can be no assurance that such a market will
develop.


TO BE ANNOUNCED (TBA) PURCHASE COMMITMENTS. A fund may enter into TBA purchase
commitments to purchase securities for a fixed price at a future dates. 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. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities.


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THIRD PARTY PUTS. A fund may purchase long-term fixed rate bonds that have been
coupled with an option granted by a third party financial institution allowing
a fund at specified intervals to tender (put) the bonds to the institution and
receive the face value thereof (plus accrued interest). These third party puts
are available in several different forms, may be represented by custodial
receipts or trust certificates and may be combined with other features such as
interest rate swaps. A fund receives a short-term rate of interest (which is
periodically reset), and the interest rate differential between that rate and
the fixed rate on the bond is retained by the financial institution. The
financial institution granting the option does not provide credit enhancement,
and in the event that there is a default in the payment of principal or
interest, or downgrading of a bond to below investment grade, or a loss of the
bond's tax-exempt status, the put option will terminate automatically. As a
result, a fund would be subject to the risks associated with holding such a
long-term bond and the weighted average maturity of that fund's portfolio would
be adversely affected.


These bonds coupled with puts may present the same tax issues as are associated
with Stand-By Commitments. As with any Stand-By Commitments acquired by a fund,
a fund intends to take the position that it is the owner of any municipal
obligation acquired subject to a third-party put, and that tax-exempt interest
earned with respect to such municipal obligations will be tax-exempt in its
hands. There is no assurance that the IRS will agree with such position in any
particular case. Additionally, the federal income tax treatment of certain
other aspects of these investments, including the treatment of tender fees and
swap payments, in relation to various regulated investment company tax
provisions is unclear. However, the Advisor seeks to manage a fund's portfolio
in a manner designed to minimize any adverse impact from these investments.


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


If payments on the underlying junior subordinated debentures held by the
Special Trust are deferred by the debenture issuer, the debentures would be
treated as original issue discount (OID) obligations for the remainder of their
term. As a result, holders of Trust Preferred Securities, such as a fund, would
be required to accrue daily for federal income tax purposes their share of the
stated interest and the de minimis OID on the debentures (regardless of whether
a fund receives any cash distributions from the Special Trust), and the value
of Trust Preferred Securities would likely be negatively affected. Interest
payments on the underlying junior subordinated debentures typically may only be
deferred if dividends are suspended on both common and preferred stock of the
issuer. The underlying junior subordinated debentures generally rank slightly
higher in terms of payment priority than both common and preferred securities
of the issuer, but rank below other subordinated debentures and debt
securities. Trust Preferred Securities may be subject to mandatory prepayment
under certain circumstances. The market values of Trust Preferred Securities
may be more volatile than those of conventional debt securities. Trust
Preferred Securities may be issued in reliance on Rule 144A under the 1933 Act,
and, unless and until registered, are restricted securities. There can be no
assurance as to the liquidity of Trust Preferred Securities and the ability of
holders of Trust Preferred Securities, such as a fund, to sell their holdings.


US GOVERNMENT SECURITIES. A fund may invest in obligations issued or guaranteed
as to both principal and interest by the US Government, its agencies,
instrumentalities or sponsored enterprises which include (a) direct obligations
of the US Treasury, and (b) securities issued or guaranteed by US Government
agencies.


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


Some agency securities are backed by the full faith and credit of the United
States (such as Maritime Administration Title XI Ship Financing Bonds and
Agency for International Development Housing Guarantee Program Bonds) and
others are backed only by the rights of the issuer to borrow from the US
Treasury (such as Federal Home Loan Bank


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Bonds and Federal National Mortgage Association Bonds), while still others,
such as the securities of the Federal Farm Credit Bank, are supported only by
the credit of the issuer. With respect to securities supported only by the
credit of the issuing agency or by an additional line of credit with the US
Treasury, there is no guarantee that the US Government will provide support to
such agencies and such securities may involve risk of loss of principal and
interest.


US Government securities may include "zero coupon" securities that have been
stripped by the US Government of their unmatured interest coupons and
collateralized obligations issued or guaranteed by a US Government agency or
instrumentality. Because interest on zero coupon securities is not distributed
on a current basis but is, in effect, compounded, zero coupon securities tend
to be subject to greater risk than interest-paying securities of similar
maturities.


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


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


VARIABLE AND FLOATING RATE INSTRUMENTS. Debt instruments purchased by a fund
may be structured to have variable or floating interest rates. The interest
rate on variable and floating rate securities may be reset daily, weekly or on
some other reset period and may have a floor or ceiling on interest rate
changes. The interest rate of variable rate securities ordinarily is determined
by reference to or is a percentage of an objective standard such as a bank's
prime rate, the 90-day US Treasury Bill rate, or the rate of return on
commercial paper or bank certificates of deposit. Generally, the changes in the
interest rate on variable rate securities reduce the fluctuation in the market
value of such securities. Accordingly, as interest rates decrease or increase,
the potential for capital appreciation or depreciation is less than for
fixed-rate obligations. A fund may purchase variable rate securities on which
stated minimum or maximum rates, or maximum rates set by state law, limit the
degree to which interest on such instruments may fluctuate; to the extent it
does, increases or decreases in value of such instruments may be somewhat
greater than would be the case without such limits. Because the adjustment of
interest rates on the variable rate securities is made in relation to movements
of the applicable rate adjustment index, the instruments are not comparable to
long-term fixed interest rate securities. Accordingly, interest rates on the
variable rate securities may be higher or lower than current market rates for
fixed rate obligations of comparable quality with similar final maturities. A
money market fund determines the maturity of variable rate securities in
accordance with Rule 2a-7, which allows a fund to consider certain of such
instruments as having maturities shorter than the maturity date on the face of
the instrument.


The Advisor will consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such instruments and, if the instrument
is subject to a demand feature (described below), will continuously monitor the
issuer's financial ability to meet payment on demand. Where necessary to ensure
that a variable or floating rate instrument is equivalent to the quality
standards applicable to a fund's fixed income investments, the issuer's
obligation to pay the principal of the instrument will be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
Any bank providing such a bank letter, line of credit, guarantee or loan
commitment will meet a fund's investment quality standards relating to
investments in bank obligations. The Advisor will also monitor the
creditworthiness of issuers of such instruments to determine whether a fund
should continue to hold the investments.


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The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and a fund
could suffer a loss if the issuer defaults or during periods in which a fund is
not entitled to exercise its demand rights. When a reliable trading market for
the variable and floating rate instruments held by a fund does not exist and a
fund may not demand payment of the principal amount of such instruments within
seven days, the instruments will be subject to a fund's limitation on
investments in illiquid securities.


Variable Rate Demand Securities. A fund may purchase variable rate demand
securities, which are variable rate securities that permit a fund to demand
payment of the unpaid principal balance plus accrued interest upon a specified
number of days' notice to the issuer or its agent. The demand feature may be
backed by a bank letter of credit or guarantee issued with respect to such
instrument. A bank that issues a repurchase commitment may receive a fee from a
fund for this arrangement. The issuer of a variable rate demand security may
have a corresponding right to prepay in its discretion the outstanding
principal of the instrument plus accrued interest upon notice comparable to
that required for the holder to demand payment.


Variable Rate Master Demand Notes. A fund may purchase variable rate master
demand notes, which are unsecured instruments that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the interest rate.
Because variable rate master demand notes are direct lending arrangements
between a fund and the issuer, they are not ordinarily traded. Although no
active secondary market may exist for these notes, a 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 at any time to a third party.
These notes are not typically rated by credit rating agencies.


WARRANTS. The holder of a warrant has the right, until the warrant expires, to
purchase a given number of shares of a particular issuer at a specified price.
Such investments can provide a greater potential for profit or loss than an
equivalent investment in the underlying security. Prices of warrants do not
necessarily move, however, in tandem with the prices of the underlying
securities and are, therefore, considered speculative investments. Warrants pay
no dividends and confer no rights other than a purchase option. Thus, if a
warrant held by a fund were not exercised by the date of its expiration, a fund
would lose the entire purchase price of the warrant.


WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. A fund may purchase securities on
a when-issued or delayed-delivery basis. Delivery of and payment for these
securities can take place a month or more after the date of the purchase
commitment. The payment obligation and the interest rate that will be received
on when-issued and delayed-delivery securities are fixed at the time the buyer
enters into the commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued or delayed-delivery basis, the yields
obtained on such securities may be higher or lower than the yields available in
the market on the dates when the investments are actually delivered to the
buyers. When-issued securities may include securities purchased on a "when, as
and if issued" basis, under which the issuance of the security depends on the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. The value of such securities is subject
to market fluctuation during this period and no interest or income, as
applicable, accrues to a fund until settlement takes place.


At the time a fund makes the commitment to purchase securities on a when-issued
or delayed delivery basis, it will record the transaction, reflect the value
each day of such securities in determining its net asset value and, if
applicable, calculate the maturity for the purposes of average maturity from
that date. At the time of settlement a when-issued security may be valued at
less than the purchase price. To facilitate such acquisitions, a fund
identifies on its books cash or liquid assets in an amount at least equal to
such commitments. It may be expected that a fund's net assets will fluctuate to
a greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. On delivery dates for such
transactions, a fund will meet its obligations from maturities or sales of the
segregated securities and/or from cash flow. If a fund chooses to dispose of
the right to acquire a when-issued security prior to its acquisition, it could,
as with the disposition of any other portfolio obligation, incur a gain or loss
due to market fluctuation. When a fund engages in when-issued or
delayed-delivery transactions, it relies on the other party to consummate the
trade and is, therefore, exposed to counterparty risk. Failure of the seller to
do so may result in a fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.


