Filed electronically with the Securities and Exchange Commission on
January 31, 2014
File No. 002-91577
File No. 811-04049
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. 71 | X |
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | __ |
Amendment No. 73 | X |
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DWS Income Trust
----------------
(Exact Name of Registrant as Specified in Charter)
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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)
It is proposed that this filing will become effective (check appropriate box):
|___| Immediately upon filing pursuant to paragraph (b)
| X | On February 1, 2014 pursuant to paragraph (b)
|___| 60 days after filing pursuant to paragraph (a)(1)
|___| On _____________ pursuant to paragraph (a)(1)
|___| 75 days after filing pursuant to paragraph (a)(2)
|___| On _____________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
|___| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
|
1
EXPLANATORY NOTE
This post-effective amendment relates solely to the prospectus and statement of
additional information of the following series of the registrant:
o DWS Core Fixed Income Fund -- Class A, Class B, Class C, Class R,
Institutional Class, and Class S
o DWS Global Inflation Fund -- Class A, Class B, Class C, Institutional Class
and Class S
o DWS GNMA Fund - Class A, Class C, Class R, Institutional Class, and Class S
o DWS High Income Fund -- Class A, Class B, Class C, Class R, Institutional
Class, and Class S
o DWS Global High Income Fund -- Class A, Class B, Class C, Institutional
Class and Class S
o DWS Short Duration Fund -- Class A, Class B, Class C, Institutional Class
and Class S
o DWS Strategic Government Securities Fund -- Class A, Class B, Class C,
Institutional Class and Class S
o DWS Ultra-Short Duration Fund -- Class A, Class B, Class C, Institutional
Class and Class S
o DWS Unconstrained Income Fund-- Class A, Class B, Class C and Class S
This post-effective amendment is not intended to update or amend any other
prospectuses or statements of additional information of the registrant's other
series or classes.
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Deutsche Asset
& Wealth Management
Prospectus
February 1, 2014
DWS Core Fixed Income Fund
CLASS/TICKER A SFXAX B SFXBX C SFXCX R SFXRX INST MFINX S SFXSX
|
..............................................................................
DWS Global Inflation Fund
CLASS/TICKER A TIPAX B TIPTX C TIPCX INST TIPIX S TIPSX
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..............................................................................
DWS GNMA Fund
CLASS/TICKER A GGGGX C GCGGX R GRGGX INST GIGGX S SGINX
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..............................................................................
DWS High Income Fund
CLASS/TICKER A KHYAX B KHYBX C KHYCX R KHYRX INST KHYIX S KHYSX
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..............................................................................
DWS Global High Income Fund
CLASS/TICKER A SGHAX B SGHBX C SGHCX INST MGHYX S SGHSX
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..............................................................................
DWS Short Duration Fund
CLASS/TICKER A PPIAX B PPLBX C PPLCX INST PPILX S DBPIX
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..............................................................................
DWS Strategic Government Securities Fund
CLASS/TICKER A KUSAX B KUSBX C KUSCX INST KUSIX S KUSMX
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..............................................................................
DWS Ultra-Short Duration Fund
CLASS/TICKER A SDUAX B SDUBX C SDUCX INST MGSFX S SDUSX
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..............................................................................
DWS Unconstrained Income Fund
CLASS/TICKER A KSTAX B KSTBX C KSTCX S KSTSX
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..............................................................................
(Class B shares are closed to new investment)
As with all mutual funds, the Securities and Exchange Commission (SEC) and, in
the case of DWS Global Inflation Fund, the Commodity Futures Trading Commission
(CFTC) 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.
[DB Logo]
[GRAPHIC APPEARS HERE]
Table of Contents
DWS CORE FIXED 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......... 5
DWS GLOBAL INFLATION FUND
Investment Objective................... 6
Fees and Expenses of the Fund.......... 6
Principal Investment Strategy.......... 7
Main Risks............................. 7
Past Performance....................... 9
Management............................. 10
Purchase and Sale of Fund Shares....... 10
Tax Information........................ 10
Payments to Broker-Dealers and
Other Financial Intermediaries......... 10
DWS GNMA FUND
Investment Objective................... 11
Fees and Expenses of the Fund.......... 11
Principal Investment Strategy.......... 11
Main Risks............................. 12
Past Performance....................... 13
Management............................. 13
Purchase and Sale of Fund Shares....... 14
Tax Information........................ 14
Payments to Broker-Dealers and
Other Financial Intermediaries......... 14
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DWS HIGH INCOME FUND
Investment Objective................... 15
Fees and Expenses of the Fund.......... 15
Principal Investment Strategy.......... 16
Main Risks............................. 16
Past Performance....................... 17
Management............................. 18
Purchase and Sale of Fund Shares....... 18
Tax Information........................ 18
Payments to Broker-Dealers and
Other Financial Intermediaries......... 18
DWS GLOBAL HIGH INCOME FUND
Investment Objective................... 19
Fees and Expenses of the Fund.......... 19
Principal Investment Strategy.......... 20
Main Risks............................. 20
Past Performance....................... 21
Management............................. 22
Purchase and Sale of Fund Shares....... 22
Tax Information........................ 22
Payments to Broker-Dealers and
Other Financial Intermediaries......... 22
DWS SHORT DURATION FUND
Investment Objective................... 23
Fees and Expenses of the Fund.......... 23
Principal Investment Strategy.......... 24
Main Risks............................. 24
Past Performance....................... 26
Management............................. 26
Purchase and Sale of Fund Shares....... 26
Tax Information........................ 27
Payments to Broker-Dealers and
Other Financial Intermediaries......... 27
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DWS STRATEGIC GOVERNMENT
SECURITIES FUND
Investment Objective............................... 28
Fees and Expenses of the Fund...................... 28
Principal Investment Strategy...................... 29
Main Risks......................................... 29
Past Performance................................... 30
Management......................................... 31
Purchase and Sale of Fund Shares................... 31
Tax Information.................................... 31
Payments to Broker-Dealers and
Other Financial Intermediaries..................... 31
DWS ULTRA-SHORT DURATION FUND
Investment Objective............................... 32
Fees and Expenses of the Fund...................... 32
Principal Investment Strategy...................... 32
Main Risks......................................... 33
Past Performance................................... 34
Management......................................... 35
Purchase and Sale of Fund Shares................... 35
Tax Information.................................... 36
Payments to Broker-Dealers and
Other Financial Intermediaries..................... 36
DWS UNCONSTRAINED INCOME FUND
Investment Objective............................... 37
Fees and Expenses of the Fund...................... 37
Principal Investment Strategy...................... 37
Main Risks......................................... 38
Past Performance................................... 39
Management......................................... 40
Purchase and Sale of Fund Shares................... 40
Tax Information.................................... 40
Payments to Broker-Dealers and
Other Financial Intermediaries..................... 40
FUND DETAILS
Additional Information About Fund Strategies and
Risks.............................................. 41
DWS Core Fixed Income Fund......................... 41
DWS Global Inflation Fund.......................... 43
DWS GNMA Fund...................................... 46
DWS High Income Fund............................... 48
DWS Global High Income Fund........................ 50
DWS Short Duration Fund............................ 53
DWS Strategic Government Securities Fund........... 56
DWS Ultra-Short Duration Fund...................... 58
DWS Unconstrained Income Fund...................... 61
Other Policies and Risks........................... 63
Who Manages and Oversees the Funds................. 64
Management......................................... 67
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INVESTING IN THE FUNDS
Choosing a Share Class............................. 70
Buying, Exchanging and Selling Shares.............. 75
How to Buy Shares.................................. 75
How to Exchange Shares............................. 76
How to Sell Shares................................. 77
How to Buy, Sell and Exchange Class R Shares....... 77
Financial Intermediary Support Payments............ 78
Policies You Should Know About..................... 78
Policies About Transactions........................ 79
How each Fund Calculates Share Price............... 83
Other Rights We Reserve............................ 84
Understanding Distributions and Taxes.............. 84
FINANCIAL HIGHLIGHTS............................... 87
APPENDIX........................................... 133
Hypothetical Expense Summary....................... 133
Additional Index Information....................... 156
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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.
Deutsche Asset
& Wealth Management
[DB Logo]
DWS Core Fixed Income Fund
INVESTMENT OBJECTIVE
The fund seeks to maximize total return consistent with preservation of capital
and prudent investment management, by investing for both current income and
capital appreciation.
FEES AND EXPENSES OF THE FUND
These are the fees and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C R INST S
---------- --------- --------- ------ ------ -----
Maximum sales charge (load)
imposed on purchases, as %
of offering price 4.50 None None None None None
----------------------------- ---- -- -- ------ ------ ---
Maximum deferred sales
charge (load), as % of
redemption proceeds None 4.00 1.00 None None None
----------------------------- ------ ---- ---- ------ ------ ---
Account Maintenance Fee
(annually, for fund balances
below $10,000 and subject to
certain exceptions) $ 20 $20 $20 None None $20
----------------------------- ------- ---- ---- ------ ------ ---
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ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C R INST S
--------- --------- --------- --------- ---------- ----------
Management fee 0.40 0.40 0.40 0.40 0.40 0.40
---------------------------- ---- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.24 1.00 1.00 0.49 None None
---------------------------- ---- ---- ---- ---- ----- -----
Other expenses 0.40 0.46 0.32 0.48 0.27 0.37
---------------------------- ---- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 1.04 1.86 1.72 1.37 0.67 0.77
---------------------------- ---- ---- ---- ---- ----- -----
Fee waiver/expense reim-
bursement 0.13 0.20 0.06 0.21 0.01 0.01
---------------------------- ---- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES AFTER FEE WAIVER/
EXPENSE REIMBURSEMENT 0.91 1.66 1.66 1.16 0.66 0.76
---------------------------- ---- ---- ---- ---- ----- -----
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The Advisor has contractually agreed through September 30, 2014 to waive and/or
reimburse fund expenses to the extent necessary to maintain the fund's total
annual operating expenses at 0.89%, 1.64%, 1.64%, 1.14%, 0.64% and 0.74%; and
for the period October 1, 2014 through January 31, 2015 at ratios no higher
than 0.91%, 1.66%, 1.66%, 1.16%, 0.66% and 0.76% (in each instance, excluding
extraordinary expenses, taxes, brokerage and interest expenses) for Class A,
Class B, Class C, Class R, Institutional Class and Class S, respectively. The
agreement may only be terminated with the consent of the fund's Board.
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 in each period) remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
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PROSPECTUS February 1, 2014 DWS Core Fixed Income Fund
YEARS A B C R INST S
------- -------- -------- -------- -------- ------ ------
1 $ 539 $ 569 $ 269 $ 118 $67 $78
-- ----- ----- ----- ----- --- ---
3 754 865 536 413 213 245
-- ----- ----- ----- ----- --- ---
5 986 1,187 928 730 372 427
-- ----- ----- ----- ----- --- ---
10 1,653 1,751 2,025 1,628 834 953
-- ----- ----- ----- ----- --- ---
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You would pay the following expenses if you did not redeem your shares:
YEARS A B C R INST S
------- -------- -------- -------- -------- ------ ------
1 $ 539 $ 169 $ 169 $ 118 $67 $78
-- ----- ----- ----- ----- --- ---
3 754 565 536 413 213 245
-- ----- ----- ----- ----- --- ---
5 986 987 928 730 372 427
-- ----- ----- ----- ----- --- ---
10 1,653 1,751 2,025 1,628 834 953
-- ----- ----- ----- ----- --- ---
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Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 241%.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal circumstances, the fund invests at least 80% of
assets, plus the amount of any borrowings for investment purposes, determined
at the time of purchase, in fixed income securities. Fixed income securities
include, but are not limited to, debt securities of the US Treasury, as well as
US government agencies and instrumentalities, corporate debt securities,
inflation-indexed bonds, mortgage-backed and asset-backed securities, US
government agency mortgage-backed to-be-announced (TBAs) instruments, taxable
municipal and tax-exempt municipal bonds and Rule 144A securities. The fund may
invest in fixed income securities of varying maturities. Portfolio management
generally targets an average portfolio duration (a measure of sensitivity to
interest rate movements) that falls within one year of the average duration of
the fund's benchmark.
The fund invests primarily in investment-grade debt securities (securities
rated within the top four long-term credit rating categories). The fund may
purchase or sell securities or instruments on a when-issued, delayed delivery
or forward commitment basis (e.g., TBAs). A forward commitment transaction is
an agreement by the fund to purchase or sell securities at a specified future
date. The fund may sell the forward commitment securities before the settlement
date or enter into new commitments to extend the delivery date into the future.
The fund may also invest up to 25% of total assets in US dollar-denominated
securities of foreign issuers and governments. The fund may hold up to 20% of
total assets in cash or money market instruments, either to maintain liquidity
or in the event portfolio management determines that securities meeting the
fund's investment objective are not readily available for purchase.
MANAGEMENT PROCESS. In seeking to achieve the fund's investment objective,
portfolio management focuses on the following key components:
o A balanced "top-down" and "bottom-up" security selection approach based on
the decisions of senior sector specialists;
o An active rotation of the sectors represented in the Barclay's U.S.
Aggregate Bond Index by a specialized sector rotation team;
o Active management of interest rate risk by a specialized team;
o Active management of mortgage-backed securities by a specialized team; and
o Portfolio construction techniques that seek to enhance returns and manage
risks by identifying inefficiencies in market-based indices.
Using these key components, the portfolio manager identifies attractive
investments. Each trade has an identified entry level, profit target and review
level. Portfolio management will typically sell a security when the profit
target has been achieved, if the rationale for the purchase has changed or if
better risk/return opportunities are identified.
DERIVATIVES. Portfolio management generally may use options or futures
contracts, which are types of derivatives (a contract whose value is based on,
for example, indices, currencies or securities), for duration management (i.e.,
reducing or increasing the sensitivity of the fund's portfolio to interest rate
changes).
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
2
PROSPECTUS February 1, 2014 DWS Core Fixed Income Fund
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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. The fund's performance could be hurt if an issuer of a security
suffers an adverse change in financial condition that results in the issuer not
making timely payments of interest or principal, a security downgrade or
inability to meet a financial obligation.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets.
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.
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.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
The performance figures for Class S shares prior to its inception date are
based on the historical performance of the Institutional Class, adjusted to
reflect the higher gross total annual operating expenses of Class S.
CALENDAR YEAR TOTAL RETURNS (%) (Class A)
These year-by-year returns do not include sales charges, if any, and would be
lower if they did. Returns for other classes were different and are not shown
here.
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PROSPECTUS February 1, 2014 DWS Core Fixed Income Fund
[BAR GRAPHIC OMITTED HERE]
[BAR GRAPHIC DATA]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
4.91 2.39 3.96 4.92 -14.31 7.32 6.71 6.74 6.79 -1.37
|
Best Quarter: 4.31%, Q3 2009 Worst Quarter: -8.54%, Q4 2008
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class A and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. 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.
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
----------- ---------- --------- ---------
CLASS A before tax 6/28/2002 -5.80 4.22 2.13
------------------------- --------- ------ ---- ----
After tax on
distributions -6.71 3.16 0.79
After tax on distribu-
tions and sale of fund
shares -3.82 2.98 1.02
------------------------- --------- ------ ---- ----
CLASS B before tax 6/28/2002 -5.00 4.24 1.84
------------------------- --------- ------ ---- ----
CLASS C before tax 6/28/2002 -2.11 4.40 1.83
------------------------- --------- ------ ---- ----
INST CLASS before tax 9/18/1992 -1.12 5.46 2.87
------------------------- --------- ------ ---- ----
CLASS R before tax 10/1/2003 -1.51 4.96 2.39
------------------------- --------- ------ ---- ----
CLASS S before tax 2/1/2005 -1.22 5.40 2.77
------------------------- --------- ------ ---- ----
BARCLAYS US AGGREGATE
BOND INDEX (reflects no
deduction for fees,
expenses or taxes) -2.02 4.44 4.55
------------------------- --------- ------ ---- ----
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MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
SUBADVISOR
Fischer Francis Trees & Watts, Inc. (FFTW)
PORTFOLIO MANAGER(S)
DOMINICK DEALTO, HEAD OF GLOBAL MULTI-SECTOR FIXED INCOME AND HEAD OF SECTOR
ROTATION, FFTW. Portfolio Manager of the fund. Began managing the fund in 2013.
GARY CHAN, CFA, FFTW. Portfolio Manager of the fund. Began managing the fund in
2012.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
----------------- -------------- -------- -------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
R None None None None
------- ----- ----- ----- ----
INST 1,000,000 N/A N/A N/A
------- --------- ----- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
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For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares and Class R
shares. Because Class B shares are closed to new investment, existing Class B
shareholders may purchase Class A and C shares with a minimum initial
investment of $50. The minimum additional investment in all other instances is
$50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Institutional Class shares
are generally available only to qualified institutions. Class R shares are
generally available only to certain retirement plans. Class S shares are only
available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
4
PROSPECTUS February 1, 2014 DWS Core Fixed Income Fund
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 related companies 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.
5
PROSPECTUS February 1, 2014 DWS Core Fixed Income Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
DWS Global Inflation Fund
INVESTMENT OBJECTIVE
The fund seeks to provide maximum inflation-adjusted return.
FEES AND EXPENSES OF THE FUND
These are the fees and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C INST S
---------- --------- --------- ------ -----
Maximum sales charge (load)
imposed on purchases, as % of
offering price 2.75 None None None None
------------------------------------ ---- -- -- ------ ---
Maximum deferred sales charge
(load), as % of redemption proceeds None 4.00 1.00 None None
------------------------------------ ------ ---- ---- ------ ---
Account Maintenance Fee (annually,
for fund balances below $10,000 and
subject to certain exceptions) $ 20 $20 $20 None $20
------------------------------------ ------- ---- ---- ------ ---
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C INST S
--------- --------- --------- ---------- ----------
Management fee 0.40 0.40 0.40 0.40 0.40
---------------------------------- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.24 1.00 1.00 None None
---------------------------------- ---- ---- ---- ----- -----
Other expenses 0.36 0.40 0.35 0.23 0.46
---------------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 1.00 1.80 1.75 0.63 0.86
---------------------------------- ---- ---- ---- ----- -----
Fee waiver/expense reimbursement 0.12 0.17 0.12 0.00 0.23
---------------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES AFTER FEE WAIVER/EXPENSE
REIMBURSEMENT 0.88 1.63 1.63 0.63 0.63
---------------------------------- ---- ---- ---- ----- -----
|
The Advisor has contractually agreed through September 30, 2014 to waive and/or
reimburse fund expenses to the extent necessary to maintain the fund's total
annual operating expenses at 0.85%, 1.60%, 1.60% and 0.60%; and for the period
October 1, 2014 through January 31, 2015 at ratios no higher than 0.88%, 1.63%,
1.63% and 0.63% (in each instance, excluding extraordinary expenses, taxes,
brokerage and interest expenses) for Class A, Class B, Class C and Class S,
respectively. The agreement may only be terminated with the consent of the
fund's Board.
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 in each period for Class A, B, C and S)
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
YEARS A B C INST S
------- -------- -------- -------- ------ --------
1 $ 362 $ 566 $ 266 $64 $ 64
-- ----- ----- ----- --- -----
3 573 850 539 202 251
-- ----- ----- ----- --- -----
5 801 1,159 938 351 454
-- ----- ----- ----- --- -----
10 1,455 1,698 2,053 786 1,040
-- ----- ----- ----- --- -----
|
You would pay the following expenses if you did not redeem your shares:
YEARS A B C INST S
------- -------- -------- -------- ------ --------
1 $ 362 $ 166 $ 166 $64 $ 64
-- ----- ----- ----- --- -----
3 573 550 539 202 251
-- ----- ----- ----- --- -----
5 801 959 938 351 454
-- ----- ----- ----- --- -----
10 1,455 1,698 2,053 786 1,040
-- ----- ----- ----- --- -----
|
6
PROSPECTUS February 1, 2014 DWS Global Inflation Fund
Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 104%.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. The fund invests in inflation-indexed bonds and other fixed
income securities of varying maturities issued by the US government and non-US
governments, their agencies or instrumentalities, and US and non-US
corporations and derivatives related to each of these types of securities. The
fund may also invest (directly or indirectly) up to 30% of its total assets in
commodity-linked derivative instruments (such as commodity-linked swaps,
structured notes and futures contracts), equity securities, and securities of
Real Estate Investment Trusts (REITs).
Commodity-linked derivative instruments are designed to provide exposure to the
investment return of assets that trade in the commodity markets, without
investing directly in physical commodities. Physical commodities are assets
that have tangible properties such as gas, heating oil, industrial and other
precious metals, livestock, or agricultural products. The fund may gain
exposure to the commodity markets by investing a portion of its assets in a
wholly-owned subsidiary (the "Subsidiary"), which shares the same portfolio
management as the fund and is expected to invest mainly in commodity-linked
derivative instruments and fixed income securities, some of which may serve as
margin or collateral for the Subsidiary's derivatives positions.
Other fixed income securities in which the fund may invest include
mortgage-backed and asset-backed securities, adjustable rate loans that have a
senior right to payment ("senior loans") and other floating rate debt
securities, and taxable and tax-exempt municipal bonds. Up to 10% of the fund's
total assets may be invested in below investment grade bonds or instruments
(also referred to as junk bonds).
INTEREST RATE STRATEGY. In addition to the fund's main investment strategy,
portfolio management may, from time to time, seek to enhance returns by
employing various strategies to identify interest rate trends across developed
markets using derivatives, in particular buying and selling interest rate
futures contracts.
MANAGEMENT PROCESS. The investment process involves both "top down" analysis as
well as "bottom up" investment selection. As part of the top down analysis,
portfolio management takes into account several factors, including, but not
limited to, current and expected levels of inflation and current and expected
economic conditions. The results of this analysis determine the overall
structure of the fund's portfolio. Having determined the desired overall
structure of the fund's portfolio, portfolio management selects individual
investments that reflect that portfolio structure. Relative value compared to
similar securities, credit quality of issuers, and liquidity of holdings are
among the factors considered by portfolio management when investment decisions
are made for the fund.
DERIVATIVES. Outside of the fund's use of commodity-linked derivatives and the
interest rate strategy, portfolio management generally may use interest rate
swaps or futures contracts, which are types of derivatives (a contract whose
value is based on, for example, indices, currencies or securities), for
duration management (i.e., reducing or increasing the sensitivity of the fund's
portfolio to interest rate changes). In addition, portfolio management
generally may use (i) credit default swaps to seek to increase the fund's
income, to gain exposure to a bond issuer's credit quality characteristics
without directly investing in the bond, or to hedge the risk of default on
bonds held in the fund's portfolio, (ii) options on interest rate futures to
hedge interest rate movements of portfolio assets and (iii) total return swaps
to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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.
7
PROSPECTUS February 1, 2014 DWS Global Inflation Fund
INFLATION-INDEXED BOND RISK. Any rise in interest rates may cause
inflation-indexed bonds to decline in price, hurting fund performance. If
interest rates rise due to reasons other than inflation, the fund's investment
in these securities may not be fully protected from the effects of rising
interest rates. The performance of any bonds that are indexed to non-US rates
of inflation may be higher or lower than those indexed to US inflation rates.
The fund's actual returns could fail to match the real rate of inflation.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
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.) In
certain interest rate environments, such as when real interest rates (current
actual interest rates) are rising faster than nominal interest rates (meaning a
real interest rate plus an expected inflation rate), inflation-indexed bonds
may experience greater losses than other interest-paying securities of
comparable quality and duration.
COMMODITIES-RELATED INVESTMENTS RISK. The commodities-linked derivative
instruments in which the fund invests tend to be more volatile than many other
types of securities and may subject the fund to special risks that do not apply
to all derivatives transactions.
FOCUS RISK. To the extent that the fund focuses its investments in particular
industries, asset classes or sectors of the economy, any market price
movements, regulatory or technological changes, or economic conditions
affecting companies in those industries, asset classes or sectors will have a
significant impact on the fund's performance.
INTEREST RATE STRATEGIES RISK. The success of the interest rate futures
strategies depends, in part, on the effectiveness and implementation of
portfolio management's proprietary models. If portfolio management's analysis
proves to be incorrect, losses to the fund may be significant. The risk of loss
is heightened during periods of rapid rises in interest rates.
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.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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
8
PROSPECTUS February 1, 2014 DWS Global Inflation Fund
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.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
STOCK MARKET RISK. The fund is affected by how the stock market performs. When
stock prices fall, you should expect the value of your investment to fall as
well.
TAX STATUS RISK. Income from certain commodity-linked derivative instruments
does not constitute "qualifying income" to the fund for purposes of
qualification as a "regulated investment company" for federal income tax
purposes. However, the Internal Revenue Service has issued a private ruling to
the fund that income earned through its wholly-owned Subsidiary that invests in
such instruments constitutes qualifying income. If such income were determined
to cause the fund's nonqualifying income to exceed 10% of the fund's gross
income, the fund would be subject to a tax at the fund level.
SUBSIDIARY RISK. The fund may invest in the Subsidiary, which is not registered
as an investment company under the Investment Company Act of 1940, as amended,
and therefore is not subject to all of the investor protections of the
Investment Company Act of 1940. A regulatory change in the US or the Cayman
Islands that impacts the Subsidiary or how the fund invests in the Subsidiary,
such as a change in tax law, could adversely affect the fund. By investing in
the Subsidiary, the fund is exposed to the risks associated with the
Subsidiary's investments, which generally include the risks of investing in
derivatives and commodities-related investments.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
CALENDAR YEAR TOTAL RETURNS (%) (Class A)
These year-by-year returns do not include sales charges, if any, 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]
2006 2007 2008 2009 2010 2011 2012 2013
1.02 11.41 -3.48 7.70 7.29 12.18 5.52 -10.84
|
Best Quarter: 4.54%, Q3 2011 Worst Quarter: -9.08%, Q2 2013
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class A and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. 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. Index comparisons for
all classes began on 7/31/05.
CLASS 1 5 SINCE
INCEPTION YEAR YEAR INCEPTION
----------- ----------- --------- ----------
CLASS A before tax 7/8/2005 -13.29 3.47 3.26
------------------------- -------- ------- ---- ----
After tax on
distributions -13.49 2.76 2.07
After tax on distribu-
tions and sale of fund
shares -8.64 2.68 2.16
------------------------- -------- ------- ---- ----
CLASS B before tax 7/8/2005 -14.08 3.10 2.83
------------------------- -------- ------- ---- ----
CLASS C before tax 7/8/2005 -11.41 3.28 2.84
------------------------- -------- ------- ---- ----
INST CLASS before tax 7/8/2005 -10.62 4.34 3.88
------------------------- -------- ------- ---- ----
CLASS S before tax 7/8/2005 -10.63 4.30 3.81
------------------------- -------- ------- ---- ----
BARCLAYS US TREASURY:
US TIPS INDEX (reflects
no deduction for fees,
expenses or taxes) -8.61 5.63 4.70
------------------------- -------- ------- ---- ----
|
9
PROSPECTUS February 1, 2014 DWS Global Inflation Fund
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
PORTFOLIO MANAGER(S)
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2005.
ERIC S. MEYER, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2010.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
------------ -------------- -------- ------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
INST 1,000,000 N/A N/A N/A
------- --------- ---- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares. Because
Class B shares are closed to new investment, existing Class B shareholders may
purchase Class A and C shares with a minimum initial investment of $50. The
minimum additional investment in all other instances is $50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Institutional Class shares
are generally available only to qualified institutions. Class S shares are only
available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
10
PROSPECTUS February 1, 2014 DWS Global Inflation Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
DWS GNMA Fund
INVESTMENT OBJECTIVE
The fund seeks to produce a high level of income.
FEES AND EXPENSES OF THE FUND
These are the fees and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A C R INST S
----------- --------- ------ ------ -----
Maximum sales charge (load)
imposed on purchases, as % of
offering price 2.75 None None None None
------------------------------------ ---- -- ------ ------ ---
Maximum deferred sales charge
(load), as % of redemption proceeds None() 1.00 None None None
------------------------------------ ------- ---- ------ ------ ---
Account Maintenance Fee (annually,
for fund balances below $10,000 and
subject to certain exceptions) $ 20 $20 None None $20
------------------------------------ ------- ---- ------ ------ ---
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A C R INST S
--------- --------- --------- ---------- ----------
Management fee 0.32 0.32 0.32 0.32 0.32
---------------------------- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.23 1.00 0.50 None None
---------------------------- ---- ---- ---- ----- -----
Other expenses 0.24 0.24 0.36 0.21 0.23
---------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 0.79 1.56 1.18 0.53 0.55
---------------------------- ---- ---- ---- ----- -----
|
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
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
YEARS A C R INST S
------- -------- -------- -------- ------ ------
1 $ 353 $ 259 $ 120 $54 $56
-- ----- ----- ----- --- ---
3 520 493 375 170 176
-- ----- ----- ----- --- ---
5 702 850 649 296 307
-- ----- ----- ----- --- ---
10 1,226 1,856 1,432 665 689
-- ----- ----- ----- --- ---
|
You would pay the following expenses if you did not redeem your shares:
YEARS A C R INST S
------- -------- -------- -------- ------ ------
1 $ 353 $ 159 $ 120 $54 $56
-- ----- ----- ----- --- ---
3 520 493 375 170 176
-- ----- ----- ----- --- ---
5 702 850 649 296 307
-- ----- ----- ----- --- ---
10 1,226 1,856 1,432 665 689
-- ----- ----- ----- --- ---
|
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 348%.
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
"Ginnie Maes," which are mortgage-backed securities that are issued or
guaranteed by the Government National Mortgage Association (GNMA). The fund may
also purchase or sell securities
11
PROSPECTUS February 1, 2014 DWS GNMA Fund
on a when-issued, delayed delivery or forward commitment basis, including US
government agency mortgage-backed to-be-announced securities (TBAs). A forward
commitment transaction is an agreement by the fund to purchase or sell
securities at a specified future date. The fund may sell the forward commitment
securities before the settlement date or enter into new commitments to extend
the delivery date into the future.
The balance of the fund's assets, among other permitted investments, may be
invested in securities issued by the US government, its agencies or
instrumentalities. These securities may not be guaranteed by the US Treasury or
backed by the full faith and credit of the US government. The fund may also
hold up to 10% of its total net assets in uninvested cash, cash equivalents
(such as money market securities), repurchase agreements or shares of money
market funds or short-term bond funds, which investments may not be issued or
guaranteed by the US government, its agencies or instrumentalities.
MANAGEMENT PROCESS. In deciding which types of securities to buy and sell,
portfolio management first considers the relative attractiveness of Ginnie Maes
compared to other eligible securities and decides on allocations. The decisions
are generally based on a number of factors, including changes in supply and
demand within the bond market and prepayment rates of individual bonds.
In choosing individual bonds, portfolio management reviews each bond's
fundamentals, compares the yields of bonds and uses detailed 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.
DERIVATIVES. Portfolio management generally may use interest rate futures
contracts or interest rate swaps, which are types of derivatives (a contract
whose value is based on, for example, indices, currencies or securities) for
duration management (i.e., reducing or increasing the sensitivity of the fund's
portfolio to interest rate changes). In addition, portfolio management
generally may use (i) options on GNMA TBAs or total return swaps to seek to
enhance potential gains; and (ii) options on interest rate futures or on
interest rates to hedge against potential adverse interest rate movements.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
CREDIT RISK. The fund's performance could be hurt if an issuer of a security
suffers an adverse change in financial condition that results in the issuer not
making timely payments of interest or principal, a security downgrade or
inability to meet a financial obligation.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
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.
12
PROSPECTUS February 1, 2014 DWS GNMA Fund
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
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.
LIQUIDITY RISK. In certain situations, it may be difficult or impossible to
sell an investment in an orderly fashion at an acceptable price.
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.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
For each of Class A, C and R shares, performance prior to its inception date is
based on the historical performance of Class S shares adjusted to reflect the
higher expenses and applicable sales charges of the relevant share class.
CALENDAR YEAR TOTAL RETURNS (%) (Class S)
These year-by-year returns do not include sales charges, if any, 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]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
3.76 2.73 3.99 6.13 5.70 7.43 5.85 7.58 2.90 -4.38
|
Best Quarter: 4.22%, Q2 2010 Worst Quarter: -4.47%, Q2 2013
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class S and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. 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. Index comparison for
Institutional Class shares began on 1/31/2009.
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
----------- ---------- --------- ---------
CLASS A before tax 2/2/2009 -7.21 2.99 3.58
--------------------------- --------- ------ ---- ----
CLASS C before tax 2/2/2009 -5.32 2.79 3.09
--------------------------- --------- ------ ---- ----
CLASS R before tax 5/1/2012 -4.90 3.14 3.45
--------------------------- --------- ------ ---- ----
CLASS S before tax 7/14/2000 -4.38 3.78 4.12
--------------------------- --------- ------ ---- ----
After tax on
distributions -5.63 2.13 2.41
After tax on distribu-
tions and sale of fund
shares -2.83 2.28 2.52
--------------------------- --------- ------ ---- ----
BARCLAYS GNMA INDEX
(reflects no deduction for
fees, expenses or taxes) -2.12 3.99 4.69
--------------------------- --------- ------ ---- ----
|
CLASS 1 SINCE
INCEPTION YEAR INCEPTION
----------- ---------- ----------
INST Class before tax 2/2/2009 -4.34 3.82
--------------------------- -------- ------ ----
BARCLAYS GNMA INDEX
(reflects no deduction for
fees, expenses or taxes) -2.12 4.07
--------------------------- -------- ------ ----
|
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
13
PROSPECTUS February 1, 2014 DWS GNMA Fund
PORTFOLIO MANAGER(S)
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2002.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
----------------- -------------- -------- -------------------
A C 1,000 500 1,000 500
------ ----- --- ----- ---
R None None None None
------ ----- ----- ----- ----
INST 1,000,000 N/A N/A N/A
------ --------- ----- ----- ----
S 2,500 1,000 1,000 1,000
------ --------- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares and Class R
shares. The minimum additional investment in all other instances is $50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Institutional Class shares are generally available only to qualified
institutions. Class R shares are generally available only to certain retirement
plans. Class S shares are only available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
14
PROSPECTUS February 1, 2014 DWS GNMA Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
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 and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C R INST S
---------- --------- --------- ---------- ---------- ---------
Maximum sales charge (load)
imposed on purchases, as %
of offering price 4.50 None None None None None
----------------------------- ---- -- -- - - --
Maximum deferred sales
charge (load), as % of
redemption proceeds None 4.00 1.00 None None None
----------------------------- ------ ---- ---- - - --
Redemption/exchange fee on
shares owned less than 30
days, as % of redemption
proceeds 2.00 2.00 2.00 2.00 2.00 2.00
----------------------------- ------ ---- ---- ----- ----- ----
Account Maintenance Fee
(annually, for fund balances
below $10,000 and subject to
certain exceptions) $ 20 $20 $20 None None $20
----------------------------- ------- ---- ---- ----- ----- ----
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C R INST S
--------- --------- --------- --------- ---------- ----------
Management fee 0.45 0.45 0.45 0.45 0.45 0.45
---------------------------- ---- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.23 1.00 1.00 0.47 None None
---------------------------- ---- ---- ---- ---- ----- -----
Other expenses 0.24 0.28 0.24 0.58 0.21 0.40
---------------------------- ---- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 0.92 1.73 1.69 1.50 0.66 0.85
---------------------------- ---- ---- ---- ---- ----- -----
|
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
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
YEARS A B C R INST S
------- -------- -------- -------- -------- ------ --------
1 $ 540 $ 576 $ 272 $ 153 $67 $ 87
-- ----- ----- ----- ----- --- -----
3 730 845 533 474 211 271
-- ----- ----- ----- ----- --- -----
5 936 1,139 918 818 368 471
-- ----- ----- ----- ----- --- -----
10 1,530 1,629 1,998 1,791 822 1,049
-- ----- ----- ----- ----- --- -----
|
You would pay the following expenses if you did not redeem your shares:
YEARS A B C R INST S
------- -------- -------- -------- -------- ------ --------
1 $ 540 $ 176 $ 172 $ 153 $67 $ 87
-- ----- ----- ----- ----- --- -----
3 730 545 533 474 211 271
-- ----- ----- ----- ----- --- -----
5 936 939 918 818 368 471
-- ----- ----- ----- ----- --- -----
10 1,530 1,629 1,998 1,791 822 1,049
-- ----- ----- ----- ----- --- -----
|
Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
15
PROSPECTUS February 1, 2014 DWS High Income Fund
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 54%.
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. Subject to its portfolio maturity policy, the fund
may purchase individual securities with any stated maturity.
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 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 attractive industry sectors and with strong long-term
fundamentals and improving credits.
DERIVATIVES. Portfolio management generally may use credit default swaps, which
are a type of derivative (a contract whose value is based on, for example,
indices, currencies or securities) to seek to increase the fund's income, to
gain exposure to a bond issuer's credit quality characteristics without
directly investing in the bond, or to hedge the risk of default on bonds held
in the fund's portfolio. In addition, portfolio management generally may use
forward currency contracts to hedge the fund's exposure to changes in foreign
currency exchange rates on its foreign currency denominated portfolio holdings
or to facilitate transactions in foreign currency denominated securities.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
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.)
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign
16
PROSPECTUS February 1, 2014 DWS High Income Fund
securities, changes in currency exchange rates may affect the US dollar value
of foreign securities or the income or gain received on these securities.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
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.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
For Class R shares, historical performance prior to class inception is based on
the performance of the fund's Class A shares adjusted to reflect the higher
expenses of Class R.
CALENDAR YEAR TOTAL RETURNS (%) (Class A)
These year-by-year returns do not include sales charges, if any, 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]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
12.33 4.00 10.27 1.01 -23.64 41.61 14.76 4.02 14.73 7.04
|
Best Quarter: 15.28%, Q2 2009 Worst Quarter: -16.05%, Q4 2008
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class A and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. 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. Index comparison for
Class S shares began on 4/30/2012.
17
PROSPECTUS February 1, 2014 DWS High Income Fund
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
----------- --------- ---------- ---------
CLASS A before tax 1/26/1978 2.22 14.67 7.01
-------------------------- --------- ----- ----- ----
After tax on
distributions() -0.04 11.60 4.02
After tax on distribu-
tions and sale of fund
shares 1.40 10.88 4.14
-------------------------- --------- ------ ----- ----
CLASS B before tax 5/31/1994 3.15 14.67 6.65
-------------------------- --------- ------ ----- ----
CLASS C before tax 5/31/1994 6.21 14.83 6.71
-------------------------- --------- ------ ----- ----
INST CLASS before tax 8/19/2002 7.32 16.04 7.85
-------------------------- --------- ------ ----- ----
CLASS R before tax 5/1/2012 6.60 15.31 7.10
-------------------------- --------- ------ ----- ----
CREDIT SUISSE HIGH YIELD
INDEX (reflects no deduc-
tion for fees, expenses
or taxes) 7.53 18.08 8.35
-------------------------- --------- ------ ----- ----
|
CLASS 1
INCEPTION YEAR SINCE INCEPTION
----------- --------- ----------------
CLASS S before tax 5/1/2012 7.32 9.27
-------------------------- -------- ---- ----
CREDIT SUISSE HIGH YIELD
INDEX (reflects no deduc-
tion for fees, expenses
or taxes) 7.53 9.43
-------------------------- -------- ---- ----
|
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
PORTFOLIO MANAGER(S)
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
----------------- -------------- -------- -------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
R None None None None
------- ----- ----- ----- ----
INST 1,000,000 N/A N/A N/A
------- --------- ----- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares and Class R
shares. Because Class B shares are closed to new investment, existing Class B
shareholders may purchase Class A and C shares with a minimum initial
investment of $50. The minimum additional investment in all other instances is
$50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Institutional Class shares
are generally available only to qualified institutions. Class R shares are
generally available only to certain retirement plans. Class S shares are only
available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
18
PROSPECTUS February 1, 2014 DWS High Income Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
DWS Global High Income Fund
INVESTMENT OBJECTIVE
The fund seeks high current income and, as a secondary objective, capital
appreciation.
FEES AND EXPENSES OF THE FUND
These are the fees and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C INST S
---------- --------- --------- ---------- ---------
Maximum sales charge (load)
imposed on purchases, as % of
offering price 4.50 None None None None
------------------------------------ ---- -- -- - --
Maximum deferred sales charge
(load), as % of redemption proceeds None 4.00 1.00 None None
------------------------------------ ------ ---- ---- - --
Redemption/exchange fee on shares
owned less than 30 days, as % of
redemption proceeds 2.00 2.00 2.00 2.00 2.00
------------------------------------ ------ ---- ---- ----- ----
Account Maintenance Fee (annually,
for fund balances below $10,000 and
subject to certain exceptions) $ 20 $20 $20 None $20
------------------------------------ ------- ---- ---- ----- ----
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C INST S
--------- --------- --------- ---------- ----------
Management fee 0.50 0.50 0.50 0.50 0.50
---------------------------- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.22 1.00 1.00 None None
---------------------------- ---- ---- ---- ----- -----
Other expenses 0.34 0.36 0.32 0.24 0.39
---------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 1.06 1.86 1.82 0.74 0.89
---------------------------- ---- ---- ---- ----- -----
|
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
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
YEARS A B C INST S
------- -------- -------- -------- ------ --------
1 $ 553 $ 589 $ 285 $76 $ 91
-- ----- ----- ----- --- -----
3 772 885 573 237 284
-- ----- ----- ----- --- -----
5 1,008 1,206 985 411 493
-- ----- ----- ----- --- -----
10 1,686 1,778 2,137 918 1,096
-- ----- ----- ----- --- -----
|
You would pay the following expenses if you did not redeem your shares:
YEARS A B C INST S
------- -------- -------- -------- ------ --------
1 $ 553 $ 189 $ 185 $76 $ 91
-- ----- ----- ----- --- -----
3 772 585 573 237 284
-- ----- ----- ----- --- -----
5 1,008 1,006 985 411 493
-- ----- ----- ----- --- -----
10 1,686 1,778 2,137 918 1,096
-- ----- ----- ----- --- -----
|
Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 59%.
19
PROSPECTUS February 1, 2014 DWS Global High Income Fund
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal conditions, the fund invests at least 65% of
total assets in domestic and foreign below investment grade debt securities
(rated below the fourth highest credit rating category, junk bonds), including
those whose issuers are located in countries with new or emerging securities
markets. The fund will generally invest in at least three different countries
and will normally invest at least 40% of net assets in securities of foreign
issuers. The fund invests in securities of varying maturities and intends to
maintain a dollar-weighted effective average portfolio maturity (the weighted
average of the maturity dates of bonds held by the fund) that will not exceed
ten years. Subject to its portfolio maturity policy, the fund may purchase
individual securities with any stated maturity.
The fund may invest in securities of any credit quality, and may include debt
securities not paying interest currently and securities in default. The fund
may invest up to 15% of total assets in credit default swaps to buy or sell
protection on credit exposure, and up to 20% of net assets in common stocks,
preferred shares and other equity securities. The fund may invest up to 35% of
total assets in cash or money market instruments to maintain liquidity or in
the event portfolio management determines that securities meeting the fund's
investment objectives are not readily available for purchase. The fund may also
purchase convertible securities, securities on a when-issued basis and engage
in short sales.
MANAGEMENT PROCESS. Portfolio management uses primarily a bottom-up approach by
using relative value and fundamental analysis to select securities within each
industry, and a top-down approach to assess the overall risk and return in the
market and which it considers macro trends in the economy. Portfolio management
also uses independent credit research, management visits and conference calls
as part of its analysis process.
DERIVATIVES. Portfolio management generally may use credit default swaps, which
are a type of derivative (a contract whose value is based on, for example,
indices, currencies or securities) to seek to increase the fund's income, to
gain exposure to a bond issuer's credit quality characteristics without
directly investing in the bond, or to hedge the risk of default on bonds held
in the fund's portfolio. In addition, portfolio management generally may use
forward currency contracts to hedge the fund's exposure to changes in foreign
currency exchange rates on its foreign currency denominated portfolio holdings
or to facilitate transactions in foreign currency denominated securities.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
Because securities in default generally have missed one or more payments of
interest and/or principal, an investment in such securities has an increased
risk of loss. Issuers of securities in default have an increased likelihood of
entering bankruptcy or beginning liquidation procedures which could impact the
fund's ability to recoup its investment. Securities in default may be illiquid
or trade in low volumes and thus may be difficult to value.
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.)
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
20
PROSPECTUS February 1, 2014 DWS Global High Income Fund
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
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.
STOCK MARKET RISK. The fund is affected by how the stock market performs. When
stock prices fall, you should expect the value of your investment to fall as
well.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
SHORT SALE RISK. If the fund sells a security short and subsequently has to buy
the security back at a higher price, the fund will lose money on the
transaction. Any loss will be increased by the amount of compensation, interest
or dividends and transaction costs the fund must pay to a lender of the
security. The amount the fund could lose on a short sale is theoretically
unlimited (as compared to a long position, where the maximum loss is the amount
invested). The use of short sales, which has the effect of leveraging the fund,
could increase the exposure of the fund to the market, increase losses and
increase the volatility of returns.
The 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 borrowed securities
be returned to it on short notice, and the 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, it is more
likely that the fund will have to cover its short sale at an unfavorable price
and potentially reduce or eliminate any gain, or cause a loss, as a result of
the short sale.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
In the table, the performance figures for each share class prior to its
inception date are based on the historical performance of the original share
class (Institutional Class), adjusted to reflect the higher net expenses and
applicable sales charges of the relevant share class. Effective February 1,
2012, some of the fund's investment strategies changed. Performance would have
been different if the fund's current investment strategy had been in effect.
CALENDAR YEAR TOTAL RETURNS (%) (Institutional Class)
These year-by-year returns do not include sales charges, if any, and would be
lower if they did. Returns for other classes were different and are not shown
here.
21
PROSPECTUS February 1, 2014 DWS Global High Income Fund
[BAR GRAPHIC OMITTED HERE]
[BAR GRAPHIC DATA]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
12.39 4.10 10.70 1.30 -23.49 41.45 14.74 4.54 15.42 6.33
|
Best Quarter: 14.90%, Q2 2009 Worst Quarter: -16.16%, Q4 2008
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Institutional Class and would be
different for other classes) reflect the historical highest individual federal
income tax rates, but do not reflect any state or local taxes. 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.
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
----------- --------- ---------- ---------
CLASS A before tax 5/13/2005 1.08 14.33 6.78
--------------------------- --------- ---- ----- ----
CLASS B before tax 5/13/2005 2.19 14.40 6.46
--------------------------- --------- ---- ----- ----
CLASS C before tax 5/13/2005 5.18 14.57 6.49
--------------------------- --------- ---- ----- ----
INST CLASS before tax 3/16/1998 6.33 15.80 7.65
--------------------------- --------- ---- ----- ----
After tax on
distributions 4.02 12.73 4.69
After tax on distribu-
tions and sale of fund
shares 3.95 11.86 4.73
--------------------------- --------- ---- ----- ----
CLASS S before tax 5/13/2005 6.25 15.63 7.51
--------------------------- --------- ---- ----- ----
BANK OF AMERICA MERRILL
LYNCH GLOBAL HIGH YIELD
CONSTRAINED INDEX
(reflects no deduction for
fees, expenses or taxes) 7.10 19.49 8.81
--------------------------- --------- ---- ----- ----
|
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
PORTFOLIO MANAGER(S)
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
------------ -------------- -------- ------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
INST 1,000,000 N/A N/A N/A
------- --------- ---- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares. Because
Class B shares are closed to new investment, existing Class B shareholders may
purchase Class A and C shares with a minimum initial investment of $50. The
minimum additional investment in all other instances is $50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Institutional Class shares
are generally available only to qualified institutions. Class S shares are only
available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
22
PROSPECTUS February 1, 2014 DWS Global High Income Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
DWS Short Duration Fund
INVESTMENT OBJECTIVE
The fund's investment objective is to provide high income while also seeking to
maintain a high degree of stability of shareholders' capital.
FEES AND EXPENSES OF THE FUND
These are the fees and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C INST S
---------- --------- --------- ------ -----
Maximum sales charge (load)
imposed on purchases, as % of
offering price 2.75 None None None None
------------------------------------ ---- -- -- ------ ---
Maximum deferred sales charge
(load), as % of redemption proceeds None 4.00 1.00 None None
------------------------------------ ------ ---- ---- ------ ---
Account Maintenance Fee (annually,
for fund balances below $10,000 and
subject to certain exceptions) $ 20 $20 $20 None $20
------------------------------------ ------- ---- ---- ------ ---
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C INST S
--------- --------- --------- ---------- ----------
Management fee 0.36 0.36 0.36 0.36 0.36
---------------------------------- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.25 0.97 1.00 None None
---------------------------------- ---- ---- ---- ----- -----
Other expenses 0.26 0.44 0.26 0.24 0.33
---------------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 0.87 1.77 1.62 0.60 0.69
---------------------------------- ---- ---- ---- ----- -----
Fee waiver/expense reimbursement 0.01 0.16 0.01 0.00 0.08
---------------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES AFTER FEE WAIVER/EXPENSE
REIMBURSEMENT 0.86 1.61 1.61 0.60 0.61
---------------------------------- ---- ---- ---- ----- -----
|
The Advisor has contractually agreed through September 30, 2014 to waive and/or
reimburse fund expenses to the extent necessary to maintain the fund's total
annual operating expenses at 0.84%, 1.59%, 1.59% and 0.59%; and for the period
October 1, 2014 through January 31, 2015 at ratios no higher than 0.86%, 1.61%,
1.61% and 0.61% (in each instance, excluding extraordinary expenses, taxes,
brokerage and interest expenses) for Class A, Class B, Class C and Class S,
respectively. The agreement may only be terminated with the consent of the
fund's Board.
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 in each period for Class A, B, C and S)
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
YEARS A B C INST S
------- -------- -------- -------- ------ ------
1 $ 360 $ 564 $ 264 $61 $62
-- ----- ----- ----- --- ---
3 544 842 510 192 213
-- ----- ----- ----- --- ---
5 743 1,144 880 335 376
-- ----- ----- ----- --- ---
10 1,317 1,613 1,921 750 851
-- ----- ----- ----- --- ---
|
You would pay the following expenses if you did not redeem your shares:
YEARS A B C INST S
------- -------- -------- -------- ------ ------
1 $ 360 $ 164 $ 164 $61 $62
-- ----- ----- ----- --- ---
3 544 542 510 192 213
-- ----- ----- ----- --- ---
5 743 944 880 335 376
-- ----- ----- ----- --- ---
10 1,317 1,613 1,921 750 851
-- ----- ----- ----- --- ---
|
23
PROSPECTUS February 1, 2014 DWS Short Duration Fund
Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 47%.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal market conditions, the fund invests at least 65%
of its total assets in fixed income securities rated, at the time of purchase,
within the top four long-term credit rating categories by a nationally
recognized statistical rating organization (a "NRSRO") (or, if unrated,
determined by the fund's investment advisor to be of similar quality). The fund
may invest in securities of varying maturities. The fund normally seeks to
maintain an average portfolio duration (a measure of sensitivity to interest
rate movements) of no longer than three years by investing in fixed income
securities with short-to intermediate-term maturities.
The fund may also invest up to 10% of its assets in domestic and foreign below
investment-grade fixed income securities ("junk bonds") rated in the fifth and
sixth long-term credit rating categories by a NRSRO or, if unrated, determined
by the fund's investment advisor to be of similar quality, including those
whose issuers are located in countries with new or emerging securities markets.
Fixed income securities in which the fund may invest include US government
securities or obligations that are issued or guaranteed by the US Treasury or
by agencies or instrumentalities of the US government; obligations backed by
such US government securities; US dollar-denominated fixed income securities of
domestic or foreign corporations, including adjustable rate loans that have a
senior right to payment ("senior loans") and other floating rate debt
instruments; US dollar-denominated fixed income securities of foreign
governments or supranational entities; US dollar-denominated asset-backed
securities issued by domestic or foreign entities; non-US dollar-denominated
fixed income securities of foreign corporations, foreign governments or
supranational entities; mortgage pass-through securities issued by governmental
and non-governmental issuers; collateralized mortgage obligations, real estate
mortgage investment conduits and commercial mortgage-backed securities;
short-term investments, including money market mutual funds.
The fund invests in short-term investments to meet shareholder withdrawals and
other liquidity needs. Short-term investments will be rated at the time of
purchase within one of the top two short-term rating categories by a NRSRO or,
if unrated, determined by the fund's investment advisor to be of similar
quality.
The fund may also invest in Rule 144A securities, securities or instruments on
a when-issued, delayed delivery or forward commitment basis (e.g. TBA
securities), repurchase agreements, reverse repurchase agreements and dollar
rolls.
MANAGEMENT PROCESS. The fund's investment strategy emphasizes a diversified
exposure to higher yielding mortgage, corporate and asset-backed sectors of the
investment-grade fixed income markets. Portfolio management uses a top-down
approach, first focusing on sector allocations, then using relative value
analysis to select the best securities within each sector. When selecting
securities, portfolio management analyzes such factors as credit quality,
interest rate sensitivity and spread relationships between individual bonds.
DERIVATIVES. Portfolio management generally may use interest rate swaps or
futures contracts, which are types of derivatives (a contract whose value is
based on, for example, indices, currencies or securities), for duration
management (i.e., reducing or increasing the sensitivity of the fund's
portfolio to interest rate changes). In addition, portfolio management
generally may use (i) credit default swaps to seek to increase the fund's
income, to gain exposure to a bond issuer's credit quality characteristics
without directly investing in the bond, or to hedge the risk of default on
bonds held in the fund's portfolio, (ii) options on interest rate futures to
hedge interest rate movements of portfolio assets and (iii) total return swaps
to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
24
PROSPECTUS February 1, 2014 DWS Short Duration Fund
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. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
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.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
LIQUIDITY RISK. In certain situations, it may be difficult or impossible to
sell an investment in an orderly fashion at an acceptable price.
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.
25
PROSPECTUS February 1, 2014 DWS Short Duration Fund
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.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
For Class B shares, historical performance prior to class inception is based on
the performance of the fund's original share class (Investment Class) adjusted
to reflect the higher expenses and applicable sales charges of Class B.
Investment Class shares were renamed Class S shares on October 23, 2006. Prior
to November 17, 2004, the fund had a different objective, strategies, fees and
expenses. Consequently, the fund's past performance prior to this time may have
been different if the current strategy had been in place.
CALENDAR YEAR TOTAL RETURNS (%) (Class A)
These year-by-year returns do not include sales charges, if any, 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]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
6.32 2.47 5.74 5.45 -7.13 12.75 4.08 0.11 4.20 1.31
|
Best Quarter: 4.57%, Q2 2009 Worst Quarter: -5.14%, Q4 2008
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class A and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. 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. Index comparison for
Institutional Class shares began on 8/31/2008.
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
------------ ---------- --------- ---------
CLASS A before tax 12/1/2002 -1.47 3.82 3.13
-------------------------- ---------- ------ ---- ----
After tax on
distributions -2.37 2.60 1.81
After tax on distribu-
tions and sale of fund
shares -0.96 2.56 1.97
-------------------------- ---------- ------ ---- ----
CLASS B before tax 4/20/2007 -2.41 3.43 2.44
-------------------------- ---------- ------ ---- ----
CLASS C before tax 2/3/2003 0.56 3.62 2.67
-------------------------- ---------- ------ ---- ----
CLASS S before tax 12/23/1998 1.56 4.62 3.59
-------------------------- ---------- ------ ---- ----
BARCLAYS 1-3 YEAR
GOVERNMENT/CREDIT
INDEX (reflects no deduc-
tion for fees, expenses
or taxes) 0.64 2.02 2.91
-------------------------- ---------- ------ ---- ----
|
CLASS 1 5 SINCE
INCEPTION YEAR YEARS INCEPTION
----------- --------- --------- ----------
INST CLASS before tax 8/26/2008 1.58 4.70 3.04
-------------------------- --------- ---- ---- ----
BARCLAYS 1-3 YEAR
GOVERNMENT/CREDIT
INDEX (reflects no deduc-
tion for fees, expenses
or taxes) 0.64 2.02 2.28
-------------------------- --------- ---- ---- ----
|
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
PORTFOLIO MANAGER(S)
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2002.
ERIC S. MEYER, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
------------ -------------- -------- ------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
INST 1,000,000 N/A N/A N/A
------- --------- ---- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
|
26
PROSPECTUS February 1, 2014 DWS Short Duration Fund
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares. Because
Class B shares are closed to new investment, existing Class B shareholders may
purchase Class A and C shares with a minimum initial investment of $50. The
minimum additional investment in all other instances is $50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Institutional Class shares
are generally available only to qualified institutions. Class S shares are only
available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
27
PROSPECTUS February 1, 2014 DWS Short Duration Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
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 and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C INST S
----------- --------- --------- ------ -----
Maximum sales charge (load)
imposed on purchases, as % of
offering price 2.75 None None None None
------------------------------------ ---- -- -- ------ ---
Maximum deferred sales charge
(load), as % of redemption proceeds None() 4.00 1.00 None None
------------------------------------ ------- ---- ---- ------ ---
Account Maintenance Fee (annually,
for fund balances below $10,000 and
subject to certain exceptions) $ 20 $20 $20 None $20
------------------------------------ ------- ---- ---- ------ ---
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C INST S
--------- --------- --------- ---------- ----------
Management fee 0.33 0.33 0.33 0.33 0.33
---------------------------------- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.22 0.99 0.99 None None
---------------------------------- ---- ---- ---- ----- -----
Other expenses 0.26 0.44 0.25 0.28 0.35
---------------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 0.81 1.76 1.57 0.61 0.68
---------------------------------- ---- ---- ---- ----- -----
Fee waiver/expense reimbursement 0.00 0.10 0.00 0.00 0.02
---------------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES AFTER FEE WAIVER/EXPENSE
REIMBURSEMENT 0.81 1.66 1.57 0.61 0.66
---------------------------------- ---- ---- ---- ----- -----
|
The Advisor has contractually agreed through September 30, 2014 to waive and/or
reimburse fund expenses to the extent necessary to maintain the fund's total
annual operating expenses at 1.64% and 0.64%; and for the period October 1,
2014 through January 31, 2015 at ratios no higher than 1.66% and 0.66% (in each
instance, excluding extraordinary expenses, taxes, brokerage and interest
expenses) for Class B and Class S, respectively. The agreement may only be
terminated with the consent of the fund's Board.
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 in each period for Class B and S) remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
YEARS A B C INST S
------- -------- -------- -------- ------ ------
1 $ 355 $ 569 $ 260 $62 $67
-- ----- ----- ----- --- ---
3 527 844 496 195 216
-- ----- ----- ----- --- ---
5 712 1,145 855 340 377
-- ----- ----- ----- --- ---
10 1,249 1,582 1,867 762 845
-- ----- ----- ----- --- ---
|
You would pay the following expenses if you did not redeem your shares:
YEARS A B C INST S
------- -------- -------- -------- ------ ------
1 $ 355 $ 169 $ 160 $62 $67
-- ----- ----- ----- --- ---
3 527 544 496 195 216
-- ----- ----- ----- --- ---
5 712 945 855 340 377
-- ----- ----- ----- --- ---
10 1,249 1,582 1,867 762 845
-- ----- ----- ----- --- ---
|
28
PROSPECTUS February 1, 2014 DWS Strategic Government Securities Fund
Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 372%.
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.
The fund may also invest in securities or instruments on a when-issued, delayed
delivery or forward commitment basis (e.g. TBAs). A forward commitment
transaction is an agreement by the fund to purchase or sell securities at a
specified future date. The fund may sell the forward commitment securities
before the settlement date or enter into new commitments to extend the delivery
date into the future.
MANAGEMENT PROCESS. In deciding which types of securities to buy and sell,
portfolio management first considers the relative attractiveness of Ginnie Maes
compared to other eligible securities and decides on allocations. The decisions
are generally based on a number of factors, including changes in supply and
demand within the bond market and prepayment rates of individual bonds.
In choosing individual bonds, portfolio management reviews each bond's
fundamentals, compares the yields of bonds and uses detailed 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.
INTEREST RATE STRATEGY. In addition to the fund's main investment strategy,
portfolio management may, from time to time, seek to enhance returns by
employing various strategies to identify interest rate trends across developed
markets using derivatives, in particular buying and selling interest rate
futures contracts.
DERIVATIVES. Outside of the interest rate strategy, portfolio management
generally may use futures contracts or interest rate swaps, which are types of
derivatives (a contract whose value is based on, for example, indices,
currencies or securities), for duration management (i.e., reducing or
increasing the sensitivity of the fund's portfolio to interest rate changes).
In addition, portfolio management generally may use (i) options on US
government agency mortgage-backed TBAs or total return swaps to seek to enhance
potential gains; or (ii) options on interest rate futures to hedge against
potential adverse interest rate movements.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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.)
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
29
PROSPECTUS February 1, 2014 DWS Strategic Government Securities Fund
the fund to the effects of leverage, which could increase the fund's exposure
to the market and magnify potential losses.
INTEREST RATE STRATEGIES RISK. The success of the interest rate futures
strategies depends, in part, on the effectiveness and implementation of
portfolio management's proprietary models. If portfolio management's analysis
proves to be incorrect, losses to the fund may be significant. The risk of loss
is heightened during periods of rapid rises in interest rates.
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.
CREDIT RISK. The fund's performance could be hurt if an issuer of a security
suffers an adverse change in financial condition that results in the issuer not
making timely payments of interest or principal, a security downgrade or
inability to meet a financial obligation.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
CALENDAR YEAR TOTAL RETURNS (%) (Class A)
These year-by-year returns do not include sales charges, if any, 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]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
3.61 2.42 3.86 5.79 4.89 7.75 6.13 7.13 2.36 -4.37
|
Best Quarter: 3.84% Q2 2010 Worst Quarter: -4.63%, Q2 2013
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class A and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. Your actual after-tax
returns may be different. After-tax returns are not relevant to
30
PROSPECTUS February 1, 2014 DWS Strategic Government Securities Fund
shares held in an IRA, 401(k) or other tax-advantaged investment plan. Index
comparison for Class S shares began on 7/31/2005.
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
----------- ---------- --------- ---------
CLASS A before tax 10/1/1979 -7.00 3.12 3.61
--------------------------- --------- ------ ---- ----
After tax on
distributions() -8.24 1.55 1.99
After tax on distribu-
tions and sale of fund
shares -4.54 1.76 2.13
--------------------------- --------- ------ ---- ----
CLASS B before tax 5/31/1994 -8.12 2.60 2.96
--------------------------- --------- ------ ---- ----
CLASS C before tax 5/31/1994 -5.20 2.90 3.07
--------------------------- --------- ------ ---- ----
INST CLASS before tax 7/3/1995 -4.32 3.89 4.10
--------------------------- --------- ------ ---- ----
BARCLAYS GNMA INDEX
(reflects no deduction for
fees, expenses or taxes) -2.12 3.99 4.69
--------------------------- --------- ------ ---- ----
|
CLASS 1 5
INCEPTION YEAR YEARS SINCE INCEPTION
----------- ---------- --------- ----------------
CLASS S before tax 7/29/2005 -4.23 3.86 4.22
--------------------------- --------- ------ ---- ----
BARCLAYS GNMA INDEX
(reflects no deduction for
fees, expenses or taxes) -2.12 3.99 4.84
--------------------------- --------- ------ ---- ----
|
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
PORTFOLIO MANAGER(S)
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2002.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
------------ -------------- -------- ------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
INST 1,000,000 N/A N/A N/A
------- --------- ---- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares. Because
Class B shares are closed to new investment, existing Class B shareholders may
purchase Class A and C shares with a minimum initial investment of $50. The
minimum additional investment in all other instances is $50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Institutional Class shares
are generally available only to qualified institutions. Class S shares are only
available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
31
PROSPECTUS February 1, 2014 DWS Strategic Government Securities Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
DWS Ultra-Short Duration Fund
INVESTMENT OBJECTIVE
The fund seeks to provide current income consistent with total return.
FEES AND EXPENSES OF THE FUND
These are the fees and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C INST S
---------- --------- --------- ------ -----
Maximum sales charge (load)
imposed on purchases, as % of
offering price 2.75 None None None None
------------------------------------ ---- -- -- ------ ---
Maximum deferred sales charge
(load), as % of redemption proceeds None 4.00 1.00 None None
------------------------------------ ------ ---- ---- ------ ---
Account Maintenance Fee (annually,
for fund balances below $10,000 and
subject to certain exceptions) $ 20 $20 $20 None $20
------------------------------------ ------- ---- ---- ------ ---
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C INST S
--------- --------- --------- ---------- ----------
Management fee 0.40 0.40 0.40 0.40 0.40
---------------------------- ---- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.23 1.00 1.00 None None
---------------------------- ---- ---- ---- ----- -----
Other expenses 0.32 0.45 0.32 0.33 0.39
---------------------------- ---- ---- ---- ----- -----
TOTAL ANNUAL FUND OPERATING
EXPENSES 0.95 1.85 1.72 0.73 0.79
---------------------------- ---- ---- ---- ----- -----
|
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
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
YEARS A B C INST S
------- -------- -------- -------- ------ ------
1 $ 369 $ 588 $ 275 $75 $81
-- ----- ----- ----- --- ---
3 569 882 542 233 252
-- ----- ----- ----- --- ---
5 786 1,201 933 406 439
-- ----- ----- ----- --- ---
10 1,409 1,716 2,030 906 978
-- ----- ----- ----- --- ---
|
You would pay the following expenses if you did not redeem your shares:
YEARS A B C INST S
------- -------- -------- -------- ------ ------
1 $ 369 $ 188 $ 175 $75 $81
-- ----- ----- ----- --- ---
3 569 582 542 233 252
-- ----- ----- ----- --- ---
5 786 1,001 933 406 439
-- ----- ----- ----- --- ---
10 1,409 1,716 2,030 906 978
-- ----- ----- ----- --- ---
|
Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 39%.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal circumstances, the fund invests at least 80% of
assets, determined at the time of purchase, in debt securities. For purposes of
this 80% investment limit, the term assets is defined as net assets,
32
PROSPECTUS February 1, 2014 DWS Ultra-Short Duration Fund
plus the amount of any borrowings for investment purposes. Debt securities
include securities of US and foreign government agencies and instrumentalities,
corporate securities, mortgage-backed and asset backed securities, taxable
municipal and tax-exempt municipal bonds, adjustable rate loans that have a
senior right to payment ("senior loans"), and other floating-rate debt
securities.
The fund may invest in investment-grade (rated within the top four credit
rating categories) and non-investment grade (rated below the fourth highest
credit rating category, junk bonds) debt securities of US and foreign issuers,
including issuers located in countries with new or emerging securities markets.
The fund's investments in non-investment grade debt securities, including
non-investment grade senior loans and other non-investment grade floating-rate
debt securities, will be limited to 50% of its total assets.
The fund may invest in senior loans that (i) may not be rated by a rating
agency, registered with the Securities and Exchange Commission or any state
securities commission, or listed on any national exchange; or (ii) are not
secured by collateral.
The fund may hold up to 20% of its total assets in cash or money market
instruments in order to maintain liquidity, or in the event portfolio
management determines that securities meeting the fund's investment objective
are not otherwise readily available for purchase.
MANAGEMENT PROCESS. Portfolio management begins with a top-down approach, first
focusing on allocations among various categories of debt securities, then using
relative value analysis to select securities within each category. Portfolio
management analyzes such factors as credit quality, interest rate sensitivity
and spread relationships between individual bonds.
Portfolio management normally targets an average portfolio duration (a measure
of sensitivity to interest rate changes) of no longer than one year. Portfolio
management seeks to achieve an average portfolio duration of one year or less
typically through a combination of investments (such as fixed-rate debt
securities with short-term maturities and senior loans and other floating-rate
debt securities, which have an effective duration of zero) and investment
techniques (such as using futures contracts and/or interest rate swaps to
reduce portfolio duration).
DERIVATIVES. Portfolio management generally may use futures contracts or
interest rate swaps, which are types of derivatives (a contract whose value is
based on, for example, indices, currencies or securities) for duration
management (e.g., reducing the sensitivity of the fund's portfolio to interest
rate changes). In addition, portfolio management generally may use (i) credit
default swaps to seek to increase the fund's income, to gain exposure to a bond
issuer's credit quality characteristics without directly investing in the bond,
or to hedge the risk of default on bonds held in the fund's portfolio; (ii)
forward currency contracts to hedge the fund's exposure to changes in foreign
currency exchange rates on its foreign currency denominated holdings and to
facilitate transactions in foreign currency denominated securities; and (iii)
total return swaps or interest rate swaps to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally
33
PROSPECTUS February 1, 2014 DWS Ultra-Short Duration Fund
are smaller and less liquid than US markets. To the extent that the fund
invests in non-US dollar denominated foreign securities, changes in currency
exchange rates may affect the US dollar value of foreign securities or the
income or gain received on these securities.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
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.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
MARKET RISK. Deteriorating market conditions might cause a general weakness in
the market that reduces the overall level of securities prices in that market.
In addition, an increase in demand for floating rate loans may adversely affect
the rate of interest payable on loans acquired by the fund, thus reducing fund
returns. During periods of limited supply of senior loans, the fund's yield may
be lower.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
INTEREST RATE RISK. When interest rates rise, prices of debt securities
generally decline. The longer the effective 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.) Senior loans typically have adjustable interest rates. As a
result, it is expected that the value of senior loans held by the fund will
fluctuate less in response to interest rate changes than will fixed-rate debt
securities. This could result in less volatility than would be expected for a
fund that invests primarily in fixed-rate debt securities. However, because
floating rates on senior loans only reset periodically, changes in prevailing
interest rates may cause a fluctuation in the fund's value. In addition,
extreme increases in prevailing interest rates may cause an increase in senior
loan defaults, which may cause a further decline in the fund's value. Finally,
a decrease in interest rates could adversely affect the income earned by the
fund from its senior loans.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
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.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
Prior to December 31, 2013, the returns in the bar chart and the after-tax
returns in the performance table below were shown for Institutional Class
shares. The bar chart
34
PROSPECTUS February 1, 2014 DWS Ultra-Short Duration Fund
and the after-tax returns below are shown for Class A shares because the shares
now have 10 or more years of annual returns and are available to most
investors.
For Class S shares, historical performance prior to class inception is based on
the performance of the fund's original share class (Institutional Class)
adjusted to reflect the higher expenses of Class S. Effective April 15, 2011,
the fund's investment strategies changed. The fund's past performance may have
been different if the fund was managed using the current investment strategies.
CALENDAR YEAR TOTAL RETURNS (%) (Class A)
These year-by-year returns do not include sales charges, if any, 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]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
1.99 2.07 4.45 4.66 -9.71 11.51 3.12 -0.51 5.82 2.15
|
Best Quarter: 4.01%, Q2 2009 Worst Quarter: -6.74%, Q4 2008
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class A and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. 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.
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
----------- ---------- --------- ---------
CLASS A before tax 2/28/2003 -0.66 3.76 2.14
--------------------------- --------- ------ ---- ----
After tax on
distributions -1.51 2.59 0.89
After tax on distribu-
tions and sale of fund
shares -0.48 2.52 1.09
--------------------------- --------- ------ ---- ----
CLASS B before tax 2/28/2003 -1.75 3.34 1.68
--------------------------- --------- ------ ---- ----
CLASS C before tax 2/28/2003 1.34 3.58 1.70
--------------------------- --------- ------ ---- ----
INST CLASS before tax 3/13/1995 2.36 4.60 2.60
--------------------------- --------- ------ ---- ----
CLASS S before tax 2/1/2005 2.33 4.59 2.57
--------------------------- --------- ------ ---- ----
BARCLAYS CORPORATE
1-YEAR DURATION INDEX
(reflects no deduction for
fees, expenses or taxes) 0.75 2.25 2.67
--------------------------- --------- ------ ---- ----
|
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
PORTFOLIO MANAGER(S)
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
ERIC S. MEYER, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
------------ -------------- -------- ------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
INST 1,000,000 N/A N/A N/A
------- --------- ---- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares. Because
Class B shares are closed to new investment, existing Class B shareholders may
purchase Class A and C shares with a minimum initial investment of $50. The
minimum additional investment in all other instances is $50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Institutional Class shares
are generally available only to qualified institutions. Class S shares are only
available to a limited group of investors.
35
PROSPECTUS February 1, 2014 DWS Ultra-Short Duration Fund
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
36
PROSPECTUS February 1, 2014 DWS Ultra-Short Duration Fund
Deutsche Asset
& Wealth Management
[DB Logo]
|
DWS Unconstrained Income Fund
INVESTMENT OBJECTIVE
The fund seeks a high total return.
FEES AND EXPENSES OF THE FUND
These are the fees and expenses you may pay when you buy and hold shares. 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. 70) and Purchase and Redemption
of Shares in the fund's Statement of Additional Information (SAI) (p. II-15).
SHAREHOLDER FEES (paid directly from your investment)
A B C S
----------- --------- --------- -----
Maximum sales charge (load) imposed on
purchases, as % of offering price 2.75 None None None
------------------------------------------- ---- -- -- ---
Maximum deferred sales charge (load), as
% of redemption proceeds None() 4.00 1.00 None
------------------------------------------- ------- ---- ---- ---
Account Maintenance Fee (annually, for
fund balances below $10,000 and subject to
certain exceptions) $ 20 $20 $20 $20
------------------------------------------- ------- ---- ---- ---
|
ANNUAL FUND OPERATING EXPENSES (expenses that you pay each year as a % of the
value of your investment)
A B C S
--------- --------- --------- ----------
Management fee 0.46 0.46 0.46 0.46
------------------------------------- ---- ---- ---- ----
Distribution/service
(12b-1) fees 0.23 1.00 1.00 None
------------------------------------- ---- ---- ---- -----
Other expenses 0.32 0.38 0.31 0.40
------------------------------------- ---- ---- ---- -----
Acquired funds fees and expenses 0.02 0.02 0.02 0.02
------------------------------------- ---- ---- ---- -----
TOTAL ANNUAL FUND OPERATING EXPENSES 1.03 1.86 1.79 0.88
------------------------------------- ---- ---- ---- -----
|
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
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
YEARS A B C S
------- -------- -------- -------- --------
1 $ 377 $ 589 $ 282 $ 90
-- ----- ----- ----- -----
3 594 885 563 281
-- ----- ----- ----- -----
5 828 1,206 970 488
-- ----- ----- ----- -----
10 1,500 1,763 2,105 1,084
-- ----- ----- ----- -----
|
You would pay the following expenses if you did not redeem your shares:
YEARS A B C S
------- -------- -------- -------- --------
1 $ 377 $ 189 $ 182 $ 90
-- ----- ----- ----- -----
3 594 585 563 281
-- ----- ----- ----- -----
5 828 1,006 970 488
-- ----- ----- ----- -----
10 1,500 1,763 2,105 1,084
-- ----- ----- ----- -----
|
Class B converts to Class A after six years; the Example for Class B reflects
Class A fees after the conversion.
PORTFOLIO TURNOVER
The fund pays transaction costs, such as commissions, 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, and can affect the fund's
performance.
Portfolio turnover rate for fiscal year 2013: 157%.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal circumstances, the fund invests mainly in fixed
income securities issued by both US and foreign corporations and governments.
The credit quality of the fund's investments may vary; the fund may
37
PROSPECTUS February 1, 2014 DWS Unconstrained Income Fund
invest up to 100% of total assets in either investment-grade fixed income
securities or in junk bonds, which are those below the fourth highest credit
rating category (that is, grade BB/Ba and below). The fund may also invest in
emerging markets securities, mortgage- and asset-backed securities, adjustable
rate loans that have a senior right to payment ("senior loans") and other
floating rate debt securities and dividend-paying common stocks.
MANAGEMENT PROCESS. 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 fixed income securities market. In choosing
individual fixed income securities, portfolio management considers how they are
structured and uses independent analysis of issuers' creditworthiness.
Portfolio management will not be constrained in the management of the fund
relative to an index and 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. Total return is a combination of capital appreciation and
current income.
DERIVATIVES. Portfolio management generally may use futures contracts or
interest rate swaps, which are types of derivatives, for duration management
(i.e., reducing or increasing the sensitivity of the fund's portfolio to
interest rate changes). In addition, portfolio management generally may use (i)
credit default swaps to seek to increase the fund's income, to gain exposure to
a bond issuer's credit quality characteristics without directly investing in
the bond, or to hedge the risk of default on bonds held in the fund's
portfolio; (ii) options on interest rate futures or on interest rate swaps to
hedge against potential adverse interest rate movements; (iii) forward currency
contracts to hedge its exposure to changes in foreign currency exchange rates
on its foreign currency denominated portfolio holdings to facilitate
transactions in foreign currency denominated securities or to seek to enhance
potential gains; or (iv) total return swaps to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
The fund may also invest in affiliated mutual funds. The fund may invest up to
5% of net assets in shares of DWS Floating Rate Fund, which invests primarily
in senior loans.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
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.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign
38
PROSPECTUS February 1, 2014 DWS Unconstrained Income Fund
securities, changes in currency exchange rates may affect the US dollar value
of foreign securities or the income or gain received on these securities.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
STOCK MARKET RISK. The fund is affected by how the stock market performs. When
stock prices fall, you should expect the value of your investment to fall as
well.
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.
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). Past performance may not indicate future results.
All performance figures below assume that dividends were reinvested. For more
recent performance figures, go to dws-investments.com (the Web site does not
form a part of this prospectus) or call the phone number included in this
prospectus.
Effective September 22, 2011, the fund's investment strategies changed. The
fund's past performance may have been different if the fund was managed using
the current investment strategies.
CALENDAR YEAR TOTAL RETURNS (%) (Class A)
These year-by-year returns do not include sales charges, if any, 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]
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
11.00 2.16 8.62 5.37 -8.66 21.71 10.16 4.74 12.14 -0.05
|
Best Quarter: 8.65%, Q2 2009 Worst Quarter: -5.21%, Q3 2008
|
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended 12/31/2013 expressed as a %)
After-tax returns (which are shown only for Class A and would be different for
other classes) reflect the historical highest individual federal income tax
rates, but do not reflect any state or local taxes. Your actual after-tax
returns may be different. After-tax returns are not relevant to
39
PROSPECTUS February 1, 2014 DWS Unconstrained Income Fund
shares held in an IRA, 401(k) or other tax-advantaged investment plan. Index
comparison for Class S shares began on 1/31/2005.
CLASS 1 5 10
INCEPTION YEAR YEARS YEARS
----------- ---------- --------- ---------
CLASS A before tax 6/23/1977 -2.80 8.89 6.14
-------------------------- --------- ------ ---- ----
After tax on
distributions() -4.27 6.93 3.99
After tax on distribu-
tions and sale of fund
shares -1.82 6.50 3.96
-------------------------- --------- ------ ---- ----
CLASS B before tax 5/31/1994 -3.75 8.49 5.56
-------------------------- --------- ------ ---- ----
CLASS C before tax 5/31/1994 -0.96 8.64 5.59
-------------------------- --------- ------ ---- ----
BARCLAYS U.S. UNIVERSAL
INDEX (reflects no deduc-
tion for fees, expenses
or taxes) -1.35 5.41 4.85
-------------------------- --------- ------ ---- ----
BARCLAYS U.S. AGGREGATE
BOND INDEX (reflects no
deduction for fees,
expenses or taxes) -2.02 4.44 4.55
-------------------------- --------- ------ ---- ----
|
CLASS 1 5 SINCE
INCEPTION YEAR YEARS INCEPTION
----------- --------- --------- ----------
CLASS S before tax 2/1/2005 0.17 9.76 6.17
-------------------------- -------- ----- ---- ----
BARCLAYS U.S. UNIVERSAL
INDEX (reflects no deduc-
tion for fees, expenses
or taxes) -1.35 5.41 4.81
-------------------------- -------- ------ ---- ----
BARCLAYS U.S. AGGREGATE
BOND INDEX (reflects no
deduction for fees,
expenses or taxes) -2.02 4.44 4.54
-------------------------- -------- ------ ---- ----
|
On May 1, 2013, the Barclays U.S. Universal Index replaced the Barclays U.S.
Aggregate Bond Index as the fund's primary benchmark index because the Advisor
believes that it more accurately reflects the fund's investment strategy. The
Advisor believes the Barclays U.S. Aggregate Bond Index provides additional
comparative performance with a broad-based fixed-income market index.
MANAGEMENT
INVESTMENT ADVISOR
Deutsche Investment Management Americas Inc.
PORTFOLIO MANAGER(S)
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2005.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
PHILIP G. CONDON, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2011.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
PURCHASE AND SALE OF FUND SHARES
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
--------- -------- -------- -----------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
S 2,500 1,000 1,000 1,000
------- ----- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. Because Class B shares are
closed to new investment, existing Class B shareholders may purchase Class A
and C shares with a minimum initial investment of $50. The minimum additional
investment in all other instances is $50.
TO PLACE ORDERS
MAIL New Accounts 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 dws-investments.com
TELEPHONE (800) 728-3337
M - F 8 a.m. - 8 p.m. ET
TDD LINE (800) 972-3006, M - F 8 a.m. - 8 p.m. ET
|
Initial investments must be sent by mail. You can make additional investments
or sell shares of the fund on any business day by visiting 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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions. Class S shares are only
available to a limited group of investors.
TAX INFORMATION
The fund's distributions 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. Any withdrawals you make from such tax-deferred
investment plans, however, may be taxable to you.
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 related companies 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.
40
PROSPECTUS February 1, 2014 DWS Unconstrained Income Fund
[GRAPHIC APPEARS HERE]
Fund Details
ADDITIONAL INFORMATION ABOUT FUND STRATEGIES AND RISKS
DWS Core Fixed Income Fund
INVESTMENT OBJECTIVE
The fund seeks to maximize total return consistent with preservation of capital
and prudent investment management, by investing for both current income and
capital appreciation.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal circumstances, the fund invests at least 80% of
assets, plus the amount of any borrowings for investment purposes, determined
at the time of purchase, in fixed income securities. Fixed income securities
include, but are not limited to, debt securities of the US Treasury, as well as
US government agencies and instrumentalities, corporate debt securities,
inflation-indexed bonds, mortgage-backed and asset-backed securities, US
government agency mortgage-backed to-be-announced (TBAs) instruments, taxable
municipal and tax-exempt municipal bonds and Rule 144A securities. The fund may
invest in fixed income securities of varying maturities. Portfolio management
generally targets an average portfolio duration (a measure of sensitivity to
interest rate movements) that falls within one year of the average duration of
the fund's benchmark.
The fund invests primarily in investment-grade debt securities (securities
rated within the top four long-term credit rating categories). The fund may
purchase or sell securities or instruments on a when-issued, delayed delivery
or forward commitment basis (e.g., TBAs). A forward commitment transaction is
an agreement by the fund to purchase or sell securities at a specified future
date. The fund may sell the forward commitment securities before the settlement
date or enter into new commitments to extend the delivery date into the future.
The fund may also invest up to 25% of total assets in US dollar-denominated
securities of foreign issuers and governments. The fund may hold up to 20% of
total assets in cash or money market instruments, either to maintain liquidity
or in the event portfolio management determines that securities meeting the
fund's investment objective are not readily available for purchase.
Because the fund may invest in fixed income securities of varying maturities,
the fund's dollar-weighted average effective portfolio maturity will vary. As
of December 31, 2013, the fund had a dollar-weighted average effective
portfolio maturity of 7.01 years. In determining the fund's dollar-weighted
average effective portfolio maturity, portfolio management uses a security's
stated maturity or, if applicable, an earlier date on which portfolio
management believes it is probable that a maturity-shortening device (such as a
call, put, pre-refunding, or prepayment provision) will cause the security to
be repaid earlier than the stated maturity date.
MANAGEMENT PROCESS. In seeking to achieve the fund's investment objective,
portfolio management focuses on the following key components:
o A balanced "top-down" and "bottom-up" security selection approach based on
the decisions of senior sector specialists;
o An active rotation of the sectors represented in the Barclay's U.S.
Aggregate Bond Index by a specialized sector rotation team;
o Active management of interest rate risk by a specialized team;
o Active management of mortgage-backed securities by a specialized team; and
o Portfolio construction techniques that seek to enhance returns and manage
risks by identifying inefficiencies in market-based indices.
Using these key components, the portfolio manager identifies attractive
investments. Each trade has an identified entry level, profit target and review
level. Portfolio management will typically sell a security when the profit
target has been achieved, if the rationale for the purchase has changed or if
better risk/return opportunities are identified.
DERIVATIVES. Portfolio management generally may use options or futures
contracts, which are types of derivatives (a contract whose value is based on,
for example, indices, currencies or securities), for duration management (i.e.,
reducing or increasing the sensitivity of the fund's portfolio to interest rate
changes).
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains;
41
Fund Details
or (iv) as a substitute for direct investment in a particular asset class or to
keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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. The fund's performance could be hurt if an issuer of a security
suffers an adverse change in financial condition that results in the issuer not
making timely payments of interest or principal, a security downgrade or
inability to meet a financial obligation.
For securities that rely on third-party guarantors to support their credit
quality, the same risks may apply if the financial condition of the guarantor
deteriorates or the guarantor ceases to insure securities. Because guarantors
may insure many types of securities, including subprime mortgage bonds and
other high-risk bonds, their financial condition could deteriorate as a result
of events that have little or no connection to securities owned by the fund.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets.
Foreign governments may restrict investment by foreigners, limit withdrawal of
trading profit or currency from the country, restrict currency exchange or
seize foreign investments. The investments of the fund may also be subject to
foreign withholding taxes. Foreign brokerage commissions and other fees are
generally higher than those for US investments, and the transactions and
custody of foreign assets may involve delays in payment, delivery or recovery
of money or investments.
Foreign markets can have liquidity risks beyond those typical of US markets.
Because foreign exchanges generally are smaller and less liquid than US
exchanges, buying and selling foreign investments can be more difficult and
costly. Relatively small transactions can sometimes materially affect the price
and availability of securities. In certain situations, it may become virtually
impossible to sell an investment in an orderly fashion at a price that
approaches portfolio management's estimate of its value. For the same reason,
it may at times be difficult to value the fund's foreign investments.
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.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
42
Fund Details
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 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
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
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.
DWS Global Inflation Fund
INVESTMENT OBJECTIVE
The fund seeks to provide maximum inflation-adjusted return.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. The fund invests in inflation-indexed bonds and other fixed
income securities of varying maturities issued by the US government and non-US
governments, their agencies or instrumentalities, and US and non-US
corporations and derivatives related to each of these types of securities. The
fund may also invest (directly or indirectly) up to 30% of its total assets in
commodity-linked derivative instruments (such as commodity-linked swaps,
structured notes and futures contracts), equity securities, and securities of
Real Estate Investment Trusts (REITs).
Inflation-indexed bonds are fixed-income securities whose principal value
and/or rate of interest are periodically adjusted to track changes in an
official inflation measure, such as the Consumer Price Index for Urban
Consumers or a comparable inflation index.
Commodity-linked derivative instruments are designed to provide exposure to the
investment return of assets that trade in the commodity markets, without
investing directly in physical commodities. Physical commodities are assets
that have tangible properties such as gas, heating oil, industrial and other
precious metals, livestock, or agricultural products. The fund may gain
exposure to the commodity markets by investing a portion of its assets in a
wholly-owned subsidiary (the "Subsidiary"), which shares the same portfolio
management as the fund and is expected to invest mainly in commodity-linked
derivative instruments and fixed income securities, some of which may serve as
margin or collateral for the Subsidiary's derivatives positions.
Other fixed income securities in which the fund may invest include
mortgage-backed and asset-backed securities, adjustable rate loans that have a
senior right to payment ("senior loans") and other floating rate debt
securities, and taxable and tax-exempt municipal bonds. Up to 10% of the fund's
total assets may be invested in below investment grade bonds or instruments
(also referred to as junk bonds).
Because the fund may invest in fixed income securities of varying maturities,
the fund's dollar-weighted average effective portfolio maturity will vary. As
of December 31, 2013, the fund had a dollar-weighted average effective
portfolio maturity of 9.95 years. In determining the fund's dollar-weighted
average effective portfolio maturity, portfolio management uses a security's
stated maturity or, if applicable, an earlier date on which portfolio
management believes it is probable that a maturity-shortening device (such as a
call, put, pre-refunding, or prepayment provision) will cause the security to
be repaid earlier than the stated maturity date.
43
Fund Details
INTEREST RATE STRATEGY. In addition to the fund's main investment strategy,
portfolio management may, from time to time, seek to enhance returns by
employing various strategies to identify interest rate trends across developed
markets using derivatives, in particular buying and selling interest rate
futures contracts.
MANAGEMENT PROCESS. The investment process involves both "top down" analysis as
well as "bottom up" investment selection. As part of the top down analysis,
portfolio management takes into account several factors, including, but not
limited to, current and expected levels of inflation and current and expected
economic conditions. The results of this analysis determine the overall
structure of the fund's portfolio. Having determined the desired overall
structure of the fund's portfolio, portfolio management selects individual
investments that reflect that portfolio structure. Relative value compared to
similar securities, credit quality of issuers, and liquidity of holdings are
among the factors considered by portfolio management when investment decisions
are made for the fund.
DERIVATIVES. Outside of the fund's use of commodity-linked derivatives and the
interest rate strategy, portfolio management generally may use interest rate
swaps or futures contracts, which are types of derivatives (a contract whose
value is based on, for example, indices, currencies or securities), for
duration management (i.e., reducing or increasing the sensitivity of the fund's
portfolio to interest rate changes). In addition, portfolio management
generally may use (i) credit default swaps to seek to increase the fund's
income, to gain exposure to a bond issuer's credit quality characteristics
without directly investing in the bond, or to hedge the risk of default on
bonds held in the fund's portfolio, (ii) options on interest rate futures to
hedge interest rate movements of portfolio assets and (iii) total return swaps
to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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.
INFLATION-INDEXED BOND RISK. Any rise in interest rates may cause
inflation-indexed bonds to decline in price, hurting fund performance. If
interest rates rise due to reasons other than inflation, the fund's investment
in these securities may not be fully protected from the effects of rising
interest rates. The performance of any bonds that are indexed to non-US rates
of inflation may be higher or lower than those indexed to US inflation rates.
The fund's actual returns could fail to match the real rate of inflation.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
Some securities issued by US government agencies or instrumentalities are
backed by the full faith and credit of the US government. Other securities that
are supported only by the credit of the issuing agency or instrumentality are
subject to greater credit risk than securities backed by the full faith and
credit of the US government. This is because the US government might provide
financial support, but has no obligation to do so, if there is a potential or
actual loss of principal or failure to make interest payments.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
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.) In
certain interest rate environments, such as when real interest rates (current
actual interest rates) are
44
Fund Details
rising faster than nominal interest rates (meaning a real interest rate plus an
expected inflation rate), inflation-indexed bonds may experience greater losses
than other interest-paying securities of comparable quality and duration.
COMMODITIES-RELATED INVESTMENTS RISK. The commodities-linked derivative
instruments in which the fund invests tend to be more volatile than many other
types of securities and may subject the fund to special risks that do not apply
to all derivatives transactions.
The value of a commodity-linked derivative investment generally is based upon
the price movements of a physical commodity (such as energy, minerals, or
agricultural products), a futures contract, swap or commodity index, or other
economic variables linked to changes in the value of commodities or the
commodities markets. The value of commodity-linked derivative instruments may
be affected by changes in overall market movements, commodity index volatility,
changes in interest rates, or factors affecting a particular industry or
commodity, such as drought, floods, weather, livestock disease, changes in
storage costs, embargoes, tariffs, policies of commodity cartels and
international economic, political and regulatory developments. Also, a liquid
secondary market may not exist for the types of commodity-linked derivative
instruments the fund buys, which may make it difficult for the fund to sell
them at an acceptable price. The fund's ability to gain exposure to
commodity-linked investments and achieve its investment objective may be
limited by its intention to qualify as a regulated investment company under the
Internal Revenue Code.
FOCUS RISK. To the extent that the fund focuses its investments in particular
industries, asset classes or sectors of the economy, any market price
movements, regulatory or technological changes, or economic conditions
affecting companies in those industries, asset classes or sectors will have a
significant impact on the fund's performance.
INTEREST RATE STRATEGIES RISK. The success of the interest rate futures
strategies depends, in part, on the effectiveness and implementation of
portfolio management's proprietary models. If portfolio management's analysis
proves to be incorrect, losses to the fund may be significant. The risk of loss
is heightened during periods of rapid rises in interest rates.
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.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
Foreign governments may restrict investment by foreigners, limit withdrawal of
trading profit or currency from the country, restrict currency exchange or
seize foreign investments. The investments of the fund may also be subject to
foreign withholding taxes. Foreign brokerage commissions and other fees are
generally higher than those for US investments, and the transactions and
custody of foreign assets may involve delays in payment, delivery or recovery
of money or investments.
Foreign markets can have liquidity risks beyond those typical of US markets.
Because foreign exchanges generally are smaller and less liquid than US
exchanges, buying and selling foreign investments can be more difficult and
costly. Relatively small transactions can sometimes materially affect the price
and availability of securities. In certain situations, it may become virtually
impossible to sell an investment in an orderly fashion at a price that
approaches portfolio management's estimate of its value. For the same reason,
it may at times be difficult to value the fund's foreign investments.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
Emerging market countries typically have economic and political systems that
are less developed, and can be expected to be less stable than developed
markets. For example, the economies of such countries can be subject to rapid
and unpredictable rates of inflation or deflation.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
45
Fund Details
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 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
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
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.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
If the Advisor wishes to invest in the publicly traded securities of a
borrower, it may not have access to material non-public information regarding
the borrower to which other lenders have access.
STOCK MARKET RISK. The fund is affected by how the stock market performs. When
stock prices fall, you should expect the value of your investment to fall as
well.
Stock prices can be hurt by poor management, shrinking product demand and other
business risks. These factors may affect single companies as well as groups of
companies. In addition, movements in financial markets may adversely affect a
stock's price, regardless of how well the company performs.
TAX STATUS RISK. Income from certain commodity-linked derivative instruments
does not constitute "qualifying income" to the fund for purposes of
qualification as a "regulated investment company" for federal income tax
purposes. However, the Internal Revenue Service has issued a private ruling to
the fund that income earned through its wholly-owned Subsidiary that invests in
such instruments constitutes qualifying income. If such income were determined
to cause the fund's nonqualifying income to exceed 10% of the fund's gross
income, the fund would be subject to a tax at the fund level.
SUBSIDIARY RISK. The fund may invest in the Subsidiary, which is not registered
as an investment company under the Investment Company Act of 1940, as amended,
and therefore is not subject to all of the investor protections of the
Investment Company Act of 1940. A regulatory change in the US or the Cayman
Islands that impacts the Subsidiary or how the fund invests in the Subsidiary,
such as a change in tax law, could adversely affect the fund. By investing in
the Subsidiary, the fund is exposed to the risks associated with the
Subsidiary's investments, which generally include the risks of investing in
derivatives and commodities-related investments.
DWS GNMA Fund
INVESTMENT OBJECTIVE
The fund seeks to produce a high level of income.
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Fund Details
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
"Ginnie Maes," which are mortgage-backed securities that are issued or
guaranteed by the Government National Mortgage Association (GNMA). The fund may
also purchase or sell securities on a when-issued, delayed delivery or forward
commitment basis, including US government agency mortgage-backed
to-be-announced securities (TBAs). A forward commitment transaction is an
agreement by the fund to purchase or sell securities at a specified future
date. The fund may sell the forward commitment securities before the settlement
date or enter into new commitments to extend the delivery date into the future.
The balance of the fund's assets, among other permitted investments, may be
invested in securities issued by the US government, its agencies or
instrumentalities. These securities may not be guaranteed by the US Treasury or
backed by the full faith and credit of the US government. The fund may also
hold up to 10% of its total net assets in uninvested cash, cash equivalents
(such as money market securities), repurchase agreements or shares of money
market funds or short-term bond funds, which investments may not be issued or
guaranteed by the US government, its agencies or instrumentalities.
Because the fund may invest in fixed income securities of varying maturities,
the fund's dollar-weighted average effective portfolio maturity will vary. As
of December 31, 2013, the fund had a dollar-weighted average effective
portfolio maturity of 10.27 years. In determining the fund's dollar-weighted
average effective portfolio maturity, portfolio management uses a security's
stated maturity or, if applicable, an earlier date on which portfolio
management believes it is probable that a maturity-shortening device (such as a
call, put, pre-refunding, or prepayment provision) will cause the security to
be repaid earlier than the stated maturity date.
MANAGEMENT PROCESS. In deciding which types of securities to buy and sell,
portfolio management first considers the relative attractiveness of Ginnie Maes
compared to other eligible securities and decides on allocations. The decisions
are generally based on a number of factors, including changes in supply and
demand within the bond market and prepayment rates of individual bonds.
In choosing individual bonds, portfolio management reviews each bond's
fundamentals, compares the yields of bonds and uses detailed 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.
DERIVATIVES. Portfolio management generally may use interest rate futures
contracts or interest rate swaps, which are types of derivatives (a contract
whose value is based on, for example, indices, currencies or securities) for
duration management (i.e., reducing or increasing the sensitivity of the fund's
portfolio to interest rate changes). In addition, portfolio management
generally may use (i) options on GNMA TBAs or total return swaps to seek to
enhance potential gains; and (ii) options on interest rate futures or on
interest rates to hedge against potential adverse interest rate movements.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
CREDIT RISK. The fund's performance could be hurt if an issuer of a security
suffers an adverse change in financial condition that results in the issuer not
making timely payments of interest or principal, a security downgrade or
inability to meet a financial obligation.
47
Fund Details
Some securities issued by US government agencies or instrumentalities are
backed by the full faith and credit of the US government. Other securities that
are supported only by the credit of the issuing agency or instrumentality are
subject to greater credit risk than securities backed by the full faith and
credit of the US government. This is because the US government might provide
financial support, but has no obligation to do so, if there is a potential or
actual loss of principal or failure to make interest payments.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
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.
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 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.
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
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.
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
48
Fund Details
portfolio maturity that will not exceed ten years. Subject to its portfolio
maturity policy, the fund may purchase individual securities with any stated
maturity.
Because the fund may invest in fixed income securities of varying maturities,
the fund's dollar-weighted average effective portfolio maturity will vary. As
of December 31, 2013, the fund had a dollar-weighted average effective
portfolio maturity of 5.98 years. In determining the fund's dollar-weighted
average effective portfolio maturity, portfolio management uses a security's
stated maturity or, if applicable, an earlier date on which portfolio
management believes it is probable that a maturity-shortening device (such as a
call, put, pre-refunding, or prepayment provision) will cause the security to
be repaid earlier than the stated maturity date.
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 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 attractive industry sectors and with strong long-term
fundamentals and improving credits.
DERIVATIVES. Portfolio management generally may use credit default swaps, which
are a type of derivative (a contract whose value is based on, for example,
indices, currencies or securities) to seek to increase the fund's income, to
gain exposure to a bond issuer's credit quality characteristics without
directly investing in the bond, or to hedge the risk of default on bonds held
in the fund's portfolio. In addition, portfolio management generally may use
forward currency contracts to hedge the fund's exposure to changes in foreign
currency exchange rates on its foreign currency denominated portfolio holdings
or to facilitate transactions in foreign currency denominated securities.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
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.)
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
Foreign governments may restrict investment by foreigners, limit withdrawal of
trading profit or currency from the country, restrict currency exchange or
seize foreign investments. The investments of the fund may also be subject to
foreign withholding taxes. Foreign brokerage commissions and other fees are
generally higher than
49
Fund Details
those for US investments, and the transactions and custody of foreign assets
may involve delays in payment, delivery or recovery of money or investments.
Foreign markets can have liquidity risks beyond those typical of US markets.
Because foreign exchanges generally are smaller and less liquid than US
exchanges, buying and selling foreign investments can be more difficult and
costly. Relatively small transactions can sometimes materially affect the price
and availability of securities. In certain situations, it may become virtually
impossible to sell an investment in an orderly fashion at a price that
approaches portfolio management's estimate of its value. For the same reason,
it may at times be difficult to value the fund's foreign investments.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
Emerging market countries typically have economic and political systems that
are less developed, and can be expected to be less stable than developed
markets. For example, the economies of such countries can be subject to rapid
and unpredictable rates of inflation or deflation.
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.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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 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
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
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.
DWS Global High Income Fund
INVESTMENT OBJECTIVE
The fund seeks high current income and, as a secondary objective, capital
appreciation.
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Fund Details
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal conditions, the fund invests at least 65% of
total assets in domestic and foreign below investment grade debt securities
(rated below the fourth highest credit rating category, junk bonds), including
those whose issuers are located in countries with new or emerging securities
markets. The fund will generally invest in at least three different countries
and will normally invest at least 40% of net assets in securities of foreign
issuers. The fund invests in securities of varying maturities and intends to
maintain a dollar-weighted effective average portfolio maturity (the weighted
average of the maturity dates of bonds held by the fund) that will not exceed
ten years. Subject to its portfolio maturity policy, the fund may purchase
individual securities with any stated maturity.
The fund may invest in securities of any credit quality, and may include debt
securities not paying interest currently and securities in default. The fund
may invest up to 15% of total assets in credit default swaps to buy or sell
protection on credit exposure, and up to 20% of net assets in common stocks,
preferred shares and other equity securities. The fund may invest up to 35% of
total assets in cash or money market instruments to maintain liquidity or in
the event portfolio management determines that securities meeting the fund's
investment objectives are not readily available for purchase. The fund may also
purchase convertible securities, securities on a when-issued basis and engage
in short sales.
Because the fund may invest in fixed income securities of varying maturities,
the fund's dollar-weighted average effective portfolio maturity will vary. As
of December 31, 2013, the fund had a dollar-weighted average effective
portfolio maturity of 6.31 years. In determining the fund's dollar-weighted
average effective portfolio maturity, portfolio management uses a security's
stated maturity or, if applicable, an earlier date on which portfolio
management believes it is probable that a maturity-shortening device (such as a
call, put, pre-refunding, or prepayment provision) will cause the security to
be repaid earlier than the stated maturity date.
MANAGEMENT PROCESS. Portfolio management uses primarily a bottom-up approach by
using relative value and fundamental analysis to select securities within each
industry, and a top-down approach to assess the overall risk and return in the
market and which it considers macro trends in the economy. Portfolio management
also uses independent credit research, management visits and conference calls
as part of its analysis process.
DERIVATIVES. Portfolio management generally may use credit default swaps, which
are a type of derivative (a contract whose value is based on, for example,
indices, currencies or securities) to seek to increase the fund's income, to
gain exposure to a bond issuer's credit quality characteristics without
directly investing in the bond, or to hedge the risk of default on bonds held
in the fund's portfolio. In addition, portfolio management generally may use
forward currency contracts to hedge the fund's exposure to changes in foreign
currency exchange rates on its foreign currency denominated portfolio holdings
or to facilitate transactions in foreign currency denominated securities.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
Because securities in default generally have missed one or more payments of
interest and/or principal, an investment in such securities has an increased
risk of loss. Issuers of securities in default have an increased likelihood of
entering bankruptcy or beginning liquidation procedures which could impact the
fund's ability to recoup its investment. Securities in default may be illiquid
or trade in low volumes and thus may be difficult to value.
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.)
51
Fund Details
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
Foreign governments may restrict investment by foreigners, limit withdrawal of
trading profit or currency from the country, restrict currency exchange or
seize foreign investments. The investments of the fund may also be subject to
foreign withholding taxes. Foreign brokerage commissions and other fees are
generally higher than those for US investments, and the transactions and
custody of foreign assets may involve delays in payment, delivery or recovery
of money or investments.
Foreign markets can have liquidity risks beyond those typical of US markets.
Because foreign exchanges generally are smaller and less liquid than US
exchanges, buying and selling foreign investments can be more difficult and
costly. Relatively small transactions can sometimes materially affect the price
and availability of securities. In certain situations, it may become virtually
impossible to sell an investment in an orderly fashion at a price that
approaches portfolio management's estimate of its value. For the same reason,
it may at times be difficult to value the fund's foreign investments.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
Emerging market countries typically have economic and political systems that
are less developed, and can be expected to be less stable than developed
markets. For example, the economies of such countries can be subject to rapid
and unpredictable rates of inflation or deflation.
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.
STOCK MARKET RISK. The fund is affected by how the stock market performs. When
stock prices fall, you should expect the value of your investment to fall as
well.
Stock prices can be hurt by poor management, shrinking product demand and other
business risks. These factors may affect single companies as well as groups of
companies. In addition, movements in financial markets may adversely affect a
stock's price, regardless of how well the company performs.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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 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
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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
52
Fund Details
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
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.
SHORT SALE RISK. If the fund sells a security short and subsequently has to buy
the security back at a higher price, the fund will lose money on the
transaction. Any loss will be increased by the amount of compensation, interest
or dividends and transaction costs the fund must pay to a lender of the
security. The amount the fund could lose on a short sale is theoretically
unlimited (as compared to a long position, where the maximum loss is the amount
invested). The use of short sales, which has the effect of leveraging the fund,
could increase the exposure of the fund to the market, increase losses and
increase the volatility of returns.
The 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 borrowed securities
be returned to it on short notice, and the 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, it is more
likely that the fund will have to cover its short sale at an unfavorable price
and potentially reduce or eliminate any gain, or cause a loss, as a result of
the short sale.
DWS Short Duration Fund
INVESTMENT OBJECTIVE
The fund's investment objective is to provide high income while also seeking to
maintain a high degree of stability of shareholders' capital.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal market conditions, the fund invests at least 65%
of its total assets in fixed income securities rated, at the time of purchase,
within the top four long-term credit rating categories by a nationally
recognized statistical rating organization (a "NRSRO") (or, if unrated,
determined by the fund's investment advisor to be of similar quality). The fund
may invest in securities of varying maturities. The fund normally seeks to
maintain an average portfolio duration (a measure of sensitivity to interest
rate movements) of no longer than three years by investing in fixed income
securities with short-to intermediate-term maturities.
The fund may also invest up to 10% of its assets in domestic and foreign below
investment-grade fixed income securities ("junk bonds") rated in the fifth and
sixth long-term credit rating categories by a NRSRO or, if unrated, determined
by the fund's investment advisor to be of similar quality, including those
whose issuers are located in countries with new or emerging securities markets.
The fund considers an emerging securities market to be one where the sovereign
debt issued by the government in local currency terms is rated below
investment-grade. Such lower-rated securities may be US dollar-denominated, and
a portion may consist of non-US dollar-denominated investments.
Fixed income securities in which the fund may invest include US government
securities or obligations that are issued or guaranteed by the US Treasury or
by agencies or instrumentalities of the US government; obligations backed by
such US government securities; US dollar-denominated fixed income securities of
domestic or foreign corporations, including adjustable rate loans that have a
senior right to payment ("senior loans") and other floating rate debt
instruments; US dollar-denominated fixed income securities of foreign
governments or supranational entities; US dollar-denominated asset-backed
securities issued by domestic or foreign entities; non-US dollar-denominated
fixed income securities of foreign corporations, foreign governments or
supranational entities; mortgage pass-through securities issued by governmental
and non-governmental issuers; collateralized mortgage obligations, real estate
mortgage investment conduits and commercial mortgage-backed securities;
short-term investments, including money market mutual funds.
The fund invests in short-term investments to meet shareholder withdrawals and
other liquidity needs. Short-term investments will be rated at the time of
purchase within one of the top two short-term rating categories by a NRSRO or,
if unrated, determined by the fund's investment advisor to be of similar
quality.
The fund may also invest in Rule 144A securities, securities or instruments on
a when-issued, delayed delivery or forward commitment basis (e.g. TBA
securities), repurchase agreements, reverse repurchase agreements and dollar
rolls.
MANAGEMENT PROCESS. The fund's investment strategy emphasizes a diversified
exposure to higher yielding mortgage, corporate and asset-backed sectors of the
investment-grade fixed income markets. Portfolio management uses a top-down
approach, first focusing on sector allocations, then using relative value
analysis to select the
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Fund Details
best securities within each sector. When selecting securities, portfolio
management analyzes such factors as credit quality, interest rate sensitivity
and spread relationships between individual bonds.
DERIVATIVES. Portfolio management generally may use interest rate swaps or
futures contracts, which are types of derivatives (a contract whose value is
based on, for example, indices, currencies or securities), for duration
management (i.e., reducing or increasing the sensitivity of the fund's
portfolio to interest rate changes). In addition, portfolio management
generally may use (i) credit default swaps to seek to increase the fund's
income, to gain exposure to a bond issuer's credit quality characteristics
without directly investing in the bond, or to hedge the risk of default on
bonds held in the fund's portfolio, (ii) options on interest rate futures to
hedge interest rate movements of portfolio assets and (iii) total return swaps
to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
When purchasing senior loans, the fund faces the risk that the creditworthiness
of the borrower may decline, causing the value of the fund's interest in a loan
to decline. In addition, a borrower may not be able to make timely payments on
the interest and principal on the debt obligations it has outstanding. In the
event of bankruptcy of a borrower, the fund could experience delays or
limitations with respect to its ability to realize the benefits of the
collateral securing a senior loan. Senior loans and other floating rate debt
securities that are below investment grade are considered speculative because
of the credit risk of the borrowers. Such borrowers may be more likely to
default on payments of interest and principal in response to changes in
economic conditions or circumstances. The value of senior loans made to such
borrowers is likely to be more sensitive to adverse news about the borrower,
markets or economy.
Any non-payment of principal or interest could result in a reduction of income
to the fund, a reduction in the value of the fund's interest in the senior loan
and a reduction in the fund's net asset value. There can be no assurance that
the liquidation of any collateral securing a senior loan would satisfy the
borrower's obligation in the event of non-payment of scheduled interest or
principal payments, or that such collateral could be readily liquidated.
Some securities issued by US government agencies or instrumentalities are
backed by the full faith and credit of the US government. Other securities that
are supported only by the credit of the issuing agency or instrumentality are
subject to greater credit risk than securities backed by the full faith and
credit of the US government. This is because the US government might provide
financial support, but has no obligation to do so, if there is a potential or
actual loss of principal or failure to make interest payments.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
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.
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
54
Fund Details
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
Foreign governments may restrict investment by foreigners, limit withdrawal of
trading profit or currency from the country, restrict currency exchange or
seize foreign investments. The investments of the fund may also be subject to
foreign withholding taxes. Foreign brokerage commissions and other fees are
generally higher than those for US investments, and the transactions and
custody of foreign assets may involve delays in payment, delivery or recovery
of money or investments.
Foreign markets can have liquidity risks beyond those typical of US markets.
Because foreign exchanges generally are smaller and less liquid than US
exchanges, buying and selling foreign investments can be more difficult and
costly. Relatively small transactions can sometimes materially affect the price
and availability of securities. In certain situations, it may become virtually
impossible to sell an investment in an orderly fashion at a price that
approaches portfolio management's estimate of its value. For the same reason,
it may at times be difficult to value the fund's foreign investments.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
Emerging market countries typically have economic and political systems that
are less developed, and can be expected to be less stable than developed
markets. For example, the economies of such countries can be subject to rapid
and unpredictable rates of inflation or deflation.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
If the Advisor wishes to invest in the publicly traded securities of a
borrower, it may not have access to material non-public information regarding
the borrower to which other lenders have access.
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 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.
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.
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Fund Details
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
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.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
DWS Strategic Government Securities Fund
INVESTMENT OBJECTIVE
The fund seeks high current income, liquidity and security of principal.
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.
The fund may also invest in securities or instruments on a when-issued, delayed
delivery or forward commitment basis (e.g. TBAs). A forward commitment
transaction is an agreement by the fund to purchase or sell securities at a
specified future date. The fund may sell the forward commitment securities
before the settlement date or enter into new commitments to extend the delivery
date into the future.
MANAGEMENT PROCESS. In deciding which types of securities to buy and sell,
portfolio management first considers the relative attractiveness of Ginnie Maes
compared to other eligible securities and decides on allocations. The decisions
are generally based on a number of factors, including changes in supply and
demand within the bond market and prepayment rates of individual bonds.
In choosing individual bonds, portfolio management reviews each bond's
fundamentals, compares the yields of bonds and uses detailed 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.
INTEREST RATE STRATEGY. In addition to the fund's main investment strategy,
portfolio management may, from time to time, seek to enhance returns by
employing various strategies to identify interest rate trends across developed
markets using derivatives, in particular buying and selling interest rate
futures contracts.
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 interest rate strategy may equal up to 100% of the
fund's assets, the fund normally limits the net notional value of all open
interest rate strategy 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 interest rate strategy 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 interest rate related derivative instruments.
DERIVATIVES. Outside of the interest rate strategy, portfolio management
generally may use futures contracts or interest rate swaps, which are types of
derivatives (a contract whose value is based on, for example, indices,
currencies or securities), for duration management (i.e., reducing or
increasing the sensitivity of the fund's portfolio
56
Fund Details
to interest rate changes). In addition, portfolio management generally may use
(i) options on US government agency mortgage-backed TBAs or total return swaps
to seek to enhance potential gains; or (ii) options on interest rate futures to
hedge against potential adverse interest rate movements.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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.)
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.
INTEREST RATE STRATEGIES RISK. The success of the interest rate futures
strategies depends, in part, on the effectiveness and implementation of
portfolio management's proprietary models. If portfolio management's analysis
proves to be incorrect, losses to the fund may be significant. The risk of loss
is heightened during periods of rapid rises in interest rates.
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.
CREDIT RISK. The fund's performance could be hurt if an issuer of a security
suffers an adverse change in financial condition that results in the issuer not
making timely payments of interest or principal, a security downgrade or
inability to meet a financial obligation.
Some securities issued by US government agencies or instrumentalities are
backed by the full faith and credit of the US government. Other securities that
are supported only by the credit of the issuing agency or instrumentality are
subject to greater credit risk than securities backed by the full faith and
credit of the US government. This is because the US government might provide
financial support, but has no obligation to do so, if there is a potential or
actual loss of principal or failure to make interest payments.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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 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.
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Fund Details
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
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.
FORWARD COMMITMENT RISK. When a fund engages in when-issued, delayed delivery
or forward commitment transactions (e.g. TBAs), the fund relies on the
counterparty to consummate the sale. Failure to do so may result in the fund
missing the opportunity to obtain a price or yield considered to be
advantageous. Such transactions may also have the effect of leverage on the
fund and may cause the fund to be more volatile. Additionally, these
transactions may create a higher portfolio turnover rate.
DWS Ultra-Short Duration Fund
INVESTMENT OBJECTIVE
The fund seeks to provide current income consistent with total return.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal circumstances, the fund invests at least 80% of
assets, determined at the time of purchase, in debt securities. For purposes of
this 80% investment limit, the term assets is defined as net assets, plus the
amount of any borrowings for investment purposes. Debt securities include
securities of US and foreign government agencies and instrumentalities,
corporate securities, mortgage-backed and asset backed securities, taxable
municipal and tax-exempt municipal bonds, adjustable rate loans that have a
senior right to payment ("senior loans"), and other floating-rate debt
securities.
The fund may invest in investment-grade (rated within the top four credit
rating categories) and non-investment grade (rated below the fourth highest
credit rating category, junk bonds) debt securities of US and foreign issuers,
including issuers located in countries with new or emerging securities markets.
The fund's investments in non-investment grade debt securities, including
non-investment grade senior loans and other non-investment grade floating-rate
debt securities, will be limited to 50% of its total assets.
The fund may invest in senior loans that (i) may not be rated by a rating
agency, registered with the Securities and Exchange Commission or any state
securities commission, or listed on any national exchange; or (ii) are not
secured by collateral.
The fund may hold up to 20% of its total assets in cash or money market
instruments in order to maintain liquidity, or in the event portfolio
management determines that securities meeting the fund's investment objective
are not otherwise readily available for purchase.
MANAGEMENT PROCESS. Portfolio management begins with a top-down approach, first
focusing on allocations among various categories of debt securities, then using
relative value analysis to select securities within each category. Portfolio
management analyzes such factors as credit quality, interest rate sensitivity
and spread relationships between individual bonds.
Portfolio management normally targets an average portfolio duration (a measure
of sensitivity to interest rate changes) of no longer than one year. Portfolio
management seeks to achieve an average portfolio duration of one year or less
typically through a combination of investments (such as fixed-rate debt
securities with short-term maturities and senior loans and other floating-rate
debt securities, which have an effective duration of zero) and investment
techniques (such as using futures contracts and/or interest rate swaps to
reduce portfolio duration).
DERIVATIVES. Portfolio management generally may use futures contracts or
interest rate swaps, which are types of derivatives (a contract whose value is
based on, for example, indices, currencies or securities) for duration
management (e.g., reducing the sensitivity of the fund's portfolio to interest
rate changes). In addition, portfolio management generally may use (i) credit
default swaps to seek to increase the fund's income, to gain exposure to a bond
issuer's credit quality characteristics without directly investing in the bond,
or to hedge the risk of default on bonds held in the fund's portfolio; (ii)
forward currency contracts to hedge the fund's exposure to changes in foreign
currency exchange rates on its foreign
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Fund Details
currency denominated holdings and to facilitate transactions in foreign
currency denominated securities; and (iii) total return swaps or interest rate
swaps to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
CREDIT RISK. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
When purchasing senior loans, the fund faces the risk that the creditworthiness
of the borrower may decline, causing the value of the fund's interest in a loan
to decline. In addition, a borrower may not be able to make timely payments on
the interest and principal on the debt obligations it has outstanding. In the
event of bankruptcy of a borrower, the fund could experience delays or
limitations with respect to its ability to realize the benefits of the
collateral securing a senior loan. Senior loans and other floating rate debt
securities that are below investment grade are considered speculative because
of the credit risk of the borrowers. Such borrowers may be more likely to
default on payments of interest and principal in response to changes in
economic conditions or circumstances. The value of senior loans made to such
borrowers is likely to be more sensitive to adverse news about the borrower,
markets or economy.
Any non-payment of principal or interest could result in a reduction of income
to the fund, a reduction in the value of the fund's interest in the senior loan
and a reduction in the fund's net asset value. There can be no assurance that
the liquidation of any collateral securing a senior loan would satisfy the
borrower's obligation in the event of non-payment of scheduled interest or
principal payments, or that such collateral could be readily liquidated.
Some securities issued by US government agencies or instrumentalities are
backed by the full faith and credit of the US government. Other securities that
are supported only by the credit of the issuing agency or instrumentality are
subject to greater credit risk than securities backed by the full faith and
credit of the US government. This is because the US government might provide
financial support, but has no obligation to do so, if there is a potential or
actual loss of principal or failure to make interest payments.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
Foreign governments may restrict investment by foreigners, limit withdrawal of
trading profit or currency from the country, restrict currency exchange or
seize foreign investments. The investments of the fund may also be subject to
foreign withholding taxes. Foreign brokerage commissions and other fees are
generally higher than those for US investments, and the transactions and
custody of foreign assets may involve delays in payment, delivery or recovery
of money or investments.
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Fund Details
Foreign markets can have liquidity risks beyond those typical of US markets.
Because foreign exchanges generally are smaller and less liquid than US
exchanges, buying and selling foreign investments can be more difficult and
costly. Relatively small transactions can sometimes materially affect the price
and availability of securities. In certain situations, it may become virtually
impossible to sell an investment in an orderly fashion at a price that
approaches portfolio management's estimate of its value. For the same reason,
it may at times be difficult to value the fund's foreign investments.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
Emerging market countries typically have economic and political systems that
are less developed, and can be expected to be less stable than developed
markets. For example, the economies of such countries can be subject to rapid
and unpredictable rates of inflation or deflation.