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YANKEE BONDS. Yankee Bonds are US dollar-denominated bonds sold in the US by
non-US issuers. As compared with bonds issued in the US, such bond issues
normally pay interest but are less actively traded. 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 many
foreign countries, there is less publicly available information about foreign
issuers, and there is less government regulation and supervision of foreign
stock exchanges, brokers and listed companies. Also in many foreign countries,
companies are not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to domestic issuers.
Security trading practices and custody arrangements abroad may offer less
protection to a fund's investments and there may be difficulty in enforcing
legal rights outside the United States. Settlement of transactions in some
foreign markets may be delayed or may be less frequent than in the United
States which could affect the liquidity of a fund's portfolio. Additionally, in
some foreign countries, there is the possibility of expropriation or
confiscatory taxation, limitations on the removal of securities, property, or
other fund assets, political or social instability or diplomatic developments
which could affect investments in foreign securities. 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.


YIELDS AND RATINGS. The yields on certain obligations in which a fund may
invest (such as commercial paper and bank obligations), are dependent on a
variety of factors, including general market conditions, conditions in the
particular market for the obligation, the financial condition of the issuer,
the size of the offering, the maturity of the obligation and the ratings of the
issue. The ratings of Moody's Investors Service (Moody's), the Standard &
Poor's (S&P) Division of The McGraw-Hill Companies and Fitch Ratings, Inc.
(Fitch) represent their opinions as to the quality of the securities that 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. See Appendix A for a
description of the ratings provided by certain recognized rating organizations.



ZERO COUPON SECURITIES AND DEFERRED INTEREST BONDS. A fund may invest in zero
coupon securities that are "stripped" US Treasury notes and bonds and in
deferred interest bonds. Zero coupon securities are the separate income or
principal components of a debt instrument. Zero coupon and deferred interest
bonds are debt obligations which are issued at a significant discount from face
value. The original discount approximates the total amount of interest the
bonds will accrue and compound over the period until maturity or the first
interest accrual date at a rate of interest reflecting the market rate of the
security at the time of issuance. Zero coupon securities are redeemed at face
value at their maturity date without interim cash payments of interest or
principal. The amount of this discount is accrued over the life of the
security, and the accrual constitutes the income earned on the security for
both accounting and federal income tax purposes. Because of these features, the
market prices of zero coupon securities are generally more volatile than the
market prices of securities that have similar maturity but that pay interest
periodically.


While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds generally provide for a period of delay before the
regular payment of interest begins. Although this period of delay is different
for each deferred interest bond, a typical period is approximately one-third of
the bond's term to maturity. Such investments benefit the issuer by mitigating
its initial need for cash to meet debt service, but some also provide a higher
rate of return to attract investors who are willing to defer receipt of such
cash.


A fund will accrue income on such investments for tax and accounting purposes,
as required, which will generally be prior to the receipt of the corresponding
cash payments. Because a fund is required to distribute to shareholders
substantially all of its net investment income, including such accrued income,
to avoid federal income and excise taxes, a fund may be required to liquidate
other portfolio securities to satisfy a fund's distribution obligations
(including at a time when it may not be advantageous to do so). Under many
market conditions, investments in zero coupon, step-coupon and pay-in-kind
securities may be illiquid, making it difficult for a fund to dispose of them
or to determine their current value.


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PART II: APPENDIX II-H - TAXES


TAXES

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


TAXATION OF A FUND AND ITS INVESTMENTS


QUALIFICATION AS A REGULATED INVESTMENT COMPANY. A fund has elected (or in the
case of a new fund, intends to elect) to be treated, and intends to qualify
each year, as a regulated investment company under Subchapter M of the Code. If
a fund qualifies for treatment as a regulated investment company that is
accorded special tax treatment, such fund will not be subject to federal income
tax on income distributed in a timely manner to its shareholders in the form of
dividends (including Capital Gain Dividends, as defined below). In order to
qualify for the special tax treatment accorded regulated investment companies
and their shareholders under the Code, a fund must, among other things:


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


(b) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of its total assets are represented
by cash and cash items, US Government securities, securities of other regulated
investment companies, and other securities limited in respect of any one issuer
to a value not greater than 5% of the value of a fund's total assets and not
more than 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets areis invested (x) in the securities
(other than those of the US Government or other regulated investment companies)
of any one issuer or of two or more issuers which the fund controls and which
are engaged in the same, similar, or related trades or businesses, or (y) in
the securities of one or more qualified publicly traded partnerships (as
defined below); and


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


In general, for purposes of the 90% gross income requirement described in
paragraph (a) above, income derived from a partnership will be treated as
qualifying income only to the extent such income is attributable to items of
income of the partnership which would be qualifying income if realized directly
by a fund. However, 100% of net income derived from an interest in a "qualified
publicly traded partnership" (generally, a partnership (x) the interests in
which are traded on an established securities market or readily tradable on a
secondary market or the substantial equivalent thereof, and (y) that derives
less than 90% of its income from the qualifying income described in paragraph
(a)(i) above) will be treated as qualifying income. In general, "qualified
publicly traded partnerships" in which a fund will invest will be treated as
partnerships for federal income tax purposes because they meet the passive
income requirement under Code section 7704(c)(2).


For purposes of the diversification test in paragraph (b) above, the term
"outstanding voting securities of such issuer" will include the equity
securities of a qualified publicly traded partnership. It is possible that
certain partnerships in which a fund may invest could be qualified publicly
traded partnerships and, therefore, the extent to which a fund may invest in
such partnerships, including master limited partnerships, is limited by its
intention to qualify as a regulated


                                     II-123
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investment company under the Code. In addition, although the passive loss rules
of the Code do not generally 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 a fund being subject to state, local or foreign
income, franchise or withholding taxes.


In addition, for purposes of the diversification test in paragraph (b) above,
the identification of the issuer (or, in some cases, issuers) of a particular
fund investment can depend on the terms and conditions of that investment. In
some cases, identification of the issuer (or issuers) is uncertain under
current law, and an adverse determination or future guidance by the Internal
Revenue Service (IRS) with respect to issuer identification for a particular
type of investment may adversely affect a fund's ability to meet the
diversification test in paragraph (b) above.


Failure to qualify as a regulated investment company. If for any taxable year a
fund were to fail to qualify for the special federal income tax treatment
accorded regulated investment companies, all of its taxable income would be
subject to federal income tax at regular corporate rates (without any deduction
for distributions to its shareholders), and all distributions from earnings and
profits, including any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to shareholders as ordinary income. Some
portions of such distributions, however, could be eligible (i) to be treated as
qualified dividend income in the case of shareholders taxed as individuals and
other noncorporate shareholders and (ii) for the dividends received deduction
in the case of corporate shareholders. In addition, a fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying as a regulated investment company
that is accorded special federal income tax treatment.


A fund is subject to a 4% nondeductible excise tax on amounts that have been
retained rather than distributed, as required, under a prescribed formula. The
formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of a fund's taxable ordinary income for
the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the one-year period ending October 31 of such
year (or the last day of a fund's taxable year if a fund's taxable year ends in
November or December and a fund makes an election to use such later date), as
well as amounts that were neither distributed by nor taxed to a fund during the
prior calendar year. For this purpose, a fund will be treated as having
distributed any ordinary income or capital gain net income on which it has been
subject to corporate income tax in the taxable year ending within the calendar
year. Although a fund's distribution policies should enable it to avoid this
excise tax liability, a fund may retain (and be subject to income or excise tax
on) a portion of its capital gain or other income if it appears to be in the
interest of such fund.


Special tax provisions that apply to certain instrumentsinvestments. Certain of
a fund's investment practices are subject to special and complex federal income
tax provisions, including rules relating to short sales, constructive sales,
"straddle" and "wash sale" transactions and section 1256 contracts (as defined
below), that may, among other things, (i) disallow, suspend or otherwise limit
the allowance of certain losses or deductions, (ii) convert lower taxed
long-term capital gains into higher taxed short-term capital gains or ordinary
income, (iii) convert an ordinary loss or a deduction into a capital loss, (iv)
cause a fund to recognize income or gain without a corresponding receipt of
cash and/or (v) adversely alter the characterization of certain fund
investments. Moreover, the straddle rules and short sale rules may require the
capitalization of certain related expenses of a fund.


Certain debt obligations. A fund's investment in debt obligations that are
issued with original issue discount (OID), or acquired with market discount, or
acquisition discount will be subject to special federal income tax rules. If a
fund holds the foregoing kinds of securities, it may be required to pay out as
an income distribution each year an amount which is greater than the total
amount of cash interest a fund actually received. Such distributions may be
made from the cash assets of a fund or by liquidation of portfolio securities
that it might otherwise have continued to hold. A fund may realize gains or
losses from such liquidations. In the event a fund realizes net capital gains
from such transactions, its shareholders may receive larger distributions than
they would have received in the absence of such transactions. These investments
may also affect the character of income recognized by a fund.


Investments in debt obligations that are at risk of or in default present
special tax issues for a fund. Federal income tax rules are not entirely clear
about issues such as whether and, if so, to what extent a fund should recognize
market discount on such a debt obligation, when a fund may cease to accrue
interest, original issue discount or market discount,


                                     II-124
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when and to what extent deductions may be taken for bad debts or worthless
securities, how payments received on obligations in default should be allocated
between principal and income and whether exchanges of debt obligations in a
workout context are taxable. These and other issues will be addressed by a
fund, when, as and if it invests in such securities, in order to seek to ensure
that it distributes sufficient income to preserve its status as a regulated
investment company and does not become subject to US federal income or excise
tax.