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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 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.
No active trading market may exist for some senior loans and certain senior
loans may be subject to restrictions on resale. The inability to dispose of
senior loans in a timely fashion could result in losses to the fund. Because
some senior loans that the fund invests in have a limited secondary market,
liquidity risk is more pronounced for the fund than for funds that invest
primarily in equity securities.
MARKET RISK. Deteriorating market conditions might cause a general weakness in
the market that reduces the overall level of securities prices in that market.
In addition, an increase in demand for floating rate loans may adversely affect
the rate of interest payable on loans acquired by the fund, thus reducing fund
returns. During periods of limited supply of senior loans, the fund's yield may
be lower.
PREPAYMENT AND EXTENSION RISK. When interest rates fall, issuers of high
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
INTEREST RATE RISK. When interest rates rise, prices of debt securities
generally decline. The longer the effective 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
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Fund Details
duration.) Senior loans typically have adjustable interest rates. As a result,
it is expected that the value of senior loans held by the fund will fluctuate
less in response to interest rate changes than will fixed-rate debt securities.
This could result in less volatility than would be expected for a fund that
invests primarily in fixed-rate debt securities. However, because floating
rates on senior loans only reset periodically, changes in prevailing interest
rates may cause a fluctuation in the fund's value. In addition, extreme
increases in prevailing interest rates may cause an increase in senior loan
defaults, which may cause a further decline in the fund's value. Finally, a
decrease in interest rates could adversely affect the income earned by the fund
from its senior loans.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
If the Advisor wishes to invest in the publicly traded securities of a
borrower, it may not have access to material non-public information regarding
the borrower to which other lenders have access.
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.
DWS Unconstrained Income Fund
INVESTMENT OBJECTIVE
The fund seeks a high total return.
PRINCIPAL INVESTMENT STRATEGY
MAIN INVESTMENTS. Under normal circumstances, the fund invests mainly in fixed
income securities 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 fixed income securities or
in junk bonds, which are those below the fourth highest credit rating category
(that is, grade BB/Ba and below). The fund may also invest in emerging markets
securities, mortgage- and asset-backed securities, adjustable rate loans that
have a senior right to payment ("senior loans") and other floating rate debt
securities and dividend-paying common stocks.
Because the fund may invest in fixed income securities of varying maturities,
the fund's dollar-weighted average effective portfolio maturity will vary. As
of December 31, 2013, the fund had a dollar-weighted average effective
portfolio maturity of 5.89 years. In determining the fund's dollar-weighted
average effective portfolio maturity, portfolio management uses a security's
stated maturity or, if applicable, an earlier date on which portfolio
management believes it is probable that a maturity-shortening device (such as a
call, put, pre-refunding, or prepayment provision) will cause the security to
be repaid earlier than the stated maturity date. Portfolio management will
manage duration depending on its forecast for interest rates.
MANAGEMENT PROCESS. 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 fixed income securities market. In choosing
individual fixed income securities, portfolio management considers how they are
structured and uses independent analysis of issuers' creditworthiness.
Portfolio management will not be constrained in the management of the fund
relative to an index and 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. Total return is a combination of capital appreciation and
current income.
DERIVATIVES. Portfolio management generally may use futures contracts or
interest rate swaps, which are types of derivatives, for duration management
(i.e., reducing or increasing the sensitivity of the fund's portfolio to
interest rate changes). In addition, portfolio management generally may use (i)
credit default swaps to seek to increase the fund's income, to gain exposure to
a bond issuer's credit quality characteristics without directly investing in
the bond, or to hedge the risk of default on bonds held in the fund's
portfolio; (ii) options on interest rate futures or on interest rate swaps to
hedge against potential adverse interest rate movements; (iii) forward currency
contracts to hedge its exposure to changes in foreign currency exchange rates
on its foreign currency denominated portfolio holdings to facilitate
transactions in foreign currency denominated securities or to seek to enhance
potential gains; or (iv) total return swaps to seek to enhance potential gains.
The fund may also use various types of derivatives (i) for hedging purposes;
(ii) for risk management; (iii) for non-hedging purposes to seek to enhance
potential gains; or (iv) as a substitute for direct investment in a particular
asset class or to keep cash on hand to meet shareholder redemptions.
SECURITIES LENDING. The fund may lend securities (up to one-third of total
assets) to approved institutions.
ACTIVE TRADING. The fund may trade actively. This could raise transaction costs
(thus lowering returns) and could mean increased taxable distributions to
shareholders and distributions that will be taxable to shareholders at higher
federal income tax rates.
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Fund Details
The fund may also invest in affiliated mutual funds. The fund may invest up to
5% of net assets in shares of DWS Floating Rate Fund, which invests primarily
in senior loans.
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. The fund may not achieve its investment objective, and is not
intended to be a complete investment program. An investment in the fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
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. The fund's performance could be hurt if an issuer of a debt
security suffers an adverse change in financial condition that results in a
payment default, security downgrade or inability to meet a financial
obligation. Credit risk is greater for lower-rated securities.
Because the issuers of high-yield debt securities or junk bonds (debt
securities rated below the fourth highest credit rating 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. High-yield debt securities are considered
speculative, and credit risk for high-yield securities is greater than for
higher-rated securities.
Some securities issued by US government agencies or instrumentalities are
backed by the full faith and credit of the US government. Other securities that
are supported only by the credit of the issuing agency or instrumentality are
subject to greater credit risk than securities backed by the full faith and
credit of the US government. This is because the US government might provide
financial support, but has no obligation to do so, if there is a potential or
actual loss of principal or failure to make interest payments.
Because of the rising US government debt burden, it is possible that the US
government may not be able to meet its financial obligations or that securities
issued by the US government may experience credit downgrades. Such a credit
event may also adversely impact the financial markets.
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.
FOREIGN INVESTMENT RISK. The fund faces the risks inherent in foreign
investing. Adverse political, economic or social developments could undermine
the value of the fund's investments or prevent the fund from realizing the full
value of its investments. Financial reporting standards for companies based in
foreign markets differ from those in the US. Additionally, foreign securities
markets generally are smaller and less liquid than US markets. To the extent
that the fund invests in non-US dollar denominated foreign securities, changes
in currency exchange rates may affect the US dollar value of foreign securities
or the income or gain received on these securities.
Foreign governments may restrict investment by foreigners, limit withdrawal of
trading profit or currency from the country, restrict currency exchange or
seize foreign investments. The investments of the fund may also be subject to
foreign withholding taxes. Foreign brokerage commissions and other fees are
generally higher than those for US investments, and the transactions and
custody of foreign assets may involve delays in payment, delivery or recovery
of money or investments.
Foreign markets can have liquidity risks beyond those typical of US markets.
Because foreign exchanges generally are smaller and less liquid than US
exchanges, buying and selling foreign investments can be more difficult and
costly. Relatively small transactions can sometimes materially affect the price
and availability of securities. In certain situations, it may become virtually
impossible to sell an investment in an orderly fashion at a price that
approaches portfolio management's estimate of its value. For the same reason,
it may at times be difficult to value the fund's foreign investments.
EMERGING MARKETS RISK. Foreign investment risks are greater in emerging markets
than in developed markets. Investments in emerging markets are often considered
speculative.
Emerging market countries typically have economic and political systems that
are less developed, and can be expected to be less stable than developed
markets. For example, the economies of such countries can be subject to rapid
and unpredictable rates of inflation or deflation.
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Fund Details
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.
COUNTERPARTY RISK. A financial institution or other counterparty with whom the
fund does business, 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 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
interest debt obligations may pay off the debts earlier than expected
(prepayment risk), and the fund may have to reinvest the proceeds at lower
yields. When interest rates rise, issuers of lower interest debt obligations
may pay off the debts later than expected (extension risk), thus keeping the
fund's assets tied up in lower interest debt obligations. Ultimately, any
unexpected behavior in interest rates could increase the volatility of the
fund's share price and yield and could hurt fund performance. Prepayments could
also create capital gains tax liability in some instances.
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.
Secondary markets may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods, which may prevent the fund from
being able to realize full value and thus sell a security for its full
valuation. This could cause a material decline in the fund's net asset value.
SENIOR LOANS RISK. Senior loans may not be rated by a rating agency, registered
with the Securities and Exchange Commission or any state securities commission
or listed on any national securities exchange. Therefore, there may be less
publicly available information about them than for registered or
exchange-listed securities. Also, because portfolio management relies mainly on
its own evaluation of the creditworthiness of borrowers, the fund is
particularly dependent on portfolio management's analytical abilities. Senior
loans involve other risks, including conflict of interest risk, credit risk,
interest rate risk, liquidity risk, and prepayment and extension risk.
CONFLICT OF INTEREST RISK. Affiliates of the Advisor may participate in the
primary and secondary market for senior loans. Because of limitations imposed
by applicable law, the presence of the Advisor's affiliates in the senior loan
market may restrict the fund's ability to participate in a restructuring of a
senior loan or to acquire some senior loans, or affect the timing or price of
such acquisition.
If the Advisor wishes to invest in the publicly traded securities of a
borrower, it may not have access to material non-public information regarding
the borrower to which other lenders have access.
STOCK MARKET RISK. The fund is affected by how the stock market performs. When
stock prices fall, you should expect the value of your investment to fall as
well.
Stock prices can be hurt by poor management, shrinking product demand and other
business risks. These factors may affect single companies as well as groups of
companies. In addition, movements in financial markets may adversely affect a
stock's price, regardless of how well the company performs.
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.
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 Core Fixed Income Fund, DWS GNMA Fund, DWS
Strategic Government Securities Fund and DWS Ultra-Short Duration Fund will
provide shareholders with at least 60 days notice prior to making any
changes to the fund's 80% investment policy as described herein. For
purposes of DWS GNMA Fund's 80% investment policy as described herein,
investments in "Ginnie Maes" include investments in collateralized mortgage
obligations collateralized by a pool of mortgage backed securities
guaranteed by GNMA.
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Fund Details
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. Short-term investments may also
include shares of money market mutual funds. To the extent a fund invests
in such instruments, the fund will not be pursuing its investment
objective. However, portfolio management may choose not to use these
strategies for various reasons, even in volatile market conditions.
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.
o Certain DWS funds-of-funds are permitted to invest in DWS Core Fixed Income
Fund, DWS Global Inflation Fund, DWS GNMA Fund, DWS High Income Fund, DWS
Global High Income Fund, DWS Short Duration Fund and DWS Ultra-Short
Duration 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 DWS Global Inflation Fund is a "commodity pool" and is subject to the
requirements of the Commodity Exchange Act (CEA), as amended, and the rules
of the Commodity Futures Trading Commission (CFTC) promulgated thereunder.
The Advisor acts as a "commodity pool operator" with respect to the
operation of the fund as a "commodity pool" under and pursuant to the CEA.
The Advisor and the fund are subject to dual regulation by the CFTC and the
SEC. The CFTC recently adopted regulations that seek to "harmonize" CFTC
regulations with overlapping SEC rules and regulations. The fund and the
Advisor will remain subject to certain CFTC-mandated disclosure, reporting
and recordkeeping regulations under the CFTC harmonization regulations.
Compliance with the CFTC regulations could increase the fund's expenses,
adversely affecting investment returns.
o DWS Global Inflation Fund may gain exposure to the commodity markets by
investing a portion of its assets in its wholly-owned subsidiary, DWS
Cayman Global Inflation Plus Fund, Ltd. (the "Subsidiary"), which is
organized under the laws of the Cayman Islands. The Subsidiary is a
"commodity pool" and is subject to the requirements of the CEA, as amended
and the rules of the CFTC promulgated thereunder. The Advisor has claimed a
limited exemption from certain of the requirements of the CEA and the CFTC
rules with respect to the Subsidiary. The Advisor acts as a "commodity pool
operator" with respect to the operation of the Subsidiary and will comply
with the requirements of the exemption.
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 dws-investments.com on or after the last day of the following month. More
frequent posting of portfolio holdings information may be made from time to
time on 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, or a subadvisor,
makes investment decisions, buys and sells securities for each fund and
conducts research that leads to these purchase and sale decisions. 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. The Advisor
and its predecessors have more than 80 years
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Fund Details
of experience managing mutual funds and provide a full range of global
investment advisory services to institutional and retail clients.
Deutsche Asset & Wealth Management represents the asset management and wealth
management activities conducted by Deutsche Bank AG or any of its subsidiaries,
including the Advisor and DWS Investments Distributors, Inc. ("DIDI" or the
"Distributor"). Deutsche Asset & Wealth Management is a global 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 may utilize the resources of its global investment platform to
provide investment management services through branch offices or affiliates
located outside the US. In some cases, the Advisor may also utilize its branch
offices or affiliates located in the US or outside the US to perform certain
services, such as trade execution, trade matching and settlement, or various
administrative, back-office or other services. To the extent services are
performed outside the US, such activity may be subject to both US and foreign
regulation. It is possible that the jurisdiction in which the Advisor or its
affiliate performs such services may impose restrictions or limitations on
portfolio transactions that are different from, and in addition to, those that
apply in the US.
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.
FUND NAME FEE PAID
--------------------------- -----------
DWS Core Fixed Income Fund 0.40 %
---------------------------- ----
DWS Global Inflation Fund 0.39%*
---------------------------- -----
DWS GNMA Fund 0.315%
---------------------------- -----
DWS High Income Fund 0.45 %
---------------------------- -----
DWS Global High Income
Fund 0.50 %
---------------------------- -----
DWS Short Duration Fund 0.36 %
---------------------------- -----
DWS Strategic Government
Securities Fund 0.33 %
---------------------------- -----
DWS Ultra-Short Duration
Fund 0.40 %
---------------------------- -----
DWS Unconstrained Income
Fund 0.45%*
---------------------------- -----
|
* Reflects the effects of expense limitations and/or fee waivers then in
effect.
The following waivers are currently in effect:
For DWS Core Fixed Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 0.89%,
1.64%, 1.64%, 1.14%, 0.64% and 0.74%; and for the period October 1, 2014
through January 31, 2015 at ratios no higher than 0.91%, 1.66%, 1.66%, 1.16%,
0.66% and 0.76% (in each instance, excluding extraordinary expenses, taxes,
brokerage and interest expenses) for Class A, Class B, Class C, Class R
Institutional Class and Class S, respectively. The agreement may only be
terminated with the consent of the fund's Board.
For DWS Global Inflation Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 0.85%,
1.60%, 1.60%, 0.60% and 0.60%; and for the period October 1, 2014 through
January 31, 2015 at ratios no higher than 0.88%, 1.63%, 1.63%, 0.63% and 0.63%
(in each instance, excluding extraordinary expenses, taxes, brokerage and
interest expenses) for Class A, Class B, Class C, Institutional Class and Class
S, respectively. The agreement may only be terminated with the consent of the
fund's Board.
For DWS GNMA Fund, the Advisor has contractually agreed through September 30,
2014 to waive and/or reimburse fund expenses to the extent necessary to
maintain the fund's total annual operating expenses (excluding certain expenses
such as extraordinary expenses, taxes, brokerage and interest expenses) at
0.92%, 1.67%, 1.17%, 0.67% and 0.67% for Class A, Class C, Class R,
Institutional Class and Class S, respectively. The agreement may only be
terminated with the consent of the fund's Board.
For DWS High Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest
expenses) at 1.06%, 1.81%, 1.81%, 1.31%, 0.81% and 0.81% for Class A, Class B,
Class C, Class R, Institutional Class and Class S, respectively. The agreement
may only be terminated with the consent of the fund's Board.
For DWS Global High Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 1.06%,
1.81%, 1.81%, 0.81% and 0.81%; and for the period October 1, 2014 through
January 31, 2015 at ratios no higher than 1.15%, 1.90%, 1.90%, 0.90% and 0.90%
(in each instance, excluding extraordinary expenses, taxes, brokerage and
interest expenses) for Class A, Class B, Class C, Institutional Class and Class
S, respectively. The agreement may only be terminated with the consent of the
fund's Board.
For DWS Short Duration Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 0.84%,
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Fund Details
1.59%, 1.59%, 0.59% and 0.59%; and for the period October 1, 2014 through
January 31, 2015 at ratios no higher than 0.86%, 1.61%, 1.61%, 0.61% and 0.61%
(in each instance, excluding extraordinary expenses, taxes, brokerage and
interest expenses) for Class A, Class B, Class C, Institutional Class and Class
S, respectively. The agreement may only be terminated with the consent of the
fund's Board.
For DWS Strategic Government Securities Fund, the Advisor has contractually
agreed through September 30, 2014 to waive and/or reimburse fund expenses to
the extent necessary to maintain the fund's total annual operating expenses at
0.89%, 1.64%, 1.64%, 0.64% and 0.64%; and for the period October 1, 2014
through January 31, 2015 at ratios no higher than 0.91%, 1.66%, 1.66%, 0.66%
and 0.66% (in each instance, excluding extraordinary expenses, taxes, brokerage
and interest expenses) for Class A, Class B, Class C, Institutional Class and
Class S, respectively. The agreement may only be terminated with the consent of
the fund's Board.
For DWS Ultra-Short Duration Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest
expenses) at 1.16%, 1.91%, 1.91%, 0.91%, and 0.91% for Class A, Class B, Class
C, Institutional Class and Class S, respectively. The agreement may only be
terminated with the consent of the fund's Board.
For DWS Unconstrained Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage, interest
expense and acquired funds fees and expenses (0.02%)) at 1.09%, 1.84%, 1.84%
and 0.84% for Class A, Class B, Class C and Class S, respectively. The
agreement may only be terminated with the consent of the fund's Board.
DWS Unconstrained Income Fund invests in other mutual funds advised by the
Advisor and its affiliates ("affiliated mutual funds"). The Advisor has agreed
not to impose its advisory fees on assets invested in such other affiliated
mutual funds. In the case of an investment in DWS Floating Rate Fund, the
Advisor has also agreed to apply a management fee credit to the fund equal to
the difference between DWS Floating Rate 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 Fund.
A discussion regarding the basis for the Board's approval of each fund's
investment management agreement and, as applicable, subadvisory agreement, is
contained in the most recent shareholder report for the annual period ended
September 30 for DWS GNMA Fund, DWS Global Inflation Fund, DWS High Income Fund
and DWS Short Duration Fund and October 31 for DWS Core Fixed Income Fund, DWS
Global High Income Fund, DWS Strategic Government Securities Fund, DWS
Ultra-Short Duration Fund and DWS Unconstrained Income 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. The administrative services fee discussed above
is included in the fees and expenses table under "Other expenses."
DWS Global Inflation Fund may pursue its investment objective, in part, by
investing in the Subsidiary. The Subsidiary has entered into a separate
contract with the Advisor whereby the Advisor provides investment advisory and
other services to the Subsidiary. The Advisor does not receive separate
compensation from the Subsidiary for providing it with investment advisory
and/or other services. However, the fund does pay the Advisor a fee based on
the fund's assets, including its investment in the Subsidiary.
MULTI-MANAGER STRUCTURE. The Advisor, subject to the approval of the Board, has
ultimate responsibility to oversee any subadvisor to a fund and to recommend
the hiring, termination and replacement of subadvisors. Each fund and the
Advisor have received an order from the SEC that permits the Advisor to appoint
or replace certain subadvisors, to manage all or a portion of a fund's assets
and enter into, amend or terminate a subadvisory agreement with certain
subadvisors, in each case subject to the approval of a fund's Board but without
obtaining shareholder approval ("multi-manager structure"). The multi-manager
structure applies to subadvisors that are not affiliated with the fund or the
Advisor ("nonaffiliated subadvisors"), as well as subadvisors that are indirect
or direct, wholly owned subsidiaries of the Advisor or Deutsche Bank AG
("wholly owned subadvisors"). Pursuant to the SEC order, the Advisor, with the
approval of a fund's Board, has the discretion to terminate any subadvisor and
allocate and reallocate a fund's assets among any other nonaffiliated
subadvisors or wholly owned subadvisors (including terminating a nonaffiliated
subadvisor and replacing it with a wholly owned subadvisor). Each fund and the
Advisor are subject to the conditions imposed by the SEC order, including the
condition that within 90 days of hiring of a new subadvisor pursuant to the
multi-manager structure, each fund will provide shareholders with an
information statement containing information about the new subadvisor. The
shareholders of DWS Core Fixed Income Fund, DWS GNMA Fund, DWS High Income
Fund, DWS Short Duration Fund, DWS Strategic Government Securities Fund, DWS
Ultra-Short Duration Fund and DWS Unconstrained Income Fund have approved the
multi-manager structure described herein in this paragraph. The shareholders of
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Fund Details
DWS Global Inflation Fund and DWS Global High Income Fund have approved the
multi-manager structure with respect to nonaffiliated subadvisors. Until
shareholders of DWS Global Inflation Fund and DWS Global High Income Fund have
approved the multi-manager structure with respect to wholly-owned subadvisors,
the fund may not appoint wholly-owned subadvisors in the manner described
herein in this paragraph.
SUBADVISOR FOR DWS CORE FIXED INCOME FUND
Pursuant to a subadvisory agreement between the Advisor and Fischer Francis
Trees & Watts, Inc., FFTW, a New York corporation, serves as the sub-advisor to
the DWS Core Fixed Income Fund. FFTW conducts investment research and is
responsible for the purchase, sale or exchange of the fund's assets. FFTW was
organized in 1972. FFTW is registered as an investment adviser with the SEC.
FFTW and certain affiliates managed, in aggregate, approximately $51 billion in
assets, as of November 30, 2013, for numerous fixed-income portfolios. FFTW
currently advises institutional clients, including central banks and official
institutions, corporations for management of cash and retirement fund assets,
public employee retirement funds, insurance companies, non-profit institutions
and commercial banks. FFTW also serves as the advisor or the sub-advisor to
domestic and international pooled investment vehicles. FFTW's New York offices
are located at 200 Park Avenue, New York, New York 10166. FFTW is directly
wholly-owned by BNP Paribas Investment Partners USA Holdings Inc. (BNPPIP USA),
a New York corporation. BNPPIP USA is owned by BNP Paribas, which is a publicly
owned banking corporation organized under the laws of the Republic of France.
MANAGEMENT
DWS CORE FIXED INCOME FUND
DOMINICK DEALTO, HEAD OF GLOBAL MULTI-SECTOR FIXED INCOME AND HEAD OF SECTOR
ROTATION, FFTW. Portfolio Manager of the fund. Began managing the fund in 2013.
o Joined FFTW in 2013 from Deutsche Asset & Wealth Management where he was
Head of Product Management and Development for DB Advisors; previously, was
Head of Fixed Income (Americas) for Robeco, Weiss Peck & Greer Investment
Management where he oversaw the management of US and global fixed income
assets. Prior to Robeco, held various fixed income portfolio manager
positions the longest of which was with Chase Asset Management, a
predecessor of J.P. Morgan Asset Management. Began career as a credit
analyst at Chase Securities Inc.
o Over 23 years of investment experience.
o BS in Economics, State University of New York, SUNY-Oneonta.
GARY CHAN, CFA, FFTW. Portfolio Manager of the fund. Began managing the fund in
2012.
o Joined FFTW in 2006.
o Prior to joining FFTW, worked as a financial/economic analyst in the Credit
and Risk Management Division and analyst in the Markets Group at the
Federal Reserve Bank of New York.
o BS, Management, Binghamton University; MA, Applied Statistics, Columbia
University.
DWS GLOBAL INFLATION FUND
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2005.
o Joined Deutsche Asset & Wealth 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.
ERIC S. MEYER, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2010.
o Joined Deutsche Asset & Wealth Management in 2006 after 16 years of
experience in positions of increasing responsibility in corporate banking
with First Chicago, Credit Agricole, and most recently, Bank of America's
subsidiary, Flagship Capital Management. Prior to his corporate banking
experience, he worked in trust management operations for 10 years at First
Chicago and E.F. Hutton.
o Head of US Loan Portfolio Management, High Yield Strategies: New York.
o BA from State University of New York, Albany; MBA from Pace University.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
o Joined Deutsche Asset & Wealth Management in 2010 from Northern Trust where
he served as a senior portfolio manager. Previously, he served as a
portfolio manager and head of credit trading for Deutsche Asset Management
from 1998-2003.
o Over 19 years of investment industry experience.
o BA in Economics, University of Chicago; MBA, University of Chicago.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
o Joined Deutsche Asset & Wealth Management in 2006; previously has worked as
a Director, Engineering and Business Development at Calpoint LLC from
2001-2004.
o Portfolio Manager: New York.
o BS and MS, University of Washington, Seattle; MS and MBA, Carnegie Mellon
University.
DWS GNMA FUND
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2002.
o Joined Deutsche Asset & Wealth 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.
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Fund Details
o Portfolio Manager for Retail Fixed Income: New York.
o BIS, University of Minnesota.
DWS HIGH INCOME FUND
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
o Joined Deutsche Asset & Wealth 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, he spent four years at Citicorp as a research analyst and
structurer of collateralized mortgage obligations. Prior to Citicorp, he
served as an officer in the US Army from 1988 to 1991.
o Head of US High Yield Bonds: New York.
o BS, United States Military Academy (West Point); MBA, New York University,
Stern School of Business.
DWS GLOBAL HIGH INCOME FUND
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
o Joined Deutsche Asset & Wealth 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, he spent four years at Citicorp as a research analyst and
structurer of collateralized mortgage obligations. Prior to Citicorp, he
served as an officer in the US Army from 1988 to 1991.
o Head of US High Yield Bonds: New York.
o BS, United States Military Academy (West Point); MBA, New York University,
Stern School of Business.
DWS SHORT DURATION FUND
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2002.
o Joined Deutsche Asset & Wealth 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.
ERIC S. MEYER, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
o Joined Deutsche Asset & Wealth Management in 2006 after 16 years of
experience in positions of increasing responsibility in corporate banking
with First Chicago, Credit Agricole, and most recently, Bank of America's
subsidiary, Flagship Capital Management. Prior to his corporate banking
experience, he worked in trust management operations for 10 years at First
Chicago and E.F. Hutton.
o Head of US Loan Portfolio Management, High Yield Strategies: New York.
o BA from State University of New York, Albany; MBA from Pace University.
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
o Joined Deutsche Asset & Wealth 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, he spent four years at Citicorp as a research analyst and
structurer of collateralized mortgage obligations. Prior to Citicorp, he
served as an officer in the US Army from 1988 to 1991.
o Head of US High Yield Bonds: New York.
o BS, United States Military Academy (West Point); MBA, New York University,
Stern School of Business.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
o Joined Deutsche Asset & Wealth Management in 2010 from Northern Trust where
he served as a senior portfolio manager. Previously, he served as a
portfolio manager and head of credit trading for Deutsche Asset Management
from 1998-2003.
o Over 19 years of investment industry experience.
o BA in Economics, University of Chicago; MBA, University of Chicago.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
o Joined Deutsche Asset & Wealth Management in 2006; previously has worked as
a Director, Engineering and Business Development at Calpoint LLC from
2001-2004.
o Portfolio Manager: New York.
o BS and MS, University of Washington, Seattle; MS and MBA, Carnegie Mellon
University.
DWS STRATEGIC GOVERNMENT SECURITIES FUND
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2002.
o Joined Deutsche Asset & Wealth 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.
DWS ULTRA-SHORT DURATION FUND
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
o Joined Deutsche Asset & Wealth 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.
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
o Joined Deutsche Asset & Wealth Management in 1996. Served as the head of the
High Yield group in Europe and as an Emerging Markets portfolio manager.
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Fund Details
o Prior to that, he spent four years at Citicorp as a research analyst and
structurer of collateralized mortgage obligations. Prior to Citicorp, he
served as an officer in the US Army from 1988 to 1991.
o Head of US High Yield Bonds: New York.
o BS, United States Military Academy (West Point); MBA, New York University,
Stern School of Business.
ERIC S. MEYER, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2008.
o Joined Deutsche Asset & Wealth Management in 2006 after 16 years of
experience in positions of increasing responsibility in corporate banking
with First Chicago, Credit Agricole, and most recently, Bank of America's
subsidiary, Flagship Capital Management. Prior to his corporate banking
experience, he worked in trust management operations for 10 years at First
Chicago and E.F. Hutton.
o Head of US Loan Portfolio Management, High Yield Strategies: New York.
o BA from State University of New York, Albany; MBA from Pace University.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
o Joined Deutsche Asset & Wealth Management in 2010 from Northern Trust where
he served as a senior portfolio manager. Previously, he served as a
portfolio manager and head of credit trading for Deutsche Asset Management
from 1998-2003.
o Over 19 years of investment industry experience.
o BA in Economics, University of Chicago; MBA, University of Chicago.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
o Joined Deutsche Asset & Wealth Management in 2006; previously has worked as
a Director, Engineering and Business Development at Calpoint LLC from
2001-2004.
o Portfolio Manager: New York.
o BS and MS, University of Washington, Seattle; MS and MBA, Carnegie Mellon
University.
DWS UNCONSTRAINED INCOME FUND
GARY RUSSELL, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2006.
o Joined Deutsche Asset & Wealth 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, he spent four years at Citicorp as a research analyst and
structurer of collateralized mortgage obligations. Prior to Citicorp, he
served as an officer in the US Army from 1988 to 1991.
o Head of US High Yield Bonds: New York.
o BS, United States Military Academy (West Point); MBA, New York University,
Stern School of Business.
WILLIAM CHEPOLIS, CFA, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2005.
o Joined Deutsche Asset & Wealth 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.
JOHN D. RYAN, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2010.
o Joined Deutsche Asset & Wealth Management in 2010 from Northern Trust where
he served as a senior portfolio manager. Previously, he served as a
portfolio manager and head of credit trading for Deutsche Asset Management
from 1998-2003.
o Over 19 years of investment industry experience.
o BA in Economics, University of Chicago; MBA, University of Chicago.
PHILIP G. CONDON, MANAGING DIRECTOR. Portfolio Manager of the fund. Began
managing the fund in 2011.
o Joined Deutsche Asset & Wealth Management in 1983.
o Head of US Retail Fixed Income Funds.
o BA and MBA, University of Massachusetts at Amherst.
DARWEI KUNG, DIRECTOR. Portfolio Manager of the fund. Began managing the fund
in 2011.
o Joined Deutsche Asset & Wealth Management in 2006; previously has worked as
a Director, Engineering and Business Development at Calpoint LLC from
2001-2004.
o Portfolio Manager: New York.
o BS and MS, University of Washington, Seattle; MS and MBA, Carnegie Mellon
University.
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.
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Fund Details
[GRAPHIC APPEARS HERE]
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 CLASS R AND S SHARES AND INSTITUTIONAL CLASS 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.
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. For an analysis of the fees associated with an
investment in a fund or similar funds, please refer to
apps.finra.org/fundanalyzer/1/fa.aspx (this Web site does not form a part of
this prospectus).
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.
Class B shares are closed to new purchases, except for exchanges and the
reinvestment of dividends or other distributions.
CLASSES AND FEATURES POINTS TO HELP YOU COMPARE
CLASS A
o Sales charge of up to 4.50% or o Some investors may be able to
2.75% charged when you buy reduce or eliminate their sales
shares charge; see "Class A Shares"
o In most cases, no charge when o Total annual expenses are
you sell shares lower than those for Class B or
Class C
o Up to 0.25% annual share-
holder servicing fee o Distributions are generally
higher than Class B or Class C
CLASS B
o No sales charge when you buy o The deferred sales charge rate
shares falls to zero after six years
o Closed to new investment o Shares automatically convert to
Class A after six years, which
o Deferred sales charge declining means lower annual expenses
from 4.00%, charged when you going forward
sell shares you bought within
the last six years o Distributions are generally
lower than Class A
o 0.75% annual distribution fee
and up to 0.25% annual share-
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
than Class B, but your shares
o Deferred sales charge of never automatically convert to
1.00%, charged when you sell Class A, so annual expenses
shares you bought within the remain higher than Class A
last year
o Distributions are generally
o 0.75% annual distribution fee lower than Class A
and up to 0.25% annual share-
holder servicing fee o Maximum investment applies
CLASS R
o No sales charge when you buy o Only available to participants in
shares certain retirement plans
o 0.25% annual distribution fee o Distributions are generally
and up to 0.25% annual share- higher than Class B and Class C
holder servicing fee but lower than Class A, Class S
or Institutional Class
INSTITUTIONAL CLASS
o No sales charge when you buy o Only available to certain institu-
shares and no deferred sales tional investors; typically
charge when you sell shares $1,000,000 minimum initial
investment
o Distributions are generally
higher than Class A, B, C and R,
and may be higher than Class
S, depending on relative
expenses
CLASS S
o No sales charge when you buy o Limited availability, see "Eligi-
shares and no deferred sales bility Requirements" under
charge when you sell shares "Class S Shares"
|
70
Investing in the Funds
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 Core Fixed Income Fund, DWS High Income Fund and DWS
Global High Income Fund have an up-front sales charge that varies with the
amount you invest:
FRONT-END SALES FRONT-END SALES
CHARGE AS A % CHARGE AS A % OF YOUR
YOUR INVESTMENT OF OFFERING PRICE(1,2) NET INVESTMENT(2)
-------------------- ------------------------ ----------------------
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
-------------------- ------------------------ ----------------------
|
Class A shares of DWS Global Inflation Fund have an up-front sales charge that
varies with the amount you invest:
FRONT-END SALES FRONT-END SALES
CHARGE AS A % CHARGE AS A % OF YOUR
YOUR INVESTMENT OF OFFERING PRICE(1,2) NET INVESTMENT(2)
-------------------- ------------------------ ----------------------
Under $100,000 2.75% 2.83%
-------------------- ----- -----
$100,000-$249,999 2.50 2.56
----------------- ----- -----
$250,000-$499,999 2.00 2.04
----------------- ----- -----
$500,000-$999,999 1.50 1.52
----------------- ----- -----
$1 million or more see below see below
-------------------- ------------------------ ----------------------
|
Class A shares of DWS GNMA Fund, DWS Short Duration Fund, DWS Strategic
Government Securities Fund, DWS Ultra-Short Duration Fund and DWS Unconstrained
Income Fund have an up-front sales charge that varies with the amount you
invest:
FRONT-END SALES FRONT-END SALES
CHARGE AS A % CHARGE AS A % OF YOUR
YOUR INVESTMENT OF OFFERING PRICE(1,2) NET INVESTMENT(2)
-------------------- ------------------------ ----------------------
Under $100,000 2.75% 2.83%
-------------------- ----- -----
$100,000-$249,999 2.50 2.56
----------------- ----- -----
$250,000 or more see below see below
-------------------- ------------------------ ----------------------
|
(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
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. 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 & Wealth Management or the DWS funds) and with
respect to certain types of investment programs (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 or a no-load
network, platform
71
Investing in the Funds
or self-directed brokerage account offered by a financial services firm that
has entered into an agreement with DIDI that may or may not charge you a
transaction fee).
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 IN DWS GNMA FUND, DWS SHORT DURATION FUND, DWS
STRATEGIC GOVERNMENT SECURITIES FUND, DWS ULTRA-SHORT DURATION FUND AND DWS
UNCONSTRAINED INCOME FUND AND $1 MILLION IN DWS CORE FIXED INCOME FUND, DWS
GLOBAL INFLATION FUND, DWS HIGH INCOME FUND AND DWS GLOBAL 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 NAV Purchase Privilege). However, you may be charged
a contingent deferred sales charge (CDSC) on any shares you sell.
FOR DWS CORE FIXED INCOME FUND, DWS GLOBAL INFLATION FUND, DWS HIGH INCOME FUND
AND DWS GLOBAL HIGH INCOME FUND, 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 0.85% if redeemed within 12
months of purchase and 0.50% if redeemed within the following six months.
FOR DWS GNMA FUND, DWS SHORT DURATION FUND, DWS STRATEGIC GOVERNMENT SECURITIES
FUND AND DWS ULTRA-SHORT DURATION FUND, investments of $250,000 or more may be
eligible to buy Class A shares without a sales charge (load), and may be
subject to a contingent deferred sales charge of 0.50% if redeemed within 12
months of the original purchase date.
FOR DWS UNCONSTRAINED INCOME FUND, investments of $250,000 or more may be
eligible to buy Class A shares without a sales charge (load), but may be
subject to a CDSC of 1.00% if redeemed within 18 months of purchase.
This CDSC is waived under certain circumstances (see "Policies About
Transactions"). Your financial advisor or Shareholder Services can answer your
questions and help you determine if you're eligible.
CLASS B SHARES
Class B shares of each fund are 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 from Class B shares of another DWS fund).
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:
YEAR AFTER YOU BOUGHT SHARES CDSC ON SHARES YOU SELL
----------------------------- ------------------------------
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)
------------------------------
|
This CDSC is waived under certain circumstances (see "Policies About
Transactions"). 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.
Except as noted above, no new purchases of Class B shares are allowed, whether
by new investors or existing shareholders, including purchases under an
automatic investment plan.
The closing of the Class B shares does not affect: (a) the right of
shareholders of Class B shares to continue to sell (redeem) their shares as
provided in this prospectus, subject to any applicable CDSC; or (b) the
automatic conversion of Class B shares to Class A shares six years after
purchase. Class B shares currently held will continue as Class B shares with
all Class B attributes, including 12b-1 fees, until sold or until their
automatic conversion to Class A shares.
Purchases by shareholders under Class B shares automatic investment plans
("AIPs") established on or prior to December 1, 2009 are automatically
continuing with Class A shares. Such shareholders are permitted to purchase
Class A shares at net asset value, without a sales charge, whether as part of
their AIP or otherwise. The foregoing
72
Investing in the Funds
applies only to purchases under (i) AIPs established directly with DWS
Investments ("DWS AIPs") and, (ii) provided they have been 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 established prior to December 1, 2009 are
responsible for contacting DWS Investments (see phone number on the back cover)
to ensure that their account has been identified as an AIP in order to benefit
from this privilege and to avoid having their purchase orders rejected.
Additionally, 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 were previously purchasing
Class B shares instead are purchasing Class A shares at net asset value,
without a sales charge.
CLASS C SHARES
Class C shares may appeal to investors 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 the distribution fee, 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:
YEAR AFTER YOU BOUGHT SHARES CDSC ON SHARES YOU SELL
----------------------------- ------------------------
First year 1.00%
------------------------------ ----
Second year and later None
------------------------------ ----
|
This CDSC is waived under certain circumstances (see "Policies About
Transactions"). 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 in excess of $250,000 for DWS GNMA Fund, DWS
Short Duration Fund, DWS Strategic Government Securities Fund, DWS Ultra-Short
Duration Fund and DWS Unconstrained Income Fund and $500,000 for DWS Core Fixed
Income Fund, DWS Global Inflation Fund, DWS High Income Fund and DWS Global
High Income Fund will be declined with the exception of orders received from
financial representatives acting for clients whose shares are held in an
omnibus account and certain employer-sponsored employee benefit plans.
CLASS R SHARES
Class R shares have no initial sales charge or deferred sales charge. Class R
shares have a 12b-1 plan, under which a distribution fee of 0.25% and a
shareholder servicing fee of up to 0.25% are deducted from class assets each
year. Because distribution fees are continuous in nature, these fees may, over
time, increase the cost of your investment and may cost you more than paying
other types of sales charges.
ELIGIBILITY REQUIREMENTS. You may buy Class R shares if you are a participant
in certain retirement plan platforms that offer Class R shares of the fund
through a plan level or omnibus account, including:
o Section 401(a) and 457 plans
o Certain section 403(b)(7) plans
o 401(k), profit sharing, money purchase pension and defined benefit plans
o Non-qualified deferred compensation plans
o Individual Retirement Accounts (IRAs)
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 (subject to the applicable investment minimum):
o An eligible institution (e.g., a financial institution, corporation, trust,
estate or educational, religious or charitable institution).
o An employee benefit plan.
o A plan administered as a college savings plan under Section 529 of the
Internal Revenue Code.
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:
73
Investing in the Funds
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 that meets or, in the Advisor's judgment,
will meet within a reasonable period of time, the $1,000,000 minimum
investment.
o Shareholders with existing accounts prior to August 13, 2004 who met the
previous minimum investment eligibility requirement.
o DWS Core Fixed Income Fund shareholders with existing Institutional Class
accounts prior to July 23, 2007 who purchased shares through certain
broker-dealers authorized to sell fund shares.
Each fund reserves the right to modify the above eligibility requirements and
investment minimum requirements 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 plan or program may not on its own meet such minimum
amount.
CLASS S SHARES
Class S shares are principally available to new investors through fee-based
programs of investment dealers that have special agreements with each 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.
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 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 and household
members residing at the same address may purchase Class S shares of such
fund and may open new individual accounts for Class S shares of any DWS
fund. (This provision applies to persons who in the future become Class S
shareholders under one of the eligibility provisions in this paragraph but
is not applicable to investors or participants holding Class S shares
through the fee based, retirement or other programs or plans referred to in
the next paragraph unless otherwise provided below.)
o A person who certifies that they are a participant in a "DWS retirement
plan" may purchase Class S shares apart from the participant's plan. For
this purpose, a DWS retirement plan is defined as an employer sponsored
employee benefit plan made available through ADP, Inc. and/or its
affiliates, or ExpertPlan, Inc. under an alliance between one of these two
firms and DWS Investments or its affiliates.
o A person who certifies that they are a participant who owns Class S shares
of any DWS fund through a retirement, employee stock, bonus, pension or
profit sharing plan may purchase Class S shares apart from the
participant's plan.
o Any participant in any employer sponsored retirement, employee stock, bonus,
pension or profit sharing plan may purchase Class S shares in connection
with a rollover of a distribution from a plan to a DWS Investments IRA made
through a rollover facilitator having a relationship with DWS Investments.
o Any person that has an existing account with Deutsche Bank Private Wealth
Management ("PWM") but who no longer meets the eligibility requirements to
maintain an account with PWM may open a new account in Class S shares of
any DWS fund.
o Class S shares are available to accounts managed by the Advisor, any
advisory products offered by the Advisor or DIDI and to DWS Target Date
Series or other fund-of-funds managed by the Advisor or its affiliates.
o A person who certifies that they are a former employee of the Advisor or one
of its affiliates may purchase Class S shares in connection with a rollover
of a distribution from a Deutsche Bank employee benefit plan to a DWS
Investments IRA.
o Fund Board Members and their family members and full-time employees of
the Advisor and its affiliates and their family members may purchase Class
S shares.
The following additional investors may purchase Class S shares of DWS funds in
connection with certain programs or plans.
o Broker-dealers, banks and registered investment advisors ("RIAs") in
connection with a comprehensive or "wrap" fee program or other fee based
program.
74
Investing in the Funds
o Any group retirement, employee stock, bonus, pension or profit-sharing
plans.
o Plans administered as college savings plans under Section 529 of the
Internal Revenue Code.
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.
For Class R shares, please see "How to Buy, Sell and Exchange Class R Shares"
or consult your retirement plan administrator.
TO CONTACT DWS INVESTMENTS
BY PHONE
(800) 728-3337
BY MAIL
TYPE ADDRESS
----------------- ------------------------------------------------
EXPEDITED MAIL
All Requests DWS Investments
-----------------
Attn: (see department names under Regular mail)
210 West 10th Street
Kansas City, MO 64105-1614
------------------------------------------------
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
|
HOW TO BUY SHARES
Please note that your account cannot be opened until we receive a completed
account application.
MINIMUM INITIAL INVESTMENT ($)
AUTOMATIC
UGMAS/ INVESTMENT
NON-IRA IRAS UTMAS PLANS
------------ -------------- -------- ------------------
A B C 1,000 500 1,000 500
------- ----- --- ----- ---
INST 1,000,000 N/A N/A N/A
------- --------- ---- ----- ----
S 2,500 1,000 1,000 1,000
------- --------- ----- ----- -----
|
For participants in all group retirement plans, and in certain fee-based and
wrap programs approved by the Advisor, there is no minimum initial investment
and no minimum additional investment for Class A, C and S shares. For Section
529 college savings plans, there is no minimum initial investment and no
minimum additional investment for Class S shares. In certain instances, the
minimum initial investment may be waived for Institutional Class shares. There
is no minimum additional investment for Institutional Class shares. Because
Class B shares are closed to new investment, existing Class B shareholders may
purchase Class A and C shares with a minimum initial investment of $50. The
minimum additional investment in all other instances is $50.
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. 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. If your check fails to clear, the fund has the right to cancel
your order, hold you liable or charge you or your account for any losses or
fees the fund or its agents have incurred.
BY AUTOMATIC INVESTMENT PLAN (NOT AVAILABLE FOR INSTITUTIONAL CLASS SHARES)
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. Subsequent investments are made
automatically from the shareholder's account at a bank, savings and loan or
credit union into the shareholder's fund account. The maximum Automatic
Investment Plan investment is $250,000. 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.
75
Investing in the Funds
BY PHONE USING QUICKBUY (FOR ADDITIONAL INVESTMENTS ONLY). Call DWS Investments
and use our automated system to place your QuickBuy purchase using the
Automated Clearing House system (ACH), or 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 $250,000
maximum.
ON THE INTERNET (FOR ADDITIONAL INVESTMENTS ONLY). Register at
dws-investments.com to set up on-line access to your account(s). Or, log in to
the Web site if you have previously registered. Follow the instructions on the
Web site to request a purchase with money from the bank account you have
established on your DWS account(s).
BY WIRE (FOR ADDITIONAL INSTITUTIONAL CLASS INVESTMENTS ONLY). You may buy
shares by wire only if your account is authorized to do so. Please note that
you or your financial advisor must call us in advance of a wire transfer
purchase. After you inform us of the amount of your purchase, you will receive
a trade confirmation number. Instruct your bank to send payment by wire using
the wire instructions noted below. All wires must be received by 4:00 p.m.
Eastern time the next business day following your purchase. If your wire is not
received by 4:00 p.m. Eastern time on the next business day after the fund
receives your request to purchase shares, your transaction will be canceled at
your expense and risk.
WIRE DETAILS
Bank name State Street Bank Boston
--------------- --------------------------------
Routing Number 011000028
---------------- ---------
Attention DWS Investments
---------------- --------------------------------
DDA Number 9903-5552
---------------- ---------
FBO (Account name) (Account number)
---------------- -------------------------------
Credit (Fund name, Fund number and, if
----------------
applicable, class name)
--------------------------------
|
Refer to your account statement for the account name and number. Wire transfers
normally take two or more hours to complete. Wire transfers may be restricted
on holidays and at certain other times.
HOW TO EXCHANGE SHARES
REQUIREMENTS AND LIMITS
CLASS EXCHANGING INTO ANOTHER FUND ($)
------- -----------------------------------------------
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
------- -----------------------------------------------
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
-----------------------------------------------
|
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 and use our automated system to place your exchange, or
choose to be transferred to a customer service representative to complete your
request. For accounts with $5,000 or more, you may also establish a Systematic
Exchange Plan of a minimum of $50 to another DWS fund on a regular basis. A
representative can assist you with establishing this privilege.
ON THE INTERNET
Register at dws-investments.com to set up on-line access to your account(s).
Or, log in to the Web site if you have previously registered. Follow the
instructions on the Web site to request an exchange to another DWS fund.
BY MAIL OR EXPEDITED MAIL
Write a letter that includes the following information: the name(s) of all
owners and address as they appear on your account, the fund name, share class,
and account number from which you want to exchange, the dollar amount or number
of shares you wish to exchange, and the name of the fund into which you want to
exchange. Also include a daytime telephone number if we have any questions. All
owners should sign the letter and it should be mailed to the appropriate
address for exchanges and redemptions.
76
Investing in the Funds
HOW TO SELL SHARES
REQUIREMENTS AND LIMITS
SELLING SHARES ($)
--------------------------------------------
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
------- --------------------------------------------
|
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 and use our automated system, or 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 request these redemptions, different transaction maximums
may apply.
BY PHONE USING QUICKSELL. Call DWS Investments and use our automated system to
request a QuickSell redemption, or choose to be transferred to a customer
service representative (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 a Systematic Withdrawal
Plan of a minimum of $50 to be sent on a regular basis as you direct. The
$5,000 value does not apply to IRA accounts.
ON THE INTERNET. Register at dws-investments.com to set up on-line access to
your account(s). Or, log in to the Web site if you have previously registered.
Follow the instructions on the Web site 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 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 Medallion Signature
Guarantee. For more information, please contact DWS Investments (see phone
number on the back cover).
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
and either use the automated system or speak with a customer service
representative to request your redemption. After you inform us 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.
HOW TO BUY, SELL AND EXCHANGE CLASS R SHARES
If your plan sponsor has selected Class R shares as an investment option, you
may buy Class R shares through your securities dealer or through any financial
institution that is authorized to act as a shareholder servicing agent
("shareholder servicing agent"). Contact them for details on how to enter and
pay for your order. Shareholder servicing agents include brokers, financial
representatives or any other bank, dealer or other institution that have a
sub-shareholder servicing agreement with the funds.
Shareholder servicing agents may charge additional fees to investors for those
services not otherwise included in their sub-distribution or servicing
agreement, such as cash management or special trust or retirement investment
reporting. In addition, the Advisor or administrator may provide compensation
to shareholder servicing agents for distribution, administrative and
promotional services.
There is no minimum investment with respect to Class R shares.
Instructions for buying and selling shares must generally be submitted by a
retirement plan administrator, not by plan participants for whose benefit the
shares are held. Please contact your shareholder servicing agent for more
information on how to open a fund account.
IRA ROLLOVERS. You may complete a direct rollover from a retirement plan
offering Class R shares to a DWS IRA account by reinvesting up to the full
amount of your distribution in Class A shares of any DWS fund at net asset
value. Subsequent purchases of Class A shares will be made at the public
offering price as described in the prospectus for Class A shares. Please note
that if you terminate your participation in a retirement plan and
77
Investing in the Funds
transfer all of your Class R shares, you will lose the privilege of purchasing
Class R shares in the future. Rollovers to a DWS Class R share IRA are not
permitted.
FINANCIAL INTERMEDIARY SUPPORT PAYMENTS
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 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 or Advisor 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
0.01% up to 0.55% of assets of each fund serviced and maintained by the
financial advisor, 0.05% to 0.25% of sales of each fund attributable to the
financial advisor, a flat fee of up to $60,000, 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. or ExpertPlan 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 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
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Investing in the Funds
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 share price next calculated.
If we are unable to verify your identity within time frames established by each
fund, after a reasonable effort to do so, you will receive written
notification.
With certain limited exceptions, only US residents may invest in each fund.
Because orders placed through a financial advisor must be forwarded to the
transfer agent before they can be processed, you'll need to allow extra time.
Your financial advisor should be able to tell you approximately when your order
will be processed. It is the responsibility of your financial advisor to
forward your order to the transfer agent in a timely manner.
SUB-MINIMUM BALANCES 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);
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).
ACCOUNT MAINTENANCE FEE FOR CLASSES A, B, C AND S. Each fund charges a $20
account maintenance fee for each fund account that has a balance below $10,000.
Except as otherwise noted below, fund accounts are not aggregated by share
class or fund. The assessment will occur once per calendar year and may be
assessed through the automatic redemption of fund shares in your account. The
fee will be assessed on each fund account that falls below the minimum for any
reason, including market value fluctuations, redemptions or exchanges.
If you elect to receive all materials (which include statements, tax forms,
prospectuses, annual and semi-annual reports, and other materials) for all of
your fund accounts by electronic delivery only, the account maintenance fee for
each fund account with a balance below $10,000 will not be charged, so long as
that election remains in effect. You may elect to receive electronic delivery
of DWS fund materials by registering on dws-investments.com or by calling the
telephone number on the back cover.
The account maintenance fee will also 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
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Investing in the Funds
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 and DWS Global 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 for 12 months. Each fund reserves the right to
extend or maintain a block beyond 12 months if it deems that the shareholder's
activity was harmful to the fund, or that the pattern of activity suggests a
pattern of abuse. 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 DWS High Income Fund's and DWS Global High Income
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, a fund may rely upon the financial intermediary's
policy to deter short-term or excessive trading if the Advisor believes that
the financial intermediary's policy is reasonably designed to detect and deter
transactions that are not in the best interests of a fund. A financial
intermediary's policy relating to short-term or excessive trading may be more
or less restrictive than the DWS funds' policy, may permit certain transactions
not permitted by the DWS funds' policies, or prohibit transactions not subject
to the DWS funds' policies.
The Advisor may also accept undertakings from a financial intermediary to
enforce short-term or excessive trading policies on behalf of a fund that
provide a substantially similar level of protection for each fund against such
transactions. For example, certain financial intermediaries may have
contractual, legal or operational restrictions that prevent them from blocking
an account. In such instances, the financial intermediary may use alternate
techniques that the Advisor considers to be a reasonable substitute for such a
block.
In addition, if a fund invests some portion of its assets in foreign
securities, it has adopted certain fair valuation practices intended to protect
the fund from "time zone arbitrage" with respect to its foreign securities
holdings and other trading practices that seek to exploit variations in
portfolio valuation that arise from the nature of the securities held by a
fund. (See "How each fund calculates share price.")
There is no assurance that these policies and procedures will be effective in
limiting short-term and excessive trading in all cases. For example, the
Advisor may not be able to effectively monitor, detect or limit short-term or
excessive trading by underlying shareholders that occurs through omnibus
accounts maintained by broker-dealers or other financial intermediaries. The
Advisor reviews trading activity at the omnibus level to detect short-term or
excessive trading. If the Advisor has reason to suspect that short-term or
excessive trading is occurring at the omnibus level, the Advisor will contact
the financial intermediary to request underlying shareholder level activity.
Depending on the amount of fund shares held in such omnibus accounts (which may
represent most of a fund's shares)
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Investing in the Funds
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 and DWS Global 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 a shareholder in a plan administered as a
college savings plan under Section 529 of the Internal Revenue Code; (v)
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; (vi)
transactions on behalf of certain unaffiliated mutual funds operating as funds
of funds; (vii) 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; (viii) transactions involving
hardship of any registered shareholder; (ix) systematic transactions with
pre-defined trade dates for purchases, exchanges or redemptions, such as
automatic account rebalancing, or loan origination and repayments; (x)
transactions involving shares purchased through the reinvestment of dividends
or other distributions; (xi) 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); (xii)
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 (xiii) 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 DWS
Investments at the phone number on the back cover. 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 calling the appropriate 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.
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.
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Investing in the Funds
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. If you pay for shares by check and the check fails to
clear, we have the right to cancel your order, hold you liable or charge you or
your account for any losses or fees each fund or its agents have incurred.
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 have your signature guaranteed. 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. DWS accepts Medallion Signature Guarantees, which can
be obtained from an eligible guarantor. Eligible guarantor institutions include
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. 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 number
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 exchanged 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 a systematic 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 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, except for
Class B shares, 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 (this may result in a tax
liability for federal income tax purposes). You'll be reimbursed (in the form
of fund shares by the Distributor) 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.
Investors who sold Class B shares may buy Class A shares (if available) with no
sales charge, although they won't be reimbursed for any CDSC they paid. You can
only use the reinstatement feature once for any given group of shares. To take
advantage of this feature, contact Shareholder Services or your financial
advisor.
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
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Investing in the Funds
and/or servicing agents to learn more about the details of this exchange
feature. Shareholders generally will not recognize a gain or loss for federal
income tax purposes upon the exchange of Class A shares of a fund for Class S
shares of the same fund.
CLASS C TO CLASS A, CLASS S OR INSTITUTIONAL CLASS IN THE SAME FUND EXCHANGE
PRIVILEGE. Investors who either (i) have invested in Class C shares through a
comprehensive or "wrap" fee program or other fee-based program sponsored by a
broker-dealer, bank or registered investment adviser or (ii) have invested in
Class C shares and are in the process of transferring their shares to such a
program may potentially become eligible to invest in either Class A shares,
Class S shares or Institutional Class shares by reason of their participation
in such a program. In such event, subject to the discretion of the Distributor
and the limitations noted below, such shareholders may exchange their Class C
shares for Class A shares, Class S shares or Institutional Class shares (as
applicable) of equal aggregate value of the same fund. No sales charges or
other charges will apply to any such exchange. Exchanges under this privilege
will be processed only in instances where the accounts are not currently
subject to a CDSC and only as part of a pre-arranged, multiple-client
transaction through the particular financial services firm offering the
comprehensive or wrap program or other fee-based program where the Class A
shares, Class S shares or Institutional Class shares are available. Investors
should contact their selling and/or servicing agents to learn more about the
details of this exchange feature. Shareholders generally will not recognize a
gain or loss for federal income tax purposes upon the exchange of Class C
shares of a fund for Class A shares, Class S shares or Institutional Class
shares of the same fund.
CLASS S TO INSTITUTIONAL CLASS IN THE SAME FUND EXCHANGE PRIVILEGE. Investors
who have invested in Class S shares through a comprehensive or "wrap" fee
program or other fee-based program sponsored by a broker-dealer, bank or
registered investment adviser may potentially become eligible to invest in
Institutional Class shares by reason of their participation in such a program.
In such event, subject to the discretion of the Distributor and the limitations
noted below, such shareholders may exchange their Class S shares for
Institutional Class shares of equal aggregate value of the same fund. No sales
charges or other charges will apply to any such exchange. Exchanges under this
privilege will be processed only as part of a pre-arranged, multiple-client
transaction through the particular financial services firm offering the
comprehensive or wrap program or other fee-based program where the
Institutional Class shares are available. Investors should contact their
selling and/or servicing agents to learn more about the details of this
exchange feature. Shareholders generally will not recognize a gain or loss for
federal income tax purposes upon the exchange of Class S shares of a fund for
Institutional Class shares of the same fund.
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:
TOTAL TOTAL TOTAL NUMBER OF
- / = NAV
( )
ASSETS LIABILITIES SHARES OUTSTANDING
|
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"). To obtain the fund's most recent share price, go to
dws-investments.com (the Web site does not form a part of this prospectus) or
call the phone number included in this prospectus.
DWS HIGH INCOME FUND AND DWS GLOBAL 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
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Investing in the Funds
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
o withhold a portion of your distributions and redemption proceeds if we have
been notified by the Internal Revenue Service 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, CDSC 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.
INCOME DIVIDENDS ARE DECLARED DAILY (MONTHLY FOR DWS GLOBAL INFLATION FUND, DWS
GNMA FUND, DWS HIGH INCOME FUND, DWS SHORT DURATION FUND, DWS UNCONSTRAINED
INCOME FUND AND DWS STRATEGIC GOVERNMENT SECURITIES FUND) AND PAID MONTHLY.
Short-term and long-term capital gains are paid in November or 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.
84
Investing in the Funds
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.
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. In addition, if shares are redeemed to
pay any account fees (e.g., an account maintenance fee), you may incur a tax
liability.
THE FEDERAL INCOME TAX STATUS of a fund's earnings you receive and your own
fund transactions generally depends on their type:
GENERALLY TAXED AT NET CAPITAL GENERALLY TAXED AT ORDINARY
GAIN RATES: INCOME RATES:
DISTRIBUTIONS FROM A FUND
o gains from the sale of securi- o gains from the sale of securi-
ties held (or treated as held) ties held (or treated as held)
by a fund for more than one by a fund for one year or less
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
|
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. Each fund may elect to pass through to its
shareholders a credit or deduction for foreign taxes it has paid if at the end
of its fiscal year more than 50% of the value of the fund's total assets
consists of stocks or securities of foreign corporations. In addition, any
investments in foreign securities or foreign currencies may increase or
accelerate a fund's recognition of ordinary income and may affect the timing or
amount of the fund's distributions. If you invest in a fund through a taxable
account, your after-tax return could be negatively affected.
Investments in certain debt obligations or other securities may cause a fund to
recognize 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.
Distributions to individuals and other noncorporate shareholders of investment
income reported by a fund as derived from qualified dividend income are
eligible for taxation for federal income tax purposes at the more favorable net
capital gain rates. 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.