Derivatives. A fund's transactions in foreign currencies, derivative
instruments (e.g. forward contracts, swap agreements, options and futures
contracts (including options and futures contracts on foreign currencies)), as
well other hedging, short sale or similar transactions, may be subject to
special provisions of the Code (including provisions relating to "hedging
transactions" and "straddles") that, among other things, may affect the
character of gains and losses realized by a fund (i.e., may affect whether
gains or losses are ordinary or capital), accelerate recognition of income to a
fund and defer fund losses. These rules could therefore affect the character,
amount and timing of distributions to shareholders. These provisions may also
(i) require a fund to mark to market annually certain types of the positions in
its portfolio (i.e., treat them as if they were closed out at the end of each
year), or (ii) cause a fund to recognize income without receiving cash with
which to pay dividends or make distributions in amounts necessary to satisfy
the distribution requirements described above in order to avoid certain income
and excise taxes. A fund may be required to liquidate other investments
(including when it is not advantageous to do so) to meet its distribution
requirements, which may also accelerate the recognition of gain by the fund. A
fund will monitor its transactions, make the appropriate tax elections and make
the appropriate entries in its books and records when it acquires any foreign
currency, forward contract, option, futures contract or hedged investment in
order to mitigate the effect of these rules and prevent disqualification of a
fund as a regulated investment company.


In general, option premiums received by a fund are not immediately included in
the income of a fund. Instead, the premiums are recognized when the option
contract expires, the option is exercised by the holder, or a fund transfers or
otherwise terminates the option (e.g., through a closing transaction). If a
call option written by a fund is exercised and a fund sells or delivers the
underlying stock, a fund generally will recognize capital gain or loss equal to
(a) the sum of the strike price and the option premium received by a fund minus
(b) a fund's basis in the stock. Such gain or loss generally will be short-term
or long-term depending upon the holding period of the underlying stock. If
securities are purchased by a fund pursuant to the exercise of a put option
written by it, a fund generally will subtract the premium received from its
cost basis in the securities purchased. The gain or loss with respect to any
termination of a fund's obligation under an option other than through the
exercise of the option and related sale or delivery of the underlying stock
generally will be short-term gain or loss depending on whether the premium
income received by a fund is greater or less than the amount paid by a fund (if
any) in terminating the transaction. Thus, for example, if an option written by
a fund expires unexercised, a fund generally will recognize short-term gain
equal to the premium received.


Certain covered call writing activities of a fund may trigger the US federal
income tax straddle rules of Section 1092 of the Code, requiring that losses be
deferred and holding periods be tolled on offsetting positions in options and
stocks deemed to constitute substantially similar or related property. Options
on single stocks that are not "deep in the money" may give rise to qualified
covered calls, which generally are not subject to the straddle rules; the
holding period on stock underlying qualified covered calls that are "in the
money" although not "deep in the money" will be suspended during the period
that such calls are outstanding. Thus, the straddle rules and the rules
governing qualified covered calls could cause gains that would otherwise
constitute long-term capital gains to be treated as short-term capital gains,
and distributions that would otherwise constitute "qualified dividend income"
(as discussed below) or qualify for the dividends-received deduction (as
discussed below) to fail to satisfy the holding period requirements and
therefore to be taxed at ordinary income tax rates or to fail to qualify for
the 70% dividends-received deduction, as the case may be.


A fund's investment in so called "section 1256 contracts," which include
certain futures contracts as well as listed non-equity options written or
purchased by a fund on US exchanges (including options on futures contracts,
equity indices and debt securities), are subject to special federal income tax
rules. All section 1256 contracts held by a fund at the end of its taxable year
are required to be marked to their market value, and any unrealized gain or
loss on those positions will be included in a fund's income as if each position
had been sold for its fair market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain or loss realized by a
fund from positions in section 1256 contracts closed during the taxable year.
Provided such positions were held as capital assets and were


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neither 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 (although certain foreign currency gains and losses from such contracts
may be treated as ordinary in character), regardless of the period of time the
positions were actually held by a fund.


As a result of entering into swap contracts, a fund may make or receive
periodic net payments. A 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 a fund has been a
party to the swap for more than one year). With respect to certain types of
swaps, a 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 federal income tax
purposes as ordinary income or loss. The federal income tax treatment of many
types of credit default swaps is uncertain under current law.
In general, gain or loss on a short sale is recognized when a fund closes the
sale by delivering the borrowed property to the lender, not when the borrowed
property is sold. Gain or loss from a short sale is generally treated as
capital gain or loss to the extent that the property used to close the short
sale constitutes a capital asset in a fund's hands. Except with respect to
certain situations where the property used by a fund to close a short sale has
a long-term holding period on the date of the short sale, special rules would
generally treat the gains on short sales as short-term capital gains. These
rules may also terminate the running of the holding period of "substantially
identical property" held by a fund. Moreover, a loss on a short sale will be
treated as a long-term capital loss if, on the date of the short sale,
"substantially identical property" has been held by a fund for more than a
year. In general, a fund will not be permitted to deduct payments made to
reimburse the lender of securities for dividends paid on borrowed stock if the
short sale is closed on or before the 45th day after the short sale is entered
into.


Because the rules described above and other federal income tax rules applicable
to these types of transactions are in some cases uncertain under current law,
an adverse determination or future guidance by the IRS with respect to these
rules (which determination or guidance could be retroactive) may affect whether
a fund has made sufficient distributions, and otherwise satisfied the relevant
requirements, to maintain its qualification as a regulated investment company
and avoid a fund-level tax. A fund intends to limit its activities in options,
futures contracts, forward contracts, short sales, swaps and related
transactions to the extent necessary to meet the requirements for qualification
and treatment as a regulated investment company under the Code.


REITs. A fund's investments in equity securities of real estate investment
trusts (REITs) may result in a fund's receipt of cash in excess of the REIT's
earnings; if a fund distributes these amounts, the distributions could
constitute a return of capital to fund shareholders for federal income tax
purposes. In addition, such investments in REIT equity securities also may
require a fund to accrue and distribute income not yet received. To generate
sufficient cash to make the requisite distributions, a fund may be required to
sell securities in its portfolio (including when it is not advantageous to do
so) that it otherwise would have continued to hold. Dividends received by a
fund from a REIT will not qualify for the corporate dividends-received
deduction and generally will not constitute qualified dividend income.


Under a notice issued by the IRS in October 2006 and Treasury regulations that
have yet to be issued but may apply retroactively, a portion of a fund's income
from a REIT (or other pass-through entity) that is attributable to the REIT's
residual interest in a real estate mortgage investment conduit (REMIC) or an
equity interest in a taxable mortgage pool (TMP) (referred to in the Code as an
"excess inclusion") will be subject to federal income tax in all events. This
notice also provides, and the regulations are expected to provide, that excess
inclusion income of a regulated investment company will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the
shareholders held the related REMIC or TMP interest directly (see Taxation of
US Shareholders - Dividends and distributions - Additional considerations for a
summary of certain federal income tax consequences to shareholders of
distributions designated as excess inclusion income).


Standby commitments. A fund may purchase municipal securities together with the
right to resell the securities to the seller at an agreed upon price or yield
within a specified period prior to the maturity date of the securities. Such a
right to resell is commonly known as a "put" and is also referred to as a
"standby commitment." A fund may pay for a standby commitment either in cash or
in the form of a higher price for the securities which are acquired subject


                                     II-126
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to the standby commitment, thus increasing the cost of securities and reducing
the yield otherwise available. Additionally, a fund may purchase beneficial
interests in municipal securities held by trusts, custodial arrangements or
partnerships and/or combined with third-party puts or other types of features
such as interest rate swaps; those investments may require a fund to pay
"tender fees" or other fees for the various features provided. The IRS has
issued a revenue ruling to the effect that, under specified circumstances, a
regulated investment company will be the owner of tax-exempt municipal
obligations acquired subject to a put option. The IRS has also issued private
letter rulings to certain taxpayers (which do not serve as precedent for other
taxpayers) to the effect that tax-exempt interest received by a regulated
investment company with respect to such obligations will be tax-exempt in the
hands of the company and may be distributed to its shareholders as
exempt-interest dividends. The IRS has subsequently announced that it will not
ordinarily issue advance ruling letters as to the identity of the true owner of
property in cases involving the sale of securities or participation interests
therein if the purchaser has the right to cause the security, or the
participation interest therein, to be purchased by either the seller or a third
party. A fund, where relevant, intends to take the position that it is the
owner of any municipal obligations acquired subject to a standby commitment or
other third party put and that tax-exempt interest earned with respect to such
municipal obligations will be tax-exempt in its hands. There is no assurance
that the IRS will agree with such position in any particular case. If a fund is
not viewed as the owner of such municipal obligations, it will not be permitted
to treat the exempt interest paid on such obligations as belonging to it. This
may affect the fund's eligibility to pay exempt-interest dividends to its
shareholders. Additionally, the federal income tax treatment of certain other
aspects of these investments, including the treatment of tender fees paid by a
fund, in relation to various regulated investment company tax provisions is
unclear. However, the Advisor intends to manage a fund's portfolio in a manner
designed to minimize any adverse impact from the tax rules applicable to these
investments.


As described herein, in certain circumstances a fund may be required to
recognize taxable income or gain even though no corresponding amounts of cash
are received concurrently. A fund may therefore be required to obtain cash to
satisfy its distribution requirements by selling securities at times when it
might not otherwise be desirable to do so or by borrowing the necessary cash,
thereby incurring interest expense. In certain situations, a fund may, for a
taxable year, defer all or a portion of its capital losses and currency losses
realized after October 31 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 31 may affect the federal income tax
character of shareholder distributions.


Foreign investments. Income (including, in some cases, capital gains) from
investments in foreign stocks or securities may be subject to foreign taxes,
including withholding and other taxes imposed by foreign jurisdictions. Tax
conventions between certain countries and the US may reduce or eliminate such
taxes. It is not possible to determine a fund's effective rate of foreign tax
in advance since the amount of a fund's assets to be invested in various
countries is not known.


If a fund is liable for foreign taxes and if more than 50% of the value of a
fund's total assets at the close of its taxable year consists of stocks or
securities of foreign corporations (including foreign governments), a fund may
make an election pursuant to which certain foreign taxes paid by a fund would
be treated as having been paid directly by shareholders of a fund. Pursuant to
such election, shareholders may be able to claim a credit or deduction on their
federal income tax returns for their pro rata portions of qualified taxes paid
by a fund to foreign countries in respect of foreign securities that such fund
has held for at least the minimum period specified in the Code. In such a case,
shareholders will include in gross income from foreign sources their pro rata
shares of such taxes paid by a fund. Each shareholder of a fund will be
notified after the close of a fund's taxable year whether the foreign taxes
paid by a fund will "pass through" for that year and, if so, such notification
will designate the shareholder's portion of (i) the foreign taxes paid by a
fund and (ii) a fund's foreign source income.