YOUR FUND WILL SEND YOU DETAILED FEDERAL INCOME TAX INFORMATION EARLY EACH
YEAR. 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.
A 3.8% Medicare contribution tax is imposed on the "net investment income" of
individuals, estates and trusts whose income exceeds certain threshold amounts.
For this purpose, net investment income generally includes taxable dividends,
including any capital gain dividends paid by a fund, and gains recognized on
the sale, redemption or exchange of shares of a fund.
IF YOU INVEST RIGHT BEFORE A FUND PAYS A DIVIDEND, you'll be getting some of
your investment back as a dividend, which may be taxable to you. 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.
DWS Global Inflation Fund intends to qualify and be treated each year as a
"regulated investment company" ("RIC") under the Internal Revenue Code of 1986,
as
85
Investing in the Funds
amended (the "Code"), such that the fund will not be subject to federal income
tax on income and capital gains distributed to shareholders. In order to
qualify for the special tax treatment accorded RICs and their shareholders, the
fund must, among other things, derive at least 90% of its gross income from
certain specified sources (such income, "qualifying income"). The fund's
ability to pursue its investment strategy and achieve its investment objectives
may be limited by its intention to qualify as a RIC. The Subsidiary will invest
in commodity-linked swaps and futures and certain other commodity-linked
derivatives. Income from commodity-linked swaps and futures and certain other
commodity-linked derivatives generally does not constitute qualifying income.
However, the IRS has issued a private letter ruling to the fund that income
earned through its wholly-owned Subsidiary that invests in such instruments
constitutes qualifying income. If income derived from the fund's investment in
the Subsidiary were to fail to constitute qualifying income, the fund might
fail to qualify as a RIC.
Another requirement for qualifying for the special tax treatment accorded RICs
and their shareholders is that DWS Global Inflation Fund must satisfy several
diversification requirements, including the requirements that not more than 25%
of the value of the fund's total assets may be invested in the securities
(other than those of the US Government or other RICs) 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. Therefore, so long as the fund is
subject to this limit, the fund may not invest any more than 25% of the value
of its assets in the Subsidiary.
If DWS Global Inflation Fund were to fail to meet the income or diversification
test described above, it could in some cases cure such failure, including by
paying a fund-level tax and, in the case of a diversification test failure,
disposing of certain assets. If the fund were ineligible to or otherwise did
not cure such failure for any year, its taxable income and gains would be
subject to tax at the fund level, and distributions from earnings and profits
would be taxable to shareholders as ordinary income.
DWS Global Inflation Fund is generally required to include in its taxable
income its share of the Subsidiary's income, including gains, each year whether
or not such income or gains are distributed to the fund. Net losses incurred by
the Subsidiary during a year will not flow through to the fund and thus will
not be available to offset the fund's income from other investments; such net
losses generally cannot be carried forward by the Subsidiary to offset income
or gain realized by it in future years.
Because each shareholder's tax situation is unique, ask your tax professional
about the tax consequences of your investment, including any state and local
tax consequences.
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.
86
Investing in the Funds
[GRAPHIC APPEARS HERE]
Financial Highlights
The financial highlights (which are consolidated for DWS Global Inflation Fund)
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. The
information for DWS Core Fixed Income Fund, DWS Global Inflation Fund, DWS GNMA
Fund, DWS Global High Income Fund, DWS Ultra-Short Duration Fund and DWS Short
Duration Fund has been audited by PricewaterhouseCoopers LLP, independent
registered public accounting firm, and the information for DWS High Income
Fund, DWS Strategic Government Securities Fund and DWS Unconstrained Income
Fund has been audited by Ernst & Young LLP, independent registered public
accounting firm, whose report, along with each fund's financial statements, is
included in each fund's annual report (see "Shareholder reports" on the back
cover).
DWS CORE FIXED INCOME FUND - CLASS A
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
------------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 9.65 $ 9.45 $ 9.04 $ 9.01
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .26 .23 .24 .27 .42
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .37) .47 .20 .41 .02
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .11) .70 .44 .68 .44
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .26) ( .23) ( .24) ( .27) ( .41)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 10.12 $ 9.65 $ 9.45 $ 9.04
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) (1.07) 7.36 4.69 7.64 5.18
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 135 164 173 242 313
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.04 1.00 1.06 1.07 1.05
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) .89 .95 .95 .87 .78
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.63 2.35 2.50 2.96 4.84
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 241(d) 300 384 293 258
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
(d) The portfolio turnover rate, including reverse repurchase
agreements, was 248% for the year ended October 31, 2013.
87
PROSPECTUS February 1, 2014 Financial Highlights
DWS CORE FIXED INCOME FUND - CLASS B
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
------------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 9.64 $ 9.44 $ 9.04 $ 9.00
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .18 .16 .16 .20 .36
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .36) .48 .20 .40 .02
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .18) .64 .36 .60 .38
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .19) ( .16) ( .16) ( .20) ( .34)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 10.12 $ 9.64 $ 9.44 $ 9.04
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) ( 1.83) 6.67 3.90 6.73 4.37
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------- -------
Net assets, end of period ($ millions) 1 2 4 8 12
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.86 1.77 1.76 1.77 1.84
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.64 1.71 1.70 1.61 1.55
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 1.81 1.60 1.75 2.22 4.07
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 241(d) 300 384 293 258
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
(d) The portfolio turnover rate, including reverse repurchase
agreements, was 248% for the year ended October 31, 2013.
88
PROSPECTUS February 1, 2014 Financial Highlights
DWS CORE FIXED INCOME FUND - CLASS C
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
------------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 9.65 $ 9.45 $ 9.04 $ 9.01
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .18 .16 .17 .20 .36
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .36) .47 .20 .41 .01
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .18) .63 .37 .61 .37
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .19) ( .16) ( .17) ( .20) ( .34)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 10.12 $ 9.65 $ 9.45 $ 9.04
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) ( 1.82) 6.57 3.92 6.85 4.36
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------- -------
Net assets, end of period ($ millions) 12 21 18 24 33
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.72 1.71 1.73 1.72 1.74
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.64 1.70 1.70 1.60 1.55
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 1.83 1.61 1.75 2.23 4.07
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 241(d) 300 384 293 258
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
(d) The portfolio turnover rate, including reverse repurchase
agreements, was 248% for the year ended October 31, 2013.
89
PROSPECTUS February 1, 2014 Financial Highlights
DWS CORE FIXED INCOME FUND - CLASS R
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
------------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 9.70 $ 9.50 $ 9.09 $ 9.05
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .23 .21 .21 .25 .40
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .35) .47 .21 .41 .03
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .12) .68 .42 .66 .43
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .24) ( .21) ( .22) ( .25) ( .39)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 10.17 $ 9.70 $ 9.50 $ 9.09
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b) (1.21) 7.07 4.44 7.39 5.02
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1 1 2 2 3
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.37 1.35 1.59 1.13 1.35
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.14 1.20 1.19 1.08 1.06
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.31 2.10 2.26 2.75 4.57
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 241(c) 300 384 293 258
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
(c) The portfolio turnover rate, including reverse repurchase
agreements, was 248% for the year ended October 31, 2013.
90
PROSPECTUS February 1, 2014 Financial Highlights
DWS CORE FIXED INCOME FUND - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------------- ---------------- ---------- --------------- ---------------
SELECTED PER SHARE DATA
------------------------------------------------------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 9.65 $ 9.45 $ 9.04 $ 9.01
------------------------------------------------ -------- -------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .29 .26 .26 .30 .44
------------------------------------------------ -------- -------- ------- ------- -------
Net realized and unrealized gain (loss) ( .37) .47 .20 .41 .02
------------------------------------------------ -------- -------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .08) .73 .46 .71 .46
------------------------------------------------ -------- -------- ------- ------- -------
Less distributions from:
Net investment income ( .29) ( .26) ( .26) ( .30) ( .43)
------------------------------------------------ -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 10.12 $ 9.65 $ 9.45 $ 9.04
------------------------------------------------ -------- -------- ------- ------- -------
Total Return (%) ( .82)(b) 7.67 (b) 4.98 7.93 (b) 5.42 (b)
------------------------------------------------ -------- -------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------- -------
Net assets, end of period ($ millions) 131 172 141 162 239
------------------------------------------------ -------- -------- ------- ------- -------
Ratio of expenses before expense reductions (%) .67 .67 .68 .70 .68
------------------------------------------------ -------- -------- ------- ------- -------
Ratio of expenses after expense reductions (%) .64 .67 .68 .60 .55
------------------------------------------------ -------- -------- ------- ------- -------
Ratio of net investment income (%) 2.87 2.64 2.77 3.23 5.07
------------------------------------------------ -------- -------- ------- ------- -------
Portfolio turnover rate (%) 241(c) 300 384 293 258
------------------------------------------------ -------- -------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
(c) The portfolio turnover rate, including reverse repurchase
agreements, was 248% for the year ended October 31, 2013.
91
PROSPECTUS February 1, 2014 Financial Highlights
DWS CORE FIXED INCOME FUND - CLASS S
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
--------------- ---------------- ------------ --------------- ---------------
SELECTED PER SHARE DATA
-------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 9.64 $ 9.44 $ 9.04 $ 9.00
------------------------------------------------ ------- -------- ------ ------- -------
Income (loss) from investment operations:
Net investment income(a) .27 .25 .25 .29 .44
------------------------------------------------ ------- -------- ------ ------- -------
Net realized and unrealized gain (loss) ( .36) .48 .20 .40 .03
------------------------------------------------ ------- -------- ------ ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .09) .73 .45 .69 .47
------------------------------------------------ ------- -------- ------ ------- -------
Less distributions from:
Net investment income ( .28) ( .25) ( .25) ( .29) ( .43)
------------------------------------------------ ------- -------- ------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 10.12 $ 9.64 $ 9.44 $ 9.04
------------------------------------------------ ------- -------- ------ ------- -------
Total Return (%) ( .92)(b) 7.69 (b) 4.88 7.71 (b) 5.42 (b)
------------------------------------------------ ------- -------- ------ ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 23 30 31 50 54
------------------------------------------------ ------- -------- ------ ------- -------
Ratio of expenses before expense reductions (%) .77 .74 .78 .80 .76
------------------------------------------------ ------- -------- ------ ------- -------
Ratio of expenses after expense reductions (%) .74 .74 .78 .70 .56
------------------------------------------------ ------- -------- ------ ------- -------
Ratio of net investment income (%) 2.77 2.57 2.67 3.13 5.06
------------------------------------------------ ------- -------- ------ ------- -------
Portfolio turnover rate (%) 241(c) 300 384(c) 293 258
------------------------------------------------ ------- -------- ------ ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
(c) The portfolio turnover rate, including reverse repurchase
agreements, was 248% for the year ended October 31, 2013.
92
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL INFLATION FUND - CLASS A
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
----------- ----------- ----------- ---------- -----------
SELECTED PER SHARE DATA
-------------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.25 $ 11.11 $ 10.39 $ 9.65 $ 10.09
------------------------------------------------ -------- -------- -------- ------- --------
Income (loss) from investment operations:
Net investment income(a) .14 .08 .31 .15 .06
------------------------------------------------ -------- -------- -------- ------- --------
Net realized and unrealized gain (loss) ( 1.13) .79 .64 .73 .20
------------------------------------------------ -------- -------- -------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS ( .99) .87 .95 .88 .26
------------------------------------------------ -------- -------- -------- ------- --------
Less distributions from:
Net investment income ( .04) ( .31) ( .23) ( .14) ( .45)
------------------------------------------------ -------- -------- -------- ------- --------
Net realized gains ( .18) ( .42) - - ( .15)
------------------------------------------------ -------- -------- -------- ------- --------
Tax return of capital - - - - ( .10)
------------------------------------------------ -------- -------- -------- ------- --------
TOTAL DISTRIBUTIONS ( .22) ( .73) ( .23) ( .14) ( .70)
------------------------------------------------ -------- -------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 10.04 $ 11.25 $ 11.11 $ 10.39 $ 9.65
------------------------------------------------ -------- -------- -------- ------- --------
Total Return (%)(b,c) ( 8.95) 8.23 9.11 9.15 3.10
------------------------------------------------ -------- -------- -------- ------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------- -------- ------- --------
Net assets, end of period ($ millions) 19 41 41 31 23
------------------------------------------------ -------- -------- -------- ------- --------
Ratio of expenses before expense reductions (%) 1.00 1.00 1.00 1.05 1.14
------------------------------------------------- -------- -------- -------- ------- --------
Ratio of expenses after expense reductions (%) .87 .98 .91 .90 .91
------------------------------------------------- -------- -------- -------- ------- --------
Ratio of net investment income (%) 1.28 .73 2.91 1.52 .61
------------------------------------------------- -------- -------- -------- ------- --------
Portfolio turnover rate (%) 104 80 118 237 114
------------------------------------------------- -------- -------- -------- ------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
93
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL INFLATION FUND - CLASS B
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
----------- ----------- ----------- ---------- -----------
SELECTED PER SHARE DATA
-------------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.36 $ 11.23 $ 10.51 $ 9.76 $ 10.13
------------------------------------------------ -------- ------- -------- ------- --------
Income (loss) from investment operations:
Net investment income (loss)(a) .06 ( .00)* .23 .07 ( .01)
------------------------------------------------ -------- ------- -------- ------- --------
Net realized and unrealized gain (loss) ( 1.13) .78 .64 .74 .20
------------------------------------------------ -------- ------- -------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS ( 1.07) .78 .87 .81 .19
------------------------------------------------ -------- ------- -------- ------- --------
Less distributions from:
Net investment income ( .01) ( .23) ( .15) ( .06) ( .31)
------------------------------------------------ -------- ------- -------- ------- --------
Net realized gains ( .18) ( .42) - - ( .15)
------------------------------------------------ -------- ------- -------- ------- --------
Tax return of capital - - - - ( .10)
------------------------------------------------ -------- ------- -------- ------- --------
TOTAL DISTRIBUTIONS ( .19) ( .65) ( .15) ( .06) ( .56)
------------------------------------------------ -------- ------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 11.36 $ 11.23 $ 10.51 $ 9.76
------------------------------------------------ -------- ------- -------- ------- --------
Total Return (%)(b,c) ( 9.55) 7.26 8.31 8.36 2.28
------------------------------------------------ -------- ------- -------- ------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------- -------- ------- --------
Net assets, end of period ($ millions) 1 2 2 3 3
------------------------------------------------ -------- ------- -------- ------- --------
Ratio of expenses before expense reductions (%) 1.80 1.81 1.81 1.86 1.96
------------------------------------------------- -------- ------- -------- ------- --------
Ratio of expenses after expense reductions (%) 1.62 1.76 1.66 1.65 1.66
------------------------------------------------- -------- ------- -------- ------- --------
Ratio of net investment income (loss) (%) .53 ( .01) 2.16 .77 ( .14)
------------------------------------------------- -------- ------- -------- ------- --------
Portfolio turnover rate (%) 104 80 118 237 114
------------------------------------------------- -------- ------- -------- ------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
* Amount is more than ($.005).
94
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL INFLATION FUND - CLASS C
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
----------- ----------- ----------- ---------- -----------
SELECTED PER SHARE DATA
-------------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.38 $ 11.24 $ 10.52 $ 9.76 $ 10.14
------------------------------------------------ -------- -------- -------- ------- --------
Income (loss) from investment operations:
Net investment income(a) .06 .00* .23 .07 ( .01)
------------------------------------------------ -------- -------- -------- ------- --------
Net realized and unrealized gain (loss) ( 1.14) .79 .64 .75 .19
------------------------------------------------ -------- -------- -------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS ( 1.08) .79 .87 .82 .18
------------------------------------------------ -------- -------- -------- ------- --------
Less distributions from:
Net investment income ( .01) ( .23) ( .15) ( .06) ( .31)
------------------------------------------------ -------- -------- -------- ------- --------
Net realized gains ( .18) ( .42) - - ( .15)
------------------------------------------------ -------- -------- -------- ------- --------
Tax return of capital - - - - ( .10)
------------------------------------------------ -------- -------- -------- ------- --------
TOTAL DISTRIBUTIONS ( .19) ( .65) ( .15) ( .06) ( .56)
------------------------------------------------ -------- -------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 11.38 $ 11.24 $ 10.52 $ 9.76
------------------------------------------------ -------- -------- -------- ------- --------
Total Return (%)(b,c) ( 9.62) 7.45 8.21 8.46 2.27
------------------------------------------------ -------- -------- -------- ------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------- -------- ------- --------
Net assets, end of period ($ millions) 11 22 16 14 12
------------------------------------------------ -------- -------- -------- ------- --------
Ratio of expenses before expense reductions (%) 1.75 1.74 1.73 1.80 1.89
------------------------------------------------- -------- -------- -------- ------- --------
Ratio of expenses after expense reductions (%) 1.62 1.73 1.66 1.65 1.66
------------------------------------------------- -------- -------- -------- ------- --------
Ratio of net investment income (%) .59 .01 2.16 .77 ( .14)
------------------------------------------------- -------- -------- -------- ------- --------
Portfolio turnover rate (%) 104 80 118 237 114
------------------------------------------------- -------- -------- -------- ------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
* Amount is less than $.005.
95
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL INFLATION FUND - INSTITUTIONAL CLASS
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
---------------- ----------- ----------- ---------------- ----------------
SELECTED PER SHARE DATA
-------------------------------------------------------------------------------------------- - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.22 $ 11.07 $ 10.36 $ 9.62 $ 10.09
------------------------------------------------ -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income(a) .15 .12 .34 .18 .08
------------------------------------------------ -------- -------- -------- -------- --------
Net realized and unrealized gain (loss) ( 1.11) .78 .63 .72 .19
------------------------------------------------ -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS ( .96) .90 .97 .90 .27
------------------------------------------------ -------- -------- -------- -------- --------
Less distributions from:
Net investment income ( .07) ( .33) ( .26) ( .16) ( .49)
------------------------------------------------ -------- -------- -------- -------- --------
Net realized gains ( .18) ( .42) - - ( .15)
------------------------------------------------ -------- -------- -------- -------- --------
Tax return of capital - - - - ( .10)
------------------------------------------------ -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS ( .25) ( .75) ( .26) ( .16) ( .74)
------------------------------------------------ -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.01 $ 11.22 $ 11.07 $ 10.36 $ 9.62
------------------------------------------------ -------- -------- -------- -------- --------
Total Return (%) ( 8.69)(b) 8.54 9.42 9.44 (b) 3.31 (b)
------------------------------------------------ -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------- -------- --------
Net assets, end of period ($ millions) 110 149 146 143 90
------------------------------------------------ -------- -------- -------- -------- --------
Ratio of expenses before expense reductions (%) .63 .63 .63 .68 .75
------------------------------------------------- -------- -------- -------- -------- --------
Ratio of expenses after expense reductions (%) .62 .63 .63 .65 .66
------------------------------------------------- -------- -------- -------- -------- --------
Ratio of net investment income (%) 1.43 1.10 3.19 1.77 .86
------------------------------------------------- -------- -------- -------- -------- --------
Portfolio turnover rate (%) 104 80 118 237 114
------------------------------------------------- -------- -------- -------- -------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
96
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL INFLATION FUND - CLASS S
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
----------- ----------- ----------- ---------- -----------
SELECTED PER SHARE DATA
-------------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.21 $ 11.07 $ 10.36 $ 9.62 $ 10.08
------------------------------------------------ -------- -------- -------- ------- --------
Income (loss) from investment operations:
Net investment income(a) .16 .09 .34 .18 .08
------------------------------------------------ -------- -------- -------- ------- --------
Net realized and unrealized gain (loss) ( 1.12) .80 .62 .72 .20
------------------------------------------------ -------- -------- -------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS ( .96) .89 .96 .90 .28
------------------------------------------------ -------- -------- -------- ------- --------
Less distributions from:
Net investment income ( .06) ( .33) ( .25) ( .16) ( .49)
------------------------------------------------ -------- -------- -------- ------- --------
Net realized gains ( .18) ( .42) - - ( .15)
------------------------------------------------ -------- -------- -------- ------- --------
Tax return of capital - - - - ( .10)
------------------------------------------------ -------- -------- -------- ------- --------
TOTAL DISTRIBUTIONS ( .24) ( .75) ( .25) ( .16) ( .74)
------------------------------------------------ -------- -------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 10.01 $ 11.21 $ 11.07 $ 10.36 $ 9.62
------------------------------------------------ -------- -------- -------- ------- --------
Total Return (%)(b) ( 8.70) 8.39 9.41 9.44 3.35
------------------------------------------------ -------- -------- -------- ------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------- -------- ------- --------
Net assets, end of period ($ millions) 10 41 29 23 19
------------------------------------------------ -------- -------- -------- ------- --------
Ratio of expenses before expense reductions (%) .86 .84 .84 .94 .98
------------------------------------------------- -------- -------- -------- ------- --------
Ratio of expenses after expense reductions (%) .62 .79 .66 .65 .67
------------------------------------------------- -------- -------- -------- ------- --------
Ratio of net investment income (%) 1.50 .85 3.16 1.77 .85
------------------------------------------------- -------- -------- -------- ------- --------
Portfolio turnover rate (%) 104 80 118 237 114
------------------------------------------------- -------- -------- -------- ------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
97
PROSPECTUS February 1, 2014 Financial Highlights
DWS GNMA FUND - CLASS A
YEARS ENDED SEPTEMBER 30, PERIOD ENDED
2013 2012 2011 2010 9/30/09(A)
----------- ----------- ----------- ----------- -------------
SELECTED PER SHARE DATA
------------------------------------------------------- - - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.55 $ 15.56 $ 15.41 $ 15.24 $ 14.81
------------------------------------------ -------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment income(b) .27 .40 .52 .53 .41
------------------------------------------- -------- -------- -------- -------- -------
Net realized and unrealized gain (loss) ( .93) .29 .31 .33 .55
------------------------------------------- -------- -------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .66) .69 .83 .86 .96
------------------------------------------- -------- -------- -------- -------- -------
Less distributions from:
Net investment income ( .54) ( .70) ( .68) ( .69) ( .53)
------------------------------------------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 14.35 $ 15.55 $ 15.56 $ 15.41 $ 15.24
------------------------------------------- -------- -------- -------- -------- -------
Total Return (%)(c) ( 4.31) 4.53 5.55 5.78 6.62**
------------------------------------------- -------- -------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------- -------- -------- -------- -------
Net assets, end of period ($ millions) 155 181 43 35 11
------------------------------------------- -------- -------- -------- -------- -------
Ratio of expenses (%) .79 .76 .78 .76 .64*
------------------------------------------- -------- -------- -------- -------- -------
Ratio of net investment income (%) 1.82 2.60 3.38 3.42 4.18*
------------------------------------------- -------- -------- -------- -------- -------
Portfolio turnover rate (%) 348 491 211 221 264
------------------------------------------- -------- -------- -------- -------- -------
|
(a) For the period from February 2, 2009 (commencement of operations) to
September 30, 2009.
(b) Based on average shares outstanding during the period.
(c) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
98
PROSPECTUS February 1, 2014 Financial Highlights
DWS GNMA FUND - CLASS C
YEARS ENDED SEPTEMBER 30, PERIOD ENDED
2013 2012 2011 2010 9/30/09(A)
----------- ----------- ----------- ----------- -------------
SELECTED PER SHARE DATA
------------------------------------------------------- - - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.56 $ 15.57 $ 15.42 $ 15.25 $ 14.81
------------------------------------------ -------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment income(b) .16 .29 .41 .41 .33
------------------------------------------- -------- -------- -------- -------- -------
Net realized and unrealized gain (loss) ( .93) .28 .31 .34 .57
------------------------------------------- -------- -------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .77) .57 .72 .75 .90
------------------------------------------- -------- -------- -------- -------- -------
Less distributions from:
Net investment income ( .43) ( .58) ( .57) ( .58) ( .46)
------------------------------------------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 14.36 $ 15.56 $ 15.57 $ 15.42 $ 15.25
------------------------------------------- -------- -------- -------- -------- -------
Total Return (%)(c) ( 5.04) 3.73 4.75 4.98 6.14**
------------------------------------------- -------- -------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------- -------- -------- -------- -------
Net assets, end of period ($ millions) 101 112 30 24 7
------------------------------------------- -------- -------- -------- -------- -------
Ratio of expenses (%) 1.56 1.52 1.54 1.52 1.40*
------------------------------------------- -------- -------- -------- -------- -------
Ratio of net investment income (%) 1.05 1.86 2.62 2.66 3.44*
------------------------------------------- -------- -------- -------- -------- -------
Portfolio turnover rate (%) 348 491 211 221 264
------------------------------------------- -------- -------- -------- -------- -------
|
(a) For the period from February 2, 2009 (commencement of operations) to
September 30, 2009.
(b) Based on average shares outstanding during the period.
(c) Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
99
PROSPECTUS February 1, 2014 Financial Highlights
DWS GNMA FUND - CLASS R
YEAR ENDED PERIOD ENDED
9/30/13 9/30/12(A)
------------ --------------------
SELECTED PER SHARE DATA
-------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.58 $ 15.62
------------------------------------------------ -------- ---------
Income (loss) from investment operations:
Net investment income(b) .24 .16
------------------------------------------------ -------- ---------
Net realized and unrealized gain (loss) ( .94) .07
------------------------------------------------ -------- ---------
TOTAL FROM INVESTMENT OPERATIONS ( .70) .23
------------------------------------------------ -------- ---------
Less distributions from:
Net investment income ( .51) ( .27)
------------------------------------------------ -------- ---------
NET ASSET VALUE, END OF PERIOD $ 14.37 $ 15.58
------------------------------------------------ -------- ---------
Total Return (%) ( 4.62) 1.50 (c)**
------------------------------------------------ -------- ---------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------- ---------
Net assets, end of period ($ thousands) 604 13
------------------------------------------------ -------- ---------
Ratio of expenses before expense reductions (%) 1.18 1.41*
------------------------------------------------- -------- ---------
Ratio of expenses after expense reductions (%) 1.18 1.04*
------------------------------------------------- -------- ---------
Ratio of net investment income (%) 1.62 2.48*
------------------------------------------------- -------- ---------
Portfolio turnover rate (%) 348 491
------------------------------------------------- -------- ---------
|
(a) For the period from May 1, 2012 (commencement of operations) to
September 30, 2012.
(b) Based on average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been
reduced.
* Annualized
** Not annualized
100
PROSPECTUS February 1, 2014 Financial Highlights
DWS GNMA FUND - INSTITUTIONAL CLASS
YEARS ENDED SEPTEMBER 30, PERIOD ENDED
2013 2012 2011 2010 9/30/09(A)
----------- ----------- ----------- ----------- -------------
SELECTED PER SHARE DATA
------------------------------------------------------- - - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.56 $ 15.58 $ 15.43 $ 15.24 $ 14.81
------------------------------------------ -------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment income(b) .31 .42 .57 .57 .42
------------------------------------------- -------- -------- -------- -------- -------
Net realized and unrealized gain (loss) ( .94) .31 .31 .34 .56
------------------------------------------- -------- -------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .63) .73 .88 .91 .98
------------------------------------------- -------- -------- -------- -------- -------
Less distributions from:
Net investment income ( .58) ( .75) ( .73) ( .72) ( .55)
------------------------------------------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 14.35 $ 15.56 $ 15.58 $ 15.43 $ 15.24
------------------------------------------- -------- -------- -------- -------- -------
Total Return (%) ( 4.13) 4.77 5.86 6.12 6.76**
------------------------------------------- -------- -------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------- -------- -------- -------- -------
Net assets, end of period ($ millions) 8 9 .47 8 7
------------------------------------------- -------- -------- -------- -------- -------
Ratio of expenses (%) .53 .51 .47 .45 .47*
------------------------------------------- -------- -------- -------- -------- -------
Ratio of net investment income (%) 2.08 2.67 3.69 3.73 4.29*
------------------------------------------- -------- -------- -------- -------- -------
Portfolio turnover rate (%) 348 491 211 221 264
------------------------------------------- -------- -------- -------- -------- -------
|
(a) For the period from February 2, 2009 (commencement of operations) to
September 30, 2009.
(b) Based on average shares outstanding during the period.
* Annualized
** Not annualized
101
PROSPECTUS February 1, 2014 Financial Highlights
DWS GNMA FUND - CLASS S
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
----------- ----------- ----------- ----------- -----------
SELECTED PER SHARE DATA
---------------------------------------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.58 $ 15.59 $ 15.44 $ 15.25 $ 14.72
------------------------------------------ -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income(a) .31 .45 .56 .56 .66
------------------------------------------- -------- -------- -------- -------- --------
Net realized and unrealized gain (loss) ( .95) .28 .31 .34 .69
------------------------------------------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS ( .64) .73 .87 .90 1.35
------------------------------------------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income ( .57) ( .74) ( .72) ( .71) ( .82)
------------------------------------------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 14.37 $ 15.58 $ 15.59 $ 15.44 $ 15.25
------------------------------------------- -------- -------- -------- -------- --------
Total Return (%) ( 4.10) 4.70 5.84 5.96 9.41
------------------------------------------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1,707 2,215 2,096 2,178 2,225
------------------------------------------- -------- -------- -------- -------- --------
Ratio of expenses (%) .55 .54 .54 .54 .55
------------------------------------------- -------- -------- -------- -------- --------
Ratio of net investment income (%) 2.06 2.86 3.62 3.64 4.42
------------------------------------------- -------- -------- -------- -------- --------
Portfolio turnover rate (%) 348 491 211 221 264
------------------------------------------- -------- -------- -------- -------- --------
|
(a) Based on average shares outstanding during the period.
102
PROSPECTUS February 1, 2014 Financial Highlights
DWS HIGH INCOME FUND - CLASS A
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.90 $ 4.42 $ 4.77 $ 4.44 $ 4.32
------------------------------------------ ------- ------- ------- ------- ------
Income (loss) from investment operations:
Net investment income(a) .30 .32 .37 .38 .35
------------------------------------------- ------- ------- ------- ------- ------
Net realized and unrealized gain (loss) .03 .49 ( .31) .33 .12
------------------------------------------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS .33 .81 .06 .71 .47
------------------------------------------- ------- ------- ------- ------- ------
Less distributions from:
Net investment income ( .33) ( .33) ( .39) ( .38) ( .35)
------------------------------------------- ------- ------- ------- ------- ------
Net realized gains ( .01) - ( .02) - -
------------------------------------------- ------- ------- ------- ------- ------
Return of capital - - - - ( .00)*
------------------------------------------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS ( .34) ( .33) ( .41) ( .38) ( .35)
------------------------------------------- ------- ------- ------- ------- ------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 4.89 $ 4.90 $ 4.42 $ 4.77 $ 4.44
------------------------------------------- ------- ------- ------- ------- ------
Total Return (%)(b) 6.84 18.96 .91 16.69 12.91
------------------------------------------- ------- ------- ------- ------- ------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1,199 1,338 1,125 1,294 1,271
------------------------------------------- ------- ------- ------- ------- ------
Ratio of expenses (%) .92 .92 .93 .96 .96
------------------------------------------- ------- ------- ------- ------- ------
Ratio of net investment income (%) 6.00 6.77 7.58 8.26 9.16
------------------------------------------- ------- ------- ------- ------- ------
Portfolio turnover rate (%) 54 50 68 73 69
------------------------------------------- ------- ------- ------- ------- ------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
* Amount is less than $.005.
103
PROSPECTUS February 1, 2014 Financial Highlights
DWS HIGH INCOME FUND - CLASS B
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.90 $ 4.42 $ 4.77 $ 4.44 $ 4.32
------------------------------------------ ------- ------- ------- ------- ------
Income (loss) from investment operations:
Net investment income(a) .26 .28 .33 .34 .32
------------------------------------------- ------- ------- ------- ------- ------
Net realized and unrealized gain (loss) .03 .50 ( .31) .33 .12
------------------------------------------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS .29 .78 .02 .67 .44
------------------------------------------- ------- ------- ------- ------- ------
Less distributions from:
Net investment income ( .29) ( .30) ( .35) ( .34) ( .32)
------------------------------------------- ------- ------- ------- ------- ------
Net realized gains ( .01) - ( .02) - -
------------------------------------------- ------- ------- ------- ------- ------
Return of capital - - - - ( .00)*
------------------------------------------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS ( .30) ( .30) ( .37) ( .34) ( .32)
------------------------------------------- ------- ------- ------- ------- ------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 4.89 $ 4.90 $ 4.42 $ 4.77 $ 4.44
------------------------------------------- ------- ------- ------- ------- ------
Total Return (%)(b) 5.95 18.01 11 15.74 11.98
------------------------------------------- ------- ------- ------- ------- ------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 7 15 21 34 44
------------------------------------------- ------- ------- ------- ------- ------
Ratio of expenses (%) 1.73 1.74 1.71 1.75 1.77
------------------------------------------- ------- ------- ------- ------- ------
Ratio of net investment income (%) 5.20 5.98 6.80 7.46 8.35
------------------------------------------- ------- ------- ------- ------- ------
Portfolio turnover rate (%) 54 50 68 73 69
------------------------------------------- ------- ------- ------- ------- ------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
* Amount is less than $.005.
104
PROSPECTUS February 1, 2014 Financial Highlights
DWS HIGH INCOME FUND - CLASS C
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.90 $ 4.42 $ 4.78 $ 4.44 $ 4.33
------------------------------------------ ------- ------- ------- ------- ------
Income (loss) from investment operations:
Net investment income(a) .26 .28 .33 .35 .32
------------------------------------------- ------- ------- ------- ------- ------
Net realized and unrealized gain (loss) .04 .50 ( .32) .34 .12
------------------------------------------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 30 .78 .01 .69 .44
------------------------------------------- ------- ------- ------- ------- ------
Less distributions from:
Net investment income ( .29) ( .30) ( .35) ( .35) ( .33)
------------------------------------------- ------- ------- ------- ------- ------
Net realized gains ( .01) - ( .02) - -
------------------------------------------- ------- ------- ------- ------- ------
Return of capital - - - - ( .00)*
------------------------------------------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS ( .30) ( .30) ( .37) ( .35) ( .33)
------------------------------------------- ------- ------- ------- ------- ------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 4.90 $ 4.90 $ 4.42 $ 4.78 $ 4.44
------------------------------------------- ------- ------- ------- ------- ------
Total Return (%)(b) 6.23 18.05 .16 15.81 11.80
------------------------------------------- ------- ------- ------- ------- ------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 114 120 98 110 110
------------------------------------------- ------- ------- ------- ------- ------
Ratio of expenses (%) 1.69 1.69 1.68 1.71 1.72
------------------------------------------- ------- ------- ------- ------- ------
Ratio of net investment income (%) 5.23 6.00 6.83 7.50 8.40
------------------------------------------- ------- ------- ------- ------- ------
Portfolio turnover rate (%) 54 50 68 73 69
------------------------------------------- ------- ------- ------- ------- ------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charges.
* Amount is less than $.005.
105
PROSPECTUS February 1, 2014 Financial Highlights
DWS HIGH INCOME FUND - CLASS R
YEAR ENDED PERIOD ENDED
9/30/13 9/30/12(A)
------------ -------------
SELECTED PER SHARE DATA
-------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.89 $ 4.81
------------------------------------------------ ------- -------
Income (loss) from investment operations:
Net investment income(b) .28 .13
------------------------------------------------ ------- -------
Net realized and unrealized gain (loss) .04 .08
------------------------------------------------ ------- -------
TOTAL FROM INVESTMENT OPERATIONS .32 .21
------------------------------------------------ ------- -------
Less distributions from:
Net investment income ( .31) ( .13)
------------------------------------------------ ------- -------
Net realized gains ( .01) -
------------------------------------------------ ------- -------
TOTAL DISTRIBUTIONS ( .32) ( .13)
------------------------------------------------ ------- -------
Redemption fees .00*** .00***
------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 4.89 $ 4.89
------------------------------------------------ ------- -------
Total Return (%)(c) 6.59 4.41**
------------------------------------------------ ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------- -------
Net assets, end of period ($ thousands) 31 1
------------------------------------------------ ------- -------
Ratio of expenses before expense reductions (%) 1.50 5.59*
------------------------------------------------- ------- -------
Ratio of expenses after expense reductions (%) 1.32 1.40*
------------------------------------------------- ------- -------
Ratio of net investment income (%) 5.57 6.34*
------------------------------------------------- ------- -------
Portfolio turnover rate (%) 54 50
------------------------------------------------- ------- -------
|
(a) For the period from May 1, 2012 (commencement of operations of Class
R) to September 30, 2012.
(b) Based on average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been
reduced.
* Annualized
** Not annualized
*** Amount is less than $.005.
106
PROSPECTUS February 1, 2014 Financial Highlights
DWS HIGH INCOME FUND - INSTITUTIONAL CLASS
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.90 $ 4.42 $ 4.77 $ 4.44 $ 4.33
------------------------------------------ ------- ------- ------- ------- ------
Income (loss) from investment operations:
Net investment income(a) .31 .33 .38 .39 .36
------------------------------------------- ------- ------- ------- ------- ------
Net realized and unrealized gain (loss) .04 .50 ( .31) .34 .12
------------------------------------------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS .35 .83 .07 .73 .48
------------------------------------------- ------- ------- ------- ------- ------
Less distributions from:
Net investment income ( .34) ( .35) ( .40) ( .40) ( .37)
------------------------------------------- ------- ------- ------- ------- ------
Net realized gains ( .01) - ( .02) - -
------------------------------------------- ------- ------- ------- ------- ------
Return of capital - - - - ( .00)*
------------------------------------------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS ( .35) ( .35) ( .42) ( .40) ( .37)
------------------------------------------- ------- ------- ------- ------- ------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 4.90 $ 4.90 $ 4.42 $ 4.77 $ 4.44
------------------------------------------- ------- ------- ------- ------- ------
Total Return (%) 7.34 19.29 1.22 17.03 13.00
------------------------------------------- ------- ------- ------- ------- ------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 118 189 58 67 92
------------------------------------------- ------- ------- ------- ------- ------
Ratio of expenses (%) .66 .66 .66 .68 .67
------------------------------------------- ------- ------- ------- ------- ------
Ratio of net investment income (%) 6.24 7.06 7.85 8.53 9.45
------------------------------------------- ------- ------- ------- ------- ------
Portfolio turnover rate (%) 54 50 68 73 69
------------------------------------------- ------- ------- ------- ------- ------
|
(a) Based on average shares outstanding during the period.
* Amount is less than $.005.
107
PROSPECTUS February 1, 2014 Financial Highlights
DWS HIGH INCOME FUND - CLASS S
YEAR ENDED PERIOD ENDED
9/30/13 9/30/12(A)
------------ -------------
SELECTED PER SHARE DATA
-------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.89 $ 4.81
------------------------------------------------ ------- -------
Income (loss) from investment operations:
Net investment income(b) .30 .13
------------------------------------------------ ------- -------
Net realized and unrealized gain (loss) .04 .09
------------------------------------------------ ------- -------
TOTAL FROM INVESTMENT OPERATIONS .34 .22
------------------------------------------------ ------- -------
Less distributions from:
Net investment income ( .33) ( .14)
------------------------------------------------ ------- -------
Net realized gains ( .01) -
------------------------------------------------ ------- -------
TOTAL DISTRIBUTIONS ( .34) ( .14)
------------------------------------------------ ------- -------
Redemption fees .00*** .00***
------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 4.89 $ 4.89
------------------------------------------------ ------- -------
Total Return (%)(c) 7.11 4.71**
------------------------------------------------ ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------- -------
Net assets, end of period ($ millions) 20 17
------------------------------------------------ ------- -------
Ratio of expenses before expense reductions (%) .85 .92*
------------------------------------------------- ------- -------
Ratio of expenses after expense reductions (%) .82 .90*
------------------------------------------------- ------- -------
Ratio of net investment income (%) 6.08 6.61*
------------------------------------------------- ------- -------
Portfolio turnover rate (%) 54 50
------------------------------------------------- ------- -------
|
(a) For the period from May 1, 2012 (commencement of operations of Class
S) to September 30, 2012.
(b) Based on average shares outstanding during the period.
(c) Total return would have been lower had certain expenses not been
reduced.
* Annualized
** Not annualized
*** Amount is less than $.005.
108
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL HIGH INCOME FUND - CLASS A
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- -------------- ---------- -------------- --------------
SELECTED PER SHARE DATA
---------------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.08 $ 6.74 $ 6.91 $ 6.36 $ 5.26
------------------------------------------------ ------- -------- ------- -------- --------
Income (loss) from investment operations:
Net investment income (loss)(a) .42 .47 .49 .52 .50
------------------------------------------------ ------- -------- ------- -------- --------
Net realized and unrealized gain (loss) .11 .34 ( .16) .55 1.12
------------------------------------------------ ------- -------- ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS .53 .81 .33 1.07 1.62
------------------------------------------------ ------- -------- ------- -------- --------
Less distributions from:
Net investment income ( .43) ( .47) ( .49) ( .52) ( .50)
------------------------------------------------ ------- -------- ------- -------- --------
Net realized gains ( .01) - ( .01) - -
------------------------------------------------ ------- -------- ------- -------- --------
Return of capital - - - - ( .02)
------------------------------------------------ ------- -------- ------- -------- --------
TOTAL DISTRIBUTIONS ( .44) ( .47) ( .50) ( .52) ( .52)
------------------------------------------------ ------- -------- ------- -------- --------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------------ ------- -------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.17 $ 7.08 $ 6.74 $ 6.91 $ 6.36
------------------------------------------------ ------- -------- ------- -------- --------
Total Return (%)(b) 7.50 12.49 (c) 4.98 17.48 (c) 32.63 (c)
------------------------------------------------ ------- -------- ------- -------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------- ------- -------- --------
Net assets, end of period ($ millions) 34 33 31 30 27
------------------------------------------------ ------- -------- ------- -------- --------
Ratio of expenses before expense reductions (%) 1.06 1.07 1.07 1.10 1.10
------------------------------------------------- ------- -------- ------- -------- --------
Ratio of expenses after expense reductions (%) 1.06 1.06 1.07 1.04 .98
------------------------------------------------- ------- -------- ------- -------- --------
Ratio of net investment income (%) 5.86 6.79 7.11 7.87 9.02
------------------------------------------------- ------- -------- ------- -------- --------
Portfolio turnover rate (%) 59 69 57 71 67
------------------------------------------------- ------- -------- ------- -------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain operating expenses
not been reduced.
* Amount is less than $.005.
109
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL HIGH INCOME FUND - CLASS B
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
--------------- -------------- ---------- -------------- --------------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.06 $ 6.72 $ 6.89 $ 6.34 $ 5.27
------------------------------------------------ ------- -------- ------- -------- --------
Income (loss) from investment operations:
Net investment income (loss)(a) .37 .41 .44 .47 .46
------------------------------------------------ ------- -------- ------- -------- --------
Net realized and unrealized gain (loss) .12 .35 ( .16) .55 1.10
------------------------------------------------ ------- -------- ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS .49 .76 .28 1.02 1.56
------------------------------------------------ ------- -------- ------- -------- --------
Less distributions from:
Net investment income ( .38) ( .42) ( .44) ( .47) ( .47)
------------------------------------------------ ------- -------- ------- -------- --------
Net realized gains ( .01) - ( .01) - -
------------------------------------------------ ------- -------- ------- -------- --------
Return of capital - - - - ( .02)
------------------------------------------------ ------- -------- ------- -------- --------
TOTAL DISTRIBUTIONS ( .39) ( .42) ( .45) ( .47) ( .49)
------------------------------------------------ ------- -------- ------- -------- --------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------------ ------- -------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.16 $ 7.06 $ 6.72 $ 6.89 $ 6.34
------------------------------------------------ ------- -------- ------- -------- --------
Total Return (%)(b) 6.82 (c) 11.64 (c) 4.16 16.61 (c) 31.47 (c)
------------------------------------------------ ------- -------- ------- -------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------- ------- -------- --------
Net assets, end of period ($ millions) 1 1 2 2 2
------------------------------------------------ ------- -------- ------- -------- --------
Ratio of expenses before expense reductions (%) 1.86 1.85 1.87 1.87 1.89
------------------------------------------------- ------- -------- ------- -------- --------
Ratio of expenses after expense reductions (%) 1.82 1.85 1.87 1.80 1.77
------------------------------------------------- ------- -------- ------- -------- --------
Ratio of net investment income (%) 5.11 6.02 6.32 7.11 8.23
------------------------------------------------- ------- -------- ------- -------- --------
Portfolio turnover rate (%) 59 69 57 71 67
------------------------------------------------- ------- -------- ------- -------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain operating expenses
not been reduced.
* Amount is less than $.005.
110
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL HIGH INCOME FUND - CLASS C
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
--------------- -------------- ---------- -------------- --------------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.11 $ 6.76 $ 6.93 $ 6.38 $ 5.27
------------------------------------------------ ------- -------- ------- -------- --------
Income (loss) from investment operations:
Net investment income (loss)(a) .37 .42 .44 .47 .46
------------------------------------------------ ------- -------- ------- -------- --------
Net realized and unrealized gain (loss) .11 .35 ( .16) .55 1.12
------------------------------------------------ ------- -------- ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS .48 .77 .28 1.02 1.58
------------------------------------------------ ------- -------- ------- -------- --------
Less distributions from:
Net investment income ( .38) ( .42) ( .44) ( .47) ( .45)
------------------------------------------------ ------- -------- ------- -------- --------
Net realized gains ( .01) - ( .01) - -
------------------------------------------------ ------- -------- ------- -------- --------
Return of capital - - - - ( .02)
------------------------------------------------ ------- -------- ------- -------- --------
TOTAL DISTRIBUTIONS ( .39) ( .42) ( .45) ( .47) ( .47)
------------------------------------------------ ------- -------- ------- -------- --------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------------ ------- -------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.20 $ 7.11 $ 6.76 $ 6.93 $ 6.38
------------------------------------------------ ------- -------- ------- -------- --------
Total Return (%)(b) 6.68 (c) 11.84 (c) 4.21 16.60 (c) 31.69 (c)
------------------------------------------------ ------- -------- ------- -------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------- ------- -------- --------
Net assets, end of period ($ millions) 12 12 10 11 8
------------------------------------------------ ------- -------- ------- -------- --------
Ratio of expenses before expense reductions (%) 1.82 1.81 1.81 1.82 1.83
------------------------------------------------- ------- -------- ------- -------- --------
Ratio of expenses after expense reductions (%) 1.82 1.80 1.81 1.76 1.71
------------------------------------------------- ------- -------- ------- -------- --------
Ratio of net investment income (%) 5.10 6.05 6.37 7.15 8.29
------------------------------------------------- ------- -------- ------- -------- --------
Portfolio turnover rate (%) 59 69 57 71 67
------------------------------------------------- ------- -------- ------- -------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain operating expenses
not been reduced.
* Amount is less than $.005.
111
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL HIGH INCOME FUND - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- -------------- --------------
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.06 $ 6.72 $ 6.88 $ 6.34 $ 5.26
------------------------------------------------ ------- ------- ------- -------- --------
Income (loss) from investment operations:
Net investment income (loss)(a) .44 .49 .52 .54 .53
------------------------------------------------ ------- ------- ------- -------- --------
Net realized and unrealized gain (loss) .11 .34 ( .15) .54 1.10
------------------------------------------------ ------- ------- ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS .55 .83 .37 1.08 1.63
------------------------------------------------ ------- ------- ------- -------- --------
Less distributions from:
Net investment income ( .45) ( .49) ( .52) ( .54) ( .53)
------------------------------------------------ ------- ------- ------- -------- --------
Net realized gains ( .01) - ( .01) - -
------------------------------------------------ ------- ------- ------- -------- --------
Return of capital - - - - ( .02)
------------------------------------------------ ------- ------- ------- -------- --------
TOTAL DISTRIBUTIONS ( .46) ( .49) ( .53) ( .54) ( .55)
------------------------------------------------ ------- ------- ------- -------- --------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------------ ------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.15 $ 7.06 $ 6.72 $ 6.88 $ 6.34
------------------------------------------------ ------- ------- ------- -------- --------
Total Return (%) 7.84 12.89 5.52 17.78 (b) 33.12 (b)
------------------------------------------------ ------- ------- ------- -------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 29 42 34 44 44
------------------------------------------------ ------- ------- ------- -------- --------
Ratio of expenses before expense reductions (%) .74 .74 .73 .74 .72
------------------------------------------------- ------- ------- ------- -------- --------
Ratio of expenses after expense reductions (%) .74 .74 .73 .68 .60
------------------------------------------------- ------- ------- ------- -------- --------
Ratio of net investment income (%) 6.20 7.11 7.46 8.23 9.41
------------------------------------------------- ------- ------- ------- -------- --------
Portfolio turnover rate (%) 59 69 57 71 67
------------------------------------------------- ------- ------- ------- -------- --------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
* Amount is less than $.005.
112
PROSPECTUS February 1, 2014 Financial Highlights
DWS GLOBAL HIGH INCOME FUND - CLASS S
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
------------------------------------------------------------------------ - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.11 $ 6.77 $ 6.94 $ 6.39 $ 5.28
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss)(a) .44 .48 .50 .53 .52
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) .12 .35 ( .15) .55 1.11
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .56 .83 .35 1.08 1.63
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .45) ( .49) ( .51) ( .53) ( .50)
------------------------------------------------ ------- ------- ------- ------- -------
Net realized gains ( .01) - ( .01) - -
------------------------------------------------ ------- ------- ------- ------- -------
Return of capital - - - - ( .02)
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .46) ( .49) ( .52) ( .53) ( .52)
------------------------------------------------ ------- ------- ------- ------- -------
Redemption fees .00* .00* .00* .00* .00*
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 7.21 $ 7.11 $ 6.77 $ 6.94 $ 6.39
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b) 7.89 12.68 5.19 17.60 32.79
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------ ------- ------- -------
Net assets, end of period ($ millions) 244 264 260 290 246
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) .89 .89 .90 .98 .82
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) .82 .89 .89 .92 .70
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 6.10 6.97 7.30 7.98 9.30
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 59 69 57 71 67
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain operating expenses
not been reduced.
* Amount is less than $.005.
113
PROSPECTUS February 1, 2014 Financial Highlights
DWS SHORT DURATION FUND - CLASS A
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
--------------- ---------- ---------- ---------- ---------------
SELECTED PER SHARE DATA
------------------------------------------------------------------------------------------------- -
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.31 $ 9.17 $ 9.55 $ 9.40 $ 9.34
-------------------------------------------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .20 .23 .29 .30 .35
-------------------------------------------- ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .08) .18 ( .33) .19 .13
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .12 .41 ( .04) .49 .48
-------------------------------------------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .23) ( .24) ( .29) ( .34) ( .30)
-------------------------------------------- ------- ------- ------- ------- -------
Return of capital ( .02) ( .03) ( .05) - ( .12)
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .25) ( .27) ( .34) ( .34) ( .42)
-------------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.18 $ 9.31 $ 9.17 $ 9.55 $ 9.40
-------------------------------------------- ------- ------- ------- ------- -------
Total Return (%)(b) 1.28 (c) 4.58 ( .51) 5.29 5.50 (c)
-------------------------------------------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 568 664 882 1,176 988
-------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses before expense reductions .87 .86 .84 .83 .88
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions .85 .86 .84 .83 .87
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.20 2.46 3.01 3.15 3.91
--------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate 47 68 93 100 112
--------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
114
PROSPECTUS February 1, 2014 Financial Highlights
DWS SHORT DURATION FUND - CLASS B
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
-------------------------------------------------------------------- - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.33 $ 9.18 $ 9.56 $ 9.42 $ 9.35
-------------------------------------------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .14 .16 .21 .22 .28
-------------------------------------------- ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .09) .19 ( .33) .18 .14
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .05 .35 ( .12) .40 .42
-------------------------------------------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .16) ( .17) ( .21) ( .26) ( .23)
-------------------------------------------- ------- ------- ------- ------- -------
Return of capital ( .02) ( .03) ( .05) - ( .12)
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .18) ( .20) ( .26) ( .26) ( .35)
-------------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.20 $ 9.33 $ 9.18 $ 9.56 $ 9.42
-------------------------------------------- ------- ------- ------- ------- -------
Total Return (%)(b,c) .52 3.88 (1.31) 4.46 4.66
-------------------------------------------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-------------------------------------------------------------------- ------- ------- -------
Net assets, end of period ($ millions) .3 1 1 1 2
-------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses before expense reductions 1.77 1.74 1.69 1.78 1.85
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions 1.60 1.63 1.61 1.63 1.65
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 1.46 1.68 2.24 2.36 3.12
--------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate 47 68 93 100 112
--------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
115
PROSPECTUS February 1, 2014 Financial Highlights
DWS SHORT DURATION FUND - CLASS C
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
--------------- ---------- ---------- ---------- ---------------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.30 $ 9.16 $ 9.54 $ 9.39 $ 9.33
-------------------------------------------- ------- ------ ------ ------ -------
Income (loss) from investment operations:
Net investment income(a) .13 .16 .21 .23 .29
-------------------------------------------- ------- ------ ------ ------ -------
Net realized and unrealized gain (loss) ( .08) .19 ( .33) .19 .13
-------------------------------------------- ------- ------ ------ ------ -------
TOTAL FROM INVESTMENT OPERATIONS .05 .35 ( .12) .42 .42
-------------------------------------------- ------- ------ ------ ------ -------
Less distributions from:
Net investment income ( .16) ( .18) ( .21) ( .27) ( .24)
-------------------------------------------- ------- ------ ------ ------ -------
Return of capital ( .02) ( .03) ( .05) - ( .12)
-------------------------------------------- ------- ------ ------ ------ -------
TOTAL DISTRIBUTIONS ( .18) ( .21) ( .26) ( .27) ( .36)
-------------------------------------------- ------- ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 9.17 $ 9.30 $ 9.16 $ 9.54 $ 9.39
-------------------------------------------- ------- ------ ------ ------ -------
Total Return (%)(b) .53 (c) 3.81 (1.26) 4.50 4.72 (c)
-------------------------------------------- ------- ------ ------ ------ -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 241 288 355 422 329
-------------------------------------------- ------- ------ ------ ------ -------
Ratio of expenses before expense reductions 1.62 1.60 1.58 1.58 1.62
--------------------------------------------- ------- ------ ------ ------ -------
Ratio of expenses after expense reductions 1.60 1.60 1.58 1.58 1.62
--------------------------------------------- ------- ------ ------ ------ -------
Ratio of net investment income (%) 1.45 1.72 2.27 2.40 3.16
--------------------------------------------- ------- ------ ------ ------ -------
Portfolio turnover rate 47 68 93 100 112
--------------------------------------------- ------- ------ ------ ------ -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
116
PROSPECTUS February 1, 2014 Financial Highlights
DWS SHORT DURATION FUND - INSTITUTIONAL CLASS
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
--------------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
------------------------------------------------------------- - - - -
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.32 $ 9.18 $ 9.56 $ 9.42 $ 9.36
-------------------------------------------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .23 .25 .32 .33 .38
-------------------------------------------- ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .10) .19 ( .33) .18 .13
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .13 .44 ( .01) .51 .51
-------------------------------------------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .25) ( .27) ( .32) ( .37) ( .33)
-------------------------------------------- ------- ------- ------- ------- -------
Return of capital ( .02) ( .03) ( .05) - ( .12)
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .27) ( .30) ( .37) ( .37) ( .45)
-------------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.18 $ 9.32 $ 9.18 $ 9.56 $ 9.42
-------------------------------------------- ------- ------- ------- ------- -------
Total Return (%) 1.45 (b) 4.91 ( .18) 5.65 5.74
-------------------------------------------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------------- ------- ------- ------- -------
Net assets, end of period ($ millions) 89 42 64 40 13
-------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses before expense reductions .60 .59 .52 .50 .52
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions .60 .59 .52 .50 .52
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.45 2.74 3.33 3.48 4.25
--------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate 47 68 93 100 112
--------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
117
PROSPECTUS February 1, 2014 Financial Highlights
DWS SHORT DURATION FUND - CLASS S
YEARS ENDED SEPTEMBER 30,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.34 $ 9.19 $ 9.57 $ 9.43 $ 9.36
-------------------------------------------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .23 .25 .31 .32 .37
-------------------------------------------- ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .10) .19 ( .33) .18 .14
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .13 .44 ( .02) .50 .51
-------------------------------------------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .25) ( .26) ( .31) ( .36) ( .32)
-------------------------------------------- ------- ------- ------- ------- -------
Return of capital ( .02) ( .03) ( .05) - ( .12)
-------------------------------------------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .27) ( .29) ( .36) ( .36) ( .44)
-------------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.20 $ 9.34 $ 9.19 $ 9.57 $ 9.43
-------------------------------------------- ------- ------- ------- ------- -------
Total Return (%)(b) 1.42 4.92 ( .31) 5.51 5.71
-------------------------------------------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 899 889 1,241 1,203 1,091
-------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses before expense reductions .69 .70 .68 .71 .70
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions .60 .63 .63 .63 .65
--------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.44 2.70 3.22 3.36 4.12
--------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate 47 68 93 100 112
--------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
118
PROSPECTUS February 1, 2014 Financial Highlights
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS A
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.85 $ 8.93 $ 8.91 $ 8.79 $ 8.08
------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income(a) .17 .23 .29 .30 .34
------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .47) .10 .11 .27 .73
------------------------------------------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .30) .33 .40 .57 1.07
------------------------------------------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .34) ( .41) ( .38) ( .37) ( .36)
------------------------------------------- ------- ------- ------- ------- -------
Net realized gains - - - ( .08) -
------------------------------------------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .34) ( .41) ( .38) ( .45) ( .36)
------------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.21 $ 8.85 $ 8.93 $ 8.91 $ 8.79
------------------------------------------- ------- ------- ------- ------- -------
Total Return (%)(b) (3.46) 3.81 4.62 6.54 13.67
------------------------------------------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1,252 1,599 1,673 1,801 1,847
------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses (%) .81 .79 .79 .80 .81
------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.01 2.57 3.30 3.33 4.00
------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 372 538 214 186 207
------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
119
PROSPECTUS February 1, 2014 Financial Highlights
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS B
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.85 $ 8.93 $ 8.91 $ 8.79 $ 8.07
------------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income(a) .09 .15 .22 .22 .27
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .47) .11 .10 .27 .74
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .38) .26 .32 .49 1.01
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .26) ( .34) ( .30) ( .29) ( .29)
------------------------------------------------ ------- ------- ------- ------- -------
Net realized gains - - - ( .08) -
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .26) ( .34) ( .30) ( .37) ( .29)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.21 $ 8.85 $ 8.93 $ 8.91 $ 8.79
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) (4.24) 2.79 3.67 5.72 12.52
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 2 4 6 9 15
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.76 1.71 1.66 1.72 1.77
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.74 1.69 1.63 1.70 1.69
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 1.03 1.68 2.46 2.43 3.12
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 372 538 214 186 207
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
120
PROSPECTUS February 1, 2014 Financial Highlights
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS C
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.86 $ 8.95 $ 8.93 $ 8.81 $ 8.09
------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income(a) .10 .16 .22 .23 .27
------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .47) .10 .11 .27 .75
------------------------------------------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .37) .26 .33 .50 1.02
------------------------------------------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .27) ( .35) ( .31) ( .30) ( .30)
------------------------------------------- ------- ------- ------- ------- -------
Net realized gains - - - ( .08) -
------------------------------------------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .27) ( .35) ( .31) ( .38) ( .30)
------------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.22 $ 8.86 $ 8.95 $ 8.93 $ 8.81
------------------------------------------- ------- ------- ------- ------- -------
Total Return (%)(b) (4.07) 2.90 3.82 5.83 12.76
------------------------------------------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 57 100 80 82 63
------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses (%) 1.57 1.55 1.56 1.56 1.59
------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 1.21 1.78 2.53 2.57 3.22
------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 372 538 214 186 207
------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
121
PROSPECTUS February 1, 2014 Financial Highlights
DWS STRATEGIC GOVERNMENT SECURITIES FUND - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.82 $ 8.91 $ 8.90 $ 8.79 $ 8.07
------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income(a) .18 .24 .32 .32 .36
------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .47) .11 .10 .26 .74
------------------------------------------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .29) .35 42 .58 1.10
------------------------------------------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .35) ( .44) ( .41) ( .39) ( .38)
------------------------------------------- ------- ------- ------- ------- -------
Net realized gains - - - ( .08) -
------------------------------------------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .35) ( .44) ( .41) ( .47) ( .38)
------------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.18 $ 8.82 $ 8.91 $ 8.90 $ 8.79
------------------------------------------- ------- ------- ------- ------- -------
Total Return (%) (3.18) 3.96 4.79 6.80 13.90
------------------------------------------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 4 11 2 2 .49
------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses (%) .61 .59 .52 .51 .57
------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.12 2.72 3.57 3.62 4.24
------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 372 538 214 186 207
------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
122
PROSPECTUS February 1, 2014 Financial Highlights
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS S
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.85 $ 8.93 $ 8.91 $ 8.80 $ 8.08
------------------------------------------------ -------- ------- ------- ------- -------
Income from investment operations:
Net investment income(a) .18 .24 .31 .31 .36
------------------------------------------------ -------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .47) .11 .11 .27 .74
------------------------------------------------ -------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ( .29) .35 .42 .58 1.10
------------------------------------------------ -------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .35) ( .43) ( .40) ( .39) ( .38)
------------------------------------------------ -------- ------- ------- ------- -------
Net realized gains - - - ( .08) -
------------------------------------------------ -------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .35) ( .43) ( .40) ( .47) ( .38)
------------------------------------------------ -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.21 $ 8.85 $ 8.93 $ 8.91 $ 8.80
------------------------------------------------ -------- ------- ------- ------- -------
Total Return (%) (3.33)(b) 3.96 4.67 6.84 13.87
------------------------------------------------ -------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 79 99 107 93 84
------------------------------------------------ -------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) .68 .65 .63 .62 .64
------------------------------------------------- -------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) .67 .65 .63 .62 .64
------------------------------------------------- -------- ------- ------- ------- -------
Ratio of net investment income (%) 2.15 2.73 3.46 3.51 4.17
------------------------------------------------- -------- ------- ------- ------- -------
Portfolio turnover rate (%) 372 538 214 186 207
------------------------------------------------- -------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
123
PROSPECTUS February 1, 2014 Financial Highlights
DWS ULTRA-SHORT DURATION FUND - CLASS A
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- --------------- ---------------- --------------- ---------------
SELECTED PER SHARE DATA
------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.05 $ 8.89 $ 9.32 $ 9.23 $ 9.00
------------------------------------------------ ------- ------- -------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .23 .30 .31 .31 .35
------------------------------------------------ ------- ------- -------- ------- -------
Net realized and unrealized gain (loss) ( .03) .16 ( .42) .09 .23
------------------------------------------------ ------- ------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .20 .46 ( .11) .40 .58
------------------------------------------------ ------- ------- -------- ------- -------
Less distributions from:
Net investment income ( .23) ( .30) ( .31) ( .31) ( .35)
------------------------------------------------ ------- ------- -------- ------- -------
Return of capital - - ( .01) - -
------------------------------------------------ ------- ------- -------- ------- -------
TOTAL DISTRIBUTIONS ( .23) ( .30) ( .32) ( .31) ( .35)
------------------------------------------------ ------- ------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.02 $ 9.05 $ 8.89 $ 9.32 $ 9.23
------------------------------------------------ ------- ------- -------- ------- -------
Total Return (%)(b) 2.21 5.22 (c) (1.36)(c) 4.50 (c) 6.62 (c)
------------------------------------------------ ------- ------- -------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DA
------------------------------------------------
Net assets, end of period ($ millions) 223 103 71 106 119
------------------------------------------------ ------- ------- -------- ------- -------
Ratio of expenses before expense reductions (%) .95 1.03 1.17 1.08 1.10
------------------------------------------------- ------- ------- -------- ------- -------
Ratio of expenses after expense reductions (%) .95 .93 .76 .75 .70
------------------------------------------------- ------- ------- -------- ------- -------
Ratio of net investment income (%) 2.47 3.40 3.39 3.28 3.91
------------------------------------------------- ------- ------- -------- ------- -------
Portfolio turnover rate (%) 39 65 120 101 177
------------------------------------------------- ------- ------- -------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
124
PROSPECTUS February 1, 2014 Financial Highlights
DWS ULTRA-SHORT DURATION FUND - CLASS B
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.06 $ 8.90 $ 9.33 $ 9.23 $ 9.00
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .15 .23 .24 .24 .28
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .03) .15 ( .42) .10 .23
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .12 .38 ( .18) .34 .51
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .15) ( .22) ( .24) ( .24) ( .28)
------------------------------------------------ ------- ------- ------- ------- -------
Return of capital - - ( .01) - -
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .15) ( .22) ( .25) ( .24) ( .28)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.03 $ 9.06 $ 8.90 $ 9.33 $ 9.23
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) 1.31 4.51 (2.09) 3.72 5.83
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 1 1 2 3 4
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.85 1.86 1.92 1.89 1.89
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.80 1.66 1.51 1.50 1.45
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 1.66 2.72 2.64 2.53 3.16
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 39 65 120 101 177
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
125
PROSPECTUS February 1, 2014 Financial Highlights
DWS ULTRA-SHORT DURATION FUND - CLASS C
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- --------------- ---------------- --------------- ---------------
SELECTED PER SHARE DATA
------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.05 $ 8.88 $ 9.32 $ 9.22 $ 8.99
------------------------------------------------ ------- ------- -------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .16 .24 .24 .24 .28
------------------------------------------------ ------- ------- -------- ------- -------
Net realized and unrealized gain (loss) ( .03) .16 ( .43) .10 .23
------------------------------------------------ ------- ------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .13 .40 ( .19) .34 .51
------------------------------------------------ ------- ------- -------- ------- -------
Less distributions from:
Net investment income ( .16) ( .23) ( .24) ( .24) ( .28)
------------------------------------------------ ------- ------- -------- ------- -------
Return of capital - - ( .01) - -
------------------------------------------------ ------- ------- -------- ------- -------
TOTAL DISTRIBUTIONS ( .16) ( .23) ( .25) ( .24) ( .28)
------------------------------------------------ ------- ------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.02 $ 9.05 $ 8.88 $ 9.32 $ 9.22
------------------------------------------------ ------- ------- -------- ------- -------
Total Return (%)(b) 1.52 4.40 (c) (2.08)(c) 3.73 (c) 5.85 (c)
------------------------------------------------ ------- ------- -------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DA
------------------------------------------------
Net assets, end of period ($ millions) 59 35 34 27 26
------------------------------------------------ ------- ------- -------- ------- -------
Ratio of expenses before expense reductions (%) 1.72 1.81 1.82 1.80 1.81
------------------------------------------------- ------- ------- -------- ------- -------
Ratio of expenses after expense reductions (%) 1.72 1.67 1.51 1.50 1.46
------------------------------------------------- ------- ------- -------- ------- -------
Ratio of net investment income (%) 1.71 2.67 2.64 2.53 3.16
------------------------------------------------- ------- ------- -------- ------- -------
Portfolio turnover rate (%) 39 65 120 101 177
------------------------------------------------- ------- ------- -------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
126
PROSPECTUS February 1, 2014 Financial Highlights
DWS ULTRA-SHORT DURATION FUND - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- --------------- ---------------- --------------- ---------------
SELECTED PER SHARE DATA
------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.06 $ 8.90 $ 9.34 $ 9.24 $ 9.01
------------------------------------------------ ------- ------- -------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .25 .32 .33 .33 .37
------------------------------------------------ ------- ------- -------- ------- -------
Net realized and unrealized gain (loss) ( .03) .16 ( .43) .10 .23
------------------------------------------------ ------- ------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .22 .48 ( .10) .43 .60
------------------------------------------------ ------- ------- -------- ------- -------
Less distributions from:
Net investment income ( .25) ( .32) ( .33) ( .33) ( .37)
------------------------------------------------ ------- ------- -------- ------- -------
Return of capital - - ( .01) - -
------------------------------------------------ ------- ------- -------- ------- -------
TOTAL DISTRIBUTIONS ( .25) ( .32) ( .34) ( .33) ( .37)
------------------------------------------------ ------- ------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.03 $ 9.06 $ 8.90 $ 9.34 $ 9.24
------------------------------------------------ ------- ------- -------- ------- -------
Total Return (%) 2.43 5.49 (b) (1.09)(b) 4.76 (b) 6.90 (b)
------------------------------------------------ ------- ------- -------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DA
------------------------------------------------
Net assets, end of period ($ millions) 56 31 20 15 9
------------------------------------------------ ------- ------- -------- ------- -------
Ratio of expenses before expense reductions (%) .73 .80 .78 .76 .76
------------------------------------------------- ------- ------- -------- ------- -------
Ratio of expenses after expense reductions (%) .73 .68 .51 .50 .45
------------------------------------------------- ------- ------- -------- ------- -------
Ratio of net investment income (%) 2.70 3.64 3.63 3.53 4.17
------------------------------------------------- ------- ------- -------- ------- -------
Portfolio turnover rate (%) 39 65 120 101 177
------------------------------------------------- ------- ------- -------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
127
PROSPECTUS February 1, 2014 Financial Highlights
DWS ULTRA-SHORT DURATION FUND - CLASS S
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.06 $ 8.90 $ 9.33 $ 9.24 $ 9.00
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .25 .32 .33 .33 .37
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .03) .16 ( .42) .09 .24
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .22 .48 ( .09) .42 .61
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .25) ( .32) ( .33) ( .33) ( .37)
------------------------------------------------ ------- ------- ------- ------- -------
Return of capital - - ( .01) - -
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .25) ( .32) ( .34) ( .33) ( .37)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.03 $ 9.06 $ 8.90 $ 9.33 $ 9.24
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b) 2.41 5.50 (1.09) 4.75 7.01
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 199 42 27 12 7
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) .79 .89 .81 .79 .77
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) .77 .68 .51 .50 .46
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.63 3.62 3.63 3.53 4.16
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 39 65 120 101 177
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
128
PROSPECTUS February 1, 2014 Financial Highlights
DWS UNCONSTRAINED INCOME FUND - CLASS A
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.06 $ 4.71 $ 4.85 $ 4.57 $ 3.80
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .18 .21 .25 .26 .22
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .12) .38 ( .14) .29 .78
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .06 .59 .11 .55 1.00
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .22) ( .24) ( .25) ( .26) ( .23)
------------------------------------------------ ------- ------- ------- ------- -------
Net realized gains ( .02) - - ( .01) -
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .24) ( .24) ( .25) ( .27) ( .23)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 4.88 $ 5.06 $ 4.71 $ 4.85 $ 4.57
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) 1.05 12.86 2.15 12.50 27.28
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 420 424 347 368 340
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.01 1.03 1.06 1.06 1.08
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.00 1.01 1.04 1.05 1.07
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 3.55 4.38 5.32 5.44 5.42
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 157 129 154 182 252
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
129
PROSPECTUS February 1, 2014 Financial Highlights
DWS UNCONSTRAINED INCOME FUND - CLASS B
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
------------------------------------------------------------------------------------------------ -
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.06 $ 4.71 $ 4.86 $ 4.58 $ 3.80
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .13 .18 .21 .22 .19
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .12) .37 ( .15) .29 .78
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .01 .55 .06 .51 .97
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .17) ( .20) ( .21) ( .22) ( .19)
------------------------------------------------ ------- ------- ------- ------- -------
Net realized gains ( .02) - - ( .01) -
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .19) ( .20) ( .21) ( .23) ( .19)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 4.88 $ 5.06 $ 4.71 $ 4.86 $ 4.58
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) .41 11.89 1.27 11.60 26.29
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 3 4 5 7 9
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.84 1.86 1.91 1.90 1.94
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.82 1.84 1.89 1.88 1.83
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.69 3.59 4.47 4.61 4.66
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 157 129 154 182 252
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
130
PROSPECTUS February 1, 2014 Financial Highlights
DWS UNCONSTRAINED INCOME FUND - CLASS C
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.09 $ 4.74 $ 4.89 $ 4.60 $ 3.82
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .14 .18 .22 .22 .19
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .12) .38 ( .15) .31 .79
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .02 .56 .07 .53 .98
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .18) ( .21) ( .22) ( .23) ( .20)
------------------------------------------------ ------- ------- ------- ------- -------
Net realized gains ( .02) - - ( .01) -
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .20) ( .21) ( .22) ( .24) ( .20)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 4.91 $ 5.09 $ 4.74 $ 4.89 $ 4.60
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b,c) .32 11.95 1.39 11.61 26.48
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 100 74 43 43 37
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) 1.77 1.78 1.81 1.82 1.84
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) 1.76 1.76 1.80 1.80 1.82
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 2.81 3.59 4.56 4.69 4.66
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 157 129 154 182 252
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return does not reflect the effect of any sales charges.
(c) Total return would have been lower had certain expenses not been
reduced.
131
PROSPECTUS February 1, 2014 Financial Highlights
DWS UNCONSTRAINED INCOME FUND - CLASS S
YEARS ENDED OCTOBER 31,
2013 2012 2011 2010 2009
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.06 $ 4.71 $ 4.86 $ 4.58 $ 3.80
------------------------------------------------ ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income(a) .19 .22 .26 .26 .23
------------------------------------------------ ------- ------- ------- ------- -------
Net realized and unrealized gain (loss) ( .12) .38 ( .15) .30 .78
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .07 .60 .11 .56 1.01
------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from:
Net investment income ( .23) ( .25) ( .26) ( .27) ( .23)
------------------------------------------------ ------- ------- ------- ------- -------
Net realized gains ( .02) - - ( .01) -
------------------------------------------------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ( .25) ( .25) ( .26) ( .28) ( .23)
------------------------------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 4.88 $ 5.06 $ 4.71 $ 4.86 $ 4.58
------------------------------------------------ ------- ------- ------- ------- -------
Total Return (%)(b) 1.26 13.07 2.32 12.77 27.56
------------------------------------------------ ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 95 94 30 33 13
------------------------------------------------ ------- ------- ------- ------- -------
Ratio of expenses before expense reductions (%) .86 .84 .88 .90 .92
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of expenses after expense reductions (%) .79 .80 .87 .89 .81
------------------------------------------------- ------- ------- ------- ------- -------
Ratio of net investment income (%) 3.75 4.49 5.49 5.60 5.68
------------------------------------------------- ------- ------- ------- ------- -------
Portfolio turnover rate (%) 157 129 154 182 252
------------------------------------------------- ------- ------- ------- ------- -------
|
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been
reduced.
132
PROSPECTUS February 1, 2014 Financial Highlights
[GRAPHIC APPEARS HERE]
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 CORE FIXED INCOME FUND - CLASS A
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.91% -0.59% $ 9,940.60 $ 538.68
--- ----- ---- ------ ----------- ----------
2 10.25% 1.04% 3.34% $ 10,334.24 $ 105.43
--- ----- ---- ------ ----------- ----------
3 15.76% 1.04% 7.43% $ 10,743.48 $ 109.60
--- ----- ---- ------ ----------- ----------
4 21.55% 1.04% 11.69% $ 11,168.92 $ 113.94
--- ----- ---- ------ ----------- ----------
5 27.63% 1.04% 16.11% $ 11,611.21 $ 118.46
--- ----- ---- ------ ----------- ----------
6 34.01% 1.04% 20.71% $ 12,071.01 $ 123.15
--- ----- ---- ------ ----------- ----------
7 40.71% 1.04% 25.49% $ 12,549.03 $ 128.02
--- ----- ---- ------ ----------- ----------
8 47.75% 1.04% 30.46% $ 13,045.97 $ 133.09
--- ----- ---- ------ ----------- ----------
9 55.13% 1.04% 35.63% $ 13,562.59 $ 138.36
--- ----- ---- ------ ----------- ----------
10 62.89% 1.04% 41.00% $ 14,099.67 $ 143.84
--- ----- ---- ------ ----------- ----------
TOTAL $ 1,652.57
--- ----------
|
133
Appendix
DWS CORE FIXED INCOME FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.66% 3.34% $ 10,334.00 $ 168.77
--- ----- ---- ----- ----------- ----------
2 10.25% 1.86% 6.58% $ 10,658.49 $ 195.23
--- ----- ---- ----- ----------- ----------
3 15.76% 1.86% 9.93% $ 10,993.16 $ 201.36
--- ----- ---- ----- ----------- ----------
4 21.55% 1.86% 13.38% $ 11,338.35 $ 207.68
--- ----- ---- ----- ----------- ----------
5 27.63% 1.86% 16.94% $ 11,694.37 $ 214.20
--- ----- ---- ----- ----------- ----------
6 34.01% 1.86% 20.62% $ 12,061.58 $ 220.93
--- ----- ---- ----- ----------- ----------
7 40.71% 1.04% 25.39% $ 12,539.22 $ 127.92
--- ----- ---- ----- ----------- ----------
8 47.75% 1.04% 30.36% $ 13,035.77 $ 132.99
--- ----- ---- ----- ----------- ----------
9 55.13% 1.04% 35.52% $ 13,551.98 $ 138.26
--- ----- ---- ----- ----------- ----------
10 62.89% 1.04% 40.89% $ 14,088.64 $ 143.73
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,751.07
--- ----------
|
DWS CORE FIXED INCOME FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.66% 3.34% $ 10,334.00 $ 168.77
--- ----- ---- ----- ----------- ----------
2 10.25% 1.72% 6.73% $ 10,672.96 $ 180.66
--- ----- ---- ----- ----------- ----------
3 15.76% 1.72% 10.23% $ 11,023.03 $ 186.59
--- ----- ---- ----- ----------- ----------
4 21.55% 1.72% 13.85% $ 11,384.58 $ 192.71
--- ----- ---- ----- ----------- ----------
5 27.63% 1.72% 17.58% $ 11,758.00 $ 199.03
--- ----- ---- ----- ----------- ----------
6 34.01% 1.72% 21.44% $ 12,143.66 $ 205.55
--- ----- ---- ----- ----------- ----------
7 40.71% 1.72% 25.42% $ 12,541.97 $ 212.30
--- ----- ---- ----- ----------- ----------
8 47.75% 1.72% 29.53% $ 12,953.35 $ 219.26
--- ----- ---- ----- ----------- ----------
9 55.13% 1.72% 33.78% $ 13,378.22 $ 226.45
--- ----- ---- ----- ----------- ----------
10 62.89% 1.72% 38.17% $ 13,817.02 $ 233.88
--- ----- ---- ----- ----------- ----------
TOTAL $ 2,025.20
--- ----------
|
134
Appendix
DWS CORE FIXED INCOME FUND - CLASS R
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.16% 3.84% $ 10,384.00 $ 118.23
--- ----- ---- ----- ----------- ----------
2 10.25% 1.37% 7.61% $ 10,760.94 $ 144.84
--- ----- ---- ----- ----------- ----------
3 15.76% 1.37% 11.52% $ 11,151.56 $ 150.10
--- ----- ---- ----- ----------- ----------
4 21.55% 1.37% 15.56% $ 11,556.36 $ 155.55
--- ----- ---- ----- ----------- ----------
5 27.63% 1.37% 19.76% $ 11,975.86 $ 161.20
--- ----- ---- ----- ----------- ----------
6 34.01% 1.37% 24.11% $ 12,410.58 $ 167.05
--- ----- ---- ----- ----------- ----------
7 40.71% 1.37% 28.61% $ 12,861.09 $ 173.11
--- ----- ---- ----- ----------- ----------
8 47.75% 1.37% 33.28% $ 13,327.94 $ 179.39
--- ----- ---- ----- ----------- ----------
9 55.13% 1.37% 38.12% $ 13,811.75 $ 185.91
--- ----- ---- ----- ----------- ----------
10 62.89% 1.37% 43.13% $ 14,313.12 $ 192.66
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,628.04
--- ----------
|
DWS CORE FIXED INCOME FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.66% 4.34% $ 10,434.00 $ 67.43
--- ----- ---- ----- ----------- --------
2 10.25% 0.67% 8.86% $ 10,885.79 $ 71.42
--- ----- ---- ----- ----------- --------
3 15.76% 0.67% 13.57% $ 11,357.15 $ 74.51
--- ----- ---- ----- ----------- --------
4 21.55% 0.67% 18.49% $ 11,848.91 $ 77.74
--- ----- ---- ----- ----------- --------
5 27.63% 0.67% 23.62% $ 12,361.97 $ 81.11
--- ----- ---- ----- ----------- --------
6 34.01% 0.67% 28.97% $ 12,897.24 $ 84.62
--- ----- ---- ----- ----------- --------
7 40.71% 0.67% 34.56% $ 13,455.69 $ 88.28
--- ----- ---- ----- ----------- --------
8 47.75% 0.67% 40.38% $ 14,038.32 $ 92.10
--- ----- ---- ----- ----------- --------
9 55.13% 0.67% 46.46% $ 14,646.18 $ 96.09
--- ----- ---- ----- ----------- --------
10 62.89% 0.67% 52.80% $ 15,280.36 $ 100.25
--- ----- ---- ----- ----------- --------
TOTAL $ 833.55
--- --------
|
135
Appendix
DWS CORE FIXED INCOME FUND - CLASS S
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.76% 4.24% $ 10,424.00 $ 77.61
--- ----- ---- ----- ----------- --------
2 10.25% 0.77% 8.65% $ 10,864.94 $ 81.96
--- ----- ---- ----- ----------- --------
3 15.76% 0.77% 13.25% $ 11,324.52 $ 85.43
--- ----- ---- ----- ----------- --------
4 21.55% 0.77% 18.04% $ 11,803.55 $ 89.04
--- ----- ---- ----- ----------- --------
5 27.63% 0.77% 23.03% $ 12,302.84 $ 92.81
--- ----- ---- ----- ----------- --------
6 34.01% 0.77% 28.23% $ 12,823.25 $ 96.74
--- ----- ---- ----- ----------- --------
7 40.71% 0.77% 33.66% $ 13,365.67 $ 100.83
--- ----- ---- ----- ----------- --------
8 47.75% 0.77% 39.31% $ 13,931.04 $ 105.09
--- ----- ---- ----- ----------- --------
9 55.13% 0.77% 45.20% $ 14,520.32 $ 109.54
--- ----- ---- ----- ----------- --------
10 62.89% 0.77% 51.35% $ 15,134.53 $ 114.17
--- ----- ---- ----- ----------- --------
TOTAL $ 953.22
--- --------
|
DWS GLOBAL INFLATION FUND - CLASS A
MAXIMUM INITIAL HYPOTHETICAL ASSUMED RATE
SALES CHARGE: INVESTMENT: OF RETURN:
2.75% $10,000 5%
--------------- ------------------------- -----------------------------
HYPOTHETICAL
CUMULATIVE ANNUAL CUMULATIVE YEAR-END
RETURN BEFORE FUND RETURN AFTER BALANCE AFTER ANNUAL FEES
FEES AND EXPENSE FEES AND FEES AND AND
YEAR EXPENSES RATIOS EXPENSES EXPENSES EXPENSES
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.88% 1.26% $ 10,125.67 $ 362.34
--- ----- ---- ----- ----------- ----------
2 10.25% 1.00% 5.31% $ 10,530.70 $ 103.28
--- ----- ---- ----- ----------- ----------
3 15.76% 1.00% 9.52% $ 10,951.92 $ 107.41
--- ----- ---- ----- ----------- ----------
4 21.55% 1.00% 13.90% $ 11,390.00 $ 111.71
--- ----- ---- ----- ----------- ----------
5 27.63% 1.00% 18.46% $ 11,845.60 $ 116.18
--- ----- ---- ----- ----------- ----------
6 34.01% 1.00% 23.19% $ 12,319.43 $ 120.83
--- ----- ---- ----- ----------- ----------
7 40.71% 1.00% 28.12% $ 12,812.20 $ 125.66
--- ----- ---- ----- ----------- ----------
8 47.75% 1.00% 33.25% $ 13,324.69 $ 130.68
--- ----- ---- ----- ----------- ----------
9 55.13% 1.00% 38.58% $ 13,857.68 $ 135.91
--- ----- ---- ----- ----------- ----------
10 62.89% 1.00% 44.12% $ 14,411.99 $ 141.35
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,455.35
--- ----------
|
136
Appendix
DWS GLOBAL INFLATION FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.63% 3.37% $ 10,337.00 $ 165.75
--- ----- ---- ----- ----------- ----------
2 10.25% 1.80% 6.68% $ 10,667.78 $ 189.04
--- ----- ---- ----- ----------- ----------
3 15.76% 1.80% 10.09% $ 11,009.15 $ 195.09
--- ----- ---- ----- ----------- ----------
4 21.55% 1.80% 13.61% $ 11,361.45 $ 201.34
--- ----- ---- ----- ----------- ----------
5 27.63% 1.80% 17.25% $ 11,725.01 $ 207.78
--- ----- ---- ----- ----------- ----------
6 34.01% 1.80% 21.00% $ 12,100.21 $ 214.43
--- ----- ---- ----- ----------- ----------
7 40.71% 1.00% 25.84% $ 12,584.22 $ 123.42
--- ----- ---- ----- ----------- ----------
8 47.75% 1.00% 30.88% $ 13,087.59 $ 128.36
--- ----- ---- ----- ----------- ----------
9 55.13% 1.00% 36.11% $ 13,611.09 $ 133.49
--- ----- ---- ----- ----------- ----------
10 62.89% 1.00% 41.56% $ 14,155.54 $ 138.83
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,697.53
--- ----------
|
DWS GLOBAL INFLATION FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.63% 3.37% $ 10,337.00 $ 165.75
--- ----- ---- ----- ----------- ----------
2 10.25% 1.75% 6.73% $ 10,672.95 $ 183.84
--- ----- ---- ----- ----------- ----------
3 15.76% 1.75% 10.20% $ 11,019.82 $ 189.81
--- ----- ---- ----- ----------- ----------
4 21.55% 1.75% 13.78% $ 11,377.97 $ 195.98
--- ----- ---- ----- ----------- ----------
5 27.63% 1.75% 17.48% $ 11,747.75 $ 202.35
--- ----- ---- ----- ----------- ----------
6 34.01% 1.75% 21.30% $ 12,129.55 $ 208.93
--- ----- ---- ----- ----------- ----------
7 40.71% 1.75% 25.24% $ 12,523.76 $ 215.72
--- ----- ---- ----- ----------- ----------
8 47.75% 1.75% 29.31% $ 12,930.79 $ 222.73
--- ----- ---- ----- ----------- ----------
9 55.13% 1.75% 33.51% $ 13,351.04 $ 229.97
--- ----- ---- ----- ----------- ----------
10 62.89% 1.75% 37.85% $ 13,784.95 $ 237.44
--- ----- ---- ----- ----------- ----------
TOTAL $ 2,052.52
--- ----------
|
137
Appendix
DWS GLOBAL INFLATION FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.63% 4.37% $ 10,437.00 $ 64.38
--- ----- ---- ----- ----------- --------
2 10.25% 0.63% 8.93% $ 10,893.10 $ 67.19
--- ----- ---- ----- ----------- --------
3 15.76% 0.63% 13.69% $ 11,369.13 $ 70.13
--- ----- ---- ----- ----------- --------
4 21.55% 0.63% 18.66% $ 11,865.96 $ 73.19
--- ----- ---- ----- ----------- --------
5 27.63% 0.63% 23.84% $ 12,384.50 $ 76.39
--- ----- ---- ----- ----------- --------
6 34.01% 0.63% 29.26% $ 12,925.70 $ 79.73
--- ----- ---- ----- ----------- --------
7 40.71% 0.63% 34.91% $ 13,490.55 $ 83.21
--- ----- ---- ----- ----------- --------
8 47.75% 0.63% 40.80% $ 14,080.09 $ 86.85
--- ----- ---- ----- ----------- --------
9 55.13% 0.63% 46.95% $ 14,695.39 $ 90.64
--- ----- ---- ----- ----------- --------
10 62.89% 0.63% 53.38% $ 15,337.58 $ 94.60
--- ----- ---- ----- ----------- --------
TOTAL $ 786.31
--- --------
|
DWS GLOBAL INFLATION FUND - CLASS S
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.63% 4.37% $ 10,437.00 $ 64.38
--- ----- ---- ----- ----------- ----------
2 10.25% 0.86% 8.69% $ 10,869.09 $ 91.62
--- ----- ---- ----- ----------- ----------
3 15.76% 0.86% 13.19% $ 11,319.07 $ 95.41
--- ----- ---- ----- ----------- ----------
4 21.55% 0.86% 17.88% $ 11,787.68 $ 99.36
--- ----- ---- ----- ----------- ----------
5 27.63% 0.86% 22.76% $ 12,275.69 $ 103.47
--- ----- ---- ----- ----------- ----------
6 34.01% 0.86% 27.84% $ 12,783.91 $ 107.76
--- ----- ---- ----- ----------- ----------
7 40.71% 0.86% 33.13% $ 13,313.16 $ 112.22
--- ----- ---- ----- ----------- ----------
8 47.75% 0.86% 38.64% $ 13,864.32 $ 116.86
--- ----- ---- ----- ----------- ----------
9 55.13% 0.86% 44.38% $ 14,438.31 $ 121.70
--- ----- ---- ----- ----------- ----------
10 62.89% 0.86% 50.36% $ 15,036.05 $ 126.74
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,039.52
--- ----------
|
138
Appendix
DWS GNMA FUND - CLASS A
MAXIMUM INITIAL HYPOTHETICAL ASSUMED RATE
SALES CHARGE: INVESTMENT: OF RETURN:
2.75% $10,000 5%
--------------- ------------------------- -----------------------------
HYPOTHETICAL
CUMULATIVE ANNUAL CUMULATIVE YEAR-END
RETURN BEFORE FUND RETURN AFTER BALANCE AFTER ANNUAL FEES
FEES AND EXPENSE FEES AND FEES AND AND
YEAR EXPENSES RATIOS EXPENSES EXPENSES EXPENSES
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.79% 1.34% $ 10,134.42 $ 353.44
--- ----- ---- ----- ----------- ----------
2 10.25% 0.79% 5.61% $ 10,561.08 $ 81.75
--- ----- ---- ----- ----------- ----------
3 15.76% 0.79% 10.06% $ 11,005.70 $ 85.19
--- ----- ---- ----- ----------- ----------
4 21.55% 0.79% 14.69% $ 11,469.04 $ 88.78
--- ----- ---- ----- ----------- ----------
5 27.63% 0.79% 19.52% $ 11,951.89 $ 92.51
--- ----- ---- ----- ----------- ----------
6 34.01% 0.79% 24.55% $ 12,455.06 $ 96.41
--- ----- ---- ----- ----------- ----------
7 40.71% 0.79% 29.79% $ 12,979.42 $ 100.47
--- ----- ---- ----- ----------- ----------
8 47.75% 0.79% 35.26% $ 13,525.86 $ 104.70
--- ----- ---- ----- ----------- ----------
9 55.13% 0.79% 40.95% $ 14,095.30 $ 109.10
--- ----- ---- ----- ----------- ----------
10 62.89% 0.79% 46.89% $ 14,688.71 $ 113.70
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,226.05
--- ----------
|
DWS GNMA FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.56% 3.44% $ 10,344.00 $ 158.68
--- ----- ---- ----- ----------- ----------
2 10.25% 1.56% 7.00% $ 10,699.83 $ 164.14
--- ----- ---- ----- ----------- ----------
3 15.76% 1.56% 10.68% $ 11,067.91 $ 169.79
--- ----- ---- ----- ----------- ----------
4 21.55% 1.56% 14.49% $ 11,448.64 $ 175.63
--- ----- ---- ----- ----------- ----------
5 27.63% 1.56% 18.42% $ 11,842.48 $ 181.67
--- ----- ---- ----- ----------- ----------
6 34.01% 1.56% 22.50% $ 12,249.86 $ 187.92
--- ----- ---- ----- ----------- ----------
7 40.71% 1.56% 26.71% $ 12,671.25 $ 194.38
--- ----- ---- ----- ----------- ----------
8 47.75% 1.56% 31.07% $ 13,107.14 $ 201.07
--- ----- ---- ----- ----------- ----------
9 55.13% 1.56% 35.58% $ 13,558.03 $ 207.99
--- ----- ---- ----- ----------- ----------
10 62.89% 1.56% 40.24% $ 14,024.43 $ 215.14
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,856.41
--- ----------
|
139
Appendix
DWS GNMA FUND - CLASS R
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.18% 3.82% $ 10,382.00 $ 120.25
--- ----- ---- ----- ----------- ----------
2 10.25% 1.18% 7.79% $ 10,778.59 $ 124.85
--- ----- ---- ----- ----------- ----------
3 15.76% 1.18% 11.90% $ 11,190.33 $ 129.62
--- ----- ---- ----- ----------- ----------
4 21.55% 1.18% 16.18% $ 11,617.81 $ 134.57
--- ----- ---- ----- ----------- ----------
5 27.63% 1.18% 20.62% $ 12,061.61 $ 139.71
--- ----- ---- ----- ----------- ----------
6 34.01% 1.18% 25.22% $ 12,522.36 $ 145.05
--- ----- ---- ----- ----------- ----------
7 40.71% 1.18% 30.01% $ 13,000.71 $ 150.59
--- ----- ---- ----- ----------- ----------
8 47.75% 1.18% 34.97% $ 13,497.34 $ 156.34
--- ----- ---- ----- ----------- ----------
9 55.13% 1.18% 40.13% $ 14,012.94 $ 162.31
--- ----- ---- ----- ----------- ----------
10 62.89% 1.18% 45.48% $ 14,548.23 $ 168.51
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,431.80
--- ----------
|
DWS GNMA FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.53% 4.47% $ 10,447.00 $ 54.18
--- ----- ---- ----- ----------- --------
2 10.25% 0.53% 9.14% $ 10,913.98 $ 56.61
--- ----- ---- ----- ----------- --------
3 15.76% 0.53% 14.02% $ 11,401.84 $ 59.14
--- ----- ---- ----- ----------- --------
4 21.55% 0.53% 19.11% $ 11,911.50 $ 61.78
--- ----- ---- ----- ----------- --------
5 27.63% 0.53% 24.44% $ 12,443.94 $ 64.54
--- ----- ---- ----- ----------- --------
6 34.01% 0.53% 30.00% $ 13,000.19 $ 67.43
--- ----- ---- ----- ----------- --------
7 40.71% 0.53% 35.81% $ 13,581.29 $ 70.44
--- ----- ---- ----- ----------- --------
8 47.75% 0.53% 41.88% $ 14,188.38 $ 73.59
--- ----- ---- ----- ----------- --------
9 55.13% 0.53% 48.23% $ 14,822.80 $ 76.88
--- ----- ---- ----- ----------- --------
10 62.89% 0.53% 54.85% $ 15,485.17 $ 80.32
--- ----- ---- ----- ----------- --------
TOTAL $ 664.91
--- --------
|
140
Appendix
DWS GNMA FUND - CLASS S
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.55% 4.45% $ 10,445.00 $ 56.22
--- ----- ---- ----- ----------- --------
2 10.25% 0.55% 9.10% $ 10,909.80 $ 58.73
--- ----- ---- ----- ----------- --------
3 15.76% 0.55% 13.95% $ 11,395.29 $ 61.34
--- ----- ---- ----- ----------- --------
4 21.55% 0.55% 19.02% $ 11,902.38 $ 64.07
--- ----- ---- ----- ----------- --------
5 27.63% 0.55% 24.32% $ 12,432.03 $ 66.92
--- ----- ---- ----- ----------- --------
6 34.01% 0.55% 29.85% $ 12,985.26 $ 69.90
--- ----- ---- ----- ----------- --------
7 40.71% 0.55% 35.63% $ 13,563.10 $ 73.01
--- ----- ---- ----- ----------- --------
8 47.75% 0.55% 41.67% $ 14,166.66 $ 76.26
--- ----- ---- ----- ----------- --------
9 55.13% 0.55% 47.97% $ 14,797.08 $ 79.65
--- ----- ---- ----- ----------- --------
10 62.89% 0.55% 54.56% $ 15,455.55 $ 83.19
--- ----- ---- ----- ----------- --------
TOTAL $ 689.29
--- --------
|
DWS HIGH INCOME FUND - CLASS A
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.92% -0.60% $ 9,939.64 $ 539.65
--- ----- ---- ------ ----------- ----------
2 10.25% 0.92% 3.45% $ 10,345.18 $ 93.31
--- ----- ---- ------ ----------- ----------
3 15.76% 0.92% 7.67% $ 10,767.26 $ 97.12
--- ----- ---- ------ ----------- ----------
4 21.55% 0.92% 12.07% $ 11,206.56 $ 101.08
--- ----- ---- ------ ----------- ----------
5 27.63% 0.92% 16.64% $ 11,663.79 $ 105.20
--- ----- ---- ------ ----------- ----------
6 34.01% 0.92% 21.40% $ 12,139.68 $ 109.50
--- ----- ---- ------ ----------- ----------
7 40.71% 0.92% 26.35% $ 12,634.97 $ 113.96
--- ----- ---- ------ ----------- ----------
8 47.75% 0.92% 31.50% $ 13,150.48 $ 118.61
--- ----- ---- ------ ----------- ----------
9 55.13% 0.92% 36.87% $ 13,687.02 $ 123.45
--- ----- ---- ------ ----------- ----------
10 62.89% 0.92% 42.45% $ 14,245.45 $ 128.49
--- ----- ---- ------ ----------- ----------
TOTAL $ 1,530.37
--- ----------
|
141
Appendix
DWS HIGH INCOME FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.73% 3.27% $ 10,327.00 $ 175.83
--- ----- ---- ----- ----------- ----------
2 10.25% 1.73% 6.65% $ 10,664.69 $ 181.58
--- ----- ---- ----- ----------- ----------
3 15.76% 1.73% 10.13% $ 11,013.43 $ 187.52
--- ----- ---- ----- ----------- ----------
4 21.55% 1.73% 13.74% $ 11,373.57 $ 193.65
--- ----- ---- ----- ----------- ----------
5 27.63% 1.73% 17.45% $ 11,745.48 $ 199.98
--- ----- ---- ----- ----------- ----------
6 34.01% 1.73% 21.30% $ 12,129.56 $ 206.52
--- ----- ---- ----- ----------- ----------
7 40.71% 0.92% 26.24% $ 12,624.45 $ 113.87
--- ----- ---- ----- ----------- ----------
8 47.75% 0.92% 31.40% $ 13,139.52 $ 118.51
--- ----- ---- ----- ----------- ----------
9 55.13% 0.92% 36.76% $ 13,675.62 $ 123.35
--- ----- ---- ----- ----------- ----------
10 62.89% 0.92% 42.34% $ 14,233.58 $ 128.38
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,629.19
--- ----------
|
DWS HIGH INCOME FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.69% 3.31% $ 10,331.00 $ 171.80
--- ----- ---- ----- ----------- ----------
2 10.25% 1.69% 6.73% $ 10,672.96 $ 177.48
--- ----- ---- ----- ----------- ----------
3 15.76% 1.69% 10.26% $ 11,026.23 $ 183.36
--- ----- ---- ----- ----------- ----------
4 21.55% 1.69% 13.91% $ 11,391.20 $ 189.43
--- ----- ---- ----- ----------- ----------
5 27.63% 1.69% 17.68% $ 11,768.25 $ 195.70
--- ----- ---- ----- ----------- ----------
6 34.01% 1.69% 21.58% $ 12,157.78 $ 202.17
--- ----- ---- ----- ----------- ----------
7 40.71% 1.69% 25.60% $ 12,560.20 $ 208.87
--- ----- ---- ----- ----------- ----------
8 47.75% 1.69% 29.76% $ 12,975.94 $ 215.78
--- ----- ---- ----- ----------- ----------
9 55.13% 1.69% 34.05% $ 13,405.45 $ 222.92
--- ----- ---- ----- ----------- ----------
10 62.89% 1.69% 38.49% $ 13,849.17 $ 230.30
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,997.81
--- ----------
|
142
Appendix
DWS HIGH INCOME FUND - CLASS R
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.50% 3.50% $ 10,350.00 $ 152.63
--- ----- ---- ----- ----------- ----------
2 10.25% 1.50% 7.12% $ 10,712.25 $ 157.97
--- ----- ---- ----- ----------- ----------
3 15.76% 1.50% 10.87% $ 11,087.18 $ 163.50
--- ----- ---- ----- ----------- ----------
4 21.55% 1.50% 14.75% $ 11,475.23 $ 169.22
--- ----- ---- ----- ----------- ----------
5 27.63% 1.50% 18.77% $ 11,876.86 $ 175.14
--- ----- ---- ----- ----------- ----------
6 34.01% 1.50% 22.93% $ 12,292.55 $ 181.27
--- ----- ---- ----- ----------- ----------
7 40.71% 1.50% 27.23% $ 12,722.79 $ 187.62
--- ----- ---- ----- ----------- ----------
8 47.75% 1.50% 31.68% $ 13,168.09 $ 194.18
--- ----- ---- ----- ----------- ----------
9 55.13% 1.50% 36.29% $ 13,628.97 $ 200.98
--- ----- ---- ----- ----------- ----------
10 62.89% 1.50% 41.06% $ 14,105.99 $ 208.01
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,790.52
--- ----------
|
DWS HIGH INCOME FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.66% 4.34% $ 10,434.00 $ 67.43
--- ----- ---- ----- ----------- --------
2 10.25% 0.66% 8.87% $ 10,886.84 $ 70.36
--- ----- ---- ----- ----------- --------
3 15.76% 0.66% 13.59% $ 11,359.32 $ 73.41
--- ----- ---- ----- ----------- --------
4 21.55% 0.66% 18.52% $ 11,852.32 $ 76.60
--- ----- ---- ----- ----------- --------
5 27.63% 0.66% 23.67% $ 12,366.71 $ 79.92
--- ----- ---- ----- ----------- --------
6 34.01% 0.66% 29.03% $ 12,903.42 $ 83.39
--- ----- ---- ----- ----------- --------
7 40.71% 0.66% 34.63% $ 13,463.43 $ 87.01
--- ----- ---- ----- ----------- --------
8 47.75% 0.66% 40.48% $ 14,047.75 $ 90.79
--- ----- ---- ----- ----------- --------
9 55.13% 0.66% 46.57% $ 14,657.42 $ 94.73
--- ----- ---- ----- ----------- --------
10 62.89% 0.66% 52.94% $ 15,293.55 $ 98.84
--- ----- ---- ----- ----------- --------
TOTAL $ 822.48
--- --------
|
143
Appendix
DWS HIGH INCOME FUND - CLASS S
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.85% 4.15% $ 10,415.00 $ 86.76
--- ----- ---- ----- ----------- ----------
2 10.25% 0.85% 8.47% $ 10,847.22 $ 90.36
--- ----- ---- ----- ----------- ----------
3 15.76% 0.85% 12.97% $ 11,297.38 $ 94.11
--- ----- ---- ----- ----------- ----------
4 21.55% 0.85% 17.66% $ 11,766.22 $ 98.02
--- ----- ---- ----- ----------- ----------
5 27.63% 0.85% 22.55% $ 12,254.52 $ 102.09
--- ----- ---- ----- ----------- ----------
6 34.01% 0.85% 27.63% $ 12,763.08 $ 106.32
--- ----- ---- ----- ----------- ----------
7 40.71% 0.85% 32.93% $ 13,292.75 $ 110.74
--- ----- ---- ----- ----------- ----------
8 47.75% 0.85% 38.44% $ 13,844.40 $ 115.33
--- ----- ---- ----- ----------- ----------
9 55.13% 0.85% 44.19% $ 14,418.94 $ 120.12
--- ----- ---- ----- ----------- ----------
10 62.89% 0.85% 50.17% $ 15,017.33 $ 125.10
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,048.95
--- ----------
|
DWS GLOBAL HIGH INCOME FUND - CLASS A
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 AND EXPENSE FEES AND FEES AND FEES AND
YEAR EXPENSES RATIOS EXPENSES EXPENSES EXPENSES
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.06% -0.74% $ 9,926.27 $ 553.22
--- ----- ---- ------ ----------- ----------
2 10.25% 1.06% 3.17% $ 10,317.37 $ 107.29
--- ----- ---- ------ ----------- ----------
3 15.76% 1.06% 7.24% $ 10,723.87 $ 111.52
--- ----- ---- ------ ----------- ----------
4 21.55% 1.06% 11.46% $ 11,146.39 $ 115.91
--- ----- ---- ------ ----------- ----------
5 27.63% 1.06% 15.86% $ 11,585.56 $ 120.48
--- ----- ---- ------ ----------- ----------
6 34.01% 1.06% 20.42% $ 12,042.03 $ 125.23
--- ----- ---- ------ ----------- ----------
7 40.71% 1.06% 25.16% $ 12,516.48 $ 130.16
--- ----- ---- ------ ----------- ----------
8 47.75% 1.06% 30.10% $ 13,009.63 $ 135.29
--- ----- ---- ------ ----------- ----------
9 55.13% 1.06% 35.22% $ 13,522.21 $ 140.62
--- ----- ---- ------ ----------- ----------
10 62.89% 1.06% 40.55% $ 14,054.99 $ 146.16
--- ----- ---- ------ ----------- ----------
TOTAL $ 1,685.88
--- ----------
|
144
Appendix
DWS GLOBAL HIGH INCOME FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.86% 3.14% $ 10,314.00 $ 188.92
--- ----- ---- ----- ----------- ----------
2 10.25% 1.86% 6.38% $ 10,637.86 $ 194.85
--- ----- ---- ----- ----------- ----------
3 15.76% 1.86% 9.72% $ 10,971.89 $ 200.97
--- ----- ---- ----- ----------- ----------
4 21.55% 1.86% 13.16% $ 11,316.41 $ 207.28
--- ----- ---- ----- ----------- ----------
5 27.63% 1.86% 16.72% $ 11,671.74 $ 213.79
--- ----- ---- ----- ----------- ----------
6 34.01% 1.86% 20.38% $ 12,038.23 $ 220.50
--- ----- ---- ----- ----------- ----------
7 40.71% 1.06% 25.13% $ 12,512.54 $ 130.12
--- ----- ---- ----- ----------- ----------
8 47.75% 1.06% 30.06% $ 13,005.53 $ 135.25
--- ----- ---- ----- ----------- ----------
9 55.13% 1.06% 35.18% $ 13,517.95 $ 140.57
--- ----- ---- ----- ----------- ----------
10 62.89% 1.06% 40.51% $ 14,050.56 $ 146.11
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,778.36
--- ----------
|
DWS GLOBAL HIGH INCOME FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.82% 3.18% $ 10,318.00 $ 184.89
--- ----- ---- ----- ----------- ----------
2 10.25% 1.82% 6.46% $ 10,646.11 $ 190.77
--- ----- ---- ----- ----------- ----------
3 15.76% 1.82% 9.85% $ 10,984.66 $ 196.84
--- ----- ---- ----- ----------- ----------
4 21.55% 1.82% 13.34% $ 11,333.97 $ 203.10
--- ----- ---- ----- ----------- ----------
5 27.63% 1.82% 16.94% $ 11,694.39 $ 209.56
--- ----- ---- ----- ----------- ----------
6 34.01% 1.82% 20.66% $ 12,066.27 $ 216.22
--- ----- ---- ----- ----------- ----------
7 40.71% 1.82% 24.50% $ 12,449.98 $ 223.10
--- ----- ---- ----- ----------- ----------
8 47.75% 1.82% 28.46% $ 12,845.89 $ 230.19
--- ----- ---- ----- ----------- ----------
9 55.13% 1.82% 32.54% $ 13,254.39 $ 237.51
--- ----- ---- ----- ----------- ----------
10 62.89% 1.82% 36.76% $ 13,675.88 $ 245.07
--- ----- ---- ----- ----------- ----------
TOTAL $ 2,137.25
--- ----------
|
145
Appendix
DWS GLOBAL HIGH INCOME FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.74% 4.26% $ 10,426.00 $ 75.58
--- ----- ---- ----- ----------- --------
2 10.25% 0.74% 8.70% $ 10,870.15 $ 78.80
--- ----- ---- ----- ----------- --------
3 15.76% 0.74% 13.33% $ 11,333.22 $ 82.15
--- ----- ---- ----- ----------- --------
4 21.55% 0.74% 18.16% $ 11,816.01 $ 85.65
--- ----- ---- ----- ----------- --------
5 27.63% 0.74% 23.19% $ 12,319.37 $ 89.30
--- ----- ---- ----- ----------- --------
6 34.01% 0.74% 28.44% $ 12,844.18 $ 93.11
--- ----- ---- ----- ----------- --------
7 40.71% 0.74% 33.91% $ 13,391.34 $ 97.07
--- ----- ---- ----- ----------- --------
8 47.75% 0.74% 39.62% $ 13,961.81 $ 101.21
--- ----- ---- ----- ----------- --------
9 55.13% 0.74% 45.57% $ 14,556.58 $ 105.52
--- ----- ---- ----- ----------- --------
10 62.89% 0.74% 51.77% $ 15,176.69 $ 110.01
--- ----- ---- ----- ----------- --------
TOTAL $ 918.40
--- --------
|
DWS GLOBAL HIGH INCOME FUND - CLASS S
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.89% 4.11% $ 10,411.00 $ 90.83
--- ----- ---- ----- ----------- ----------
2 10.25% 0.89% 8.39% $ 10,838.89 $ 94.56
--- ----- ---- ----- ----------- ----------
3 15.76% 0.89% 12.84% $ 11,284.37 $ 98.45
--- ----- ---- ----- ----------- ----------
4 21.55% 0.89% 17.48% $ 11,748.16 $ 102.49
--- ----- ---- ----- ----------- ----------
5 27.63% 0.89% 22.31% $ 12,231.01 $ 106.71
--- ----- ---- ----- ----------- ----------
6 34.01% 0.89% 27.34% $ 12,733.70 $ 111.09
--- ----- ---- ----- ----------- ----------
7 40.71% 0.89% 32.57% $ 13,257.06 $ 115.66
--- ----- ---- ----- ----------- ----------
8 47.75% 0.89% 38.02% $ 13,801.92 $ 120.41
--- ----- ---- ----- ----------- ----------
9 55.13% 0.89% 43.69% $ 14,369.18 $ 125.36
--- ----- ---- ----- ----------- ----------
10 62.89% 0.89% 49.60% $ 14,959.75 $ 130.51
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,096.07
--- ----------
|
146
Appendix
DWS SHORT DURATION FUND - CLASS A
MAXIMUM INITIAL HYPOTHETICAL ASSUMED RATE
SALES CHARGE: INVESTMENT: OF RETURN:
2.75% $10,000 5%
--------------- ------------------------- -----------------------------
HYPOTHETICAL
CUMULATIVE ANNUAL CUMULATIVE YEAR-END
RETURN BEFORE FUND RETURN AFTER BALANCE AFTER ANNUAL FEES
FEES AND EXPENSE FEES AND FEES AND AND
YEAR EXPENSES RATIOS EXPENSES EXPENSES EXPENSES
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.86% 1.28% $ 10,127.62 $ 360.37
--- ----- ---- ----- ----------- ----------
2 10.25% 0.87% 5.46% $ 10,545.89 $ 89.93
--- ----- ---- ----- ----------- ----------
3 15.76% 0.87% 9.81% $ 10,981.43 $ 93.64
--- ----- ---- ----- ----------- ----------
4 21.55% 0.87% 14.35% $ 11,434.96 $ 97.51
--- ----- ---- ----- ----------- ----------
5 27.63% 0.87% 19.07% $ 11,907.23 $ 101.54
--- ----- ---- ----- ----------- ----------
6 34.01% 0.87% 23.99% $ 12,399.00 $ 105.73
--- ----- ---- ----- ----------- ----------
7 40.71% 0.87% 29.11% $ 12,911.07 $ 110.10
--- ----- ---- ----- ----------- ----------
8 47.75% 0.87% 34.44% $ 13,444.30 $ 114.65
--- ----- ---- ----- ----------- ----------
9 55.13% 0.87% 40.00% $ 13,999.55 $ 119.38
--- ----- ---- ----- ----------- ----------
10 62.89% 0.87% 45.78% $ 14,577.73 $ 124.31
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,317.16
--- ----------
|
DWS SHORT DURATION FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.61% 3.39% $ 10,339.00 $ 163.73
--- ----- ---- ----- ----------- ----------
2 10.25% 1.77% 6.73% $ 10,672.95 $ 185.96
--- ----- ---- ----- ----------- ----------
3 15.76% 1.77% 10.18% $ 11,017.69 $ 191.96
--- ----- ---- ----- ----------- ----------
4 21.55% 1.77% 13.74% $ 11,373.56 $ 198.16
--- ----- ---- ----- ----------- ----------
5 27.63% 1.77% 17.41% $ 11,740.92 $ 204.56
--- ----- ---- ----- ----------- ----------
6 34.01% 1.77% 21.20% $ 12,120.15 $ 211.17
--- ----- ---- ----- ----------- ----------
7 40.71% 0.87% 26.21% $ 12,620.72 $ 107.62
--- ----- ---- ----- ----------- ----------
8 47.75% 0.87% 31.42% $ 13,141.95 $ 112.07
--- ----- ---- ----- ----------- ----------
9 55.13% 0.87% 36.85% $ 13,684.72 $ 116.70
--- ----- ---- ----- ----------- ----------
10 62.89% 0.87% 42.50% $ 14,249.89 $ 121.52
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,613.45
--- ----------
|
147
Appendix
DWS SHORT DURATION FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.61% 3.39% $ 10,339.00 $ 163.73
--- ----- ---- ----- ----------- ----------
2 10.25% 1.62% 6.88% $ 10,688.46 $ 170.32
--- ----- ---- ----- ----------- ----------
3 15.76% 1.62% 10.50% $ 10,049.73 $ 176.08
--- ----- ---- ----- ----------- ----------
4 21.55% 1.62% 14.23% $ 11,423.21 $ 182.08
--- ----- ---- ----- ----------- ----------
5 27.63% 1.62% 18.09% $ 11,809.31 $ 188.18
--- ----- ---- ----- ----------- ----------
6 34.01% 1.62% 22.08% $ 12,208.47 $ 194.54
--- ----- ---- ----- ----------- ----------
7 40.71% 1.62% 26.21% $ 12,621.11 $ 201.12
--- ----- ---- ----- ----------- ----------
8 47.75% 1.62% 30.48% $ 13,047.71 $ 207.92
--- ----- ---- ----- ----------- ----------
9 55.13% 1.62% 34.89% $ 13,488.72 $ 214.95
--- ----- ---- ----- ----------- ----------
10 62.89% 1.62% 39.45% $ 13,944.64 $ 222.21
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,921.08
--- ----------
|
DWS SHORT DURATION FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.60% 4.40% $ 10,440.00 $ 61.32
--- ----- ---- ----- ----------- --------
2 10.25% 0.60% 8.99% $ 10,899.36 $ 64.02
--- ----- ---- ----- ----------- --------
3 15.76% 0.60% 13.79% $ 11,378.93 $ 66.83
--- ----- ---- ----- ----------- --------
4 21.55% 0.60% 18.80% $ 11,879.60 $ 69.78
--- ----- ---- ----- ----------- --------
5 27.63% 0.60% 24.02% $ 12,402.31 $ 72.85
--- ----- ---- ----- ----------- --------
6 34.01% 0.60% 29.48% $ 12,948.01 $ 76.05
--- ----- ---- ----- ----------- --------
7 40.71% 0.60% 35.18% $ 13,517.72 $ 79.40
--- ----- ---- ----- ----------- --------
8 47.75% 0.60% 41.13% $ 14,112.50 $ 82.89
--- ----- ---- ----- ----------- --------
9 55.13% 0.60% 47.33% $ 14,733.45 $ 86.54
--- ----- ---- ----- ----------- --------
10 62.89% 0.60% 53.82% $ 15,381.72 $ 90.35
--- ----- ---- ----- ----------- --------
TOTAL $ 750.03
--- --------
|
148
Appendix
DWS SHORT DURATION FUND - CLASS S
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.61% 4.39% $ 10,439.00 $ 62.34
--- ----- ---- ----- ----------- --------
2 10.25% 0.69% 8.89% $ 10,888.92 $ 73.58
--- ----- ---- ----- ----------- --------
3 15.76% 0.69% 13.58% $ 11,358.23 $ 76.75
--- ----- ---- ----- ----------- --------
4 21.55% 0.69% 18.48% $ 11,847.77 $ 80.06
--- ----- ---- ----- ----------- --------
5 27.63% 0.69% 23.58% $ 12,358.41 $ 83.51
--- ----- ---- ----- ----------- --------
6 34.01% 0.69% 28.91% $ 12,891.06 $ 87.11
--- ----- ---- ----- ----------- --------
7 40.71% 0.69% 34.47% $ 13,446.66 $ 90.87
--- ----- ---- ----- ----------- --------
8 47.75% 0.69% 40.26% $ 14,026.22 $ 94.78
--- ----- ---- ----- ----------- --------
9 55.13% 0.69% 46.31% $ 14,630.75 $ 98.87
--- ----- ---- ----- ----------- --------
10 62.89% 0.69% 52.61% $ 15,261.33 $ 103.13
--- ----- ---- ----- ----------- --------
TOTAL $ 851.00
--- --------
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS A
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.81% 1.32% $ 10,132.48 $ 355.42
--- ----- ---- ----- ----------- ----------
2 10.25% 0.81% 5.57% $ 10,557.03 $ 83.79
--- ----- ---- ----- ----------- ----------
3 15.76% 0.81% 9.99% $ 10,999.37 $ 87.30
--- ----- ---- ----- ----------- ----------
4 21.55% 0.81% 14.60% $ 11,460.24 $ 90.96
--- ----- ---- ----- ----------- ----------
5 27.63% 0.81% 19.40% $ 11,940.43 $ 94.77
--- ----- ---- ----- ----------- ----------
6 34.01% 0.81% 24.41% $ 12,440.73 $ 98.74
--- ----- ---- ----- ----------- ----------
7 40.71% 0.81% 29.62% $ 12,962.00 $ 102.88
--- ----- ---- ----- ----------- ----------
8 47.75% 0.81% 35.05% $ 13,505.10 $ 107.19
--- ----- ---- ----- ----------- ----------
9 55.13% 0.81% 40.71% $ 14,070.97 $ 111.68
--- ----- ---- ----- ----------- ----------
10 62.89% 0.81% 46.61% $ 14,660.54 $ 116.36
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,249.09
--- ----------
|
149
Appendix
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.66% 3.34% $ 10,334.00 $ 168.77
--- ----- ---- ----- ----------- ----------
2 10.25% 1.76% 6.69% $ 10,668.82 $ 184.82
--- ----- ---- ----- ----------- ----------
3 15.76% 1.76% 10.14% $ 11,014.49 $ 190.81
--- ----- ---- ----- ----------- ----------
4 21.55% 1.76% 13.71% $ 11,371.36 $ 197.00
--- ----- ---- ----- ----------- ----------
5 27.63% 1.76% 17.40% $ 11,739.79 $ 203.38
--- ----- ---- ----- ----------- ----------
6 34.01% 1.76% 21.20% $ 12,120.16 $ 209.97
--- ----- ---- ----- ----------- ----------
7 40.71% 0.81% 26.28% $ 12,628.00 $ 100.23
--- ----- ---- ----- ----------- ----------
8 47.75% 0.81% 31.57% $ 13,157.11 $ 104.43
--- ----- ---- ----- ----------- ----------
9 55.13% 0.81% 37.08% $ 13,708.39 $ 108.81
--- ----- ---- ----- ----------- ----------
10 62.89% 0.81% 42.83% $ 14,282.77 $ 113.36
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,581.58
--- ----------
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.57% 3.43% $ 10,343.00 $ 159.69
--- ----- ---- ----- ----------- ----------
2 10.25% 1.57% 6.98% $ 10,697.76 $ 165.17
--- ----- ---- ----- ----------- ----------
3 15.76% 1.57% 10.65% $ 11,064.70 $ 170.84
--- ----- ---- ----- ----------- ----------
4 21.55% 1.57% 14.44% $ 11,444.22 $ 176.69
--- ----- ---- ----- ----------- ----------
5 27.63% 1.57% 18.37% $ 11,836.75 $ 182.76
--- ----- ---- ----- ----------- ----------
6 34.01% 1.57% 22.43% $ 12,242.75 $ 189.02
--- ----- ---- ----- ----------- ----------
7 40.71% 1.57% 26.63% $ 12,662.68 $ 195.51
--- ----- ---- ----- ----------- ----------
8 47.75% 1.57% 30.97% $ 13,097.01 $ 202.21
--- ----- ---- ----- ----------- ----------
9 55.13% 1.57% 35.46% $ 13,546.24 $ 209.15
--- ----- ---- ----- ----------- ----------
10 62.89% 1.57% 40.11% $ 14,010.87 $ 216.32
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,867.36
--- ----------
|
150
Appendix
DWS STRATEGIC GOVERNMENT SECURITIES FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- -----------
1 5.00% 0.61% 4.39% $ 10,439.00 $ 62.34
--- ----- ---- ----- ----------- --------
2 10.25% 0.61% 8.97% $ 10,897.27 $ 65.08
--- ----- ---- ----- ----------- --------
3 15.76% 0.61% 13.76% $ 11,375.66 $ 67.93
--- ----- ---- ----- ----------- --------
4 21.55% 0.61% 18.75% $ 11,875.05 $ 70.91
--- ----- ---- ----- ----------- --------
5 27.63% 0.61% 23.96% $ 12,396.37 $ 74.03
--- ----- ---- ----- ----------- --------
6 34.01% 0.61% 29.41% $ 12,940.57 $ 77.28
--- ----- ---- ----- ----------- --------
7 40.71% 0.61% 35.09% $ 13,508.66 $ 80.67
--- ----- ---- ----- ----------- --------
8 47.75% 0.61% 41.02% $ 14,101.69 $ 84.21
--- ----- ---- ----- ----------- --------
9 55.13% 0.61% 47.21% $ 14,720.75 $ 87.91
--- ----- ---- ----- ----------- --------
10 62.89% 0.61% 53.67% $ 15,367.00 $ 91.77
--- ----- ---- ----- ----------- --------
TOTAL $ 762.13
--- --------
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND - CLASS S
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
------ --------------- --------- -------------- --------------- -----------
1 5.00% 0.66% 4.34% $ 10,434.00 $ 67.43
--- ----- ---- ----- ----------- --------
2 10.25% 0.68% 8.85% $ 10,884.75 $ 72.48
--- ----- ---- ----- ----------- --------
3 15.76% 0.68% 13.55% $ 11,354.97 $ 75.62
--- ----- ---- ----- ----------- --------
4 21.55% 0.68% 18.46% $ 11,845.50 $ 78.88
--- ----- ---- ----- ----------- --------
5 27.63% 0.68% 23.57% $ 12,357.23 $ 82.29
--- ----- ---- ----- ----------- --------
6 34.01% 0.68% 28.91% $ 12,891.06 $ 85.84
--- ----- ---- ----- ----------- --------
7 40.71% 0.68% 34.48% $ 13,447.96 $ 89.55
--- ----- ---- ----- ----------- --------
8 47.75% 0.68% 40.29% $ 14,028.91 $ 93.42
--- ----- ---- ----- ----------- --------
9 55.13% 0.68% 46.35% $ 14,634.96 $ 97.46
--- ----- ---- ----- ----------- --------
10 62.89% 0.68% 52.67% $ 15,267.19 $ 101.67
--- ----- ---- ----- ----------- --------
TOTAL $ 844.64
--- --------
|
151
Appendix
DWS ULTRA-SHORT DURATION FUND - CLASS A
MAXIMUM INITIAL HYPOTHETICAL ASSUMED RATE
SALES CHARGE: INVESTMENT: OF RETURN:
2.75% $10,000 5%
--------------- ------------------------- -----------------------------
HYPOTHETICAL
CUMULATIVE ANNUAL CUMULATIVE YEAR-END
RETURN BEFORE FUND RETURN AFTER BALANCE AFTER ANNUAL FEES
FEES AND EXPENSE FEES AND FEES AND AND
YEAR EXPENSES RATIOS EXPENSES EXPENSES EXPENSES
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.95% 1.19% $ 10,118.86 $ 369.26
--- ----- ---- ----- ----------- ----------
2 10.25% 0.95% 5.29% $ 10,528.68 $ 98.08
--- ----- ---- ----- ----------- ----------
3 15.76% 0.95% 9.55% $ 10,955.09 $ 102.05
--- ----- ---- ----- ----------- ----------
4 21.55% 0.95% 13.99% $ 11,398.77 $ 106.18
--- ----- ---- ----- ----------- ----------
5 27.63% 0.95% 18.60% $ 11,860.42 $ 110.48
--- ----- ---- ----- ----------- ----------
6 34.01% 0.95% 23.41% $ 12,340.77 $ 114.96
--- ----- ---- ----- ----------- ----------
7 40.71% 0.95% 28.41% $ 12,840.57 $ 119.61
--- ----- ---- ----- ----------- ----------
8 47.75% 0.95% 33.61% $ 13,360.61 $ 124.46
--- ----- ---- ----- ----------- ----------
9 55.13% 0.95% 39.02% $ 13,901.71 $ 129.50
--- ----- ---- ----- ----------- ----------
10 62.89% 0.95% 44.65% $ 14,464.73 $ 134.74
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,409.32
--- ----------
|
DWS ULTRA-SHORT DURATION FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.85% 3.15% $ 10,315.00 $ 187.91
--- ----- ---- ----- ----------- ----------
2 10.25% 1.85% 6.40% $ 10,639.92 $ 193.83
--- ----- ---- ----- ----------- ----------
3 15.76% 1.85% 9.75% $ 10,975.08 $ 199.94
--- ----- ---- ----- ----------- ----------
4 21.55% 1.85% 13.21% $ 11,320.80 $ 206.24
--- ----- ---- ----- ----------- ----------
5 27.63% 1.85% 16.77% $ 11,677.40 $ 212.73
--- ----- ---- ----- ----------- ----------
6 34.01% 1.85% 20.45% $ 12,045.24 $ 219.43
--- ----- ---- ----- ----------- ----------
7 40.71% 0.95% 25.33% $ 12,533.07 $ 116.75
--- ----- ---- ----- ----------- ----------
8 47.75% 0.95% 30.41% $ 13,040.66 $ 121.48
--- ----- ---- ----- ----------- ----------
9 55.13% 0.95% 35.69% $ 13,568.81 $ 126.39
--- ----- ---- ----- ----------- ----------
10 62.89% 0.95% 41.18% $ 14,118.34 $ 131.51
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,716.21
--- ----------
|
152
Appendix
DWS ULTRA-SHORT DURATION FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.72% 3.28% $ 10,328.00 $ 174.82
--- ----- ---- ----- ----------- ----------
2 10.25% 1.72% 6.67% $ 10,666.76 $ 180.55
--- ----- ---- ----- ----------- ----------
3 15.76% 1.72% 10.17% $ 11,016.63 $ 186.48
--- ----- ---- ----- ----------- ----------
4 21.55% 1.72% 13.78% $ 11,377.97 $ 192.59
--- ----- ---- ----- ----------- ----------
5 27.63% 1.72% 17.51% $ 11,751.17 $ 198.91
--- ----- ---- ----- ----------- ----------
6 34.01% 1.72% 21.37% $ 12,136.61 $ 205.43
--- ----- ---- ----- ----------- ----------
7 40.71% 1.72% 25.35% $ 12,534.69 $ 212.17
--- ----- ---- ----- ----------- ----------
8 47.75% 1.72% 29.46% $ 12,945.83 $ 219.13
--- ----- ---- ----- ----------- ----------
9 55.13% 1.72% 33.70% $ 13,370.45 $ 226.32
--- ----- ---- ----- ----------- ----------
10 62.89% 1.72% 38.09% $ 13,809.00 $ 233.74
--- ----- ---- ----- ----------- ----------
TOTAL $ 2,030.14
--- ----------
|
DWS ULTRA-SHORT DURATION FUND - INSTITUTIONAL CLASS
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
------ --------------- --------- -------------- --------------- -----------
1 5.00% 0.73% 4.27% $ 10,427.00 $ 74.56
--- ----- ---- ----- ----------- --------
2 10.25% 0.73% 8.72% $ 10,872.23 $ 77.74
--- ----- ---- ----- ----------- --------
3 15.76% 0.73% 13.36% $ 11,336.48 $ 81.06
--- ----- ---- ----- ----------- --------
4 21.55% 0.73% 18.21% $ 11,820.54 $ 84.52
--- ----- ---- ----- ----------- --------
5 27.63% 0.73% 23.25% $ 12,325.28 $ 88.13
--- ----- ---- ----- ----------- --------
6 34.01% 0.73% 28.52% $ 12,851.57 $ 91.90
--- ----- ---- ----- ----------- --------
7 40.71% 0.73% 34.00% $ 13,400.33 $ 95.82
--- ----- ---- ----- ----------- --------
8 47.75% 0.73% 39.73% $ 13,972.53 $ 99.91
--- ----- ---- ----- ----------- --------
9 55.13% 0.73% 45.69% $ 14,569.15 $ 104.18
--- ----- ---- ----- ----------- --------
10 62.89% 0.73% 51.91% $ 15,191.26 $ 108.63
--- ----- ---- ----- ----------- --------
TOTAL $ 906.45
--- --------
|
153
Appendix
DWS ULTRA-SHORT DURATION FUND - CLASS S
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
------ --------------- --------- -------------- --------------- -----------
1 5.00% 0.79% 4.21% $ 10,421.00 $ 80.66
--- ----- ---- ----- ----------- --------
2 10.25% 0.79% 8.60% $ 10,859.72 $ 84.06
--- ----- ---- ----- ----------- --------
3 15.76% 0.79% 13.17% $ 11,316,92 $ 87.60
--- ----- ---- ----- ----------- --------
4 21.55% 0.79% 17.93% $ 11,793.36 $ 91.29
--- ----- ---- ----- ----------- --------
5 27.63% 0.79% 22.90% $ 12,289.86 $ 95.13
--- ----- ---- ----- ----------- --------
6 34.01% 0.79% 28.07% $ 12,807.26 $ 99.13
--- ----- ---- ----- ----------- --------
7 40.71% 0.79% 33.46% $ 13,346.45 $ 103.31
--- ----- ---- ----- ----------- --------
8 47.75% 0.79% 39.08% $ 13,908.34 $ 107.66
--- ----- ---- ----- ----------- --------
9 55.13% 0.79% 44.94% $ 14,493.88 $ 112.19
--- ----- ---- ----- ----------- --------
10 62.89% 0.79% 51.04% $ 15,104.07 $ 116.91
--- ----- ---- ----- ----------- --------
TOTAL $ 977.94
--- --------
|
DWS UNCONSTRAINED INCOME FUND - CLASS A
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.03% 1.11% $ 10,111.08 $ 377.16
--- ----- ---- ----- ----------- ----------
2 10.25% 1.03% 5.12% $ 10,512.49 $ 106.21
--- ----- ---- ----- ----------- ----------
3 15.76% 1.03% 9.30% $ 10,929.84 $ 110.43
--- ----- ---- ----- ----------- ----------
4 21.55% 1.03% 13.64% $ 11,363.75 $ 114.81
--- ----- ---- ----- ----------- ----------
5 27.63% 1.03% 18.15% $ 11,814.89 $ 119.37
--- ----- ---- ----- ----------- ----------
6 34.01% 1.03% 22.84% $ 12,283.95 $ 124.11
--- ----- ---- ----- ----------- ----------
7 40.71% 1.03% 27.72% $ 12,771.62 $ 129.04
--- ----- ---- ----- ----------- ----------
8 47.75% 1.03% 32.79% $ 13,278.65 $ 134.16
--- ----- ---- ----- ----------- ----------
9 55.13% 1.03% 38.06% $ 13,805.81 $ 139.48
--- ----- ---- ----- ----------- ----------
10 62.89% 1.03% 43.54% $ 14,353.90 $ 145.02
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,499.79
--- ----------
|
154
Appendix
DWS UNCONSTRAINED INCOME FUND - CLASS B
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.86% 3.14% $ 10,314.00 $ 188.92
--- ----- ---- ----- ----------- ----------
2 10.25% 1.86% 6.38% $ 10,637.86 $ 194.85
--- ----- ---- ----- ----------- ----------
3 15.76% 1.86% 9.72% $ 10,971.89 $ 200.97
--- ----- ---- ----- ----------- ----------
4 21.55% 1.86% 13.16% $ 11,316.41 $ 207.28
--- ----- ---- ----- ----------- ----------
5 27.63% 1.86% 16.72% $ 11,671.74 $ 213.79
--- ----- ---- ----- ----------- ----------
6 34.01% 1.86% 20.38% $ 12,038.23 $ 220.50
--- ----- ---- ----- ----------- ----------
7 40.71% 1.03% 25.16% $ 12,516.15 $ 126.46
--- ----- ---- ----- ----------- ----------
8 47.75% 1.03% 30.13% $ 13,013.04 $ 131.48
--- ----- ---- ----- ----------- ----------
9 55.13% 1.03% 35.30% $ 13,529.66 $ 136.69
--- ----- ---- ----- ----------- ----------
10 62.89% 1.03% 40.67% $ 14,066.79 $ 142.12
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,763.06
--- ----------
|
DWS UNCONSTRAINED INCOME FUND - CLASS C
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 1.79% 3.21% $ 10,321.00 $ 181.87
--- ----- ---- ----- ----------- ----------
2 10.25% 1.79% 6.52% $ 10,652.30 $ 187.71
--- ----- ---- ----- ----------- ----------
3 15.76% 1.79% 9.94% $ 10,994.24 $ 193.74
--- ----- ---- ----- ----------- ----------
4 21.55% 1.79% 13.47% $ 11,347.16 $ 199.96
--- ----- ---- ----- ----------- ----------
5 27.63% 1.79% 17.11% $ 11,711.40 $ 206.37
--- ----- ---- ----- ----------- ----------
6 34.01% 1.79% 20.87% $ 12,087.34 $ 213.00
--- ----- ---- ----- ----------- ----------
7 40.71% 1.79% 24.75% $ 12,475.34 $ 219.84
--- ----- ---- ----- ----------- ----------
8 47.75% 1.79% 28.76% $ 12,875.80 $ 226.89
--- ----- ---- ----- ----------- ----------
9 55.13% 1.79% 32.89% $ 13,289.11 $ 234.18
--- ----- ---- ----- ----------- ----------
10 62.89% 1.79% 37.16% $ 13,715.69 $ 241.69
--- ----- ---- ----- ----------- ----------
TOTAL $ 2,105.25
--- ----------
|
155
Appendix
DWS UNCONSTRAINED INCOME FUND - CLASS S
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
------ --------------- --------- -------------- --------------- ------------
1 5.00% 0.88% 4.12% $ 10,412.00 $ 89.81
--- ----- ---- ----- ----------- ----------
2 10.25% 0.88% 8.41% $ 10,840.97 $ 93.51
--- ----- ---- ----- ----------- ----------
3 15.76% 0.88% 12.88% $ 11,287.62 $ 97.37
--- ----- ---- ----- ----------- ----------
4 21.55% 0.88% 17.53% $ 11,752.67 $ 101.38
--- ----- ---- ----- ----------- ----------
5 27.63% 0.88% 22.37% $ 12,236.88 $ 105.55
--- ----- ---- ----- ----------- ----------
6 34.01% 0.88% 27.41% $ 12,741.04 $ 109.90
--- ----- ---- ----- ----------- ----------
7 40.71% 0.88% 32.66% $ 13,265.97 $ 114.43
--- ----- ---- ----- ----------- ----------
8 47.75% 0.88% 38.13% $ 13,812.53 $ 119.15
--- ----- ---- ----- ----------- ----------
9 55.13% 0.88% 43.82% $ 14,381.61 $ 124.05
--- ----- ---- ----- ----------- ----------
10 62.89% 0.88% 49.74% $ 14,974.13 $ 129.17
--- ----- ---- ----- ----------- ----------
TOTAL $ 1,084.32
--- ----------
|
ADDITIONAL INDEX INFORMATION
DWS CORE FIXED INCOME FUND
BARCLAYS U.S. AGGREGATE BOND INDEX is an unmanaged index representing domestic
taxable investment-grade bonds, with index components for government and
corporate securities, mortgage pass-through securities, and asset-backed
securities with average maturities of one year or more.