A shareholder's ability to claim an offsetting foreign tax credit or deduction
in respect of foreign taxes paid by a fund is subject to certain limitations
imposed by the Code, which may result in the shareholder not receiving a full
credit or deduction (if any) for the amount of such taxes. Shareholders who do
not itemize on their US federal income tax returns may claim a credit (but not
a deduction) for such foreign taxes. The amount of foreign taxes that a
shareholder may claim as a credit in any year will generally be subject to a
separate limitation for "passive income" which includes,


                                     II-127
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among other types of income, dividends, interest and certain foreign currency
gains. Because capital gains realized by a fund on the sale of foreign
securities will be treated as US source income, the available credit of foreign
taxes paid with respect to such gains may be restricted by this limitation.


If a fund does not satisfy the requirements for passing through to its
shareholders their proportionate shares of any foreign taxes paid by a fund,
shareholders generally will not be entitled to claim a credit or deduction with
respect to foreign taxes incurred by a fund but will not be required to include
such taxes in their gross incomes.


A fund's transactions in foreign currencies, foreign-currency-denominated debt
obligations and certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned. Under section 988 of the Code, gains or losses
attributable to fluctuations in exchange rates between the time a fund accrues
income or receivables or expenses or other liabilities denominated in a foreign
currency and the time a 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 a fund elects otherwise. Such ordinary income treatment may accelerate
fund distributions to shareholders and increase the distributions taxed to
shareholders as ordinary income. Any net ordinary losses so created cannot be
carried forward by a fund to offset income or gains earned in subsequent
taxable years.


Investment in passive foreign investment companies (PFICs). If a 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, which tax cannot be eliminated by making distributions to fund
shareholders. Such excess distributions and gains will be considered ordinary
income. Additional charges in the nature of interest may be imposed on a fund
in respect of deferred taxes arising from such distributions or gains.


However, a fund may elect to avoid the imposition of that tax. For example, a
fund may in certain cases elect to treat the PFIC as a "qualified electing
fund" under the Code (i.e., make a "QEF election"), in which case a fund would
be required to include in income each year its share of the ordinary earnings
and net capital gains of the qualified electing fund, even if such amounts were
not distributed to a fund. In order to make this election, a fund would be
required to obtain certain annual information from the PFICs in which it
invests, which may be difficult or not possible to obtain.


Alternatively, a fund may make a mark-to-market election that will result in a
fund being treated as if it had sold (and, solely for purposes of this
mark-to-market election, repurchased) its PFIC stock at the end of such fund's
taxable year. In such case, a 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 QEF and mark-to-market elections must be made
separately for each PFIC owned by a fund and, once made, would be effective for
all subsequent taxable years, unless revoked with the consent of the IRS. By
making the election, a fund could potentially ameliorate the adverse federal
income 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. A fund may have to distribute this "phantom" income and gain to satisfy
the 90% distribution requirement and/or to avoid imposition of the 4% excise
tax. Making either of these elections therefore may require a fund to liquidate
other investments (including when it is not advantageous to do so) to meet its
distribution requirement, which also may accelerate the recognition of gain and
affect a fund's total return. A fund will make the appropriate tax elections,
if possible, and take any additional steps that are necessary to mitigate the
effect of these rules. Dividends paid by PFICs will not be eligible to be
treated as "qualified dividend income."


TAXATION OF US SHAREHOLDERS

                                     II-128
<PAGE>

DIVIDENDS AND DISTRIBUTIONS. A fund intends to distribute substantially all of
its net investment company taxable income (computed without regard to the
dividends-paid deduction) and net capital gain (that is, the excess of net
realized long-term capital gains over net realized short-term capital losses),
if any, to shareholders each year. Unless a shareholder instructs the
Trust/Corporation to pay such dividends and distributions in cash, they will be
automatically reinvested in additional shares of a fund.


Dividends and other distributions by a fund are generally treated under the
Code as received by the shareholders at the time the dividend or distribution
is made, whether you receive them in cash or reinvest them in additional
shares. However, any dividend or distribution declared by a 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
a fund not later than such December 31, provided such dividend is actually paid
by a fund during January of the following calendar year. Dividends and
distributions received by a retirement plan qualifying for tax-exempt treatment
under the Code will not be subject to US federal income tax.


If a fund retains for investment an amount equal to all or a portion of its net
capital gain, it will be subject to federal income tax at the fund level at
regular corporate rates on the amount retained. In that event, a fund may
designate such retained amount as undistributed capital gains in a notice to
its shareholders who (i) will be required to include in income for US federal
income tax purposes, as long-term capital gains, their proportionate shares of
the undistributed amount, and (ii) will be entitled to credit their
proportionate shares of the federal income tax paid by a fund on the
undistributed amount against their US federal income tax liabilities, if any,
and to claim refunds to the extent their credits exceed their liabilities. The
tax basis of shares owned by a fund shareholder, for US federal income tax
purposes, will be increased by an amount equal to the difference between the
amount of undistributed capital gains included in the shareholder's gross
income and the federal income tax deemed paid by the shareholder under clause
(ii) of the preceding sentence. 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 a fund upon filing appropriate returns or claims
for refund with the IRS.


For federal income tax purposes, distributions of investment income are
generally taxable to shareholders as ordinary income. Taxes on distributions of
capital gains are determined by how long a fund owned (or is deemed to have
owned) the investments that generated them, rather than how long a shareholder
has owned his or her shares. In general, the fund will recognize long-term
capital gain or loss on assets it has owned (or is deemed to have owned) for
more than one year, and short-term capital gain or loss on investments it has
owned (or is deemed to have owned) for one year or less. Distributions of net
capital gains that are properly designated by a fund as capital gain dividends
(Capital Gain Dividends) will be taxable as long-term capital gains.
Distributions from capital gains are generally made after applying any
available capital loss carryovers. Long-term capital gain rates applicable to
individuals and other noncorporate investors have been temporarily reduced to
15% - with a 0% rate applying to taxpayers in the 10% and 15% rate brackets -
for taxable years beginning before January 1, 2011. It is currently unclear
whether Congress will extend this provision for taxable years beginning on or
after January 1, 2011. However, a portion of the proceeds from the disposition
of certain real property assets held by a fund for more than one year may
produce "unrecaptured section 1250 gain." Any unrecaptured section 1250 gain
received by a fund will be taxable to shareholders at a 25% rate. Except as
discussed below, all other dividends of a fund (including dividends from
short-term capital gains) from current and accumulated earnings and profits are
generally subject to federal income tax as ordinary income.


Qualified dividend income. For taxable years beginning before January 1, 2011,
dividends designated by a fund as derived from "qualified dividend income" will
be taxed to individuals and other noncorporate shareholders at the federal
income tax rates generally applicable to long-term capital gains, provided
certain holding period and other requirements are met at both the shareholder
and fund levels. Dividends subject to these special rules are not actually
treated as capital gains, however, and thus are not included in the computation
of an individual's net capital gain and generally cannot be used to offset by
capital losses. It is currently unclear whether Congress will extend this
provision for taxable years beginning on or after January 1, 2011.


                                     II-129
<PAGE>

If 95% or more of a fund's gross income (excluding net long-term capital gain
over net short-term capital loss) in a taxable year is attributable to
qualified dividend income received by a fund, 100% of the dividends paid by a
fund (other than distributions designated by a fund as Capital Gain Dividends)
to individuals and other noncorporate shareholders during such taxable year
will be eligible to be treated as qualified dividend income. If less than 95%
of a fund's gross income is attributable to qualified dividend income, then
only the portion of the fund's dividends that is attributable to qualified
dividend income and designated as such by the fund will be eligible to be
treated as qualified dividend income.


For these purposes, qualified dividend income generally means income from
dividends received by a fund from US corporations and certain foreign
corporations. Dividend income received by a fund and distributed to a fund
shareholder may not be treated as qualified dividend income by the shareholder
unless a fund satisfies certain holding period and other requirements with
respect to the stock in its portfolio generating such dividend income and the
shareholder meets certain holding period and other requirements with respect to
a fund's shares. A dividend will not be treated as qualified dividend income
(at either a fund or shareholder level) (1) if the dividend is received with
respect to any share of stock held for fewer than 61 days during the 121-day
period beginning on the date which is 60 days before the date on which such
share becomes ex-dividend with respect to such dividend (or, in the case of
certain preferred stock, 91 days during the 181-day period beginning 90 days
before such date), (2) to the extent that the recipient is under an obligation
(whether pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property, (3) if the
recipient elects to have the dividend income treated as investment income for
purposes of the limitation on deductibility of investment interest, or (4) if
the dividend is received from a foreign corporation that is (a) not eligible
for the benefits of a comprehensive income tax treaty with the United States
(with the exception of dividends paid on stock of such a foreign corporation
readily tradable on an established securities market in the United States) or
(b) treated as a passive foreign investment company. For purposes of
determining the holding period for stock on which a dividend is received, such
holding period is reduced for any period the recipient has an option to sell,
is under a contractual obligation to sell or has made (and not closed) a short
sale of substantially identical stock or securities, and in certain other
circumstances.


Qualified dividend income does not include any dividends received from
tax-exempt corporations or interest from fixed income securities. Also,
dividends received by a fund from a REIT or another regulated investment
company are generally qualified dividend income only to the extent the dividend
distributions are made out of qualified dividend income received by such REIT
or other regulated investment company. In the case of securities lending
transactions, payments in lieu of dividends are not qualified dividend income.


Dividends-received deduction. If dividends from domestic corporations comprise
a portion of a fund's gross income, a portion of the income distributions of a
fund may be eligible for the 70% dividends-received deduction generally
available to corporations to the extent of the amount of eligible dividends
received by a fund from domestic corporations for the taxable year. A dividend
received by a fund will not be treated as a dividend eligible for the
dividends-received deduction (1i) if it has been received with respect to any
share of stock that the fund has held for less than 46 days (91 days in the
case of certain preferred stock) during the 91-day period beginning on the date
which is 45 days before the date on which such share becomes ex-dividend with
respect to such dividend (during the 181-day period beginning 90 days before
such date in the case of certain preferred stock) or (2ii) to the extent that
the fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property. Moreover, the dividends -received deduction may otherwise be
disallowed or reduced (1i) if a corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of a fund or (2ii) by
application of various provisions of the Code (for instance, the
dividends-received deduction is reduced in the case of a dividend received on
debt-financed portfolio stock (generally, stock acquired with borrowed funds)).
For purposes of determining the holding period for stock on which a dividend is
received, such holding period is reduced for any period the recipient has an
option to sell, is under a contractual obligation to sell or has made (and not
closed) a short sale of substantially identical stock or securities, and in
certain other circumstances.


Distributions from REITs do not qualify for the deduction for dividends
received. Shareholders will be informed of the portion of dividends which so
qualify.


                                     II-130
<PAGE>

Capital gains. In determining its Capital Gain Dividend (as defined above), a
regulated investment company generally must treat any net capital loss or any
net long-term capital loss incurred after October 31 as if it had been incurred
in the succeeding year. In addition, in determining its taxable income, a
regulated investment company is permitted to elect to treat all or part of any
net capital loss, any net long-term capital loss or any foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.


Capital gains distributions may be reduced if a fund has capital loss
carryforwards available. Capital losses in excess of capital gains ("net
capital losses") are not permitted to be deducted against a fund's net
investment income. A fund may carry net capital losses forward for eight years
and use them to offset capital gains realized during this period; any net
capital losses remaining at the conclusion of the eighth taxable year
succeeding the taxable year in which such net capital losses arose will expire
unused. All net capital losses carried forward are treated as short-term
capital losses, and will offset any short-term capital gains before offsetting
any long-term capital gains. A fund's ability to use net capital losses to
offset gains may be limited as a result of certain (i) acquisitive
reorganizations and (ii) shifts in the ownership of a fund by a shareholder
owning or treated as owning 5% or more of the stock of such fund. Any capital
loss carryforwards and any post-October loss deferrals to which a fund is
entitled are disclosed in a fund's annual reports to shareholders.


Additional considerations. Certain of a fund's investments in derivative
instruments and foreign currency-denominated instruments, and any of a fund's
transactions in foreign currencies and hedging activities, are likely to
produce a difference between its book income and the sum of its taxable income
and net tax-exempt income. If there are differences between a fund's book
income and the sum of its taxable income and net tax-exempt income, a fund may
be required to distribute amounts in excess of its book income or a portion of
fund distributions may be treated as a return of capital to shareholders. If a
fund's book income exceeds the sum of its taxable income (including realized
capital gains) and net tax-exempt income, the distribution of such excess
generally will be treated as (i) a dividend to the extent of a fund's remaining
earnings and profits, (ii) thereafter, as a return of capital to the extent of
the recipient's basis in its shares, and (iii) thereafter, as gain from the
sale or exchange of a capital asset. If a fund's book income is less than the
sum of its taxable income and net tax-exempt income, a fund could be required
to make distributions exceeding its book income to qualify for treatment as a
regulated investment company.


Distributions to shareholders designated as excess inclusion income (see
Special tax provisions that apply to certain investments - REITs) (i) may
constitute "unrelated business taxable income" ("UBTI") for those shareholders
who would otherwise be exempt from federal income tax, such as individual
retirement accounts, 401(k) accounts, Keogh plans, pension plans and certain
charitable entities, thereby potentially requiring such an entity that is
allocated excess inclusion income, and otherwise might not be required to file
a federal income tax return, to file a tax return and pay tax on such income,
(ii) cannot be offset by net operating losses (subject to a limited exception
for certain thrift institutions), (iii) will not be eligible for reduced US
withholding tax rates for non-US shareholders (including non-US shareholders
eligible for the benefits of a US income tax treaty), and (iv) may cause a fund
to be subject to tax if certain "disqualified organizations," as defined in the
Code, are fund shareholders.


All distributions by a fund result in a reduction in the net asset value of a
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to
the shareholder as ordinary income, qualified dividend 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 fund shares just prior to a
distribution will receive a partial return of capital upon the distribution,
which nevertheless may be taxable to them for federal income tax purposes.


After the end of each calendar year, a fund will inform shareholders of the
federal income tax status of dividends and distributions paid (or treated as
paid) during such calendar year.


Exempt-interest dividends. Any dividends paid by a fund that are properly
designated as exempt-interest dividends will not be subject to regular federal
income tax. A fund will be qualified to pay exempt-interest dividends to its
shareholders only if, at the end of each quarter of a fund's taxable year, at
least 50% of the total value of a fund's assets consists of obligations of a
state or political subdivision thereof the interest on which is exempt from
federal income tax under


                                     II-131
<PAGE>

Code section 103(a). Distributions that a fund properly designates as
exempt-interest dividends are treated as interest excludable from shareholders'
gross income for federal income tax purposes but may result in liability for
federal alternative minimum tax purposes and for state and local tax purposes,
both for individual and corporate shareholders. For example, if a fund invests
in "private activity bonds," certain shareholders may be subject to alternative
minimum tax on the part of a fund's distributions derived from interest on such
bonds.


Interest on indebtedness incurred directly or indirectly to purchase or carry
shares of a fund will not be deductible to the extent it is deemed related to
exempt-interest dividends paid by a fund. The portion of interest that is not
deductible is equal to the total interest paid or accrued on the indebtedness,
multiplied by the percentage of a fund's total distributions (not including
Capital Gain Dividends) paid to the shareholder that are exempt-interest
dividends. Under rules used by the IRS to determine when borrowed funds are
considered incurred for the purpose of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with
borrowed funds even though such funds are not directly traceable to the
purchase of shares. In addition, the Code may require a shareholder that
receives exempt-interest dividends to treat as taxable income a portion of
certain otherwise, non-taxable social security and railroad retirement benefit
payments. A portion of any exempt-interest dividend paid by a fund that
represents income derived from certain revenue or private activity bonds held
by a fund may not retain its tax-exempt status in the hands of a shareholder
who is a "substantial user" of a facility financed by such bonds, or a "related
person" thereof. Moreover, some or all of the exempt-interest dividends
distributed by a fund may be a specific preference item, or a component of an
adjustment item, for purposes of the federal individual and corporate
alternative minimum taxes. The receipt of dividends and distributions from a
fund may affect a foreign corporate shareholder's federal "branch profits" tax
liability and the federal "excess net passive income" tax liability of a
shareholder that is a Subchapter S corporation. Shareholders should consult
their own tax advisors as to whether they are (i) "substantial users" with
respect to a facility or "related" to such users within the meaning of the Code
or (ii) subject to a federal alternative minimum tax, the federal "branch
profits" tax or the federal "excess net passive income" tax.


Shareholders that are required to file tax returns are required to report
tax-exempt interest income, including exempt-interest dividends, on their
federal income tax returns. A fund will inform shareholders of the federal
income tax status of its distributions after the end of each calendar year,
including the amounts, if any, that qualify as exempt-interest dividends and
any portions of such amounts that constitute tax preference items under the
federal alternative minimum tax. Shareholders who have not held shares of a
fund for a full taxable year may have designated as tax-exempt or as a tax
preference item a percentage of their distributions which is different from the
percentage of a fund's income that was tax-exempt or comprising tax preference
items during the period of their investment in a fund. Shareholders should
consult their tax advisors for more information.


Transactions in fund shares. Upon the sale or exchange of his or her shares, a
shareholder generally will realize a taxable gain or loss equal to the
difference between the amount realized and his or her basis in the shares. A
redemption of shares by a fund generally will be treated as a sale for this
purpose. Such gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands, and will be long-term
capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for one year or less.
Any loss realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced, including replacement through the reinvesting
of dividends and capital gains distributions in a fund, within 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.


Any loss realized by a shareholder on the sale of fund shares held by the
shareholder for six months or less will be disallowed to the extent of any
exempt-interest dividends received by the shareholder with respect to such
shares and, to the extent not disallowed, will be treated for US federal income
tax purposes as a long-term capital loss to the extent of any distributions or
deemed distributions of long-term capital gains received by the shareholder
with respect to such shares. A shareholder's ability to utilize capital losses
may be limited under the Code. If a shareholder incurs a sales charge in
acquiring shares of a fund, disposes of those shares within 90 days and then
acquires shares in a mutual fund for which the otherwise applicable sales
charge is reduced by reason of a reinvestment right (e.g., an exchange
privilege), the original sales charge will not be taken into account in
computing gain or loss on the original shares to the extent the subsequent
sales charge is reduced. Instead, the disregarded portion of the original sales



                                     II-132
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charge will be added to the tax basis of the newly acquired shares.
Furthermore, the same rule also applies to a disposition of the newly acquired
shares made within 90 days of the second acquisition. This provision prevents a
shareholder from immediately deducting the sales charge by shifting his or her
investment within a family of mutual funds.


The sale or other disposition of shares of a fund by a retirement plan
qualifying for tax-exempt treatment under the Code will not be subject to US
federal income tax. Because the federal income tax treatment of a sale or
exchange of fund shares depends on your purchase price and your personal tax
position, you should keep your regular account statements to use in determining
your federal income tax liability.


TAX-EXEMPT SHAREHOLDERS. Under current law, a fund generally serves to "block"
(that is, prevent the attribution to shareholders of) UBTI from being realized
by tax-exempt shareholders. Notwithstanding this "blocking" effect, a
tax-exempt shareholder could recognize UBTI by virtue of its investment in a
fund if shares in a fund constitute debt-financed property in the hands of the
tax-exempt shareholder within the meaning of Code Section 514(b).