DWS GLOBAL INFLATION FUND
BARCLAYS U.S. TREASURY: US TIPS INDEX is an unmanaged, dollar-denominated index
consisting of inflation-protected securities issued by the US Treasury with at
least one year to final maturity and must be rated investment grade Baa3/BBB or
higher by at least two rating agencies.
DWS GNMA FUND
BARCLAYS GNMA INDEX is an unmanaged market value-weighted measure of all
fixed-rate securities backed by mortgage pools of the Government National
Mortgage Association.
DWS HIGH INCOME FUND
CREDIT SUISSE HIGH YIELD INDEX is an unmanaged index that tracks the
performance of the global high-yield debt market.
DWS GLOBAL HIGH INCOME FUND
BANK OF AMERICA MERRILL LYNCH GLOBAL HIGH YIELD CONSTRAINED INDEX tracks the
performance of below investment grade bonds of corporate issuers domiciled in
countries having an investment grade foreign currency long term debt rating.
The index limits the percentage represented by any single issuer in the index.
DWS SHORT DURATION FUND
BARCLAYS 1-3 YEAR GOVERNMENT/CREDIT INDEX is an unmanaged index consisting of
all US government agency and Treasury securities, as well as all investment
grade corporate debt securities with maturities of one to three years.
DWS STRATEGIC GOVERNMENT SECURITIES FUND
BARCLAYS GNMA INDEX is an unmanaged market value-weighted measure of all
fixed-rate securities backed by mortgage pools of the Government National
Mortgage Association.
DWS ULTRA-SHORT DURATION FUND
BARCLAYS CORPORATE 1-YEAR DURATION INDEX is designed to measure the performance
of the short term U.S. corporate bond market. The Index includes publicly
issued U.S. dollar denominated corporate issues that have a remaining maturity
of 1 year or less, are rated investment grade (must be Baa3/BBB- or higher
using the middle rating of Moody's Investor Service, Inc., Standard & Poor's,
and Fitch Rating), and have $250 million or more of outstanding face value.
DWS UNCONSTRAINED INCOME FUND
BARCLAYS U.S. UNIVERSAL INDEX represents the union of the U.S. Aggregate Index,
the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the
Emerging Markets Index, and the non-ERISA portion of the CMBS Index.
156
Appendix
BARCLAYS U.S. AGGREGATE BOND INDEX is an unmanaged index representing domestic
taxable investment-grade bonds, with index components for government and
corporate securities, mortgage pass-through securities, and asset-backed
securities with average maturities of one year or more.
157
Appendix
TO GET MORE INFORMATION
SHAREHOLDER REPORTS. Additional information about a fund's investments is
available in a fund's annual and semi-annual reports to shareholders. In the
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected fund performance during its
last fiscal year.
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 dws-investments.com. These documents and other information about each
fund are available from the EDGAR Database on the SEC's Internet site at
sec.gov. If you like, you may obtain copies of this information, after paying a
duplicating 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 the SEC at (202) 551-8090.
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
DWS INVESTMENTS PO Box 219151
Kansas City, MO
64121-9151
dws-investments.com
Shareholders:
(800) 728-3337
Investment professionals:
(800) 621-5027
SEC Public Reference Section
Washington, D.C. 20549-1520
SEC.GOV
DISTRIBUTOR DWS Investments Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148
SEC FILE NUMBER DWS Income Trust
DWS Core Fixed Income Fund
811-04049
DWS Income Trust
DWS Global Inflation Fund
811-04049
DWS Income Trust
DWS GNMA Fund
811-04049
DWS Income Trust
DWS High Income Fund
811-04049
DWS Income Trust
DWS Global High Income Fund
811-04049
DWS Income Trust
DWS Short Duration Fund
811-04049
DWS Income Trust
DWS Strategic Government Securities
Fund
811-04049
DWS Income Trust
DWS Ultra-Short Duration Fund
811-04049
DWS Income Trust
DWS Unconstrained Income Fund
811-04049
|
Deutsche Asset
& Wealth Management [DB Logo]
(02/01/14) DTXIF-1
Deutsche Asset
& Wealth Management
Statement of Additional Information
February 1, 2014
DWS INCOME TRUST
DWS Core Fixed Income Fund
CLASS/TICKER A SFXAX B SFXBX C SFXCX R SFXRX INST MFINX S SFXSX
|
..............................................................................
DWS Global Inflation Fund
CLASS/TICKER A TIPAX B TIPTX C TIPCX INST TIPIX S TIPSX
|
..............................................................................
DWS GNMA Fund
CLASS/TICKER A GGGGX C GCGGX R GRGGX INST GIGGX S SGINX
|
..............................................................................
DWS High Income Fund
CLASS/TICKER A KHYAX B KHYBX C KHYCX R KHYRX INST KHYIX S KHYSX
|
..............................................................................
DWS Global High Income Fund
CLASS/TICKER A SGHAX B SGHBX C SGHCX INST MGHYX S SGHSX
|
..............................................................................
DWS Short Duration Fund
CLASS/TICKER A PPIAX B PPLBX C PPLCX INST PPILX S DBPIX
|
..............................................................................
DWS Strategic Government Securities Fund
CLASS/TICKER A KUSAX B KUSBX C KUSCX INST KUSIX S KUSMX
|
..............................................................................
DWS Ultra-Short Duration Fund
CLASS/TICKER A SDUAX B SDUBX C SDUCX INST MGSFX S SDUSX
|
..............................................................................
DWS Unconstrained Income Fund
CLASS/TICKER A KSTAX B KSTBX C KSTCX S KSTSX
|
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, 2014, as supplemented, a copy of which may be obtained without
charge by calling (800) 728-3337; by visiting dws-investments.com (the Web site
does not form a part of this SAI); 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, 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.
Class B shares are closed to new investment.
[DB Logo]
STATEMENT OF ADDITIONAL INFORMATION (SAI) - PART I
PAGE
Part I................................................................................... I-1
Definitions............................................................................ I-1
Fund Organization...................................................................... I-1
Management of Each Fund................................................................ I-2
Sales Charges and Distribution Plan Payments........................................... I-3
Portfolio Transactions and Brokerage Commissions....................................... I-3
Investments............................................................................ I-3
Investment Restrictions................................................................ I-3
Taxes.................................................................................. I-7
Independent Registered Public Accounting Firm, Reports to Shareholders and Financial I-7
Statements
Additional Information................................................................. I-7
Part I: Appendix I-A - Board Member Share Ownership and Control........................ I-8
Part I: Appendix I-B - Board Committees and Meetings................................... I-29
Part I: Appendix I-C - Board Member Compensation....................................... I-33
Part I: Appendix I-D - Portfolio Management............................................ I-36
Part I: Appendix I-E - Service Provider Compensation................................... I-46
Part I: Appendix I-F - Sales Charges................................................... I-54
Part I: Appendix I-G - Distribution Plan Payments...................................... I-56
Part I: Appendix I-H - Portfolio Transactions and Brokerage Commissions................ I-57
Part I: Appendix I-I - Investment Practices and Techniques............................. I-61
Part I: Appendix I-J - Additional Information.......................................... I-66
Part I: Appendix I-K - Wholly - Owned Subsidiary Companies............................ I-68
Part II.................................................................................. II-1
Detailed Part II table of contents precedes page II-1
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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
"SEC" - the Securities and Exchange Commission
"DIMA" or "Advisor" or "Administrator" - Deutsche Investment Management
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Americas Inc., 345 Park Avenue, New York, New York 10154
"Subadvisor"- Fischer Francis Trees & Watts, Inc., 200 Park Avenue, New York,
New York 10166 for DWS Core Fixed Income Fund
"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
"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) of the fund or its investment advisor
"fund" or "series" - DWS Core Fixed Income Fund, DWS Global Inflation Fund, DWS
GNMA Fund, DWS High Income Fund, DWS Global High Income Fund, DWS Short
Duration Fund, DWS Strategic Government Securities Fund, DWS Ultra-Short
Duration Fund and/or DWS Unconstrained Income Fund as the context may require
"Custodian" - State Street Bank and Trust Company, State Street Financial
Center, One Lincoln Street, Boston, Massachusetts 02111
"Fund Legal Counsel" - Vedder Price P.C., 222 North LaSalle Street, Chicago,
Illinois 60601
"Trustee/Director Legal Counsel" - Ropes & Gray LLP, Prudential Tower, 800
Boylston Street, Boston, Massachusetts 02199
"Trust" - DWS Income Trust
"NRSRO"- A nationally recognized statistical rating organization
"S&P" - Standards & Poor's Ratings Services, an NRSRO
"Moody's" - Moody's Investors Service, Inc., an NRSRO
"Fitch" - Fitch Ratings, an NRSRO
FUND ORGANIZATION
Each fund is a series of DWS Income Trust, a Massachusetts business trust
established under a Declaration of Trust dated June 8, 1984, as amended from
time to time. On February 6, 2006, Scudder Income Trust was renamed DWS Income
Trust and Scudder GNMA Fund was renamed DWS GNMA Fund.
On February 6, 2006, Scudder High Income Fund and Scudder Strategic Income Fund
were renamed DWS High Income Fund and DWS Strategic Income Fund, respectively.
On February 1, 2011, the predecessor of each of DWS High Income Fund and DWS
Strategic Income Fund transferred all of its assets and liabilities from DWS
High Income Series and DWS Strategic Income Fund respectively, each a
Massachusetts business trust, to DWS Income Trust, while retaining the same
fund names. On September 22, 2011, DWS Strategic Income Fund was renamed DWS
Unconstrained Income Fund.
On February 6, 2006, Scudder Fixed Income Fund was renamed DWS Core Fixed
Income Fund, Scudder Short Duration Fund was renamed DWS Short Duration Fund
and Scudder High Income Plus Fund was renamed DWS High Income Plus Fund. On
February 1, 2011, the predecessor of each of DWS Core Fixed Income Fund, DWS
Short Duration Fund and DWS High Income Plus Fund transferred all of its assets
and liabilities from DWS Advisor Funds, a Massachusetts business trust, to DWS
Income Trust, while retaining the same fund names. On July 10, 2006, August 21,
2006 and July 10, 2006, respectively, the predecessor of each predecessor fund
of DWS Core Fixed Income Fund, DWS Short Duration Fund and DWS
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High Income Plus Fund transferred all of its assets and liabilities from DWS
Investments Trust, a Delaware statutory trust, to DWS Advisor Funds, while
retaining the same fund names. On April 15, 2011, DWS Short Duration Fund was
renamed DWS Ultra-Short Duration Fund. On February 1, 2012, DWS High Income
Plus Fund was renamed DWS Global High Income Fund.
On February 6, 2006, Scudder Inflation Protected Plus Fund was renamed DWS
Inflation Protected Plus Fund. On March 31, 2010, DWS Inflation Protected Plus
Fund was renamed DWS Global Inflation Plus Fund. On February 1, 2011, the
predecessor of DWS Global Inflation Plus Fund transferred all of its assets and
liabilities from DWS Institutional Funds, a Massachusetts business trust, to
DWS Income Trust, while retaining the same fund name. On October 1, 2011, DWS
Global Inflation Plus Fund was renamed DWS Global Inflation Fund.
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. On February 1, 2011,
the predecessor of DWS Strategic Government Securities Fund transferred all of
its assets and liabilities from DWS Strategic Government Securities Fund, a
Massachusetts business trust, to DWS Income Trust, while retaining the same
fund name.
On June 1, 2005, Scudder PreservationPlus Income Fund was renamed Scudder
Limited-Duration Plus Fund and on February 6, 2006, was renamed DWS Short
Duration Plus Fund. On February 1, 2011, the predecessor of DWS Short Duration
Plus Fund transferred all of its assets and liabilities from DWS Advisor Funds,
a Massachusetts business trust, to DWS Income Trust, while retaining the same
fund name. On October 1, 2011, DWS Short Duration Plus Fund was renamed DWS
Short Duration Fund.
The predecessor fund of each of DWS High Income Fund, DWS Unconstrained Income
Fund, DWS Core Fixed Income Fund, DWS Ultra-Short Duration Fund, DWS Global
High Income Fund, DWS Global Inflation Fund, DWS Strategic Government
Securities Fund and DWS Short Duration Fund is referred to herein as a
"Predecessor Fund." All historical financial information and other information
contained in the fund's prospectus and SAI for periods prior to February 1,
2011 relating to a fund (or any class thereof) is that of the applicable
Predecessor Fund (or corresponding class thereof).
The Trust is governed by an Amended and Restated Declaration of Trust dated
June 2, 2008, as may be further amended from time to time (the "Declaration of
Trust"). The Declaration of Trust was last approved by shareholders in 2006.
Additional information about the Trust is set forth in PART II under "Fund
Organization."
MANAGEMENT OF EACH FUND
BOARD MEMBERS AND OFFICERS' IDENTIFICATION AND BACKGROUND
The identification and background of the Board Members and officers are set
forth in PART II - APPENDIX II-A.
BOARD COMMITTEES AND COMPENSATION
Compensation paid to the Independent Board Members, for certain specified
periods is set forth in PART I - APPENDIX I-C. Information regarding the
committees of the Board, is set forth in PART I - APPENDIX I-B.
BOARD MEMBER SHARE OWNERSHIP AND CONTROL PERSONS
Information concerning the ownership of fund shares by Board Members and
officers, 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.
SERVICE PROVIDER COMPENSATION
Compensation paid by each fund to its service providers for various services,
including investment management, administrative, transfer agency, and, for
certain funds, fund accounting services and subadvisory services, is set forth
in PART I - APPENDIX I-E. For information regarding payments made to DIDI, see
PART I - APPENDIX I-F. The service provider compensation and underwriting and
sales commission information is not applicable to
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new funds that have not completed a fiscal reporting period. Fee rates for
services of the above-referenced service providers are included in PART II -
APPENDIX II-C.
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 funds/classes that do not impose sales
charges, or to new funds/classes that have not completed a fiscal reporting
period.
DISTRIBUTION PLAN PAYMENTS
Payments made by each fund for the most recent fiscal year under each fund's
Rule 12b-1 Plans are set forth in PART I - APPENDIX I-G. This information is
not applicable to funds/classes that do not incur expenses paid in connection
with Rule 12b-1 Plans, or to new funds/ classes that have not completed a
fiscal reporting period.
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 new funds that have 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. This section does not apply to
new funds that have not completed a fiscal reporting period.
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. The fund's election to be
classified as diversified under the 1940 Act may not be changed without the
vote of a majority of the outstanding voting securities (as defined herein) of
the fund.
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:
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(1) borrow money, except as permitted under the 1940 Act, as interpreted or
modified by regulatory authority having jurisdiction, from time to time.
(2) issue senior securities, except as permitted under the 1940 Act, as
interpreted or modified by regulatory authority having jurisdiction,
from time to time.
(3) purchase or sell commodities, except as permitted by the 1940 Act, as
interpreted or modified by regulatory authority having jurisdiction,
from time to time.
(4) engage in the business of underwriting securities issued by others,
except to the extent that the fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities.
(5) purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured
by real estate or interests therein, except that the fund reserves
freedom of action to hold and to sell real estate acquired as a result
of the fund's ownership of securities.
(6) make loans except as permitted under the 1940 Act, 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, as interpreted or modified by regulatory authority
having jurisdiction, from time to time.
For purposes of fundamental policy (5), each of DWS High Income Fund, DWS
Unconstrained Income Fund and DWS Strategic Government Securities Fund has no
current intention to hold and sell real estate acquired as a result of a fund's
ownership of securities.
For purposes of fundamental policy (7), with respect to DWS GNMA Fund, DWS High
Income Fund, DWS Unconstrained Income Fund, and DWS Strategic Government
Securities Fund only, when determining the percentage of the fund's total
assets invested in securities of issuers having their principal business
activities in a particular industry, asset-backed securities will be classified
separately, based on the nature of the underlying assets, according to the
following categories: captive auto, diversified, retail and consumer loans,
captive equipment and business, business trade receivables, nuclear fuel and
capital and mortgage lending.
The following is intended to help investors better understand the meaning of a
fund's fundamental policies by briefly describing limitations, if any, imposed
by the 1940 Act. References to the 1940 Act below may encompass rules,
regulations or orders issued by the SEC and, to the extent deemed appropriate
by the fund, interpretations and guidance provided by the SEC staff. These
descriptions are intended as brief summaries of such limitations as of the date
of this SAI; they are not comprehensive and they are qualified in all cases by
reference to the 1940 Act (including any rules, regulations or orders issued by
the SEC and any relevant interpretations and guidance provided by the SEC
staff). These descriptions are subject to change based on evolving guidance by
the appropriate regulatory authority and are not part of a fund's fundamental
policies.
The 1940 Act generally permits a fund to borrow money in amounts of up to
33 1-3% of its total assets from banks for any purpose. The 1940 Act requires
that after any borrowing from a bank a fund shall maintain an asset coverage of
at least 300% for all of the fund's borrowings, and, in the event that such
asset coverage shall at any time fall below 300%, a fund must, within three
days thereafter (not including Sundays and holidays), reduce the amount of its
borrowings to an extent that the asset coverage of all of a fund's borrowings
shall be at least 300%. In addition, a fund may borrow up to 5% of its total
assets from banks or other lenders for temporary purposes (a loan is presumed
to be for temporary purposes if it is repaid within 60 days and is not extended
or renewed). For additional information, see "Borrowing" in PART II - APPENDIX
II-G.
Under the 1940 Act, a senior security does not include any promissory note or
evidence of indebtedness where such loan is for temporary purposes only and in
an amount not exceeding 5% of the value of the total assets of a fund at the
time the loan is made (a loan is presumed to be for temporary purposes if it is
repaid within 60 days and is not extended or renewed). The SEC and/or its staff
has indicated that certain investment practices may raise senior security
issues unless a fund takes appropriate steps to segregate assets against, or
cover, its obligations. A fund is permitted to engage in the investment
practices described in its prospectus and in this SAI.
For additional information regarding the fund's asset segregation practices,
see "Asset Segregation" in PART II - APPENDIX II-G.
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At present, the 1940 Act does not set forth a maximum percentage of a fund's
assets that may be invested in commodities.
Under the 1940 Act, a fund generally may not lend portfolio securities
representing more than one-third of its total asset value (including the value
of collateral received for loans of portfolio securities).
OTHER INVESTMENT POLICIES. The Board has adopted certain additional
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) (for each fund except DWS Unconstrained Income 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) (for each fund except DWS Global Inflation Fund) 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 (1) 5% of the value
of the fund's total (DWS Core Fixed Income Fund, DWS GNMA Fund, DWS High
Income Fund, DWS Strategic Government Securities Fund, DWS Ultra-Short
Duration Fund and DWS Unconstrained Income Fund) and (2) 20% of the
value of the fund's net (DWS Global High Income Fund and DWS Short
Duration Fund) assets (for this purpose, warrants acquired in units or
attached to securities will be deemed to have no value).
(5) (for DWS GNMA Fund, DWS High Income Fund, DWS Short Duration Fund, DWS
Unconstrained Income Fund and DWS Strategic Government Securities Fund
only) 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) (for DWS GNMA Fund only) when purchasing Asset-Backed Securities,
the fund will not pay any additional or separate fees for Credit
Enhancement.
(7) (for DWS GNMA Fund only) the fund may invest in certificates of deposit
issued by banks and savings and loan institutions which had, at the time
of their most recent financial statements, total assets of less than $1
billion, provided that (i) the principal amounts of such certificates of
deposit are insured by an agency of the US Government, (ii) at no time
will the fund hold more than $100,000 principal amount of certificates
of deposit of any one such bank, and (iii) at the time of acquisition,
no more than 10% of the fund's assets (taken at current value) are
invested in certificates of deposit of such banks having total assets
not in excess of $1 billion.
(8) (for DWS Core Fixed Income Fund only) the fund's non-US investments may
be denominated only in the US dollar.
(9) (for DWS Core Fixed Income Fund only) the fund may only invest up to 5%
of net assets in below investment-grade bonds, including securities in
default.
(10) (for DWS Short Duration Fund only) the fund may invest up to 10% of its
total assets in debt securities rated in the 5/th/ and 6/th/ long-term
rating categories by S&P, Moody's and Fitch or comparably rated by
another NRSRO, or if unrated, of comparable quality as determined by the
Advisor.
(11) (for DWS GNMA Fund, DWS High Income Fund and DWS Strategic Government
Securities Fund only) 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.
(12) (for DWS High Income Fund and DWS Strategic Government Securities Fund
only) the fund will not sell put options if, as a result, more than 50%
of
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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.
(13) (for DWS Global High Income Fund only) the fund may not invest more than
25% of its total assets in purchased protective put options.
(14) (for DWS Global Inflation Fund only) the fund may not invest more than
15% of its total assets in purchased protective put options.
(15) (for DWS Short Duration Fund only) the fund will only write put options
involving securities for which a determination is made at the time the
option is written that the fund wishes to acquire the securities at the
exercise price.
(16) (for DWS Short Duration Fund only) no more than 5% of the fund's total
assets may be invested in credit default swaps for purposes of buying
credit protection for non-hedging purposes.
(17) (for DWS Core Fixed Income Fund only) the fund has a 15% of total assets
combined limit on futures and interest rate swaps.
(18) (for each fund except DWS GNMA Fund and DWS Unconstrained Income Fund)
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.
(19) (for DWS High Income Fund, DWS Global High Income Fund and DWS Strategic
Government Securities Fund only) may invest up to 15% of its total
assets in credit default swaps (measured by the notional amount of the
credit default swap).
(20) (for DWS Global Inflation Fund only) the fund may invest up to 25% of
its total assets in credit default swaps (measured by the notional
amount).
(21) (for DWS Short Duration Fund only) the fund may invest up to 15% of its
total assets in credit default swaps.
(22) (for DWS High Income Fund, DWS Global High Income Fund and DWS Strategic
Government Securities Fund only) 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.
(23) (for DWS Global Inflation Fund only) no more than 5% of the fund's total
assets may be invested in credit default swaps for purposes of buying
credit protection.
(24) (for each fund except DWS GNMA Fund) the fund will only sell credit
protection with respect to securities in which it would be authorized to
invest directly.
(25) (for DWS High Income Fund only) the fund may not exceed 25% of the value
of its assets in securities purchased on a when-issued or forward
delayed-delivery basis.
(26) (for DWS High Income Fund and DWS Strategic Government Securities Fund
only) 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.
(27) (for DWS High Income Fund and DWS Strategic Government Securities Fund
only) the fund currently does not intend to invest more than 20% of its
net assets in zero coupon US government securities.
(28) (for DWS Strategic Government Securities Fund only) the fund will not
invest in Mortgage-Backed Securities issued by private issuers.
(29) (for DWS High Income Fund only) the fund may invest up to 50% of its
total assets in bonds denominated in US dollars or foreign currencies
from foreign issuers.
(30) (for DWS Global Inflation Fund only) under normal conditions, the fund
will have investment exposure to at least three countries, including the
United States, and combined direct and indirect exposure to foreign
securities, foreign currencies and other foreign investments (measured
on a gross basis) equal to at least 40% of the fund's net assets.
For purposes of non-fundamental policy (1), and for so long as it remains a
position of the SEC, fixed time deposits maturing in more than seven days that
cannot be traded on a secondary market and participation interests in loans
will be treated as illiquid. Restricted
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securities (including commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933) that the Board has determined to be readily marketable
will not be deemed to be illiquid for purposes of non-fundamental policy (1).
For purposes of non-fundamental policy (30), an investment is considered to be
an investment in a foreign security or a foreign investment if the issuer is
organized or located outside the U.S. or is doing a substantial amount of
business outside of the U.S. An issuer that derives at least 50% of its revenue
from business outside the U.S. or has at least 50% of its assets outside the
U.S. will be considered to be doing a substantial amount of business outside
the U.S.
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 its prospectus and financial
statements incorporated by reference into this SAI have been so included or
incorporated by reference in reliance on the report of PricewaterhouseCoopers
LLP, 125 High Street, Boston, MA 02110 (for DWS Core Fixed Income Fund, DWS
Global Inflation Fund, DWS GNMA Fund, DWS Global High Income Fund, DWS Short
Duration Fund and DWS Ultra-Short Duration Fund) and Ernst & Young LLP, 200
Clarendon Street, Boston, MA 02116 (for DWS High Income Fund, DWS Strategic
Government Securities Fund and DWS Unconstrained Income Fund).
PricewaterhouseCoopers LLP and Ernst & Young LLP are each an independent
registered public accounting firm. The report is given on the authority of said
firm as experts in auditing and accounting. The independent registered public
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, 2013 for DWS Short Duration Fund, DWS High Income Fund, DWS
Global Inflation Fund and DWS GNMA Fund; October 31, 2013 for DWS Core Fixed
Income Fund, DWS Global High Income Fund, DWS Strategic Government Securities
Fund, DWS Ultra-Short Duration Fund and DWS Unconstrained Income Fund (SEC File
No. 811-04049), 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.
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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,
2013.
DOLLAR RANGE OF BENEFICIAL OWNERSHIP/(1)/
DWS CORE DWS GLOBAL
FIXED INCOME INFLATION DWS GNMA
BOARD MEMBER FUND FUND FUND
INDEPENDENT BOARD MEMBER:
John W. Ballantine None None None
Henry P. Becton, Jr. None None None
Dawn-Marie Driscoll $ 1-$10,000 $ 1-$10,000 $1-$10,000
Keith R. Fox None None None
Paul K. Freeman None None None
Kenneth C. Froewiss $10,001-$50,000 None None
Richard J. Herring None $10,001-$50,000 None
William McClayton None None None
Rebecca W. Rimel None None None
William N. Searcy, Jr. None None None
Jean Gleason Stromberg None None None
Robert Wadsworth None None None
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DWS HIGH DWS GLOBAL HIGH DWS SHORT
INCOME INCOME DURATION
BOARD MEMBER FUND FUND FUND
INDEPENDENT BOARD MEMBER:
John W. Ballantine None None None
Henry P. Becton, Jr. None None $50,001-$100,000
Dawn-Marie Driscoll None $ 1-$10,000 $ 1-$10,000
Keith R. Fox None None None
Paul K. Freeman $10,001-$50,000 None None
Kenneth C. Froewiss None $10,001-$50,000 $ 10,001-$50,000
Richard J. Herring None None None
William McClayton None None None
Rebecca W. Rimel None None None
William N. Searcy, Jr. $10,001-$50,000 None None
Jean Gleason Stromberg None None None
Robert Wadsworth None None None
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DWS
STRATEGIC DWS
GOVERNMENT DWS ULTRA-SHORT UNCONSTRAINED
SECURITIES DURATION INCOME
BOARD MEMBER FUND FUND FUND
INDEPENDENT BOARD MEMBER:
John W. Ballantine None None None
Henry P. Becton, Jr. None None None
Dawn-Marie Driscoll None $1-$10,000 None
Keith R. Fox None None None
Paul K. Freeman None None $1-$10,000
Kenneth C. Froewiss $1-$10,000 None $1-$10,000
Richard J. Herring None None None
William McClayton None None None
Rebecca W. Rimel None None None
William N. Searcy, Jr. None None None
Jean Gleason Stromberg None None None
Robert Wadsworth None None None
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AGGREGATE DOLLAR RANGE OF BENEFICIAL OWNERSHIP/(1)/
FUNDS OVERSEEN BY
BOARD MEMBER IN THE
BOARD MEMBER DWS FUNDS
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
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(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, 2013. An immediate family member can be a spouse,
children residing in the same household, including step and adoptive children,
and any dependents.
I-9
The securities represent ownership in the Advisor or Distributor and any
persons (other than a registered investment company) directly or indirectly
controlling, controlled by, or under common control with the Advisor or
Distributor (including Deutsche Bank AG).
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
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
|
As of January 2, 2014, all Board Members and officers owned, as a group, less
than 1% of the outstanding shares of a fund.
25% OR GREATER OWNERSHIP
Shareholders who beneficially own 25% or more of a fund's shares may have a
significant impact on any shareholder vote of the fund. The following table
identifies those investors who own 25% or more of a fund's shares as of January
2, 2014:
DWS GLOBAL INFLATION FUND
NAME AND ADDRESS OF INVESTOR SHARES PERCENTAGE
STATE STREET BANK & TRUST CO 3,884,356.45 32.28%
CUST FBO
DWS SELECT ALTERNATIVE ALLOC
BOSTON MA 02111-1750
STATE STREET BANK & TRUST CO 3,190,411.59 26.51%
CUST FBO
DWS ALT ASSET ALLOC PLUS FUND
BOSTON MA 02111-1750
|
DWS GLOBAL HIGH INCOME FUND
NAME AND ADDRESS OF INVESTOR SHARES PERCENTAGE
STATE STREET BANK & TRUST CO 11,981,010.45 26.72%
FBO ADP ACCESS
BOSTON MA 02111-2901
|
I-10
5% OR GREATER OWNERSHIP OF SHARE CLASSES
The following table identifies those investors who own 5% or more of a fund
share class as of January 2, 2014. All holdings are of record, unless otherwise
indicated.
DWS CORE FIXED INCOME FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
UBS WM USA 3,261,295.02 A 24.55%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
STATE STREET CORP TRUSTEE 3,010,083.86 A 22.66%
FBO ADP ACCESS
BOSTON MA 02111-2901
DWS TRUST COMPANY 1,094,007.87 A 8.24%
FBO IBEW 163 RETIREMENT PLAN
ATTN SHARE RECON DEPT A/C XXXXXX
SALEM NH 03079-1143
MORGAN STANLEY SMITH BARNEY 23,162.42 B 26.92%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
PERSHING LLC 8,039.36 B 9.34%
JERSEY CITY NJ 07399-0001
AMERICAN ENTERPRISE INVESTMENT SVC 7,370.13 B 8.56%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
NATIONAL FINANCIAL SERVICES LLC 5,372.78 B 6.24%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
MLPF&S FOR THE SOLE BENEFIT OF 4,346.20 B 5.05%
ITS CUSTOMERS
ATTN FUND ADM 9H0P4
JACKSONVILLE FL 32246-6484
MLPF&S FOR THE SOLE BENEFIT OF 196,893.33 C 16.29%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
SEC XXXXX
JACKSONVILLE FL 32246-6484
FIRST CLEARING LLC 172,283.30 C 14.26%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MORGAN STANLEY SMITH BARNEY 112,445.17 C 9.31%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
|
I-11
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
RAYMOND JAMES 109,295.98 C 9.05%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
PERSHING LLC 72,075.82 C 5.96%
JERSEY CITY NJ 07399-0001
NATIONAL FINANCIAL SERVICES LLC 71,520.03 C 5.92%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
DWS TRUST COMPANY TTEE 5,881,764.81 Institutional 50.60%
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET RECON DEPT # XXXXXX
SALEM NH 03079-1143
STATE STREET BANK & TRUST CO 1,699,056.72 Institutional 14.62%
CUST FBO
DWS LIFECOMPASS 2020 FUND
BOSTON MA 02111-1712
STATE STREET BANK & TRUST CO 1,236,042.80 Institutional 10.63%
CUST FBO
DWS LIFECOMPASS 2015 FUND
BOSTON MA 02111-1712
STATE STREET BANK & TRUST CO 974,478.20 Institutional 8.38%
CUST FBO
DWS LIFECOMPASS RETIREMENT FUND
BOSTON MA 02111-1712
COMMUNITY BANK N A CUST 8,667.96 R 16.37%
FBO FOXBORO CONTROLLES S A 1165(E)
RETIRMENT PLAN
UTICA NY 13502-6317
COMMUNITY BANK NA CUST 8,348.77 R 15.77%
FBO CUNA MUTUAL 1165E
RETIREMENT PLAN FOR PR
UTICA NY 13502-6317
DANIEL SKOOG 7,079.01 R 13.37%
FBO MR KEYS INC 401K PSP
& TR
BRICK NJ 08724-1733
COMMUNITY BANK NA CUST 5,821.01 R 10.99%
FBO ENERGY SOLAR PRODUCTS INC
SAVINGS PLAN
UTICA NY 13502-6317
MLPF&S FOR THE SOLE BENEFIT OF 4,629.45 R 8.74%
ITS CUSTOMERS
ATTN FUND ADM 9H759
JACKSONVILLE FL 32246-6484
|
I-12
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
COMMUNITY BANK NA CUST FBO 4,067.35 R 7.68%
MCALLISTER TOWING & TRANSPORTATION
COMPANY INC 1165(E) PLAN
UTICA NY 13502-6317
MG TRUST CUSTODIAN 3,267.08 R 6.17%
FBO DONGAN ELECTRIC MANUFACTURING
A/C XXXXXXXX
DENVER CO 80202-3304
PATRICIA BLYTH MPP 3,042.72 R 5.75%
FBO PATRICIA BLYTH
RPM MP PLAN
BERKELEY CA 94708-1339
DWS TRUST COMPANY 283,506.23 S 12.53%
FBO HENRY M JACKSON FOUNDATION
#XXXXXX
ATTN ASSET RECONCILIATION DEPT
SALEM NH 03079-1143
MORGAN STANLEY SMITH BARNEY 271,719.24 S 12.01%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
FIRST CLEARING LLC 263,496.04 S 11.65%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
|
DWS GLOBAL INFLATION FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
AMERICAN ENTERPRISE INVESTMENT SVC 234,511.90 A 13.78%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
PERSHING LLC 174,030.42 A 10.23%
JERSEY CITY NJ 07399-0001
FIRST CLEARING LLC 130,071.48 A 7.64%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
UBS WM USA 99,612.47 A 5.85%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
NATIONAL FINANCIAL SERVICES LLC 93,312.87 A 5.48%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
|
I-13
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
FIRST CLEARING LLC 18,122.01 B 30.05%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
STIFEL NICOLAUS & CO INC 9,673.02 B 16.04%
EXCLUSIVE BENEFIT OF CUSTOMERS
ST LOUIS MO 63102-2188
MLPF&S FOR THE SOLE BENEFIT OF 4,786.13 B 7.94%
ITS CUSTOMERS
ATTN FUND ADM
JACKSONVILLE FL 32246-6484
PERSHING LLC 4,474.92 B 7.42%
JERSEY CITY NJ 07399-0001
EDWARD D JONES & CO 4,238.45 B 7.03%
FOR THE BENEFIT OF CUSTOMERS
ST LOUIS MO 63131-3729
NATIONAL FINANCIAL SERVICES LLC 3,264.96 B 5.41%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
MLPF&S FOR THE SOLE BENEFIT OF 379,183.00 C 40.33%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 9LTU2
JACKSONVILLE FL 32246-6484
FIRST CLEARING LLC 164,278.97 C 17.47%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
PERSHING LLC 60,966.06 C 6.48%
JERSEY CITY NJ 07399-0001
UBS WM USA 47,823.95 C 5.09%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
STATE STREET BANK & TRUST CO CUST 3,884,356.45 Institutional 45.70%
FBO DWS SELECT ALTERNATIVE ALLOC
BOSTON MA 02111-1750
STATE STREET BANK & TRUST CO CUST 3,190,411.59 Institutional 37.53%
FBO DWS ALT ASSET ALLOC PLUS FUND
BOSTON MA 02111-1750
STATE STREET BANK & TRUST CO CUST 629,980.73 Institutional 7.41%
FBO DWS ALT ASSET ALLOC VIP FUND
BOSTON MA 02111-1750
PERSHING LLC 51,723.11 Institutional 6.22%
JERSEY CITY NJ 07399-0001
|
I-14
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
DWS TRUST COMPANY TTEE 50,657.54 Institutional 6.09%
ROCKLAND TRUST CO EMPLOYEE
SAVINGS& P/S PLAN
ATTN: ASSET RECON
SALEM NH 03079-1143
CHARLES SCHWAB & CO INC 48,780.44 S 5.86%
ATTN MUTUAL FUNDS DEPARTMENT
SAN FRANCISCO CA 94104-4151
FIRST CLEARING LLC 48,293.96 S 5.81%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MERRILL LYNCH PIERCE FENNER 45,778.03 S 5.50%
& SMITH FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN SERVICE TEAM 99102
JACKSONVILLE FL 32246-6484
|
DWS GNMA FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
FIRST CLEARING LLC 1,770,654.21 A 20.87%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
AMERICAN ENTERPRISE INVESTMENT SVC 1,509,900.56 A 17.80%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
UBS WM USA 817,064.23 A 9.63%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
PERSHING LLC 715,817.39 A 8.44%
JERSEY CITY NJ 07399-0001
MLPF&S FOR THE SOLE BENEFIT OF 673,679.62 A 7.94%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 97098
JACKSONVILLE FL 32246-6484
FIRST CLEARING LLC 1,397,401.20 C 24.82%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
AMERICAN ENTERPRISE INVESTMENT SVC 624,933.48 C 11.10%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
|
I-15
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
UBS WM USA 616,201.72 C 10.95%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
PERSHING LLC 414,433.36 C 7.36%
JERSEY CITY NJ 07399-0001
MLPF&S FOR THE SOLE BENEFIT OF 365,238.61 C 6.49%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
SEC #XXXXX
JACKSONVILLE FL 32246-6484
MORGAN STANLEY SMITH BARNEY 325,023.42 C 5.77%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
NFS LLC FBO 143,221.89 Institutional 38.16%
PAUL J PIZZOLATO
TORRIE J PIZZOLATO
DARIEN CT 06820-5518
FIRST CLEARING LLC 107,565.88 Institutional 28.66%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
CHARLES SCHWAB & CO INC 40,238.30 Institutional 10.72%
SPECIAL CUSTODY ACCOUNT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104-4151
NFS LLC FBO 34,486.64 Institutional 9.19%
FIIOC AS AGENT FBO
QUALIFIED EMPLOYEE BENEFIT
PLANS 401K FINOPS-IC FUNDS
COVINGTON KY 41015-1987
SAMMONS FINANCIAL NETWORK LLC 30,921.36 R 100.00%
WEST DES MOINES IA 50266-5911
|
DWS HIGH INCOME FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
FIRST CLEARING LLC 24,831,230.55 A 10.28%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
NATIONAL FINANCIAL SERVICES LLC 16,622,113.06 A 6.88%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
|
I-16
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
PERSHING LLC 13,349,651.20 A 5.53%
JERSEY CITY NJ 07399-0001
FIRST CLEARING LLC 168,530.44 B 14.17%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
PERSHING LLC 152,111.56 B 12.79%
JERSEY CITY NJ 07399-0001
NATIONAL FINANCIAL SERVICES LLC 83,124.95 B 6.99%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
MORGAN STANLEY SMITH BARNEY 75,413.26 B 6.34%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
MLPF&S FOR THE SOLE BENEFIT OF 64,310.87 B 5.41%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 97851
JACKSONVILLE FL 32246-6484
RBC CAPITAL MARKETS LLC 64,081.04 B 5.39%
MUTUAL FUND OMNIBUS PROCESSING
OMNIBUS
MINNEAPOLIS MN 55402-1110
STIFEL NICOLAUS & CO INC 60,148.00 B 5.06%
EXCLUSIVE BENEFIT OF CUSTOMERS
ST LOUIS MO 63102-2188
RAYMOND JAMES 3,610,614.08 C 15.58%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
FIRST CLEARING LLC 3,583,455.44 C 15.46%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MORGAN STANLEY SMITH BARNEY 1,855,429.91 C 8.01%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
CHARLES SCHWAB & CO INC 1,803,858.49 C 7.78%
SPECIAL CUSTODY ACCT FBO CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104-4151
PERSHING LLC 1,710,861.65 C 7.38%
JERSEY CITY NJ 07399-0001
|
I-17
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
UBS WM USA 1,425,283.26 C 6.15%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
DWS TRUST COMPANY TTEE 8,271,637.59 Institutional 34.64%
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET RECON DEPT # 063115
SALEM NH 03079-1143
NFS LLC FBO 4,481,911.97 Institutional 18.77%
US BANK NATIONAL ASSOCIATION
OMNIBUS - REINVEST/REINVEST
MILWAUKEE WI 53212-3958
PERSHING LLC 3,738,008.28 Institutional 15.66%
JERSEY CITY NJ 07399-0001
FIRST CLEARING LLC 1,589,477.77 Institutional 6.66%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
STATE STREET CORP TRUSTEE 1,456.09 R 86.32%
FBO ADP ACCESS
BOSTON MA 02111-2901
DIMA INC 230.709 R 13.68%
ATTN RANJIT COLOFRANSON &
SONNYFER TOLENTINO CONTROLLING
60 WALL STREET 33RD FLOOR
NEW YORK NY 10005-2836
MERRILL LYNCH PIERCE FENNER 876,792.28 S 25.63%
& SMITH FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN SERVICE TEAM
JACKSONVILLE FL 32246-6484
|
DWS GLOBAL HIGH INCOME FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
PERSHING LLC 455,061.62 A 9.32%
JERSEY CITY NJ 07399-0001
AMERICAN ENTERPRISE INVESTMENT SVC 429,366.37 A 8.80%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
FIRST CLEARING LLC 412,281.72 A 8.45%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
|
I-18
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
CHARLES SCHWAB & CO INC 389,915.88 A 7.99%
SPECIAL CUSTODY ACCOUNT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104-4151
RAYMOND JAMES 318,134.47 A 6.52%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 92500015
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
TD AMERITRADE INC FOR THE 293,991.10 A 6.02%
EXCLUSIVE BENEFIT OF OUR CLIENTS
A/C XXXXXXXXX
OMAHA NE 68103-2226
FIRST CLEARING LLC 32,731.90 B 30.44%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
PERSHING LLC 20,765.44 B 19.31%
JERSEY CITY NJ 07399-0001
EDWARD D JONES & CO 10,824.30 B 10.06%
FOR THE BENEFIT OF CUSTOMERS
ST LOUIS MO 63131-3729
RBC CAPITAL MARKETS LLC 10,733.93 B 9.98%
MUTUAL FUND OMNIBUS PROCESSING
OMNIBUS
MINNEAPOLIS MN 55402-1110
UBS WM USA 7,300.20 B 6.79%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
MORGAN STANLEY SMITH BARNEY 226,345.53 C 14.17%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
MLPF&S FOR THE SOLE BENEFIT OF 196,491.98 C 12.30%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 9LN64
JACKSONVILLE FL 32246-6484
FIRST CLEARING LLC 195,027.90 C 12.21%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
|
I-19
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
RAYMOND JAMES 163,535.70 C 10.24%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
AMERICAN ENTERPRISE INVESTMENT SVC 122,110.93 C 7.65%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
PERSHING LLC 120,246.26 C 7.53%
JERSEY CITY NJ 07399-0001
UBS WM USA 111,417.62 C 6.98%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
NATIONAL FINANCIAL SERVICES LLC 98,985.83 C 6.20%
FOR EXCLUSIVE BENE OF OUR
CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
DEUTSCHE BANK SECURITIES INC 1,523,743.79 Institutional 38.36%
FBO XXX-XXXXX-XX
ATTN MUTUAL FUND DEPT 26TH FL
NEW YORK NY 10020-1130
LPL FINANCIAL 556,753.24 Institutional 14.02%
A/C XXXX-XXXX
SAN DIEGO CA 92121-1968
FELICIAN SERVICES INC 512,975.66 Institutional 12.91%
CHICAGO IL 60659-3116
PERSHING LLC 319,914.70 Institutional 8.05%
JERSEY CITY NJ 07399-0001
NATIONWIDE TRUST COMPANY FSB 242,751.22 Institutional 6.11%
C/O IPO PORTFOLIO ACCOUNTING
COLUMBUS OH 43218-2029
FIRST CLEARING LLC 223,324.90 Institutional 5.62%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
STATE STREET CORP TRUSTEE 11,981,010.45 S 34.94%
FBO ADP ACCESS
BOSTON MA 02111-2901
|
DWS SHORT DURATION FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
AMERICAN ENTERPRISE INVESTMENT SVC 14,680,698.35 A 24.81%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
|
I-20
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
FIRST CLEARING LLC 8,114,853.63 A 13.71%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
UBS WM USA 6,534,922.98 A 11.04%
XXX XXXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
MORGAN STANLEY SMITH BARNEY 5,356,827.86 A 9.05%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
PERSHING LLC 4,956,339.41 A 8.38%
JERSEY CITY NJ 07399-0001
MLPF&S FOR THE SOLE BENEFIT OF 3,364,888.41 A 5.69%%
ITS CUSTOMERS
ATTN FUND ADM 9LR83
JACKSONVILLE FL 32246-6484
AMERICAN ENTERPRISE INVESTMENT SVC 7,413.92 B 18.36%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
UBS WM USA 6,005.27 B 14.87%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
MLPF&S FOR THE SOLE BENEFIT OF 4,523.03 B 11.20%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #97D64
JACKSONVILLE FL 32246-6484
RAYMOND JAMES 4,441.27 B 11.00%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
DWS TRUST COMPANY CUST 2,758.60 B 6.83%
FOR THE IRA OF
XXXXXXXXXXXXXXXXXXXXXXXXXXXX
PASADENA TX 77505-2800
STERLING TRUST COMPANY CUST 2,529.42 B 6.26%
FBO DONNA J OETKER A/C XXXXX
WACO TX 76710-4455
DWS TRUST COMPANY CUST 2,119.99 B 5.25%
FOR THE ROTH IRA OF
XXXXXXXXXXXXXX
MOBILE AL 36608-3250
|
I-21
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
FIRST CLEARING LLC 4,041,532.20 C 16.02%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
UBS WM USA 3,490,573.91 C 13.84%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
MLPF&S FOR THE SOLE BENEFIT OF 3,127,399.07 C 12.40%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 9K551
JACKSONVILLE FL 32246-6484
MORGAN STANLEY SMITH BARNEY 2,826,563.85 C 11.21%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
RAYMOND JAMES 2,739,647.60 C 10.86%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM ########
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
PERSHING LLC 1,995,779.43 C 7.91%
JERSEY CITY NJ 07399-0001
AMERICAN ENTERPRISE INVESTMENT SVC 1,560,693.40 C 6.19%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
FIRST CLEARING LLC 3,063,072.04 Institutional 58.79%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
THE SAFEWAY FOUNDATION 398,108.09 Institutional 7.64%
PLEASANTON CA 94588-3229
CHARLES SCHWAB & CO INC 372,823.93 Institutional 7.16%
SPECIAL CUSTODY ACCOUNT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104-4151
PERSHING LLC 315,312.76 Institutional 6.05%
JERSEY CITY NJ 07399-0001
NFS LLC FBO 275,932.67 Institutional 5.30%
THE STONE FAMILY TR
XXXXXXXXXXXXXXXXXXXXXXX
U/A XXXXXXXXXXXXX
VILLANOVA PA 19085-2035
|
I-22
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
MERRILL LYNCH PIERCE FENNER 22,533,159.08 S 20.19%
& SMITH FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN SERVICE TEAM
JACKSONVILLE FL 32246-6484
CHARLES SCHWAB & CO 15,338,502.82 S 13.75%
OMNIBUS ACCOUNT REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA 94104-4151
FIRST CLEARING LLC 8,314,798.00 S 7.45%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
PERSHING LLC 6,721,030.46 S 6.02%
JERSEY CITY NJ 07399-0001
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
FIRST CLEARING LLC 12,526,519.21 A 8.48%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
FIRST CLEARING LLC 15,611.06 B 6.37%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
NATIONAL FINANCIAL SERVICES LLC 14,502.43 B 5.92%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
PERSHING LLC 12,921.55 B 5.27%
JERSEY CITY NJ 07399-0001
DWS TRUST COMPANY 12,816.85 B 5.23%
CUST FOR THE IRA OF
CAROL E CHAMPION
SALINAS CA 93907-1232
FIRST CLEARING LLC 1,402,587.12 C 22.39%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MLPF&S FOR THE SOLE BENEFIT OF 826,772.54 C 13.20%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 97D94
JACKSONVILLE FL 32246-6484
|
I-23
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
CHARLES SCHWAB & CO INC 724,906.93 C 11.57%
SPECIAL CUSTODY ACCT FBO CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104-4151
AMERICAN ENTERPRISE INVESTMENT SVC 530,711.66 C 8.47%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
PERSHING LLC 429,871.83 C 6.86%
JERSEY CITY NJ 07399-0001
RAYMOND JAMES 425,170.01 C 6.79%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
FIRST CLEARING LLC 340,529.63 Institutional 79.26%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
NFS LLC FBO 22,295.80 Institutional 5.19%
NFS/FMTC IRA
FBO XXXXXXXXXXXXXXXXXXXXX
OLATHE KS 66062-8817
CHARLES SCHWAB & CO INC 1,543,583.32 S 16.21%
SPECIAL CUSTODY ACCOUNT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104-4151
STIFEL NICOLAUS & CO INC 981,634.64 S 10.31%
EXCLUSIVE BENEFIT OF CUSTOMERS
ST LOUIS MO 63102-2188
FIRST CLEARING LLC 936,715.07 S 9.84%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MORGAN STANLEY SMITH BARNEY 562,210.47 S 5.91%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
MLPF&S FOR THE SOLE BENEFIT OF 540,103.99 S 5.67%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 9LSC1
JACKSONVILLE FL 32246-6484
|
I-24
DWS ULTRA-SHORT DURATION FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
AMERICAN ENTERPRISE INVESTMENT SVC 6,316,194.04 A 23.94%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
FIRST CLEARING LLC 4,435,289.25 A 16.81%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
UBS WM USA 4,122,384.09 A 15.63%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
NATIONAL FINANCIAL SERVICES LLC 2,289,013.22 A 8.68%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
MORGAN STANLEY SMITH BARNEY 1,380,249.39 A 5.23%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
PERSHING LLC 1,361,946.98 A 5.16%
JERSEY CITY NJ 07399-0001
RAYMOND JAMES 29,520.34 B 26.22%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
FIRST CLEARING LLC 22,224.13 B 19.74%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
AMERICAN ENTERPRISE INVESTMENT SVC 15,807.08 B 14.04%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
PERSHING LLC 7,534.51 B 6.69%
JERSEY CITY NJ 07399-0001
FIRST CLEARING LLC 1,772,653.33 C 24.85%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MLPF&S FOR THE SOLE BENEFIT OF 1,140,807.58 C 15.99%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
SEC XXXXX
JACKSONVILLE FL 32246-6484
|
I-25
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
MORGAN STANLEY SMITH BARNEY 896,230.40 C 12.56%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
AMERICAN ENTERPRISE INVESTMENT SVC 658,806.42 C 9.23%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
UBS WM USA 594,399.23 C 8.33%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
RAYMOND JAMES 526,945.50 C 7.39%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
NATIONAL FINANCIAL SERVICES LLC 376,067.03 C 5.27%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
FIRST CLEARING LLC 4,898,462.69 Institutional 65.51%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
NFS LLC FBO 642,997.59 Institutional 8.60%
ASSEMBLIES OF GOD LOAN FUND
XXXXXXXXXXXXXXXX
SPRINGFIELD MO 65807-8766
CHARLES SCHWAB & CO INC 604,706.82 Institutional 8.09%
SPECIAL CUSTODY ACCOUNT
MUTUAL FUNDS DEPARTMENT
SAN FRANCISCO CA 94104-4151
MERRILL LYNCH PIERCE FENNER 5,087,185.44 S 20.65%
& SMITH FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN SERVICE TEAM 99102
JACKSONVILLE FL 32246-6484
MORGAN STANLEY SMITH BARNEY 4,805,330.23 S 19.50%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
CHARLES SCHWAB & CO INC 2,458,932.61 S 9.98%
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104-4151
LPL FINANCIAL 2,127,925.07 S 8.64%
A/C XXXX-XXXX
SAN DIEGO CA 92121-1968
|
I-26
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
PERSHING LLC 1,550,549.27 S 6.29%
JERSEY CITY NJ 07399-0001
|
DWS UNCONSTRAINED INCOME FUND
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
AMERICAN ENTERPRISE INVESTMENT SVC 12,552,770.36 A 15.07%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
FIRST CLEARING LLC 6,625,953.37 A 7.95%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
UBS WM USA 4,958,355.66 A 5.95%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
NATIONAL FINANCIAL SERVICES LLC 4,589,462.84 A 5.51%
FOR EXCLUSIVE BENE OF OUR CUSTOMERS
ATTN MUTUAL FUNDS DEPT - 4TH FL
JERSEY CITY NJ 07310-2010
MORGAN STANLEY SMITH BARNEY 4,265,602.14 A 5.12%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
FIRST CLEARING LLC 97,828.04 B 20.51%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MLPF&S FOR THE SOLE BENEFIT OF 64,321.84 B 13.49%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION XXXXX
JACKSONVILLE FL 32246-6484
AMERICAN ENTERPRISE INVESTMENT SVC 46,945.02 B 9.84%
FBO #XXXXXXX
MINNEAPOLIS MN 55402-2405
UBS WM USA 45,840.88 B 9.61%
XXX XXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
MLPF&S FOR THE SOLE BENEFIT OF 2,151,886.59 C 11.10%
ITS CUSTOMERS
ATTN FUND ADMINISTRATION 97D56
JACKSONVILLE FL 32246-6484
|
I-27
NAME AND ADDRESS OF INVESTOR SHARES CLASS PERCENTAGE
RAYMOND JAMES 2,004,040.07 C 10.34%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM XXXXXXXX
ATTN COURTNEY WALLER
ST PETERSBURG FL 33716-1100
FIRST CLEARING LLC 1,989,522.96 C 10.26%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
AMERICAN ENTERPRISE INVESTMENT SVC 1,946,353.32 C 10.04%
FBO #XXXXXXXX
MINNEAPOLIS MN 55402-2405
UBS WM USA 1,797,384.79 C 9.27%
XXX XXXXXX XXXX
OMNI ACCOUNT M/F
ATTN DEPARTMENT MANAGER
WEEHAWKEN NJ 07086-6761
PERSHING LLC 1,786,600.23 C 9.22%
JERSEY CITY NJ 07399-0001
MORGAN STANLEY SMITH BARNEY 1,020,435.49 C 5.26%
HARBORSIDE FINANCIAL CENTER
PLAZA II 3RD FLOOR
JERSEY CITY NJ 07311
FIRST CLEARING LLC 2,355,895.91 S 13.59%
SPECIAL CUSTODY ACCT FOR THE
EXCLUSIVE BENEFIT OF CUSTOMER
ST LOUIS MO 63103-2523
MERRILL LYNCH PIERCE FENNER 2,263,739.20 S 13.06%
& SMITH FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN SERVICE TEAM 973Y3
JACKSONVILLE FL 32246-6484
PERSHING LLC 1,733,520.14 S 10.00%
JERSEY CITY NJ 07399-0001
LPL FINANCIAL 1,671,812.84 S 9.64%
A/C XXXX-XXXX
SAN DIEGO CA 92121-1968
CHARLES SCHWAB & CO INC 1,244,463.70 S 7.18%
ATTN MUTUAL FUNDS DEPARTMENT
SAN FRANCISCO CA 94104-4151
RAYMOND JAMES 992,982.41 S 5.73%
OMNIBUS FOR MUTUAL FUNDS
HOUSE ACCT FIRM 92500015
ATTN COURTNEY WALLER
880 CARILLON PARKWAY
ST PETERSBURG FL 33716-1100
|
I-28
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 8 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.