Furthermore, a tax-exempt shareholder may recognize UBTI if a fund recognizes
"excess inclusion income" derived from direct or indirect investments in REMIC
residual interests or TMPs if the amount of such income recognized by a fund
exceeds a fund's investment company taxable income (after taking into account
deductions for dividends paid by a fund). Any investment in residual interests
of a Collateralized Mortgage Obligation (a "CMO") that has elected to be
treated as a REMIC likewise can create complex tax problems, especially if a
fund has state or local governments or other tax-exempt organizations as
shareholders.


In addition, special tax consequences apply to charitable remainder trusts
(CRTs) that invest in regulated investment companies that invest directly or
indirectly in residual interests in REMICs or equity interests in TMPs. Under
legislation enacted in December 2006, if a CRT (defined in section 664 of the
Code) realizes any UBTI for a taxable year, it must pay an excise tax annually
of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a
CRT will not recognize UBTI as a result of investing in a fund that recognizes
"excess inclusion income." Rather, if at any time during any taxable year a CRT
(or one of certain other tax-exempt shareholders, such as the United States, a
state or political subdivision, or an agency or instrumentality thereof, and
certain energy cooperatives) is a record holder of a share in a fund that
recognizes "excess inclusion income," then a fund will be subject to a tax on
that portion of its "excess inclusion income" for the taxable year that is
allocable to such shareholders at the highest federal corporate income tax
rate. The extent to which this IRS guidance remains applicable in light of the
December 2006 legislation is unclear. To the extent permitted under the 1940
Act and the Code, a fund may elect to specially allocate any such tax to the
applicable CRT, or other shareholder, and thus reduce such shareholder's
distributions for the year by the amount of the tax that relates to such
shareholder's interest in a fund. CRTs and other tax-exempt investors are urged
to consult their tax advisors concerning the consequences of investing in a
fund.


BACKUP WITHHOLDING AND OTHER TAX CONSIDERATIONS. A fund may be required to
withhold US federal income tax on distributions (including exempt-interest
dividends) and redemption proceeds payable to shareholders who fail to provide
a fund with their correct taxpayer identification number or to make required
certifications, who have underreported dividend or interest income, or who have
been notified (or when a fund is notified) by the IRS that they are subject to
backup withholding. The backup withholding tax rate is 28% for amounts paid
through 2010. This rate will expire and the backup withholding rate will be 31%
for amounts paid after December 31, 2010, unless Congress enacts tax
legislation providing otherwise. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's US federal income tax liability.


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


                                     II-133
<PAGE>

A fund's shareholders may be subject to state and local taxes on distributions
received from a fund and on redemptions of a 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. You are urged to consult your tax advisor as to the
consequences of these and other state and local tax rules affecting an
investment in a fund.


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


TAXATION OF NON-US SHAREHOLDERS. In general, dividends other than Capital Gain
Dividends and exempt-interest dividends paid by a fund to a shareholder that is
not a "US person" within the meaning of the Code (a "non-US shareholder") are
subject to withholding of US federal income tax at a rate of 30% (or lower
applicable treaty rate) even if they are funded by income or gains (such as
portfolio interest, short-term capital gains, or foreign-source dividend and
interest income) that, if paid to a non-US shareholder directly, would not be
subject to withholding. Distributions properly designated as Capital Gain
Dividends and exempt-interest dividends generally are not subject to
withholding of federal income tax.


Effective for taxable years of a fund beginning before January 1, 2010,
however, a fund is not required to withhold any amounts (i) with respect to
distributions (from US-source interest income of types similar to those not
subject to US federal income tax if earned directly by an individual non-US
shareholder, to the extent such distributions are properly designated by the
fund ("interest-related dividends"), and (ii) with respect to distributions of
net short-term capital gains in excess of net long-term capital losses, to the
extent such distributions are properly designated by the fund ("short-term
capital gain dividends"). The exception to withholding for interest-related
dividends does not apply to distributions to a non-US shareholder (A) that has
not provided a satisfactory statement that the beneficial owner is not a US
person, (B) to the extent that the dividend is attributable to certain interest
on an obligation if the non-US shareholder is the issuer or is a 10%
shareholder of the issuer, (C) that is within certain foreign countries that
have inadequate information exchange with the United States, or (D) to the
extent the dividend is attributable to interest paid by a person that is a
related person of the non-US shareholder and the non-US shareholder is a
controlled foreign corporation). The exception to withholding for short-term
capital gain dividends does not apply to (A) distributions to an individual
non-US shareholder who is present in the United States for a period or periods
aggregating 183 days or more during the year of the distribution and (B)
distributions subject to special rules regarding the disposition of US real
property interests (USRPIs) as defined below. Depending on the circumstances, a
fund may make designations of interest-related and/or short-term capital gain
dividends with respect to all, some or none of its potentially eligible
dividends and/or treat such dividends, in whole or in part, as ineligible for
these exemptions from withholding. A fund does not currently intend to make
designations of interest-related dividends. Absent legislation extending these
exemptions for taxable years beginning on or after January 1, 2010, these
special withholding exemptions for interest-related and short-term capital gain
dividends will expire and these dividends generally will be subject to
withholding as described above. It is currently unclear whether Congress will
extend the exemptions for taxable years beginning on or after January 1, 2010.


A non-US shareholder is not, in general, subject to US federal income tax on
gains (and is not allowed a deduction for losses) realized on the sale of
shares of a fund or on Capital Gain Dividends or exempt-interest dividends
unless (i) such gain or dividend is effectively connected with the conduct by
the non-US shareholder of a trade or business within the United States, (ii) in
the case of a non-US shareholder that is an individual, the shareholder is
present in the United States for a period or periods aggregating 183 days or
more during the year of the sale or the receipt of the Capital Gain Dividend
and certain other conditions are met, or (iii) the shares constitute USRPIs or
the Capital Gain Dividends are attributable to gains from the sale or exchange
of USRPIs in accordance with the rules set forth below. If a non-US shareholder
is eligible for the benefits of a tax treaty, any effectively connected income
or gain will generally be subject to US federal income tax on a net basis only
if it is also attributable to a permanent establishment maintained by the
non-US shareholder in the United States.


                                     II-134
<PAGE>

In order to qualify for any exemption from withholding tax or a reduced rate of
withholding tax under an applicable income tax treaty, a non-US shareholder
will need to comply with applicable certification requirements relating to its
non-US status (including, in general, furnishing an IRS Form W-8BEN or
substitute form). In the case of shares held through an intermediary, the
intermediary may withhold tax even if a fund designates a dividend as an
interest-related dividend or short-term capital gain dividend. Non-US
shareholders should contact their intermediaries with respect to the
application of these rules to their accounts.


The withholding tax does not apply to dividends paid to a non-US shareholder
who provides a Form W-8ECI, certifying that the dividends are effectively
connected with the non-US shareholder's conduct of a trade or business within
the United States. Instead, the effectively connected dividends will be subject
to regular US income tax as if the non-US shareholder were a US shareholder. A
non-US corporation receiving effectively connected dividends may also be
subject to additional "branch profits tax" imposed at a rate of 30% (or a lower
treaty rate). A non-US shareholder who fails to provide an IRS Form W-8BEN or
other applicable form may be subject to backup withholding at the appropriate
rate.


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


Special rules apply to distributions to certain foreign persons from a fund if
a fund is either a "US real property holding corporation" (USRPHC) or would be
a USRPHC but for the operation of the exceptions to the definition thereof
described below. Additionally, special rules apply to the sale of shares in a
fund if a fund is a USRPHC. Very generally, a USRPHC is a corporation that
holds US real property interests ("USRPIs") the fair market value of which
equals or exceeds 50% of the sum of the fair market values of the corporation's
USRPIs plus interests in real property located outside the United States and
other assets. USRPIs are defined as any interest in US real property or any
interest (other than a creditor) in a USRPHC or former USRPHC. If a fund holds
(directly or indirectly) significant interests in REITs, it may be a USRPHC.
The special rules discussed in the next paragraph will also apply to
distributions from a fund if it would be a USRPHC absent exclusions from USRPI
treatment for interests in domestically controlled REITs or regulated
investment companies and not-greater-than-5% interests in publicly traded
classes of stock in REITs or regulated investment companies.


If a fund is a USRPHC or would be a USRPHC but for the exceptions from the
definition of USRPI (described above), distributions by a fund that are
attributable to (a) gains realized on the disposition of USRPIs by a fund and
(b) distributions received by a fund from a lower-tier regulated investment
company or REIT that a fund is required to treat as USRPI gain in its hands
will retain their character as gains realized from USRPIs in the hands of the
foreign persons. (However, absent legislation, after December 31, 2009, this
"look-through" treatment for distributions by a fund to foreign persons will
apply only to such distributions that, in turn, are attributable to
distributions received by a fund from a lower-tier REIT and are required to be
treated as USRPI gain in a fund's hands.) If the foreign shareholder holds (or
has held at any time during the prior year) more than a 5% interest in a class
of stock of a fund, such distributions received by the shareholder with respect
to such class of stock will be treated as gains "effectively connected" with
the conduct of a "US trade or business," and subject to tax at graduated rates.
Moreover, such shareholders will be required to file a US income tax return for
the year in which the gain was recognized and a fund will be required to
withhold 35% of the amount of such distribution. In the case of all other
foreign persons (i.e., those whose interest in a fund did not exceed 5% at any
time during the prior year), the USRPI distribution will be treated as ordinary
income (regardless of any designation by a fund that such distribution is
qualified short-term capital gain or net capital gain) and a fund must withhold
30% (or a lower applicable treaty rate) of the amount of the distribution paid
to such foreign persons. Foreign persons are also subject to "wash sale" rules
to prevent the avoidance of the tax-filing and payment obligations discussed
above through the sale and repurchase of fund shares.