BOARD LEADERSHIP STRUCTURE
A fund's Board is responsible for the general oversight of a fund's affairs and
for assuring that the fund is managed in the best interests of its
shareholders. The Board regularly reviews a fund's investment performance as
well as the quality of other services provided to a fund and its shareholders
by DIMA and its affiliates, including administration and shareholder servicing.
At least annually, the Board reviews and evaluates the fees and operating
expenses paid by a fund for these services and negotiates changes that it deems
appropriate. In carrying out these responsibilities, the Board is assisted by a
fund's auditors, independent counsel and other experts as appropriate, selected
by and responsible to the Board.
Independent Board Members are not considered "interested persons" (as defined
in the 1940 Act) of the fund or its investment adviser. These Independent Board
Members must vote separately to approve all financial arrangements and other
agreements with a fund's investment adviser and other affiliated parties. The
role of the Independent Board Members has been characterized as that of a
"watchdog" charged with oversight to protect shareholders' interests against
overreaching and abuse by those who are in a position to control or influence a
fund. A fund's Independent Board Members meet regularly as a group in executive
session without representatives of the investment adviser present. An
Independent Board Member currently serves as chairman of the Board.
Taking into account the number, the diversity and the complexity of the funds
overseen by the Board Members and the aggregate amount of assets under
management in the DWS funds, the Board has determined that the efficient
conduct of its affairs makes it desirable to delegate responsibility for
certain specific matters to committees of the Board. These committees, which
are described in more detail below, review and evaluate matters specified in
their charters and/or enabling resolutions, and take actions on those matters
and/or make recommendations to the Board as appropriate. Each committee may
utilize the resources of a fund's counsel and auditors as well as other
experts. The committees meet as often as necessary, either in conjunction with
regular meetings of the Board or otherwise. The membership and chair of each
committee are appointed by the Board upon recommendation of the Nominating and
Governance Committee. The membership and chair of each committee consists
exclusively of Independent Board Members.
The Board has determined that this committee structure also allows the Board to
focus more effectively on the oversight of risk as part of its broader
oversight of the fund's affairs. While risk management is the primary
responsibility of a fund's investment adviser, the Board regularly receives
reports regarding investment risks and compliance risks. The Board's committee
structure allows separate committees to focus on different aspects of these
risks and their potential impact on some or all of the DWS funds and to discuss
with the fund's investment adviser and administrator how it monitors and
controls such risks.
I-29
BOARD COMMITTEES. The Board has established the following standing committees:
Audit Committee, Nominating and Governance Committee, Contract Committee,
Equity Oversight Committee, Fixed Income and Asset Allocation Oversight
Committee, Operations Committee, Valuation Sub-Committee and Dividend
Committee.
NUMBER OF
MEETINGS IN LAST
NAME OF COMMITTEE CALENDAR YEAR FUNCTIONS CURRENT MEMBERS
AUDIT COMMITTEE 7 Assists the Board in fulfilling its responsibility Paul K. Freeman (Chair),
for oversight of (1) the integrity of the financial William McClayton (Vice
statements, (2) the fund's accounting and Chair), John W. Ballantine,
financial reporting policies and procedures, (3) Henry P. Becton, Jr. and
the fund's compliance with legal and regulatory Richard J. Herring
requirements related to accounting and
financial reporting, (4) valuation of fund assets
and securities and (5) the qualifications,
independence and performance of the
independent registered public accounting firm
for the fund. Oversees the valuation of the
fund's securities and other assets and
determines, as needed, the fair value of fund
securities or other assets under certain
circumstances as described in the fund's
Valuation Procedures. 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.
|
I-30
NUMBER OF
MEETINGS IN LAST
NAME OF COMMITTEE CALENDAR YEAR FUNCTIONS CURRENT MEMBERS
NOMINATING AND 6 Recommends individuals for membership on Rebecca W. Rimel (Chair),
GOVERNANCE the Board, nominates officers, Board and Henry P. Becton, Jr. (Vice
COMMITTEE committee chairs, vice chairs and committee Chair), John W. Ballantine
members, and oversees the operations of the and William McClayton
Board. The Nominating and Governance
Committee has not established specific,
minimum qualifications that must be met by an
individual to be considered by the Nominating
and Governance Committee for nomination as
a Board Member. The Nominating and
Governance Committee may take into account
a wide variety of factors in considering Board
Member candidates, including, but not limited
to: (i) availability and commitment of a
candidate to attend meetings and perform his
or her responsibilities to the Board, (ii) relevant
industry and related experience, (iii)
educational background, (iv) financial expertise,
(v) an assessment of the candidate's ability,
judgment and expertise, and (vi) the current
composition of the Board. The Committee
generally believes that the Board benefits from
diversity of background, experience and views
among its members, and considers this as a
factor in evaluating the composition of the
Board, but has not adopted any specific policy
in this regard. The Nominating and Governance
Committee reviews recommendations by
shareholders for candidates for Board positions
on the same basis as candidates
recommended by other sources. Shareholders
may recommend candidates for Board
positions by forwarding their correspondence
by US mail or courier service to Kenneth C.
Froewiss, Chairman, DWS Mutual Funds, P.O.
Box 78, Short Hills, NJ 07078.
CONTRACT 7 Reviews at least annually, (a) the fund's Keith R. Fox (Chair), Robert
COMMITTEE financial arrangements with DIMA and its H. Wadsworth (Vice Chair),
affiliates, and (b) the fund's expense ratios. Dawn-Marie Driscoll, Paul K.
Freeman, Richard J. Herring,
William N. Searcy, Jr. and
Jean Gleason Stromberg
EQUITY OVERSIGHT 6 Reviews the investment operations of those William McClayton (Chair),
COMMITTEE funds that primarily invest in equity securities Keith R. Fox (Vice Chair),
(except for those funds managed by an asset Henry P. Becton, Jr.,
allocation investment team). Rebecca W. Rimel, Jean
Gleason Stromberg and
Robert H. Wadsworth
FIXED INCOME AND 6 Reviews the investment operations of those John W. Ballantine (Chair),
ASSET ALLOCATION funds that primarily invest in fixed income William N. Searcy, Jr. (Vice
OVERSIGHT securities or pursue an asset allocation Chair), Dawn-Marie Driscoll,
COMMITTEE strategy. Paul K. Freeman and Richard
J. Herring
|
I-31
NUMBER OF
MEETINGS IN LAST
NAME OF COMMITTEE CALENDAR YEAR FUNCTIONS CURRENT MEMBERS
OPERATIONS 6 Reviews the administrative operations and Jean Gleason Stromberg
COMMITTEE general compliance matters of the fund. (Chair), Dawn-Marie Driscoll
Reviews administrative matters related to the (Vice Chair), Keith R. Fox,
operations of the fund, policies and procedures Rebecca W. Rimel, William
relating to portfolio transactions, custody N. Searcy, Jr. and Robert H.
arrangements, fidelity bond and insurance Wadsworth
arrangements, valuation of fund assets and
securities and such other tasks as the full
Board deems necessary or appropriate.
VALUATION SUB- 0 Appointed by the Audit Committee, the John W. Ballantine, Richard
COMMITTEE Valuation Sub-Committee may make J. Herring, Henry P. Becton,
determinations of fair value required when the Jr. (Alternate), Paul K.
Audit Committee is not in session. Freeman (Alternate) and
William McClayton
(Alternate)
DIVIDEND 0 Authorizes dividends and other distributions for Kenneth C. Froewiss,
COMMITTEE those funds that are organized as series of a Robert H. Wadsworth, John
Maryland corporation. Committee meets on an W. Ballantine (Alternate),
as-needed basis. Henry P. Becton, Jr.
(Alternate), Dawn-Marie
Driscoll (Alternate), Keith R.
Fox (Alternate), Paul K.
Freeman (Alternate), Richard
J. Herring (Alternate),
William McClayton
(Alternate), Rebecca W.
Rimel (Alternate), William N.
Searcy, Jr. (Alternate) and
Jean Gleason Stromberg
(Alternate)
|
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.
I-32
PART I: APPENDIX I-C - BOARD MEMBER COMPENSATION
Each Independent Board Member receives compensation from each fund for his or
her services, which includes retainer fees and specified amounts for various
committee services and for the Board Chairperson. No additional compensation is
paid to any Independent Board Member for travel time to meetings, attendance at
directors' educational seminars or conferences, service on industry or
association committees, participation as speakers at directors' conferences or
service on special fund industry director task forces or subcommittees.
Independent Board Members do not receive any employee benefits such as pension
or retirement benefits or health insurance from a fund or any fund in the DWS
fund complex.
Board Members who are officers, directors, employees or stockholders of
Deutsche Asset & Wealth Management or its affiliates receive no direct
compensation from the fund, although they are compensated as employees of
Deutsche Asset & Wealth Management, or its affiliates, and as a result may be
deemed to participate in fees paid by a fund. The following tables show, for
each Independent Board Member, compensation from each fund during its most
recently completed fiscal year, and aggregate compensation from all of the
funds in the DWS fund complex during calendar year 2013.
AGGREGATE COMPENSATION FROM EACH FUND
DWS CORE FIXED DWS GLOBAL INFLATION DWS GNMA
BOARD MEMBER INCOME FUND FUND FUND
INDEPENDENT BOARD MEMBER:
John W. Ballantine $1,158 $ 822 $6,820
Henry P. Becton, Jr. $1,087 $ 761 $6,583
Dawn-Marie Driscoll $1,103 $ 785 $6,450
Keith R. Fox $1,182 $ 838 $6,984
Paul K. Freeman $1,220 $ 849 $7,477
Kenneth C. Froewiss $1,433 $1,004 $8,668
Richard J. Herring $1,103 $ 785 $6,450
William McClayton $1,218 $ 861 $7,222
Rebecca W. Rimel $1,127 $ 788 $6,854
William N. Searcy, Jr. $1,087 $ 761 $6,583
Jean Gleason Stromberg $1,158 $ 822 $6,820
Robert Wadsworth $1,092 $ 764 $6,616
|
I-33
DWS HIGH DWS GLOBAL HIGH DWS SHORT
BOARD MEMBER INCOME FUND INCOME FUND DURATION FUND
INDEPENDENT BOARD MEMBER:
John W. Ballantine $4,535 $1,081 $5,013
Henry P. Becton, Jr. $4,359 $1,011 $4,824
Dawn-Marie Driscoll $4,292 $1,030 $4,744
Keith R. Fox $4,645 $1,104 $5,135
Paul K. Freeman $4,936 $1,131 $5,468
Kenneth C. Froewiss $5,757 $1,336 $6,366
Richard J. Herring $4,292 $1,030 $4,744
William McClayton $4,798 $1,136 $5,305
Rebecca W. Rimel $4,540 $1,049 $5,024
William N. Searcy, Jr. $4,359 $1,011 $4,824
Jean Gleason Stromberg $4,535 $1,081 $5,013
Robert Wadsworth $4,379 $1,015 $4,847
|
DWS STRATEGIC
GOVERNMENT DWS ULTRA-SHORT DWS UNCONSTRAINED
BOARD MEMBER SECURITIES FUND DURATION FUND INCOME FUND
INDEPENDENT BOARD MEMBER:
John W. Ballantine $4,718 $1,028 $1,961
Henry P. Becton, Jr. $4,541 $ 953 $1,861
Dawn-Marie Driscoll $4,465 $ 980 $1,861
Keith R. Fox $4,831 $1,052 $2,008
Paul K. Freeman $5,152 $1,056 $2,093
Kenneth C. Froewiss $5,984 $1,278 $2,468
Richard J. Herring $4,465 $ 980 $1,861
William McClayton $4,993 $1,078 $2,069
Rebecca W. Rimel $4,728 $ 992 $1,937
William N. Searcy, Jr. $4,541 $ 953 $1,861
Jean Gleason Stromberg $4,718 $1,028 $1,961
Robert Wadsworth $4,564 $ 956 $1,869
|
I-34
TOTAL COMPENSATION FROM DWS FUND COMPLEX
TOTAL COMPENSATION
FROM EACH FUND AND
BOARD MEMBER DWS FUND COMPLEX/(1)/
INDEPENDENT BOARD MEMBER:
John W. Ballantine $300,000
Henry P. Becton, Jr. $276,875
Dawn-Marie Driscoll $275,000
Keith R. Fox $296,875
Paul K. Freeman $322,500
Kenneth C. Froewiss/(2)/ $365,625
Richard J. Herring $275,000
William McClayton/(3)/ $326,250
Rebecca W. Rimel $288,125
William N. Searcy, Jr. $276,875
Jean Gleason Stromberg $290,000
Robert Wadsworth/(4)/ $320,625
|
(1) For each Independent Board Member, except for Mr. Wadsworth, total
compensation from the DWS fund complex represents compensation from 103
funds as of December 31, 2013.
(2) Includes $90,625 in annual retainer fees received by Mr. Froewiss as
Chairperson of DWS funds.
(3) Includes $15,000 in annual retainer fees received by Mr. McClayton as
Vice Chairperson of DWS funds.
(4) For Mr. Wadsworth, total compensation from the DWS fund complex
represents compensation from 106 funds as of December 31, 2013.
I-35
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, including investments by their immediate family members
sharing the same household and amounts invested through retirement and deferred
compensation plans. This information is provided as of the most recent fiscal
year for each fund.
DWS CORE FIXED INCOME FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
Dominick DeAlto $0 N/A
Gary Chan $0 N/A
|
DWS GLOBAL INFLATION FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
William Chepolis $1 - $10,000 $500,001 - $1,000,000
Eric S. Meyer $10,001 - $50,000 $100,001 - $500,000
John D. Ryan $1 - $10,000 $100,001 - $500,000
Darwei Kung $1 - $10,000 $100,001 - $500,000
|
DWS GNMA FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
William Chepolis $1 - $10,000 $500,001 - $1,000,000
|
DWS HIGH INCOME FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
Gary Russell $100,001 - $500,000 $500,001 - $1,000,000
|
DWS GLOBAL HIGH INCOME FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
Gary Russell $1 - $10,000 $500,001 - $1,000,000
|
I-36
DWS SHORT DURATION FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
William Chepolis $50,001 - $100,000 $500,001 - $1,000,000
Eric S. Meyer $10,001 - $50,000 $100,001 - $500,000
Gary Russell $10,001 - $50,000 $500,001 - $1,000,000
John D. Ryan $1 - $10,000 $100,001 - $500,000
Darwei Kung $10,001 - $50,000 $100,001 - $500,000
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
William Chepolis $10,001 - $50,000 $500,001 - $1,000,000
|
DWS ULTRA-SHORT DURATION FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
William Chepolis $50,001 - $100,000 $500,001 - $1,000,000
Gary Russell $1 - $10,000 $500,001 - $1,000,000
Eric S. Meyer $10,001 - $50,000 $100,001 - $500,000
John D. Ryan $10,001 - $50,000 $100,001 - $500,000
Darwei Kung $1 - $10,000 $100,001 - $500,000
|
DWS UNCONSTRAINED INCOME FUND
DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
Gary Russell $1 - $10,000 $500,001 - $1,000,000
William Chepolis $10,001 - $50,000 $500,001 - $1,000,000
John D. Ryan $10,001 - $50,000 $100,001 - $500,000
Darwei Kung $1 - $10,000 $100,001 - $500,000
Philip G. Condon $10,001 - $50,000 Over $1,000,000
|
CONFLICTS OF INTEREST
In addition to managing the assets of each fund, a portfolio manager may have
responsibility for managing other client accounts. 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. For a fund
subadvised by subadvisors unaffiliated with the Advisor, total assets of funds
managed may only include assets allocated to the portfolio manager and not the
total assets of a fund managed. The tables also show the number of performance
based fee accounts, as well as the total assets of the accounts for which the
advisory fee is based on the performance of the account. This information is
provided as of the most recent fiscal year for each fund.
I-37
DWS CORE FIXED INCOME FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
Dominick DeAlto 0 $0 0 $0
Gary Chan 0 $0 0 $0
|
DWS GLOBAL INFLATION FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
William Chepolis 15 $9,334,612,915 0 $0
Eric S. Meyer 4 $6,304,210,968 0 $0
John D. Ryan 11 $5,820,396,052 0 $0
Darwei Kung 16 $6,246,256,866 0 $0
|
DWS GNMA FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
William Chepolis 15 $7,511,992,409 0 $0
|
DWS HIGH INCOME FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
Gary Russell 16 $6,019,614,926 0 $0
|
I-38
DWS GLOBAL HIGH INCOME FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
Gary Russell 16 $5,904,721,481 0 $0
|
DWS SHORT DURATION FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
William Chepolis 15 $7,692,539,151 0 $0
Eric S. Meyer 4 $4,661,963,301 0 $0
Gary Russell 16 $5,683,905,237 0 $0
John D. Ryan 11 $4,178,322,287 0 $0
Darwei Kung 16 $4,604,183,101 0 $0
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
William Chepolis 15 $6,517,586,379 0 $0
|
DWS ULTRA-SHORT DURATION FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
William Chepolis 15 $7,387,223,848 0 $0
Gary Russell 16 $5,683,451,619 0 $0
Eric S. Meyer 4 $6,073,392,997 0 $0
John D. Ryan 11 $5,596,270,455 0 $0
Darwei Kung 16 $5,984,186,316 0 $0
|
I-39
DWS UNCONSTRAINED INCOME FUND
OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:
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
Gary Russell 16 $ 5,599,870,243 0 $0
William Chepolis 15 $ 7,303,642,471 0 $0
John D. Ryan 11 $ 5,512,689,078 0 $0
Darwei Kung 16 $ 5,900,604,940 0 $0
Philip G. Condon 13 $13,181,667,453 0 $0
|
DWS CORE FIXED INCOME FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
Dominick DeAlto 1 $61,857,056 0 $0
Gary Chan 1 $61,857,056 0 $0
|
DWS GLOBAL INFLATION FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
William Chepolis 0 $ 0 0 $ 0
Eric S. Meyer 4 $1,119,675,976 1 $16,710
John D. Ryan 0 $ 0 0 $ 0
Darwei Kung 0 $ 0 0 $ 0
|
DWS GNMA FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
William Chepolis 0 $0 0 $0
|
I-40
DWS HIGH INCOME FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
Gary Russell 0 $0 0 $0
|
DWS GLOBAL HIGH INCOME FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
Gary Russell 0 $0 0 $0
|
DWS SHORT DURATION FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
William Chepolis 0 $ 0 0 $ 0
Eric S. Meyer 4 $1,119,675,976 1 $16,710
Gary Russell 0 $ 0 0 $ 0
John D. Ryan 0 $ 0 0 $ 0
Darwei Kung 0 $ 0 0 $ 0
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
William Chepolis 0 $0 0 $0
|
I-41
DWS ULTRA-SHORT DURATION FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
William Chepolis 0 $ 0 0 $0
Gary Russell 0 $ 0 0 $0
Eric S. Meyer 3 $1,130,467,976 0 $0
John D. Ryan 0 $ 0 0 $0
Darwei Kung 0 $ 0 0 $0
|
DWS UNCONSTRAINED INCOME FUND
OTHER POOLED INVESTMENT VEHICLES MANAGED:
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
Gary Russell 0 $0 0 $0
William Chepolis 0 $0 0 $0
John D. Ryan 0 $0 0 $0
Darwei Kung 0 $0 0 $0
Philip G. Condon 0 $0 0 $0
|
DWS CORE FIXED INCOME FUND
OTHER ACCOUNTS MANAGED:
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
Dominick DeAlto 5 $2,035,878,491 1 $1,580,335,652
Gary Chan 5 $2,035,878,491 1 $1,580,335,652
|
I-42
DWS GLOBAL INFLATION FUND
OTHER ACCOUNTS MANAGED:
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
William Chepolis 0 $ 0 0 $0
Eric S. Meyer 2 $399,982,082 0 $0
John D. Ryan 0 $ 0 0 $0
Darwei Kung 0 $ 0 0 $0
|
DWS GNMA FUND
OTHER ACCOUNTS MANAGED:
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
William Chepolis 0 $0 0 $0
|
DWS HIGH INCOME FUND
OTHER ACCOUNTS MANAGED:
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
Gary Russell 3 $650,919,112 0 $0
|
DWS GLOBAL HIGH INCOME FUND
OTHER ACCOUNTS MANAGED:
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
Gary Russell 3 $674,465,318 0 $0
|
I-43
DWS SHORT DURATION FUND
OTHER ACCOUNTS MANAGED:
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
William Chepolis 0 $ 0 0 $0
Eric S. Meyer 2 $399,982,082 0 $0
Gary Russell 3 $650,919,112 0 $0
John D. Ryan 0 $ 0 0 $0
Darwei Kung 0 $ 0 0 $0
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND
OTHER ACCOUNTS MANAGED:
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
William Chepolis 0 $0 0 $0
|
DWS ULTRA-SHORT DURATION FUND
OTHER ACCOUNTS MANAGED:
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
William Chepolis 0 $ 0 0 $0
Gary Russell 3 $674,465,318 0 $0
Eric S. Meyer 2 $417,555,313 0 $0
John D. Ryan 0 $ 0 0 $0
Darwei Kung 0 $ 0 0 $0
|
DWS UNCONSTRAINED INCOME FUND
OTHER ACCOUNTS MANAGED:
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
Gary Russell 3 $674,465,318 0 $0
William Chepolis 0 $ 0 0 $0
John D. Ryan 0 $ 0 0 $0
Darwei Kung 0 $ 0 0 $0
Philip G. Condon 0 $ 0 0 $0
|
I-44
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 or Subadvisor, as applicable,
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-45
PART I: APPENDIX I-E - SERVICE PROVIDER COMPENSATION
DWS CORE FIXED INCOME FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $1,391,680 $0 $347,920 $0
2012 $1,522,755 $0 $380,689 $0
2011 $1,690,475 $0 $424,142 $0
|
GROSS AMOUNT PAID TO AMOUNT WAIVED BY AMOUNT PAID BY DIMA
DISC FOR TRANSFER DISC FOR TRANSFER TO NON-AFFILIATED SUBADVISOR(S)
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES FOR SUBADVISORY SERVICES
2013 $256,318 $171,677 $542,571
2012 $275,618 $ 90,246 $715,822
2011 $306,474 $150,055 $599,090
|
DWS GLOBAL INFLATION FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $962,483 $14,725 $240,621 $0
2012 $970,110 $ 0 $242,528 $0
2011 $945,160 $ 0 $236,274 $0
|
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $39,833 $37,634
2012 $46,450 $26,444
2011 $45,547 $39,256
|
DWS GNMA FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $7,630,942 $0 $2,422,521 $0
2012 $7,192,728 $0 $2,283,406 $0
2011 $6,913,434 $0 $2,187,377 $0
|
I-46
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $,1299,168 $0
2012 $1,399,647 $6
2011 $1,413,363 $0
|
DWS HIGH INCOME FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $7,202,278 $0 $1,610,995 $0
2012 $7,141,866 $0 $1,596,946 $0
2011 $6,693,522 $0 $1,501,195 $0
|
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $733,612 $5,969
2012 $744,560 $ 834
2011 $895,327 $ 0
|
DWS GLOBAL HIGH INCOME FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $1,681,369 $0 $336,274 $0
2012 $1,705,987 $0 $341,197 $0
2011 $1,803,942 $0 $358,114 $0
|
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $134,622 $111,407
2012 $148,518 $ 5,378
2011 $180,886 $ 30,207
|
DWS SHORT DURATION FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $6,432,687 $0 $1,781,673 $0
2012 $7,709,752 $0 $2,170,964 $0
2011 $9,203,560 $0 $2,653,995 $0
|
I-47
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $ 671,630 $636,432
2012 $ 810,137 $596,533
2011 $1,019,906 $495,095
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $5,298,266 $0 $1,628,473 $0
2012 $5,986,259 $0 $1,850,406 $0
2011 $6,101,027 $0 $1,899,526 $0
|
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $ 982,960 $5,975
2012 $1,119,349 $ 813
2011 $1,272,159 $2,101
|
DWS ULTRA-SHORT DURATION FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $1,473,508 $ 0 $368,507 $0
2012 $ 660,156 $ 45,896 $165,039 $0
2011 $ 664,484 $336,442 $164,722 $0
|
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $82,589 $14,400
2012 $67,043 $67,043
2011 $82,942 $82,942
|
DWS UNCONSTRAINED INCOME FUND
GROSS AMOUNT AMOUNT WAIVED GROSS 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
2013 $3,098,663 $75,664 $671,925 $0
2012 $2,287,488 $67,694 $491,664 $0
2011 $2,054,899 $67,614 $439,222 $0
|
I-48
GROSS AMOUNT PAID TO AMOUNT WAIVED BY
DISC FOR TRANSFER DISC FOR TRANSFER
FISCAL YEAR ENDED AGENCY SERVICES AGENCY SERVICES
2013 $320,876 $39,950
2012 $319,470 $11,790
2011 $353,296 $ 0
|
The following waivers were in effect for DWS Core Fixed Income Fund during the
most recent three fiscal years:
Effective October 1, 2012 through September 30, 2013, the Advisor has
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 0.89%, 1.64%, 1.64%, 1.14%, 0.64% and 0.74% for Class A, Class
B, Class C, Class R, Institutional Class and Class S, respectively.
For the period November 1, 2011 through September 30, 2012, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding extraordinary expenses, taxes, brokerage and interest expenses) at
0.96%, 1.71%, 1.71%, 1.21% and 0.81% for Class A, Class B, Class C, Class R and
Class S, respectively.
For the period November 1, 2010 through September 30, 2011, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the fund's total
annual operating expenses (excluding certain expenses such as extraordinary
expenses, taxes, brokerage and interest expense) at 0.95%, 1.70%, 1.70%, 1.20%,
0.70% and 0.80% for Class A, Class B, Class C, Class R, Institutional Class and
Class S, respectively.
The following waivers were in effect for DWS Global Inflation Fund during the
most recent three fiscal years:
For the period from October 1, 2012 through September 30, 2013, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) 0.87, 1.62%, 1.62%, 0.62% and 0.62% for Class A, Class B, Class
C, Institutional Class and Class S, respectively.
For the period from October 1, 2010 through January 31, 2012, the Advisor had
contractually agreed to waiver its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest expense) at 0.90%, 1.65%, 1.65%, 0.65% and 0.65%% for Class A,
Class B, Class C, Institutional Class and Class S, respectively.
The following waivers were in effect for DWS GNMA Fund during the most recent
three fiscal years:
Effective May 1, 2012 through April 30, 2013, the Advisor had contractually
agreed to waive its fees and/or reimburse certain operating expenses of Class R
shares to the extent necessary to maintain the operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest)
at 1.04%.
The following waivers were in effect for DWS Global High Income Fund during the
most recent three fiscal years:
For the period from November 1, 2012 through September 30, 2013, the Advisor
had contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 1.07%, 1.82%, 1.82%, 0.82% and 0.82% for Class A, Class B,
Class C, Institutional Class and Class S, respectively.
For the period from October 1, 2011 through September 30, 2012, the Advisor has
contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class S shares to the extent necessary to maintain the operating
expenses (excluding certain expenses such as extraordinary expenses, taxes,
brokerage and interest) at 0.90%.
I-49
The following waivers were in effect for DWS High Income Fund during the most
recent three fiscal years:
Effective from October 1, 2012 through September 30, 2013, the Advisor has
contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class R and S shares to the extent necessary to maintain the
operating expenses (excluding certain expenses such as extraordinary expenses,
taxes, brokerage and interest) at 1.32% and 0.82%, respectively.
For the period from May 1, 2012 through September 30, 2012, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class R and S shares to the extent necessary to maintain the
operating expenses (excluding certain expenses such as extraordinary expenses,
taxes, brokerage and interest) at 1.40% and 0.90%, respectively.
The following waivers were in effect for DWS Short Duration Fund during the
most recent three fiscal years:
For the period from October 1, 2012 through September 30, 2013, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 0.85%, 1.60%, 1.60%, 0.60% and 0.60% for Class A, Class B,
Class C, Institutional Class and Class S, respectively.
For the period from October 1, 2011 through January 31, 2013, the Advisor has
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 1.63% and 0.63% for Class B and Class S, respectively.
For the period from February 1, 2011 through September 30, 2011, the Advisor
had contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class B to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest expense) at 1.67%.
For the period from October 1, 2010 through September 30, 2011, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses to the extent necessary to maintain the operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest
expense) at 0.92%, 1.65%, 1.67%, 0.67% and 0.67% for Class A, Class B, Class C
and Institutional Class and Class S, respectively.
For the period from October 1, 2010 through September 30, 2011, the Advisor had
voluntarily agreed to waive its fees and/or reimburse certain operating
expenses of Class S shares to the extent necessary to maintain the operating
expenses (excluding certain expenses such as extraordinary expenses, taxes,
brokerage and interest expense) at 0.63%.
The following waivers were in effect for DWS Strategic Government Securities
Fund during the most recent fiscal year:
For the period from November 1, 2012 through January 31, 2013, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class B shares to the extent necessary to maintain the operating
expenses (excluding certain expenses such as extraordinary expenses, taxes,
brokerage and interest) at 1.69%.
For the period from November 1, 2011 through September 30, 2013, the Advisor
has contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class B shares to the extent necessary to maintain the operating
expenses (excluding certain expenses such as extraordinary expenses, taxes,
brokerage and interest) at 1.69%.
For the period from February 1, 2011 through September 30, 2012, the Advisor
had contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class B shares to maintain the operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest
expense) at 1.72%.
I-50
For the period from October 1, 2011 through September 30, 2012, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class B shares to the extent necessary to maintain the operating
expenses (excluding certain expenses such as extraordinary expenses, taxes,
brokerage and interest) at 1.69%.
For the period from November 1, 2010 through January 31, 2011, the Advisor had
contractually agreed to waive its fees and/or reimburse certain operating
expenses of Class B shares to the extent necessary to maintain the operating
expenses (excluding certain expenses such as extraordinary expenses, taxes,
brokerage and interest) at 1.70%.
The following waivers were in effect for DWS Ultra-Short Duration Fund during
the most recent three fiscal years:
Effective October 1, 2013 through January 31, 2014, the Advisor has
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 1.13%, 1.88%, 1.88%, 0.88% and 0.88% for Class A, Class B,
Class C, Institutional Class and Class S, respectively.
For the period from November 1, 2012 through September 30, 2013, the Advisor
had contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 1.06%, 1.81%, 1.81%, 0.81% and 0.81% for Class A, Class B,
Class C, Institutional Class and Class S, respectively.
For the period February 1, 2012 through September 30, 2012, the Advisor had
voluntarily agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the fund's total
annual operating expenses at 0.95%, 1.70%, 1.70%, 0.70% and 0.70% for Class A,
Class B, Class C, Institutional Class and Class S, respectively. The Advisor,
at its discretion, may revise or discontinue this arrangement at anytime, and
it does not extend to extraordinary expenses, taxes, brokerage and interest
expenses.
For the period from November 1, 2011 through January 31, 2012, the Advisor had
voluntarily agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the fund's total
annual operating expenses at 0.85%, 1.60%, 1.60%, 0.60% and 0.60% for Class A,
Class B, Class C, Institutional Class and Class S, respectively. The Advisor,
at its discretion, may revise or discontinue this arrangement at anytime, and
it does not extend to extraordinary expenses, taxes, brokerage and interest
expenses.
For the period from November 1, 2010 through September 30, 2011, the Advisor
had contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest expense) at 0.92%, 1.67%, 1.67%, 0.67% and 0.67% for Class A,
Class B, Class C, Institutional Class and Class S, respectively. The agreement
may only be terminated with the consent of the fund's Board.
For the period from October 1, 2011 through October 31, 2011, the Advisor had
voluntarily agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 0.85%, 1.60%, 1.60%, 0.60% and 0.60%, for Class A, Class B,
Class C, Institutional Class and Class S, respectively.
For the period from November 1, 2010 through September 30, 2011, the Advisor
had voluntarily agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
at 0.75%, 1.50%, 1.50%, 0.50%, 0.50%, for Class A, Class B, Class C,
Institutional Class and Class S, respectively. The Advisor, at its discretion,
may revise or discontinue this arrangement at anytime, and it does not extend
to extraordinary expenses, taxes, brokerage and interest expenses.
The following waivers were in effect for DWS Unconstrained Income Fund during
the most recent three fiscal years:
I-51
For the period from November 1, 2012 through January 31, 2014, the Advisor has
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 1.07%, 1.82%, 1.82% and 0.82% for Class A, Class B, Class C
and Class S, respectively.
Effective October 1, 2012 through September 30, 2013, the Advisor has
contractually agreed to waive its fees and/or reimburse certain operating
expenses of the fund to the extent necessary to maintain the operating expenses
(excluding certain expenses such as extraordinary expenses, taxes, brokerage
and interest) at 1.07%, 1.82%, 1.82% and 0.82% for Class A, Class B, Class C
and Class S, respectively.
CURRENT FISCAL YEAR WAIVERS
For DWS Core Fixed Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 0.89%,
1.64%, 1.64%, 1.14%, 0.64% and 0.74%; and for the period October 1, 2014
through January 31, 2015 at ratios no higher than 0.91%, 1.66%, 1.66%, 1.16%,
0.66% and 0.76% (in each instance, excluding extraordinary expenses, taxes,
brokerage and interest expenses) for Class A, Class B, Class C, Class R
Institutional Class and Class S, respectively. The agreement may only be
terminated with the consent of the fund's Board.
For DWS Global Inflation Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 0.85%,
1.60%, 1.60%, 0.60% and 0.60%; and for the period October 1, 2014 through
January 31, 2015 at ratios no higher than 0.88%, 1.63%, 1.63%, 0.63% and 0.63%
(in each instance, excluding extraordinary expenses, taxes, brokerage and
interest expenses) for Class A, Class B, Class C, Institutional Class and Class
S, respectively. The agreement may only be terminated with the consent of the
fund's Board.
For DWS GNMA Fund, the Advisor has contractually agreed through September 30,
2014 to waive and/or reimburse fund expenses to the extent necessary to
maintain the fund's total annual operating expenses (excluding certain expenses
such as extraordinary expenses, taxes, brokerage and interest expenses) at
0.92%, 1.67%, 1.17%, 0.67% and 0.67% for Class A, Class C, Class R,
Institutional Class and Class S, respectively. The agreement may only be
terminated with the consent of the fund's Board.
For DWS High Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest
expenses) at 1.06%, 1.81%, 1.81%, 1.31%, 0.81% and 0.81% for Class A, Class B,
Class C, Class R, Institutional Class and Class S, respectively. The agreement
may only be terminated with the consent of the fund's Board.
For DWS Global High Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 1.06%,
1.81%, 1.81%, 0.81% and 0.81%; and for the period October 1, 2014 through
January 31, 2015 at ratios no higher than 1.15%, 1.90%, 1.90%, 0.90% and 0.90%
(in each instance, excluding extraordinary expenses, taxes, brokerage and
interest expenses) for Class A, Class B, Class C, Institutional Class and Class
S, respectively. The agreement may only be terminated with the consent of the
fund's Board.
For DWS Short Duration Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses at 0.84%,
1.59%, 1.59%, 0.59% and 0.59%; and for the period October 1, 2014 through
January 31, 2015 at ratios no higher than 0.86%, 1.61%, 1.61%, 0.61% and 0.61%
(in each instance, excluding extraordinary expenses, taxes, brokerage and
interest expenses) for Class A, Class B, Class C, Institutional Class and Class
S, respectively. The agreement may only be terminated with the consent of the
fund's Board.
I-52
For DWS Strategic Government Securities Fund, the Advisor has contractually
agreed through September 30, 2014 to waive and/or reimburse fund expenses to
the extent necessary to maintain the fund's total annual operating expenses at
0.89%, 1.64%, 1.64%, 0.64% and 0.64%; and for the period October 1, 2014
through January 31, 2015 at ratios no higher than 0.91%, 1.66%, 1.66%, 0.66%
and 0.66% (in each instance, excluding extraordinary expenses, taxes, brokerage
and interest expenses) for Class A, Class B, Class C, Institutional Class and
Class S, respectively. The agreement may only be terminated with the consent of
the fund's Board.
For DWS Ultra-Short Duration Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest
expenses) at 1.16%, 1.91%, 1.91%, 0.91%, and 0.91% for Class A, Class B, Class
C, Institutional Class and Class S, respectively. The agreement may only be
terminated with the consent of the fund's Board.
For DWS Unconstrained Income Fund, the Advisor has contractually agreed through
September 30, 2014 to waive and/or reimburse fund expenses to the extent
necessary to maintain the fund's total annual operating expenses (excluding
certain expenses such as extraordinary expenses, taxes, brokerage, interest
expense and acquired funds fees and expenses (0.02%)) at 1.09%, 1.84%, 1.84%
and 0.84% for Class A, Class B, Class C and Class S, respectively. The
agreement may only be terminated with the consent of the fund's Board.
I-53
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:
AGGREGATE AGGREGATE
AGGREGATE AGGREGATE COMMISSIONS COMMISSIONS
FISCAL SALES COMMISSIONS PAID TO AFFILIATED RETAINED
YEAR COMMISSIONS PAID TO FIRMS FIRMS BY DIDI
DWS Core Fixed Income Fund 2013 $ 12,000 $ 6,000 $ 0 $ 6,000
2012 $ 18,000 $ 11,000 $ 1,000 $ 6,000
2011 $ 22,000 $ 15,000 $ 0 $ 7,000
DWS Global Inflation Fund 2013 $ 6,000 $ 2,000 $ 0 $ 4,000
2012 $ 23,000 $ 7,000 $ 1,000 $ 15,000
2011 $ 10,000 $ 3,000 $ 0 $ 7,000
DWS GNMA Fund 2013 $163,000 $ 34,000 $ 3,000 $126,000
2012 $139,000 $ 37,000 $ 5,000 $ 97,000
2011 $ 28,000 $ 11,000 $ 2,000 $ 15,000
DWS High Income Fund 2013 $348,000 $215,000 $24,000 $109,000
2012 $335,000 $176,000 $22,000 $137,000
2011 $407,000 $238,000 $29,000 $140,000
DWS Global High Income Fund 2013 $ 10,000 $ 3,000 $ 2,000 $ 5,000
2012 $ 10,000 $ 5,000 $ 0 $ 5,000
2011 $ 9,000 $ 4,000 $ 2,000 $ 3,000
DWS Short Duration Fund 2013 $ 27,000 $ 9,000 $ 0 $ 18,000
2012 $ 31,000 $ 9,000 $ 0 $ 22,000
2011 $ 84,000 $ 26,000 $ 1,000 $ 57,000
DWS Strategic Government Securities Fund 2013 $ 75,000 $ 31,000 $17,000 $ 27,000
2012 $128,000 $ 62,000 $16,000 $ 50,000
2011 $172,000 $ 82,000 $17,000 $ 73,000
DWS Ultra-Short Duration Fund 2013 $ 39,000 $ 5,000 $ 0 $ 34,000
2012 $ 20,000 $ 4,000 $ 0 $ 16,000
2011 $ 25,000 $ 10,000 $ 0 $ 15,000
DWS Unconstrained Income Fund 2013 $ 79,000 $ 27,000 $ 2,000 $ 50,000
2012 $ 68,000 $ 26,000 $ 3,000 $ 39,000
2011 $ 62,000 $ 27,000 $ 4,000 $ 31,000
|
CDSC PAID TO DIDI ON:
FISCAL
YEAR CLASS A SHARES CLASS B SHARES CLASS C SHARES
DWS Core Fixed Income Fund 2013 $ 0 $ 3,891 $1,256
2012 $1,839 $ 4,795 $ 859
2011 $ 55 $11,921 $1,285
DWS Global Inflation Fund 2013 $ 568 $ 3,529 $1,930
2012 $ 281 $ 3,273 $1,915
|
I-54
FISCAL
YEAR CLASS A SHARES CLASS B SHARES CLASS C SHARES
2011 $ 7,237 $ 5,064 $ 2,229
DWS GNMA Fund 2013 $70,745 - $129,063
2012 $ 8,248 - $ 21,118
2011 $ 3,165 - $ 2,482
DWS High Income Fund 2013 $ 5,339 $13,473 $ 9,849
2012 $ 1,223 $30,794 $ 11,034
2011 $ 323 $56,710 $ 9,966
DWS Global High Income 2013 $ 1 $ 250 $ 4,817
Fund
2012 $ 314 $ 2,667 $ 1,893
2011 $ 4,898 $ 1,897 $ 1,393
DWS Short Duration Fund 2013 $51,767 $ 447 $ 19,386
2012 $50,804 $ 737 $ 39,446
2011 $82,818 $ 2,266 $ 73,070
DWS Strategic Government 2013 $ 8,380 $ 5,073 $ 33,516
Securities Fund
2012 $ 2,380 $ 6,976 $ 11,120
2011 $17,203 $14,409 $ 8,956
DWS Ultra-Short Duration 2013 $33,559 $ 3,961 $ 30,538
Fund
2012 $ 4,739 $ 6,975 $ 6,370
2011 $ 6,145 $ 5,942 $ 11,408
DWS Unconstrained Income 2013 $ 8,781 $ 4,817 $ 26,424
Fund
2012 $ 1,255 $ 6,897 $ 6,227
2011 $ 479 $14,241 $ 7,758
|
I-55
PART I: APPENDIX I-G - DISTRIBUTION PLAN PAYMENTS
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 fiscal year.
12B-1 COMPENSATION TO UNDERWRITER AND FIRMS:
12B-1 DISTRIBUTION 12B-1 SHAREHOLDER
FEES SERVICES FEES
DWS Core Fixed Income Fund Class A - $ 368,921/(1)/
Class B $ 11,759 $ 3,892/(1)/
Class C $ 115,201 $ 37,981/(1)/
Class R $ 3,076 $ 2,961/(1)/
DWS Global Inflation Fund Class A - $ 77,626/(2)/
Class B $ 9,558 $ 3,158/(2)/
Class C $ 116,478 $ 38,776/(2)/
DWS GNMA Fund Class A - $ 518,971
Class C $1,087,320 $ 361,679
Class R $ 890 $ 886
DWS High Income Fund Class A - $ 2,980,577
Class B $ 78,283 $ 25,928
Class C $ 896,056 $ 296,534
Class R $ 57 $ 50
DWS Global High Income Fund Class A - $ 74,869
Class B $ 7,055 $ 2,332
Class C $ 97,924 $ 32,382
DWS Short Duration Fund Class A - $ 1,467,376
Class B $ 3,320 $ 968
Class C $1,944,056 $ 646,228/(3)/
DWS Strategic Government Securities Fund Class A - $ 3,232,719
Class B $ 24,724 $ 7,971
Class C $ 641,984 $ 209,535
DWS Ultra-Short Duration Fund Class A - $ 376,338
Class B $ 8,307 $ 2,762
Class C $ 360,238 $ 119,950
DWS Unconstrained Income Fund Class A - $ 1,060,802
Class B $ 25,340 $ 8,373
Class C $ 703,630 $ 234,181
|
/(1)/ For DWS Core Fixed Income Fund, $125,937, $1,700, $4,104 and $2,412 in
Shareholder Services Fees were waived for Class A, Class B, Class C and Class R
respectively.
/(2)/ For DWS Global Inflation Fund, $23,771, $1,356 and $14,830 in Shareholder
Services Fees were waived for Class A, Class B and Class C, respectively.
/(3)/ For DWS Short Duration Fund, $1,126 in Shareholder Services Fees were
waived for Class C.
I-56
PART I: APPENDIX I-H - PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
PORTFOLIO TURNOVER RATES
FUND 2013 2012
DWS Core Fixed Income Fund 241% 300%
DWS Global Inflation Fund 104% 80%
DWS GNMA Fund 348%/*/ 491%
DWS High Income Fund 54% 50%
DWS Global High Income Fund 59% 69%
DWS Short Duration Fund 47% 68%
DWS Strategic Government Securities Fund 372%/*/ 538%
DWS Ultra-Short Duration Fund 39% 65%
DWS Unconstrained Income Fund 157% 129%
|
* The decrease in portfolio turnover rate for the most recent fiscal year
was due to general market conditions.
BROKERAGE COMMISSIONS
FISCAL BROKERAGE COMMISSIONS
YEAR PAID BY FUND
DWS Core Fixed Income Fund 2013 $ 11,926
2012 $ 22,651
2011 $ 17,096
DWS Global Inflation Fund 2013 $ 40,364
2012 $ 50,560
2011 $ 24,566
DWS GNMA Fund 2013 $106,645
2012 $157,818
2011 $158,509
DWS High Income Fund 2013 $ 0
2012 $ 1,425
2011 $ 1,975
DWS Global High Income Fund 2013 $ 0
2012 $ 16,639
2011 $ 30,605
DWS Short Duration Fund 2013 $ 94,318
2012 $301,642
2011 $240,254
DWS Strategic Government Securities Fund 2013 $139,724
2012 $222,399
2011 $258,754
DWS Ultra-Short Duration Fund 2013 $ 8,455
2012 $ 15,545
2011 $ 6,194
DWS Unconstrained Income Fund 2013 $ 63,119
2012 $ 88,873
|
I-57
FISCAL BROKERAGE COMMISSIONS
YEAR PAID BY FUND
2011 $54,166
|
BROKERAGE COMMISSIONS PAID TO AFFILIATED BROKERS
AGGREGATE % OF THE
BROKERAGE AGGREGATE
COMMISSIONS DOLLAR
NAME OF PAID BY FUND % OF THE TOTAL VALUE OF ALL
FISCAL AFFILIATED TO AFFILIATED BROKERAGE PORTFOLIO
YEAR BROKER AFFILIATION BROKERS COMMISSIONS TRANSACTIONS
DWS Core Fixed Income Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS Global Inflation Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS GNMA Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS High Income Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS Global High Income Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS Short Duration Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS Strategic Government Securities Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS Ultra-Short Duration Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
DWS Unconstrained Income Fund 2013 None - None - -
2012 None - None - -
2011 None - None - -
|
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 held as of the end of its most recent fiscal year and the dollar value of
such securities.
I-58
DWS CORE FIXED INCOME FUND
NAME OF REGULAR BROKER OR DEALER OR PARENT
(ISSUER) SECURITIES OF REGULAR BROKER DEALERS
Citigroup $11,349,000
Morgan Stanley $ 5,322,000
Goldman Sachs & Co. $ 2,932,000
Chase Securities Inc. $15,489,000
|
DWS GLOBAL INFLATION FUND
The fund did not hold any securities of its regular brokers or dealers.
DWS GNMA FUND
The fund did not hold any securities of its regular brokers or dealers.
DWS HIGH INCOME FUND
The fund did not hold any securities of its regular brokers or dealers.
DWS GLOBAL HIGH INCOME FUND
The fund did not hold any securities of its regular brokers or dealers.
DWS SHORT DURATION FUND
NAME OF REGULAR BROKER OR DEALER OR PARENT
(ISSUER) SECURITIES OF REGULAR BROKER DEALERS
UBS AG $6,867,000
Morgan Stanley $3,864,000
Goldman Sachs & Co. $2,913,000
BNP Paribas $2,493,000
|
DWS STRATEGIC GOVERNMENT SECURITIES FUND
The fund did not hold any securities of its regular brokers or dealers.
DWS ULTRA-SHORT DURATION FUND
NAME OF REGULAR BROKER OR DEALER OR PARENT
(ISSUER) SECURITIES OF REGULAR BROKER DEALERS
Citigroup $8,536,000
Morgan Stanley $7,735,000
UBS AG $5,474,000
Barclays Bank $ 579,000
BNP Paribas $3,900,000
Goldman Sachs & Co. $ 236,000
Nomura $2,399,000
|
I-59
DWS UNCONSTRAINED INCOME FUND
NAME OF REGULAR BROKER OR DEALER OR PARENT
(ISSUER) SECURITIES OF REGULAR BROKER DEALERS
Goldman Sachs & Co. $2,492,000
Morgan Stanley $2,620,000
BNP Paribas SA $ 765,000
Wells Fargo & Co. $ 587,000
Barclays Bank PLC $1,558,000
|
TRANSACTIONS FOR 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 research services. The provision of research
services was not necessarily a factor in the placement of business with such
firms.