In addition, if a fund is a USRPHC or former USRPHC, a fund may be required to
withhold US tax upon a redemption of shares by a greater-than-5% shareholder
that is a foreign person, and that shareholder would be required to file a US
income tax return for the year of the disposition of the USRPI and pay any
additional tax due on the gain. On or before December 31, 2009, no withholding
is generally required with respect to amounts paid in redemption of shares of a
fund if a fund is a domestically controlled qualified investment entity, or, in
certain other limited cases, if a fund


                                     II-135
<PAGE>

(whether or not domestically controlled) holds substantial investments in
regulated investment companies that are domestically controlled qualified
investment entities. Absent legislation extending this exemption from
withholding beyond December 31, 2009, it will expire at that time and a fund
will be required to withhold with respect to amounts paid in redemption of its
shares as described above.


Shares of a fund held by a non-US shareholder at death will be considered
situated within the United States and will be 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 advisors with respect to the
particular tax consequences to them of an investment in a fund, including the
applicability of foreign taxes.


THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL US FEDERAL INCOME TAX
CONSEQUENCES AFFECTING A 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.



                                     II-136
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PART II: APPENDIX II-I - PROXY VOTING GUIDELINES

I.   INTRODUCTION


Deutsche Asset Management ("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:


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<PAGE>

(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.


                                     II-138
<PAGE>

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.


                                     II-139
<PAGE>

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.


                                     II-140
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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.


                                     II-141
<PAGE>

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.


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<PAGE>

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.


                                     II-143
<PAGE>

                 ATTACHMENT A - GLOBAL PROXY VOTING GUIDELINES


                           DEUTSCHE ASSET MANAGEMENT


             GLOBAL PROXY VOTING GUIDELINESAS AMENDED OCTOBER 2008

                               [GRAPHIC OMITTED]

                                     II-144
<PAGE>

TABLE OF CONTENTS


<TABLE>
<S>   <C>  <C>
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
</TABLE>

                                      II-145
<PAGE>


<TABLE>
<S>    <C>  <C>
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
</TABLE>



                                     II-146
<PAGE>

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.


                                     II-147
<PAGE>

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.


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<PAGE>

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.


                                     II-149
<PAGE>

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.


                                     II-150
<PAGE>

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.


                                     II-151
<PAGE>

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.


                                     II-152
<PAGE>

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.

                                     II-153
<PAGE>

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.


                                     II-154
<PAGE>

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.


                                     II-155
<PAGE>

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.


                                     II-156
<PAGE>

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.


                                     II-157
<PAGE>

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.

                                     II-158
<PAGE>

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.

-------------------------------------------------------------------------------
 IMPORTANT: The information contained herein is the property of Deutsche Bank
 Group and may not be copied, used or disclosed in whole or in part, stored in
 a retrieval system or transmitted in any form or by any means (electronic,
 mechanical, reprographic, recording or otherwise) without the prior written
 permission of Deutsche Bank Group.
-------------------------------------------------------------------------------


                                     II-159

<PAGE>

                    DWS STRATEGIC GOVERNMENT SECURITIES FUND

                                     PART C

                                OTHER INFORMATION

<TABLE>
<CAPTION>
Item 28.       Exhibits.
--------       ---------

<S>            <C>                      <C>
               (a)(1)                   Amended and Restated Declaration of Trust dated June 2, 2008 is
                                        filed.
                                        (Incorporated by reference to Post-Effective Amendment No. 46 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on January 28, 2009.)

               (a)(2)                   Amended and Restated Establishment and Designation of Series and
                                        Classes of Shares of Beneficial Interest Without Par Value dated
                                        January 22, 2009 is filed herein.

               (b)                      By-Laws dated April 1, 2008.
                                        (Incorporated by reference to Post-Effective Amendment No. 46 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on January 28, 2009.)

               (c)(1)                   Text of Share Certificate.
                                        (Incorporated by reference to Post-Effective Amendment No. 23 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on November 30, 1995.)

               (c)(2)                   Written Instrument Establishing and Designating Separate Classes of
                                        Shares.
                                        (Incorporated by reference to Post-Effective Amendment No. 23 to
                                        Registrant's Registration Statement on Form N-1A filed on November
                                        30, 1995.)

               (c)(3)                   Amended and Restated Written Instrument Establishing and
                                        Designating Separate Classes of Shares dated March 9, 1996.
                                        (Incorporated by reference to Post-Effective Amendment No. 30 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on December 29, 1999.)

               (c)(4)                   Amended and Restated Written Instrument Establishing and
                                        Designating separate classes of shares dated February 1, 2003.
                                        (Incorporated by reference to Post-Effective Amendment No. 40 to
                                        Registrant's Registration Statement filed on Form N-1A on
                                        January 27, 2006.)

               (c)(5)                   Redesignation of Class from Class I to Institutional Class dated
                                        July 21, 2004.
                                        (Incorporated by reference to Post-Effective Amendment No. 40 to
                                        Registrant's Registration Statement filed on Form N-1A on
                                        January 27, 2006.)



                                       3
<PAGE>

               (c)(6)                   Redesignation of Series from Scudder U.S. Government Securities
                                        Fund to DWS U.S. Government Securities Fund dated November 16,
                                        2005.
                                        (Incorporated by reference to Post-Effective Amendment No. 40 to
                                        Registrant's Registration Statement filed on Form N-1A on
                                        January 27, 2006.)

               (c)(7)                   Amended and Restated Establishment and Designation of Classes of
                                        Shares dated March 9, 2005.
                                        (Incorporated by reference to Post-Effective Amendment No. 42 to
                                        Registrant's Registration Statement filed on Form N-1A on August
                                        15, 2006.)

               (c)(8)                   Redesignation of Class of Shares dated May 10, 2006.
                                        (Incorporated by reference to Post-Effective Amendment No. 42 to
                                        Registrant's Registration Statement filed on Form N-1A on August
                                        15, 2006.)

               (d)                      Investment Management Agreement, between the Registrant and
                                        Deutsche Investment Management Americas Inc., dated as of May 1,
                                        2008.
                                        (Incorporated by reference to Post-Effective Amendment No. 46 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on January 28, 2009.)

               (e)                      Underwriting and Distribution Services Agreement between the
                                        Registrant and Scudder Distributors, Inc., dated April 5, 2002.
                                        (Incorporated by reference to Post-Effective Amendment No. 34 to
                                        Registrant's Registration Statement filed on Form N-1A on December
                                        3, 2002.)

               (f)                      Inapplicable.


               (g)                      Master Custodian Agreement, between the Registrant and State Street
                                        Bank and Trust Company, dated as of November 17, 2008.
                                        (Incorporated by reference to Post-Effective Amendment No. 46 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on January 28, 2009.)

               (h)(1)                   Agency Agreement between Registrant and DWS Scudder Investments
                                        Service Company, dated as of April 1, 2007.
                                        (Incorporated by reference to Post-Effective Amendment No. 46 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on January 28, 2009.)

               (h)(2)                   Amended and Restated Administrative Service Agreement between
                                        Registrant and Deutsche Investment Management Americas Inc., dated
                                        as of October 1, 2008.
                                        (Incorporated by reference to Post-Effective Amendment No. 46 to
                                        the Registrant's Registration Statement on Form N-1A which was
                                        filed on January 28, 2009.)



                                       4
<PAGE>

               (h)(3)                   Letter of Indemnity to the Scudder Funds dated September 10, 2004.
                                        (Incorporated by reference to Post-Effective Amendment No. 38 to
                                        Registrant's Registration Statement filed on Form N-1A on December
                                        3, 2004.)

               (h)(4)                   Letter of Indemnity to the Scudder Funds dated September 10, 2004.
                                        (Incorporated by reference to Post-Effective Amendment No. 38 to
                                        Registrant's Registration Statement filed on Form N-1A on December
                                        3, 2004.)

               (h)(5)                   Letter of Indemnity to the Independent Trustees dated September 10,
                                        2004.
                                        (Incorporated by reference to Post-Effective Amendment No. 38 to
                                        Registrant's Registration Statement filed on Form N-1A on December
                                        3, 2004.)

               (h)(6)                   Form of Mutual Fund Rule 22c-2 Information Sharing Agreement
                                        between DWS Scudder Distributors, Inc. and certain financial
                                        intermediaries is filed herein.


               (h)(7)                   Form of Expense Limitation Agreement between the Fund and Deutsche
                                        Investment Management Americas Inc. is filed herein.


               (i)(1)                   Legal Opinion and Consent of Counsel.
                                        (Incorporated by reference to Post-effective Amendment No. 35 to
                                        the Registrant's Registration Statement.)

               (i)(2)                   Legal Opinion and Consent of Counsel on behalf of DWS U.S.
                                        Government Securities Fund - Class S.
                                        (Incorporated by reference to Post-Effective Amendment No. 42 to
                                        Registrant's Registration Statement filed on Form N-1A on August
                                        15, 2006.)

               (j)                      Consent of Independent Registered Public Accounting Firm to be
                                        filed by amendment.

               (k)                      Inapplicable.

               (l)                      Inapplicable.

               (m)(1)                   Amended and Restated 12b-1 Plan between the Registrant (Class B
                                        shares) and Scudder Distributors, Inc., dated July 1, 2001.
                                        (Incorporated by reference to Post-Effective Amendment No. 33 to
                                        Registrant's Registration Statement filed on Form N-1A on
                                        January 30, 2002.)

               (m)(2)                   Amended and Restated 12b-1 Plan between the Registrant (Class C
                                        shares) and Scudder Distributors, Inc., dated July 1, 2001.
                                        (Incorporated by reference to Post-Effective Amendment No. 33 to
                                        Registrant's Registration Statement filed on Form N-1A on
                                        January 30, 2002.)



                                       5
<PAGE>

               (m)(3)                   Rule 12b-1 Plan between Scudder U.S. Government Securities Fund
                                        (Class A shares) and Scudder Distributors, Inc., dated July 1, 2001.
                                        (Incorporated by reference to Post-Effective Amendment No. 33 to
                                        Registrant's Registration Statement filed on Form N-1A on
                                        January 30, 2002.)

               (m)(4)                   Shareholder Services Agreement dated July 1, 2001 between Scudder
                                        U.S. Government Securities Fund and Zurich Scudder Investments,
                                        Inc.  (Incorporated by reference to Post-Effective Amendment No. 33
                                        to Registrant's Registration Statement filed on Form N-1A on
                                        January 30, 2002.)

               (m)(5)                   Shareholder Services Agreement for Class A, Class B and Class C
                                        Shares, between the Registrant and Scudder Distributors, Inc.,
                                        dated April 5, 2002.
                                        (Incorporated by reference to Post-Effective Amendment No. 34 to
                                        Registrant's Registration Statement filed on Form N-1A on December
                                        3, 2002.)

               (n)                      Amended and Restated Multi-Distribution System Plan (18f-3), dated
                                        March 11, 2009 is filed herein.

               (p)(1)                   Deutsche Asset Management - U.S. Code of Ethics, dated January 1,
                                        2009 is filed herein.

               (p)(2)                   Consolidated Code of Ethics dated March 14, 2006.
                                        (Incorporated by reference to Post-Effective Amendment No. 42 to
                                        Registrant's Statement filed on Form N-1A on August 15, 2006).

</TABLE>

Item 29.          Persons Controlled by or under Common Control with Registrant.
--------          --------------------------------------------------------------

                  None.

Item 30.          Indemnification.
--------          ----------------

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

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

                  On April 5, 2002, Zurich Scudder Investments, Inc.
                  ("Scudder"), the investment adviser, now known as Deutsche
                  Investment Management Americas Inc., was acquired by Deutsche
                  Bank AG, not including certain U.K. Operations (the


                                       6
<PAGE>

                  "Transaction"). In connection with the Trustees' evaluation of
                  the Transaction, Deutsche Bank agreed to indemnify, defend and
                  hold harmless Registrant and the trustees who were not
                  "interested persons" of Scudder, Deutsche Bank or Registrant
                  (the "Independent Trustees") for and against any liability and
                  claims and expenses based upon or arising from, whether in
                  whole or in part, or directly or indirectly, any untrue
                  statement or alleged untrue statement of a material fact made
                  to the Independent Trustees by Deutsche Bank in connection
                  with the Independent Trustees' consideration of the
                  Transaction, or any omission or alleged omission of a material
                  fact necessary in order to make statements made, in light of
                  the circumstances under which they were made, not misleading.

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

                  In recognition of its undertaking to indemnify the Registrant,
                  and in light of the rebuttable presumption generally afforded
                  to non-interested board members of an investment company that
                  they have not engaged in disabling conduct, DIMA has also
                  agreed, subject to applicable law and regulation, to indemnify
                  and hold harmless each of the Independent Trustees against any
                  and all loss, damage, liability and expense, including without
                  limitation the advancement and payment as incurred of
                  reasonable fees and expenses of counsel and consultants, and
                  other customary costs and expenses incurred by the Independent
                  Trustees, arising from the matters alleged in any Private
                  Litigation and Enforcement Actions or matters arising from or
                  similar in subject matter to the matters alleged in the
                  Private Litigation and Enforcement Actions (collectively,
                  "Covered Matters"), including without limitation:

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

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



                                       7
<PAGE>

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

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

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

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

Item 31.          Business and Other Connections of Investment Advisor
--------          ----------------------------------------------------

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



                                       8
<PAGE>

Item 32.          Principal Underwriters
--------          ----------------------

                  (a)

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

                  (b)

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

<TABLE>
<CAPTION>
                      (1)                             (2)                                  (3)
          DWS Investments
          Distributors, Inc.
          Name and Principal             Positions and Offices with               Positions and
          Business Address               DWS Investments Distributors, Inc.       Offices with Registrant
          ----------------               ----------------------------------       -----------------------

<S>                   <C>                             <C>                                  <C>
          Michael J. Woods                Director, Chairman of the Board, CEO    None
          345 Park Avenue                 and President
          New York, NY 10154

          Michael Colon                   Director                                None
          345 Park Avenue
          New York, NY 10154

          Matthew Eisenhardt              Chief Operating Officer                 None
          222 South Riverside Plaza
          Chicago, IL 60606

          Cliff Goldstein                 Chief Financial Officer and Treasurer   None
          100 Plaza One
          Jersey City, NJ 07311

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

          Donna White                     Chief Compliance Officer                None
          280 Park Avenue
          New York, NY 10017

          Jason Vazquez                   Vice President and AML Compliance       Anti-Money Laundering
          280 Park Avenue                 Officer                                 Compliance Officer
          New York, NY 10017



                                       9
<PAGE>

                      (1)                             (2)                                  (3)
          DWS Investments
          Distributors, Inc.
          Name and Principal             Positions and Offices with               Positions and
          Business Address               DWS Investments Distributors, Inc.       Offices with Registrant
          ----------------               ----------------------------------       -----------------------

          Caroline Pearson                Secretary                               Assistant Secretary
          One Beacon Street
          Boston, MA 02108

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

          Patricia DeFilippis             Assistant Secretary                     None
          280 Park Avenue
          New York, NY 10017

          Anjie LaRocca                   Assistant Secretary                     None
          280 Park Avenue
          New York, NY 10017
</TABLE>


         (c)      Not applicable



Item 33.          Location of Accounts and Records
--------          --------------------------------

     DWS Strategic Government Securities Fund        345 Park Avenue
     (Registrant)                                    New York, New York  10154

     Deutsche Investment Management Americas Inc.    345 Park Avenue
     (Investment Advisor)                            New York, NY 10154

     Deutsche Investment Management Americas Inc.    345 Park Avenue
      (Administrator)                                New York, NY 10154

                                                     One Beacon Street
                                                     Boston, MA 02108

     DWS Investments Service Company                 222 South Riverside Plaza
     (Transfer Agent)                                Chicago, IL 60606

     DWS Investments Distributors, Inc.              222 South Riverside Plaza
     (Distributor)                                   Chicago, IL 60606

     State Street Bank and Trust Company             Lafayette Corporate Center
     (Custodian)                                     2 Avenue De Lafayette
                                                     Boston, MA 02111

     DST Systems, Inc.                               333 West 11th Street
     (Sub-Transfer Agent and                         Kansas City, MO 64105
     Sub-Dividend Distribution Agent)




                                       10
<PAGE>

Item 34.          Management Services
--------          -------------------

                  Inapplicable.

Item 35.          Undertakings
--------          ------------

                  None.




                                       11
<PAGE>

                                   SIGNATURES
                                   ----------

     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and the State of New York on
the 16th day of November 2009.


                        DWS STRATEGIC GOVERNMENT SECURITIES FUND

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


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

<TABLE>
<CAPTION>
 SIGNATURE                                  TITLE                                        DATE
 ---------                                  -----                                        ----

<S>                                         <C>                                          <C>
 /s/Michael G. Clark
 -------------------------------------
 Michael G. Clark*                          President                                    November 16, 2009

 /s/Paul H. Schubert
 -------------------------------------
 Paul H. Schubert                           Chief Financial Officer and Treasurer        November 16, 2009

 /s/John W. Ballantine
 -------------------------------------
 John W. Ballantine*                        Trustee                                      November 16, 2009

 /s/Henry P. Becton, Jr.
 -------------------------------------
 Henry P. Becton, Jr.*                      Trustee                                      November 16, 2009

  /s/Dawn-Marie Driscoll
 -------------------------------------
 Dawn-Marie Driscoll*                       Trustee                                      November 16, 2009

 /s/Keith R. Fox
 -------------------------------------
 Keith R. Fox*                              Trustee                                      November 16, 2009

 /s/Paul K. Freeman
 -------------------------------------
 Paul K. Freeman*                           Chairperson and Trustee                      November 16, 2009

 /s/Kenneth C. Froewiss
 -------------------------------------
 Kenneth C. Froewiss*                       Trustee                                      November 16, 2009

 /s/Richard J. Herring
 -------------------------------------
 Richard J. Herring*                        Trustee                                      November 16, 2009

 /s/William McClayton
 -------------------------------------
 William McClayton*                         Trustee                                      November 16, 2009

 /s/Rebecca W. Rimel
 -------------------------------------
 Rebecca W. Rimel*                          Trustee                                      November 16, 2009

 /s/William N. Searcy, Jr.
 -------------------------------------
 William N. Searcy, Jr.*                    Trustee                                      November 16, 2009


<PAGE>

 /s/Jean Gleason Stromberg
 -------------------------------------
 Jean Gleason Stromberg*                    Trustee                                      November 16, 2009

 /s/Robert H. Wadsworth
 -------------------------------------
 Robert H. Wadsworth*                       Trustee                                      November 16, 2009

 /s/Axel Schwarzer
 -------------------------------------
 Axel Schwarzer*                            Trustee                                      November 16, 2009
</TABLE>

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

**   Attorney-in-fact pursuant to the powers of attorney as filed on January 28,
     2009 in Post-Effective Amendment No. 46 to the Registration Statement.

<PAGE>

                                                                File No. 2-57937
                                                               File No. 811-2719


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    EXHIBITS

                                       TO

                                    FORM N-1A

                         POST-EFFECTIVE AMENDMENT NO. 47

                            TO REGISTRATION STATEMENT

                                      UNDER

                           THE SECURITIES ACT OF 1933

                                       AND

                                AMENDMENT NO. 47

                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940



                    DWS STRATEGIC GOVERNMENT SECURITIES FUND




                                       12
<PAGE>

                    DWS STRATEGIC GOVERNMENT SECURITIES FUND

                                  EXHIBIT INDEX

                                     (a)(2)
                                     (h)(6)
                                     (h)(7)
                                       (n)
                                     (p)(1)




                                       13