COMMISSIONS PAID
AMOUNT OF TRANSACTIONS ON TRANSACTIONS
FUND WITH RESEARCH FIRMS WITH RESEARCH FIRMS
DWS Core Fixed Income Fund $0 $0
DWS Global Inflation Fund $0 $0
DWS GNMA Fund $0 $0
DWS High Income Fund $0 $0
DWS Global High Income Fund $0 $0
DWS Short Duration Fund $0 $0
DWS Strategic Government Securities Fund $0 $0
DWS Ultra-Short Duration Fund $0 $0
DWS Unconstrained Income Fund $0 $0
|
I-60
PART I: APPENDIX I-I - INVESTMENT PRACTICES AND TECHNIQUES
Below is a list of headings related to investment policies and techniques which
are further described in Appendix II-G.
DWS CORE FIXED INCOME FUND
Asset-Backed Securities
Asset Segregation
Auction Rate Securities
Borrowing
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Common Stock
Convertible Securities
Custodial Receipts
Derivatives
Dollar Roll Transactions
Fixed Income Securities
Foreign Investment
High Yield Fixed Income Securities - Junk Bonds
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Inflation-Indexed Bonds
Interfund Borrowing and Lending Program
Inverse Floaters
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Leases, Certificates of Participation and Other Participation
Interests
Municipal Securities
Obligations of Banks and Other Financial Institutions
Preferred Stock
Put Bonds
Repurchase Agreements
Reverse Repurchase Agreements
Short-Term Securities
Sovereign Debt
Tax-Exempt Commercial Paper
Tax-Exempt Custodial Receipts
Tax-Exempt Pass-Through Securities
To Be Announced (TBA) Purchase Commitments
US Government Securities
Variable and Floating Rate Instruments
Warrants
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
DWS GLOBAL INFLATION FUND
Asset-Backed Securities
Asset Segregation
Borrowing
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Regulation
Common Stock
Convertible Securities
Custodial Receipts
Depositary Receipts
Derivatives
Dollar Roll Transactions
Fixed Income Securities
Foreign Investment
High Yield Fixed Income Securities - Junk Bonds
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Indexed Securities
Inflation-Indexed Bonds
Interfund Borrowing and Lending Program
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
IPO Risk
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Securities
Obligations of Banks and Other Financial Institutions
Preferred Stock
Private Activity Bonds
Put Bonds
Real Estate Investment Trusts (REITs)
Repurchase Agreements
I-61
Reverse Repurchase Agreements
Short-Term Securities
Sovereign Debt
Stand-by Commitments
Subsidiary Companies
To Be Announced (TBA) Purchase Commitments
US Government Securities
Variable and Floating Rate Instruments
Warrants
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
DWS GNMA FUND
Adjustable Rate Securities
Advance Refunded Bonds
Asset-Backed Securities
Asset-Indexed Securities
Asset Segregation
Bank Loans
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Credit Enhancement
Derivatives
Dollar Roll Transactions
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Indexed Securities
Interfund Borrowing and Lending Program
Inverse Floaters
Lending of Portfolio Securities
Mortgage-Backed Securities
Obligations of Banks and Other Financial Institutions
Participation Interests
Repurchase Agreements
Reverse Repurchase Agreements
Securities with Put Rights
Short-Term Securities
To Be Announced (TBA) Purchase Commitments
Trust Preferred Securities
US Government Securities
When-Issued and Delayed-Delivery Securities
Zero Coupon Securities and Deferred Interest Bonds
DWS HIGH INCOME FUND
Adjustable Rate Securities
Advance Refunded Bonds
Asset-Backed Securities
Asset Segregation
Bank Loans
Borrowing
Brady Bonds
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Common Stock
Convertible Securities
Credit Enhancement
Depositary Receipts
Derivatives
Direct Debt Instruments
Dollar Roll Transactions
Eurodollar Obligations
Fixed Income Securities
Foreign Currencies
Foreign Investment
High Yield Fixed Income Securities - Junk Bonds
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Inverse Floaters
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Securities
Obligations of Banks and Other Financial Institutions
Repurchase Agreements
Reverse 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
Variable and Floating Rate Instruments
Warrants
I-62
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
DWS GLOBAL HIGH INCOME FUND
Asset-Backed Securities
Asset Segregation
Auction Rate Securities
Bank Loans
Borrowing
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Common Stock
Convertible Securities
Custodial Receipts
Derivatives
Direct Debt Instruments
Dollar Roll Transactions
Fixed Income Securities
Foreign Investment
High Yield Fixed Income Securities - Junk Bonds
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Inverse Floaters
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Leases, Certificates of Participation and Other Participation
Interests
Municipal Securities
Obligations of Banks and Other Financial Institutions
Preferred Stock
Put Bonds
Repurchase Agreements
Securities as a Result of Exchanges or Workouts
Short-Term Securities
Sovereign Debt
Tax-Exempt Commercial Paper
Tax-Exempt Custodial Receipts
Tax-Exempt Pass-Through Securities
US Government Securities
Variable and Floating Rate Instruments
Warrants
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
DWS SHORT DURATION FUND
Adjustable Rate Securities
Asset-Backed Securities
Asset Segregation
Auction Rate Securities
Bank Loans
Borrowing
Brady Bonds
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Credit Enhancement
Custodial Receipts
Depositary Receipts
Derivatives
Dollar Roll Transactions
Fixed Income Securities
Foreign Currencies
Foreign Investment
High Yield Fixed Income Securities - Junk Bonds
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Indexed Securities
Interfund Borrowing and Lending Program
Inverse Floaters
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Leases, Certificates of Participation and Other Participation
Interests
Municipal Securities
Obligations of Banks and Other Financial Institutions
Private Activity Bonds
Put Bonds
I-63
Repurchase Agreements
Reverse Repurchase Agreements
Short-Term Securities
Sovereign Debt
Tax-Exempt Commercial Paper
To Be Announced (TBA) Purchase Commitments
US Government Securities
Variable and Floating Rate Instruments
Warrants
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
DWS STRATEGIC GOVERNMENT SECURITIES FUND
Adjustable Rate Securities
Advance Refunded Bonds
Asset-Backed Securities
Asset Segregation
Bank Loans
Borrowing
Brady Bonds
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Convertible Securities
Credit Enhancement
Custodial Receipts
Derivatives
Dollar Roll Transactions
Fixed Income Securities
Foreign Currencies
Foreign Investment
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Inverse Floaters
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Securities
Obligations of Banks and Other Financial Institutions
Repurchase Agreements
Reverse Repurchase Agreements
Short Sales Against the Box
Short-Term Securities
Sovereign Debt
To Be Announced (TBA) Purchase Commitments
US Government Securities
Variable and Floating Rate Instruments
Warrants
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
DWS ULTRA-SHORT DURATION FUND
Asset-Backed Securities
Asset Segregation
Auction Rate Securities
Bank Loans
Borrowing
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Common Stock
Convertible Securities
Custodial Receipts
Derivatives
Dollar Roll Transactions
Fixed Income Securities
Foreign Investment
High Yield Fixed Income Securities - Junk Bonds
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Inverse Floaters
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Leases, Certificates of Participation and Other Participation
Interests
Municipal Securities
Obligations of Banks and Other Financial Institutions
Preferred Stock
Put Bonds
Repurchase Agreements
Short-Term Securities
I-64
Sovereign Debt
Tax-Exempt Commercial Paper
Tax-Exempt Custodial Receipts
Tax-Exempt Pass-Through Securities
US Government Securities
Variable and Floating Rate Instruments
Warrants
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
DWS UNCONSTRAINED INCOME FUND
Adjustable Rate Securities
Advance Refunded Bonds
Asset-Backed Securities
Asset Segregation
Bank Loans
Borrowing
Brady Bonds
Cash Management Vehicles
Commercial Paper
Commodity Pool Operator Exclusion
Common Stock
Convertible Securities
Credit Enhancement
Depositary Receipts
Derivatives
Direct Debt Instruments
Dollar Roll Transactions
Eurodollar Obligations
Fixed Income Securities
Foreign Currencies
Foreign Investment
High Yield Fixed Income Securities - Junk Bonds
Illiquid Securities
Impact of Large Redemptions and Purchases of Fund Shares
Interfund Borrowing and Lending Program
Inverse Floaters
Investment Companies and Other Pooled Investment Vehicles
Investment-Grade Bonds
Lending of Portfolio Securities
Mortgage-Backed Securities
Municipal Securities
Obligations of Banks and Other Financial Institutions
Privatized Enterprises
Real Estate Investment Trusts (REITs)
Repurchase Agreements
Reverse 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
Variable and Floating Rate Instruments
Warrants
When-Issued and Delayed-Delivery Securities
Yields and Ratings
Zero Coupon Securities and Deferred Interest Bonds
I-65
PART I: APPENDIX I-J - ADDITIONAL INFORMATION
FUND CLASS CUSIP NUMBER
DWS Core Fixed Income Fund Class A 23339E889
Fiscal Year End: 10/31 Class B 23339E871
Class C 23339E863
Class R 23339E855
Class S 23339E541
Institutional Class 23339E848
DWS Global Inflation Fund Class A 23339C883
Fiscal Year End: 9/30 Class B 23339C875
Class C 23339C867
Class S 23339C859
Institutional Class 23339C842
DWS GNMA Fund Class A 23337P308
Fiscal Year End: 9/30 Class C 23337P407
Class R 23339E418
Class S 23337P209
Institutional Class 23337P506
DWS High Income Fund Class A 23337M107
Fiscal Year End: 9/30 Class B 23337M206
Class C 23337M305
Class R 23339E392
Class S 23339E384
Institutional Class 23337M404
DWS Global High Income Fund Class A 23339E699
Fiscal Year End: 10/31 Class B 23339E681
Class C 23339E673
Class S 23339E665
Institutional Class 23339E772
DWS Short Duration Fund Class A 23336Y748
Fiscal Year End: 9/30 Class B 23336Y623
Class C 23336Y730
Class S 23336Y755
Institutional Class 23336Y565
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
DWS Ultra-Short Duration Fund Class A 23339E822
Fiscal Year End: 10/31 Class B 23339E814
Class C 23339E798
Class S 23339E780
Institutional Class 23339E640
|
I-66
FUND CLASS CUSIP NUMBER
DWS Unconstrained Income Fund Class A 23337K101
Fiscal Year End: 10/31 Class B 23337K200
Class C 23337K309
Class S 23337K507
|
I-67
PART I: APPENDIX I-K - WHOLLY - OWNED SUBSIDIARY COMPANIES
DWS GLOBAL INFLATION FUND
DWS Cayman Global Inflation Plus Fund, Ltd., domiciled in Cayman Islands.
- John Millette, Secretary of DWS Cayman Global Inflation Plus Fund, Ltd.,
One Beacon Street, 14th Floor, Boston, MA 02108
I-68
STATEMENT OF ADDITIONAL INFORMATION (SAI) - PART II
PAGE
Part II................................................................................... II-1
Management of the Funds................................................................. II-1
Board Members.......................................................................... II-6
Fund Organization....................................................................... II-8
Purchase and Redemption of Shares....................................................... II-15
Purchases.............................................................................. II-16
Redemptions............................................................................ II-20
Distribution and Service Agreements and Plans........................................... II-30
Investments............................................................................. II-36
General Investment Practices and Techniques............................................ II-36
Portfolio Transactions.................................................................. II-36
Portfolio Holdings Information.......................................................... II-38
Net Asset Value......................................................................... II-39
Proxy Voting Guidelines................................................................. II-43
Miscellaneous........................................................................... II-43
Ratings Of Investments.................................................................. II-43
Part II: Appendix II-A - Board Members and Officers..................................... II-50
Part II: Appendix II-B - Portfolio Management Compensation.............................. II-55
Part II: Appendix II-C - Fee Rates of Service Providers................................. II-62
Part II: Appendix II-D - Financial Services Firms' Compensation......................... II-73
Part II: Appendix II-E - Firms With Which Deutsche Asset & Wealth Management Has II-77
Revenue Sharing
Arrangements..............................................................................
Part II: Appendix II-F - Class A Sales Charge Schedule.................................. II-80
Part II: Appendix II-G - Investment Practices and Techniques............................ II-83
Part II: Appendix II-H - Taxes.......................................................... II-138
Part II: Appendix II-I - Proxy Voting Policy and Guidelines............................. II-158
|
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 DWS funds.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISOR. Deutsche Investment Management Americas Inc. ("DIMA" or the
"Advisor"), with headquarters at 345 Park Avenue, New York, NY 10154, is the
investment advisor for the fund. Under the oversight of the Board, the Advisor
makes investment decisions, buys and sells securities for the fund and conducts
research that leads to these purchase and sale decisions. The Advisor 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. The Advisor and its
predecessors have more than 80 years of experience managing mutual funds and
provide a full range of global investment advisory services to institutional
and retail clients.
Deutsche Asset & Wealth Management represents the asset management and wealth
management activities conducted by Deutsche Bank AG or any of its subsidiaries,
including the Advisor and DWS Investments Distributors, Inc. ("DIDI" or the
"Distributor"). Deutsche Asset & Wealth Management is a global 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 may utilize the resources of its global investment platform to
provide investment management services through branch offices or affiliates
located outside the US. In some cases, the Advisor may also utilize its branch
offices or affiliates located in the US or outside the US to perform certain
services, such as trade execution, trade matching and settlement, or various
administrative, back-office or other services. To the extent services are
performed outside the US, such activity may be subject to both US and foreign
regulation. It is possible that the jurisdiction in which the Advisor or its
affiliate performs such services may impose restrictions or limitations on
portfolio transactions that are different from, and in addition to, those that
apply in the US.
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
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.
TERMS OF THE INVESTMENT MANAGEMENT AGREEMENTS. Pursuant to the applicable
Investment Management Agreement, 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.
DIMA may enter into arrangements with affiliates and third party service
providers to perform various administrative, back-office and other services.
Such service providers may be located in the US or in non-US jurisdictions. The
costs and expenses of such arrangements are borne by DIMA, not by a fund.
For DWS Latin America Equity Fund, in rendering investment advisory services,
DIMA may use the resources of one or more foreign (non-U.S.) affiliates (the
DIMA Overseas Affiliates) that are not registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), to provide portfolio management
and research services to the fund. Under a Participating Affiliates Agreement,
a DIMA Overseas Affiliate may be considered a Participating Affiliate of DIMA
as that term is used in relief granted by the staff of the SEC allowing
US-registered advisers to use investment advisory and trading resources of
unregistered advisory affiliates subject to the regulatory supervision of the
registered adviser. Each Participating Affiliate and any of their respective
employees who provide services to the fund are considered under a Participating
Affiliate Agreement to be an "associated person" of DIMA as that term is
defined in the Advisers Act for purposes of DIMA's required supervision.
Deutsche Bank S.A. - Banco Alemao (DB Brazil)
II-2
is a Participating Affiliate of DIMA. DB Brazil has appointed DIMA to act as
its resident agent for service of process in the US.
For Money Market Portfolio, DWS Mid Cap Value Fund, DWS Small Cap Value Fund,
and DWS Equity Dividend 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 Mid Cap Value Fund, DWS Small Cap
Value Fund, and DWS Equity Dividend Fund, 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 Mid Cap Value Fund, DWS Small Cap Value Fund,
and DWS Equity Dividend 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 is set forth in PART II - APPENDIX
II-C.
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."
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).
Dreman Value Management, L.L.C. (Dreman), 777 South Flagler Drive, Suite 800 -
Tower West, West Palm Beach, FL 33401, serves as a Sub-Advisor to DWS
International Value Fund. Dreman was formed in April 1977 and is an investment
advisor registered with the SEC. DVM is controlled by David Dreman.
II-3
Fischer Francis Trees & Watts, Inc. (FFTW), 200 Park Avenue, New York, New York
10166, serves as Sub-Advisor to DWS Core Fixed Income Fund. FFTW is directly
wholly-owned by Charter Atlantic Corporation (CAC), a New York corporation. CAC
is owned by BNP Paribas, which is a publicly owned banking corporation
organized under the laws of the Republic of France.
Henderson Alternative Investment Advisor Limited (Henderson), 201 Bishopsgate,
London, UK, EC2M 3 AE, serves as a Sub-Advisor of a portion of the assets of
DWS Diversified Market Neutral Fund. Henderson Group is a subsidiary of
Henderson Group PLC, an independent global asset management business founded in
1934.
Northern Trust Investments, Inc. (NTI) 50 South LaSalle Street, Chicago, IL
60603, serves as a Sub-Advisor of all the assets of certain funds. NTI is an
Illinois state banking corporation and an investment adviser registered under
the Investment Advisers Act of 1940, as amended. It primarily manages assets
for institutional and individual separately managed accounts, investment
companies and bank common and collective funds. Northern Trust Corporation 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.
Pyramis Global Advisors, LLC (Pyramis), 900 Salem Street, Smithfield, Rhode
Island 02917, serves as Sub-Advisor of a portion of the assets of DWS
Diversified Market Neutral Fund. Pyramis, formed in 2005, is the institutional
asset management arm of Fidelity Investments, one of the world's largest mutual
fund managers.
RREEF America L.L.C. (RREEF), 222 South Riverside, Chicago, Illinois 60606,
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 an indirect, wholly-owned 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.
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 (a) the sub-advisor causing a fund to be in violation of
any applicable federal or state law, rule or regulation or any investment
policy or restriction set forth in a fund's prospectus or as may be provided in
writing by the Board or DIMA, or (b) 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.
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 the applicable
sub-subadvisory agreement between it and the Sub-Advisor (Sub-Subadvisory
Agreement).
Deutsche Alternative Asset Management (Global) Limited (DAAM Global), formerly
known as RREEF Global Advisors Limited (RGAL), 1 Great Winchester Street,
London, United Kingdom, EC2N 2DB, serves as Sub-Subadvisor
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to a fund. DAAM Global is an investment advisor registered with the SEC. In
addition, DAAM Global is an affiliate of DIMA and an indirect, wholly owned
subsidiary of Deutsche Bank AG.
Deutsche Investments Australia Limited (DIAL), Level 16, 126 Phillip Street,
Sydney NSW 200, Australia, serves as Sub-Subadvisor to a fund. DIAL is an
investment advisor registered with the SEC. In addition, DIAL is an affiliate
of DIMA and an indirect, wholly owned subsidiary of Deutsche Bank AG.
TERMS OF THE SUB-SUBADVISORY AGREEMENTS. 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 the 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-subadvisory fee is paid directly by a Sub-Advisor at specific
rates negotiated between a Sub-Advisor and a Sub-Subadvisor. No fund is
responsible for paying a 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 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
II-5
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 I-C.
ADMINISTRATOR, FUND ACCOUNTING AGENT, TRANSFER AGENT AND SHAREHOLDER SERVICE
AGENT, AND CUSTODIAN
ADMINISTRATOR. 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. 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.
FUND ACCOUNTING AGENT. For Money Market Portfolio, DWS Mid Cap Value Fund, DWS
Equity Dividend Fund and DWS Small Cap Value Fund, DIMA, One Beacon Street,
Boston, Massachusetts 02108, 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, DIMA receives a fee at the rate set forth in PART II -
APPENDIX II-C. Prior to March 31, 2011, DWS Investments Fund Accounting
Corporation (DIFA), a subsidiary of DIMA, performed these fund accounting
services for the funds.
Pursuant to an agreement between DIMA and SSB, DIMA has delegated certain fund
accounting functions to SSB under the Fund Accounting Agreement. Prior to March
31, 2011, DIFA had also delegated these functions to SSB. The costs and
expenses of such delegation are borne by DIMA, not by a fund.
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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 a
transfer agency and service agreement (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.
In some instances, the 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 the 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 the 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
(e.g., foreign exchange transactions or corporate transactions).
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.
TRUSTEE/DIRECTOR 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 parties to the Distribution Agreement
or interested persons of any such party.
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 any related 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 fund-by-fund and class-
by-class basis.
Under the Distribution Agreement, DIDI uses reasonable efforts to sell shares
of a fund 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 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
II-7
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, 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 or in any related
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 who are not
interested persons of a fund and who have no direct or indirect financial
interest in the Services Agreement or in any related 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.
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.
FUND ORGANIZATION
FOR EACH TRUST (EXCEPT DWS TARGET DATE SERIES, DWS PORTFOLIO TRUST, DWS TAX
FREE TRUST AND CASH ACCOUNT TRUST)
The Board has the authority to divide the shares of the Trust into multiple
funds by establishing and designating two or more series of the Trust. The
Board also has the authority to establish and designate two or more classes of
shares of the Trust, or of any series thereof, with variations in the relative
rights and preferences
II-8
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 10% 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 the Trust currently provide
that the presence in person or by proxy of the holders of 30% of the shares
entitled to vote at a meeting shall constitute a quorum for the transaction of
business at meetings of shareholders of the 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 the 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 the Trust to redeem all of the shares of the
Trust or one or more series or classes held by any shareholder for any reason,
to the extent permissible by the 1940 Act, including (a) if the shareholder
owns shares having an aggregate net asset value of less than a specified
minimum amount, (b) if a particular shareholder's ownership of shares would
disqualify a series from being a regulated investment company, (c) upon a
shareholder's failure to provide sufficient identification to permit the Trust
to verify the shareholder's identity, (d) upon a shareholder's failure to pay
for shares or meet or maintain the qualifications for ownership of a particular
class or series of shares, (e) if the Board 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 the Trust may
suspend the right of shareholders to require the 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 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
II-9
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 the Trust or any series, after paying or adequately
providing for the payment of all liabilities, which may include the
establishment of a liquidating trust or similar vehicle, and upon receipt of
such releases, indemnities and refunding agreements as they deem necessary for
their protection, the Board may distribute the remaining Trust property or
property of the series to the shareholders of the Trust or the series involved,
ratably according to the number of shares of the Trust or such series held by
the several shareholders of the Trust or such series on the date of
termination, except to the extent otherwise required or permitted by the
preferences and special or relative rights and privileges of any classes of
shares of a series involved, provided that any distribution to the shareholders
of a particular class of shares shall be made to such shareholders pro rata in
proportion to the number of shares of such class held by each of them. The
composition of any such distribution (e.g., cash, securities or other assets)
shall be determined by the Trust in its sole discretion and may be different
among shareholders (including differences among shareholders in the same series
or class).
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
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.
FOR DWS TARGET DATE SERIES, DWS PORTFOLIO TRUST AND DWS TAX FREE TRUST
The Board has the authority to divide the shares of the Trust into multiple
funds by establishing and designating two or more series of the Trust. The
Board also has the authority to establish and designate two or more classes of
shares of the 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 10% 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 change any right with respect to any
shares of the Trust or fund by reducing the amount payable thereon upon
liquidation of the Trust or fund or by diminishing or eliminating any voting
rights pertaining thereto, in which case the vote or consent of the holders of
two-thirds of the shares of the Trust or fund outstanding and entitled to vote
would be required (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.
II-10
In addition, under the Declaration of Trust, shareholders of the Trust also
have the power to vote in connection with the following matters to the extent
and as provided in the Declaration of Trust and as required by applicable law:
(a) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claims should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the shareholders; (b) with respect to any merger, consolidation
or sale of assets; (c) with respect to any investment advisory or management
contract entered into with respect to one or more funds; (d) with respect to
the incorporation of the Trust or a fund; (e) with respect to any plan adopted
pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act; and (f) with
respect to such additional matters relating to the Trust as may be required by
the Declaration of Trust, the By-laws or any registration of the Trust with the
SEC as an investment company under the 1940 Act.
The Declaration of Trust provides that shareholder meeting quorum requirements
shall be established in the By-laws. The By-laws of the Trust currently provide
that the presence in person or by proxy of the holders of 30% of the shares
entitled to vote at a meeting shall constitute a quorum for the transaction of
business at meetings of shareholders of the 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 the 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 the Trust to redeem all of the shares of the
Trust or one or more series or classes held by any shareholder for any reason,
to the extent permissible by the 1940 Act, including (a) if the shareholder
owns shares having an aggregate net asset value of less than a specified
minimum amount, (b) if a particular shareholder's ownership of shares would
disqualify a series from being a regulated investment company, (c) upon a
shareholder's failure to provide sufficient identification to permit the Trust
to verify the shareholder's identity, (d) upon a shareholder's failure to pay
for shares or meet or maintain the qualifications for ownership of a particular
class or series of shares, (e) if the Board 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 the Trust may
suspend the right of shareholders to require the Trust to redeem shares to the
extent permissible under the 1940 Act.
Upon the termination of the Trust or any series, after paying or adequately
providing for the payment of all liabilities, which may include the
establishment of a liquidating trust or similar vehicle, and upon receipt of
such releases, indemnities and refunding agreements as they deem necessary for
their protection, the Board may distribute the remaining Trust property or
property of the series to the shareholders of the Trust or the series involved,
ratably according to the number of shares of the Trust or such series held by
the several shareholders of the Trust or such series on the date of
termination, except to the extent otherwise required or permitted by the
preferences and special or relative rights and privileges of any classes of
shares of a series involved, provided that any distribution to the shareholders
of a particular class of shares shall be made to such shareholders pro rata in
proportion to the number of shares of such class held by each of them. The
composition of any such distribution (e.g., cash, securities or other assets)
shall be determined by the Trust in its sole discretion and may be different
among shareholders (including differences among shareholders in the same series
or class).
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of a
fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
a fund or a fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of fund property for all losses and
II-11
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.
FOR CASH ACCOUNT TRUST
The Board Members have the authority to create additional funds and to
designate the relative rights and preferences as between the different funds.
The Board Members also may authorize the division of shares of a fund into
different classes, which may bear different expenses. All shares issued and
outstanding are fully paid and non-assessable, transferable, have no
pre-emptive or conversion rights and are redeemable as described in the funds'
prospectuses and SAIs. Each share has equal rights with each other share of the
same class of the fund as to voting, dividends, exchanges, conversion features
and liquidation. Shareholders are entitled to one vote for each full share held
and fractional votes for fractional shares held. The Board Members may also
terminate any fund or class by notice to the shareholders without shareholder
approval.
The Trust generally is not required to hold meetings of its shareholders. Under
the Declaration of Trust, however, shareholder meetings will be held in
connection with the following matters: (a) the election or removal of Board
Members if a meeting is called for such purpose; (b) the adoption of any
contract for which shareholder approval is required by the 1940 Act; (c) any
termination or reorganization of the Trust to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust or any fund, establishing a fund,
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law, the Declaration of Trust, the
By-laws of the Trust, or any registration of the Trust with the Securities and
Exchange Commission or any state, or as the Board Members may consider
necessary or desirable. The shareholders also would vote upon changes in
fundamental investment objectives, policies or restrictions.
Subject to the Declaration of Trust, shareholders may remove Board Members.
Each Board Member serves until the next meeting of shareholders, if any, called
for the purpose of electing Board Members and until the election and
qualification of a successor or until such Board Member sooner dies, resigns,
retires or is removed by a majority vote of the shares entitled to vote (as
described below) or a majority of the Board Members. In accordance with the
1940 Act (a) the Trust will hold a shareholder meeting for the election of
Board Members at such time as less than a majority of the Board Members have
been elected by shareholders, and (b) if, as a result of a vacancy in the
Board, less than two-thirds of the Board Members have been elected by the
shareholders, that vacancy will be filled only by a vote of the shareholders.
The Declaration of Trust provides that obligations of the Trust are not binding
upon the Board Members individually but only upon the property of the Trust,
that the Board Members and officers will not be liable for errors of judgment
or mistakes of fact or law, and that a Trust will indemnify its Board Members
and officers against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with a Trust
except if it is determined in the manner provided in the Declaration of Trust
that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust protects or indemnifies a Board Member or officer against
any liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of their office.
Board Members may be removed from office by a vote of the holders of a majority
of the outstanding shares at a meeting called for that purpose, which meeting
shall be held upon the written request of the holders of not less than 10% of
the outstanding shares. Upon the written request of ten or more shareholders
who have been such for at least six months and who hold shares constituting at
least 1% of the outstanding shares of the Trust stating that such shareholders
wish to communicate with the other shareholders for the purpose of obtaining
the signatures necessary to demand a meeting to consider removal of a trustee,
the Trust has undertaken to disseminate appropriate materials at the expense of
the requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of a fund could take
place even if less than a majority of the shareholders were represented on its
scheduled date. Shareholders would in such a case be permitted to take action
which does not require a larger vote than a majority
II-12
of a quorum, such as the election of Board Members and ratification of the
selection of auditors. Some matters requiring a larger vote under the
Declaration of Trust, such as termination or reorganization of a fund and
certain amendments of the Declaration of Trust, would not be affected by this
provision; nor would matters which under the 1940 Act require the vote of a
"majority of the outstanding voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board to terminate the
Trust (or any fund or class) by notice to the shareholders without shareholder
approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the Board Members. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust may be covered by insurance. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered by the Advisor
remote and not material, since it is limited to circumstances in which a
disclaimer is inoperative and the Trust itself is unable to meet its
obligations.
FOR EACH CORPORATION (EXCEPT DWS VALUE SERIES, INC.)
All shares issued and outstanding are fully paid and non-assessable,
transferable, have no pre-emptive rights (except as may be determined by the
Board of Directors) or conversion rights (except as described below) and are
redeemable as described in the SAI and in each fund's prospectus. Each share
has equal rights with each other share of the same class of a fund as to
voting, dividends, exchanges and liquidation. Shareholders are entitled to one
vote for each share held and fractional votes for fractional shares held.
The Board of Directors may determine that shares of a fund or a class of a fund
shall be automatically converted into shares of another fund of the Corporation
or of another class of the same or another fund based on the relative net
assets of such fund or class at the time of conversion. The Board of Directors
may also provide that the holders of shares of a fund or a class of a fund
shall have the right to convert or exchange their shares into shares of one or
more other funds or classes on terms established by the Board of Directors.
Each share of the Corporation may be subject to such sales loads or charges,
expenses and fees, account size requirements, and other rights and provisions,
which may be the same or different from any other share of the Corporation or
any other share of any fund or class of a fund (including shares of the same
fund or class as the share), as the Board of Directors may establish or change
from time to time and to the extent permitted under the 1940 Act.
The Corporation is not required to hold an annual meeting of shareholders in
any year in which the election of Directors is not required by the 1940 Act. If
a meeting of shareholders of the Corporation is required by the 1940 Act to
take action on the election of Directors, then an annual meeting shall be held
to elect Directors and take such other action as may come before the meeting.
Special meetings of the shareholders of the Corporation, or of the shareholders
of one or more funds or classes thereof, for any purpose or purposes, may be
called at any time by the Board of Directors or by the President, and shall be
called by the President or Secretary at the request in writing of shareholders
entitled to cast a majority of the votes entitled to be cast at the meeting.
Except as provided in the 1940 Act, the presence in person or by proxy of the
holders of one-third of the shares entitled to vote at a meeting shall
constitute a quorum for the transaction of business at meetings of shareholders
of the Corporation or of a fund or class.
On any matter submitted to a vote of shareholders, all shares of the
Corporation entitled to vote shall be voted in the aggregate as a single class
without regard to series or classes of shares, provided, however, that (a) when
applicable law requires that one or more series or classes vote separately,
such series or classes shall vote separately and, subject to (b) below, all
other series or classes shall vote in the aggregate; and (b) when the Board of
Directors determines that a matter does not affect the interests of a
particular series or class, such series or class shall not be entitled to any
vote and only the shares of the affected series or classes shall be entitled to
vote.
Notwithstanding any provision of Maryland corporate law requiring authorization
of any action by a greater proportion than a majority of the total number of
shares entitled to
II-13
vote on a matter, such action shall be effective if authorized by the majority
vote of the outstanding shares entitled to vote.
Subject to the requirements of applicable law and any procedures adopted by the
Board of Directors from time to time, the holders of shares of the Corporation
or any one or more series or classes thereof may take action or consent to any
action by delivering a consent, in writing or by electronic transmission, of
the holders entitled to cast not less than the minimum number of votes that
would be necessary to authorize or take the action at a formal meeting.
The Articles of Incorporation provide that the Board of Directors may, in its
discretion, establish minimum investment amounts for shareholder accounts,
impose fees on accounts that do not exceed a minimum investment amount and
involuntarily redeem shares in any such account in payment of such fees. The
Board of Directors, in its sole discretion, also may cause the Corporation to
redeem all of the shares of the Corporation 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 the 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 Corporation 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 series or class, (e) if the Board of Directors
determines (or pursuant to policies established by the Board of Directors it is
determined) that share ownership by a shareholder is not in the best interests
of the remaining shareholders, (f) when the Corporation is requested or
compelled to do so by governmental authority or applicable law, or (g) upon a
shareholder's failure to comply with a request for information with respect to
the direct or indirect ownership of shares of the Corporation. By redeeming
shares the Corporation may terminate a fund or any class without shareholder
approval, and the Corporation may suspend the right of shareholders to require
the Corporation to redeem shares to the extent permissible under the 1940 Act.
Except as otherwise permitted by the Articles of Incorporation, upon
liquidation or termination of a fund or class, shareholders of such fund or
class of such fund shall be entitled to receive, pro rata in proportion to the
number of shares of such fund or class held by each of them, a share of the net
assets of such fund or class, and the holders of shares of any other particular
fund or class shall not be entitled to any such distribution, provided,
however, that the composition of any such payment (e.g., cash, securities
and/or other assets) to any shareholder shall be determined by the Corporation
in its sole discretion, and may be different among shareholders (including
differences among shareholders in the same fund or class).
FOR DWS VALUE SERIES, INC.
All shares issued and outstanding are fully paid and non-assessable,
transferable, have no pre-emptive rights (except as may be determined by the
Board of Directors) or conversion rights (except as described below) and are
redeemable as described in the SAI and in each fund's prospectus. Each share
has equal rights with each other share of the same class of a fund as to
voting, dividends, exchanges and liquidation. Shareholders are entitled to one
vote for each share held and fractional votes for fractional shares held.
The Board of Directors may provide that the holders of shares of a fund or a
class of a fund shall have the right to convert or exchange their shares into
shares of one or more other funds or classes on terms established by the Board
of Directors.
Each share of the Corporation may be subject to such sales loads or charges,
expenses and fees, and account size requirements as the Board of Directors may
establish or change from time to time and to the extent permitted under the
1940 Act.
The Corporation is not required to hold an annual meeting of shareholders in
any year in which the election of Directors is not required by the 1940 Act. If
a meeting of shareholders of the Corporation is required by the 1940 Act to
take action on the election of Directors, then an annual meeting shall be held
to elect Directors and take such other action as may come before the meeting.
Special meetings of the shareholders of the Corporation, or of the shareholders
of one or more funds or classes thereof, for any purpose or purposes, may be
called at any time by the Board of Directors or by the President, and shall be
called by the President or Secretary at the request in writing of shareholders
entitled to cast a majority of the votes entitled to be cast at the meeting.
II-14
Except as provided in the 1940 Act, the presence in person or by proxy of the
holders of one-third of the shares entitled to vote at a meeting shall
constitute a quorum for the transaction of business at meetings of shareholders
of the Corporation or of a fund or class.
On any matter submitted to a vote of shareholders, all shares of the
Corporation entitled to vote shall be voted in the aggregate as a single class
without regard to series or classes of shares, provided, however, that (a) when
applicable law requires that one or more series or classes vote separately,
such series or classes shall vote separately and, subject to (b) below, all
other series or classes shall vote in the aggregate; and (b) when a matter does
not affect the interests of a particular series or class, such series or class
shall not be entitled to any vote and only the shares of the affected series or
classes shall be entitled to vote.
Notwithstanding any provision of Maryland corporate law requiring authorization
of any action by a greater proportion than a majority of the total number of
shares entitled to vote on a matter, such action shall be effective if
authorized by the majority vote of the outstanding shares entitled to vote.
The Board of Directors, in its sole discretion, may cause the Corporation to
redeem all of the shares of the Corporation or one or more series or classes
held by any shareholder for any reason, to the extent permissible by the 1940
Act. By redeeming shares the Corporation may terminate a fund or any class
without shareholder approval, and the Corporation may suspend the right of
shareholders to require the Corporation to redeem shares to the extent
permissible under the 1940 Act.
Except as otherwise permitted by the Articles of Incorporation, upon
liquidation or termination of a fund or class, shareholders of such fund or
class of such fund shall be entitled to receive, pro rata in proportion to the
number of shares of such fund or class held by each of them, a share of the net
assets of such fund or class, and the holders of shares of any other particular
fund or class shall not be entitled to any such distribution.
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 services 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 share price next calculated after receipt in good
order by DIDI. 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
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
II-15
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. Certain funds investing in municipal
securities may not be appropriate for such Tax-Sheltered Retirement 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. For information regarding purchases of shares of DWS
Variable Series I, DWS Variable Series II and DWS Investments VIT Funds, please
see VARIABLE INSURANCE FUNDS below. For information regarding purchases of
money market funds, please see MONEY MARKET FUNDS below.
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 "Class A Sales Charge 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 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 "Class A Sales Charge Schedule" set forth in PART
II -
II-16
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 (1) and (2);
(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) persons who purchase such shares 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 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;
II-17
(9) financial service firms that have entered into an agreement with DIDI to
offer Class A shares through a no-load network, platform or
self-directed brokerage account that may or may not charge transaction
fees to their clients;
(10) 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;
(11) investors investing $1 million or more ($250,000 or more for DWS
Alternative Asset Allocation Fund, DWS California Tax-Free Income Fund,
DWS Diversified Market Neutral Fund, DWS Global Growth Fund, DWS GNMA
Fund, DWS Intermediate Tax/AMT Free Fund, DWS Large Cap Value 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 Fund, DWS Strategic High Yield Tax-Free Fund, DWS Select
Alternative Allocation Fund, DWS Strategic Government Securities Fund,
DWS Unconstrained Income Fund and DWS Ultra-Short Duration 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;
(12) 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:
(13) 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;
(14) 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;
(15) reinvestment of fund dividends and distributions; and
(16) 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 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-18
As described in the prospectus, Class B shares are 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 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 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 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
II-19
$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. Shares of a fund are sold at net asset value 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 Funds 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
Global High Income 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. Please consult the prospectus for the availability of
these redemption features for a specific fund. In addition, the information
provided below does not apply to contract holders in variable insurance
products. Contract owners should consult their contract prospectuses for
applicable redemption procedures.
A request for repurchase (confirmed redemption) may be communicated by a
shareholder through a financial services firm to DIDI, which firms must
promptly submit orders to be effective.
Redemption requests must be unconditional. Redemption requests (and a stock
power for certificated shares) must be duly endorsed by the account holder. As
specified in
II-20
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. DWS accepts Medallion Signature Guarantees. 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.
SYSTEMATIC WITHDRAWAL PLAN. An owner of $5,000 or more of a class of a fund's
shares at the offering price (net asset value plus, in the case of Class A
shares, the initial sales charge) may provide for the payment from the owner's
account of any requested dollar amount to be paid to the owner or a designated
payee monthly, quarterly, semiannually or annually pursuant to a Systematic
Withdrawal Plan (the "Plan"). The $5,000 minimum account size is not applicable
to IRAs. The minimum periodic payment is $50. The maximum annual rate at which
shares subject to CDSC may be redeemed without the imposition of the CDSC is
12% of the net asset value of the account.
Non-retirement plan shareholders may establish a Plan to receive monthly,
quarterly or periodic redemptions from his or her account for any designated
amount of $50 or more. Shareholders may designate which day they want the
systematic withdrawal to be processed. If a day is not designated, the
withdrawal will be processed on the 25th day of the month to that the payee
should receive payment approximately on the first of the month. The check
amounts may be based on the redemption of a fixed dollar amount, fixed share
amount, percent of account value or declining balance. The Plan provides for
income dividends and capital gains distributions, if any, to be reinvested in
additional shares. Shares are then liquidated as necessary to provide for
withdrawal payments. Since the withdrawals are in amounts selected by the
investor and have no relationship to yield or income, payments received cannot
be considered as yield or income on the investment and the resulting
liquidations may deplete or possibly extinguish the initial investment and any
reinvested dividends and capital gains distributions. Any such requests must be
received by the Shareholder Service Agent ten days prior to the date of the
first systematic withdrawal. A Plan may be terminated at any time by the
shareholder, the Trust or its agent on written notice, and will be terminated
when all fund shares under the Plan have been liquidated or upon receipt by the
Trust of notice of death of the shareholder.
The purchase of Class A shares while participating in a Plan will ordinarily be
disadvantageous to the investor because the investor will be paying a sales
charge on the purchase of shares at the same time that the investor is
redeeming shares upon which a sales charge may have already been paid.
Therefore, an investor should consider carefully whether to make additional
investments in Class A shares if the investor is at the same time making
systematic withdrawals.
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.
II-21
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 Internal Revenue Code (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 for certain loan advances, hardship provisions or returns of
excess contributions from retirement plans; and
(7) for shares purchased prior to February 1, 2011, redemptions of shares
whose dealer of record at the time of the investment notified DIDI that
the dealer waived the discretionary commission applicable to such Large
Order NAV Purchase.
The Class B CDSC will be waived for the circumstances set forth in items (3),
(4), (5) and (6) 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 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 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
II-22
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 and DWS Money Market Series, each a series of DWS Money Market
Trust; and Treasury Portfolio and DWS Variable NAV Money Fund, each a series of
Investors Cash Trust.
CHECKWRITING (applicable to DWS Short Duration 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 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 certain Money Market Funds. Please consult the
prospectus for the availability of these redemption features for a specific
fund.
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 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
II-23
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 (see telephone number on front cover) 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 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
II-24
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 special redemption features, applicable charges, minimum balance
requirements and special rules of the cash management program being offered.
EXCHANGES
The exchange features may not be available to all funds. Please consult the
prospectus for the availability of exchanges for a specific fund. 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. In addition, the information provided below does not apply to contract
holders in variable insurance products. Contract holders should consult their
contract prospectuses for applicable exchange procedures.
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: dws-investments.com (the Web
site does not form a part of this Statement of Additional Information) or call
DWS Investments (see telephone number on front cover).
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.
II-25
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.
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 an annual outperformance award
potential, based on achieving certain sales and other performance metrics.
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 tier of a fund.
Each fund is assigned to one of four product tiers - Tier I: cornerstone or
capital market compass funds; Tier II: core or baseline funds; Tier III:
non-core funds; and Tier IV: index or passive 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
o Market size for the fund tier
o a fund's size, including sales and redemptions of a fund's shares
This information and other factors are presented to a senior management
committee comprised of representatives from various groups within DWS
Investments, who review on a regular basis the funds assigned to each product
tier described above, and may make changes to those assignments periodically.
No one factor, whether positive or negative, determines a fund's placement in a
given product tier; all these factors together are considered, and the
designation of funds in a particular tier 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
tier assignment. These tier assignments will be posted quarterly to the DWS
funds' Web site at dws-investments.com/EN/wholesaler-compensation.jsp,
approximately one month after the end of each quarter. DWS Investments
Wholesalers receive the highest compensation for Tier I funds, successively
less for Tier II (within which there are two payout sub-tiers) and Tier III
funds, and the lowest for Tier IV funds. The level of compensation among these
product tiers may differ significantly.
In the normal course of business, DWS Investments will from time to time
introduce new funds into the DWS family of funds. As a general rule, new funds
will be assigned to the product tier that is most appropriate to the type of
fund at the time of its launch based on the criteria described above. As
described above, the fund tier assignments are reviewed periodically and are
subject to change.
The prospect of receiving, or the receipt of, additional compensation by a DWS
Investments Wholesaler under the Plan may provide an incentive to favor
marketing funds in higher payout tiers over funds in lower payout tiers. 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 tier of the 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.
II-26
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 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 or
Advisor 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.
II-27
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 0.01% up
to 0.55% of assets of a fund serviced and maintained by the financial advisor,
0.05% to 0.25% of sales of a fund attributable to the financial advisor, a flat
fee of up to $60,000, 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 ExpertPlan, Inc. on the DWS Investments branded retirement plan
platform (the "Platform") with the level of revenue sharing payments being
based upon sales of both the DWS funds and the non-DWS funds by the financial
advisor on the Platform or current assets of both the DWS funds and the non-DWS
funds serviced and maintained by the financial advisor on the Platform.
As of the date hereof, each fund has been advised that the Advisor, the
Distributor and their affiliates expect that the 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 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 generally taxable ordinary income and
any excess of net realized short-term capital gains over net realized long-term
capital losses, and net tax-exempt income, if any; 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 be treated for federal income tax
purposes as having received their share of such gains, but will then generally
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
II-28
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.
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, 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 that a check be issued for that
particular distribution. Shareholders who chose to receive distributions by
electronic transfer are not subject to this minimum.
Generally, 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.
With respect to variable insurance products, all distributions will be
reinvested in shares of a fund unless we are informed by an insurance company
that they should be paid out in cash. The insurance companies will be informed
about the amount and character of distributions from the relevant fund for
federal income tax purposes.
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 net
realized capital gain 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. 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
II-29
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 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 a check be issued for that particular
distribution. Shareholders who chose to receive distributions by electronic
transfer are not subject to this minimum.
Dividends and distributions are treated the same for federal income tax
purposes, whether made in shares or cash.
DISTRIBUTION AND SERVICE AGREEMENTS AND PLANS
For information regarding distribution and service agreements and plans for
retail funds, see I. RETAIL FUNDS below.
For information regarding distribution and service agreements and plans for
money market funds, see II. MONEY MARKET FUNDS below.
For information regarding distribution and service agreements and plans for
variable insurance funds, see III. DWS VARIABLE SERIES I AND DWS VARIABLE
SERIES II; and IV. DWS INVESTMENTS VIT FUNDS below.
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.
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
II-30
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 (for Class A shares) and immediately after investment (for Class R
shares). 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 attributable to 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.
Firms to which service fees may be paid include affiliates of DIDI. In addition
DIDI may, from time to time, pay certain firms from its 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.
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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.
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 Money Market Trust, 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
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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.
Premier Money Market Shares - Investors Cash Trust. The Distribution Agreement
authorizes a fund to pay DIDI, as an expense of the Premier Money Market Shares
class 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 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 fund, 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 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 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, 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% of average daily net assets of the Capital Assets
Funds Shares of the applicable fund. This fee is paid pursuant to a Rule 12b-1
Plan. DIDI normally pays the sole sub-distributor for the classes, Apex
Clearing Corporation, 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. 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% of average daily net assets of the Capital Assets Funds
Shares of the applicable 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.
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
II-33
to a Rule 12b-1 Plan. The Rule 12b-1 Plan for the Tax-Exempt Cash Managed
Shares class authorizes the payment of up to 0.25% of average daily net assets
of the class 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. The Rule 12b-1 Plan for the Government Cash Managed Shares
class authorizes the payment of up to 0.15% of average daily net assets of the
class. 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
each fund to pay DIDI, as an expense of the Institutional Shares class of the
Treasury Portfolio and DWS Variable NAV Money Fund, each a series 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% for the Institutional Shares of the Treasury
Portfolio at the discretion of the Board. 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.
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.
Managed Shares - Cash Reserve Fund, Inc. The Services Agreement authorizes the
fund to pay DIDI, as an expense of the Managed Shares class of the Prime Series
of Cash Reserve Fund, Inc., an administrative service fee, payable monthly, at
an annual rate of 0.15% of average daily net assets of the Managed Shares of
the fund. This fee is 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 0.15% of average daily net assets of Managed Shares held in
accounts that they maintain and service.
Shareholder Services Plan for Cash Management Fund - Institutional Class, Cash
Reserves Fund Institutional - Institutional Class, NY Tax Free Money Fund -
Investment Class and Tax-Free Money Fund - Investment Shares, each a series and
class of DWS Money Market Trust. 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
II-34
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 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 B2 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 B2 shares,
as applicable, under a participation agreement, service agreement,
sub-distribution agreement or other similar agreement which provides for Class
B shares or Class B2 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 B2
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 B2
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
II-35
or Class B2 shares of a fund at any time, without penalty, by vote of a
majority of the outstanding Class B shares or Class B2 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 B2 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 Sub-Advisor, 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
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.
II-36
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 Sub-Advisor is acting in accordance with any
instructions and directions of the Advisor or the Board, the Sub-Advisor is
authorized to pay to a broker or dealer who provides third party brokerage and
research services a commission for executing a portfolio transaction for a fund
in excess of what another broker or dealer may charge, if the Sub-Advisor
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. The Advisor has adopted policies and
procedures that are reasonably designed to ensure that when the Advisor
aggregates securities purchased or sold on behalf of accounts, the securities
are allocated among the participating accounts in a manner that the Advisor
believes to be fair and equitable. The Advisor may make allocations among
accounts based upon a number of factors
II-37
that may include, but not limited to, investment objectives and guidelines,
risk tolerance, availability of other investment opportunities and available
cash for investment. With respect to limited opportunities or initial public
offerings, the Advisor may make allocations among accounts on a pro-rata basis
with consideration given to suitability. 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 Sub-Advisor, the
Sub-Advisor or one of its affiliates) may act as a broker for the funds and
receive brokerage commissions or other transaction-related compensation from
the funds in the purchase and sale of securities, options or futures contracts
when, in the judgment of the Advisor, and in accordance with procedures
approved by the 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 SEC quarterly filings (and monthly filings for money market funds),
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 & Wealth Management and its affiliates, subadvisors,
if any, custodians, independent registered public accounting firms, attorneys,
officers and trustees/directors and each of their respective affiliates and
advisers who require access to this information to fulfill their duties to the
fund and are subject to the duties of confidentiality, including the duty not
to trade on non-public information, imposed by law or contract, or by 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, to shareholders in connection with in-kind
redemptions or, in connection with investing in underlying funds, subadvisors
to DWS funds of funds (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 Deutsche Asset & Wealth Management 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 Deutsche
Asset & Wealth Management or a subadvisor for the purpose of facilitating
efficient trading
II-38
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 Deutsche Asset & Wealth
Management may be subject to different portfolio holdings disclosure policies,
and neither Deutsche Asset & Wealth Management nor the Board exercise control
over such policies. In addition, separate account clients of Deutsche Asset &
Wealth Management 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 Deutsche Asset & Wealth Management and some of
the separate accounts managed by Deutsche Asset & Wealth Management may
substantially overlap with the portfolio holdings of a fund.
Deutsche Asset & Wealth Management 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, Deutsche Asset & Wealth Management 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 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 shall be valued based
on information obtained from an approved pricing agent, or if such information
is not available, the money market instruments shall be valued using the
average of the most recent reliable bid quotations or evaluated prices obtained
from two or more broker-dealers. 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
II-39
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 two 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 a price supplied by an approved pricing
agent, if available, and otherwise 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 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 FUNDS THAT INVEST IN UNDERLYING MUTUAL
FUNDS. The net asset value of each underlying DWS mutual 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 mutual fund. Shares
of each underlying DWS mutual fund in which the fund may invest are valued at
the net asset value per share of each underlying DWS mutual 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 mutual funds will
be calculated and reported to the fund by each underlying DWS mutual 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 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
II-40
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, CASH RESERVES FUND-INSTITUTIONAL AND PRIME SERIES OF CASH
RESERVE FUND, INC. AND DWS VARIABLE NAV MONEY FUND. 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 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 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.
II-41
THE FOLLOWING PARAGRAPH APPLIES TO DWS VARIABLE NAV MONEY FUND ONLY. The net
asset value of shares of the fund is generally calculated on each day the New
York Stock Exchange is open for trading, as described in the fund's
prospectuses. Pursuant to Board approved valuation procedures, the fund
generally values its portfolio instruments using information furnished by an
independent pricing service or market quotations. Interactive Data Corporation
serves as the primary independent pricing service for the fund. In accordance
with Board approved procedures, in the event pricing service information or
market quotations are not readily available for certain portfolio assets, or
when the value of certain portfolio assets is believed to have been materially
affected by a significant event, the fair value of such portfolio assets will
be determined by the fund's Pricing Committee (or, in some cases, the Board's
Valuation Committee). In accordance with its procedures, the fund will
typically value newly acquired securities at amortized cost on date of
acquisition, and thereafter using information furnished by an independent
pricing service.
APPLICABLE TO THE FOLLOWING MONEY MARKET FUNDS (EACH, A FUND): DWS MONEY MARKET
SERIES, CASH MANAGEMENT FUND, CASH RESERVES FUND INSTITUTIONAL AND PRIME SERIES
OF CASH RESERVE FUND, INC. 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-42
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 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 OBLIGATION RATINGS
Moody's long-term ratings are forward-looking opinions of the relative credit
risks of financial obligations with an original maturity of one year or more.
They address the possibility that a financial obligation will not be honored as
promised. Such ratings use Moody's Global Scale and reflect both the likelihood
of default and any financial loss suffered in the event of default.
AAA Obligations rated Aaa are judged to be of the highest quality, subject to
the lowest level of credit risk.
AA Obligations rated Aa are judged to be of high quality and are subject to
very low credit risk.
A Obligations rated A are judged to be upper-medium grade and are subject to
low credit risk.
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BAA Obligations rated Baa are judged to be medium-grade and subject to moderate
credit risk and as such may possess certain speculative characteristics.
BA Obligations rated Ba are judged to be speculative and are subject to
substantial credit risk.
B Obligations rated B are considered speculative and are subject to high credit
risk.
CAA Obligations rated Caa are judged to be speculative of poor standing and are
subject to very high credit risk.
CA Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.
C Obligations rated C are the lowest rated and are typically in default, with
little prospect for recovery of principal or interest.
NOTE: Moody's appends 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 that generic rating category. Additionally, a ("hyb") indicator is
appended to all ratings of hybrid securities issued by banks, insurers, finance
companies, and securities firms.
By their terms, hybrid securities allow for the omission of scheduled
dividends, interest, or principal payments, which can potentially result in
impairment if such an omission occurs. Hybrid securities may also be subject to
contractually allowable write-downs of principal that could result in
impairment. Together with the hybrid indicator, the long-term obligation rating
assigned to a hybrid security is an expression of the relative credit risk
associated with that security.
MOODY'S INVESTORS SERVICE, INC.'S SHORT-TERM OBLIGATION RATINGS
Moody's short-term ratings are forward-looking opinions of the ability of
issuers to honor short-term financial obligations. Ratings may be assigned to
issuers, short-term programs or to individual short-term debt instruments. Such
obligations generally have an original maturity not exceeding thirteen months,
unless explicitly noted.
Moody's employs the following designations to indicate the relative repayment
ability of rated issuers:
P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability
to repay short-term debt obligations.
P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to
repay short-term debt obligations.
P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable
ability to repay short-term obligations.
NP Issuers (or supporting institutions) rated Not Prime do not fall within any
of the Prime rating categories.
MOODY'S INVESTORS SERVICE, INC.'S US MUNICIPAL SHORT-TERM DEBT AND DEMAND
OBLIGATION RATINGS
SHORT-TERM OBLIGATION RATINGS
There are three rating categories for short-term municipal obligations that are
considered investment grade. These ratings are designated as Municipal
Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are
designated SG, or speculative grade. MIG ratings expire at the maturity of the
obligation.
MIG 1 This designation denotes superior credit quality. Excellent protection is
afforded by established cash flows, highly reliable liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG 2 This designation denotes strong credit quality. Margins of protection are
ample, although not as large as in the preceding group.
MIG 3 This designation denotes acceptable credit quality. Liquidity and
cash-flow protection may be narrow, and market access for refinancing is likely
to be less well-established.
SG This designation denotes speculative-grade credit quality. Debt instruments
in this category may lack sufficient margins of protection.
DEMAND OBLIGATION RATINGS
In the case of variable rate demand obligations (VRDOs), a two-component rating
is assigned: a long or short-term debt rating and a demand obligation rating.
The first element represents Moody's evaluation of risk associated with
scheduled principal and interest payments. The second element represents
Moody's evaluation of risk associated with the ability to receive purchase
price upon
II-44
demand ("demand feature"). The second element uses a rating from a variation of
the MIG scale called the Variable Municipal Investment Grade (VMIG) scale.
The rating transitions on the VMIG scale differ from those on the Prime scale
to reflect the risk that external liquidity support generally will terminate if
the issuer's long-term ratings drops below investment grade.
VMIG 1 This designation denotes superior credit quality. Excellent protection
is afforded by the superior short-term credit strength of the liquidity
provider and structural and legal protections that ensure the timely payment of
purchase price upon demand.
VMIG 2 This designation denotes strong credit quality. Good protection is
afforded by the strong short-term credit strength of the liquidity provider and
structural and legal protections that ensure the timely payment of purchase
price upon demand.
VMIG 3 This designation denotes acceptable credit quality. Adequate protection
is afforded by the satisfactory short-term credit strength of the liquidity
provider and structural and legal protections that ensure the timely payment of
purchase price upon demand.
SG This designation denotes speculative-grade credit quality. Demand features
rated in this category may be supported by a liquidity provider that does not
have an investment grade short-term rating or may lack the structural and/or
legal protections necessary to ensure the timely payment of purchase price upon
demand.
STANDARD & POOR'S RATINGS SERVICES LONG-TERM ISSUE CREDIT RATINGS
INVESTMENT GRADE
AAA An obligation rated 'AAA' has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA An obligation rated 'AA' differs from the highest-rated obligations only to
a small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated 'A' is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet its financial commitment on the
obligation.
SPECULATIVE GRADE
Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the lowest degree of
speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB An obligation rated 'BB' is less vulnerable 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 the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated 'B' is more vulnerable to nonpayment than obligations
rated 'BB', but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC An obligation rated 'CCC' 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. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated 'CC' is currently highly vulnerable to nonpayment. The
'CC' rating is used when a default has not yet occurred, but Standard & Poor's
expects default to be a virtual certainty, regardless of the anticipated time
to default.
C An obligation rated 'C' is currently highly vulnerable to nonpayment, and the
obligation is expected to have lower relative seniority or lower ultimate
recovery compared to obligations that are rated higher.
D An obligation rated 'D' is in default or in breach of an imputed promise. For
non-hybird capital instruments, the 'D' rating category is used when payments
on an obligation are not made on the date due, unless Standard & Poor's
believes that such payments will be made within
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five business days in the absence of a stated grace period or within the
earlier of the stated grace period or 30 calendar days. The 'D' rating also
will be used upon the filing of a bankruptcy petition or the taking of similar
action and where default on an obligation is a virtual certainty, for example
due to automatic stay provisions. An obligation's rating is lowered to 'D' if
it is subject to a distressed exchange offer.
NR This indicates that no rating has been requested, or that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.
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.
STANDARD & POOR'S RATINGS SERVICES SHORT-TERM ISSUE CREDIT RATINGS
A-1 A short-term obligation rated 'A-1' is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated 'A-2' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated 'A-3' exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
B A short-term obligation rated 'B' is regarded as vulnerable and has
significant speculative characteristics. The obligor currently has the capacity
to meet its financial commitments; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitments.
C A short-term obligation rated 'C' is currently vulnerable to nonpayment and
is dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation.
D A short-term obligation rated 'D' is in default or in breach of an imputed
promise. For non-hybird capital instruments, the 'D' rating category is used
when payments on an obligation are not made on the date due, unless Standard &
Poor's believes that such payments will be made within any stated grace period.
However, any stated grace period longer than five business days will be treated
as five business days. The 'D' rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action and where default on an
obligation is a virtual certainty, for example due to automatic stay
provisions. An obligation's rating is lowered to 'D' if it is subject to a
distressed exchange offer.
SPUR (STANDARD & POOR'S UNDERLYING RATING) A SPUR rating is an opinion about
the stand-alone capacity of an obligor to pay debt service on a credit-enhanced
debt issue, without giving effect to the enhancement that applies to it. These
ratings are published only at the request of the debt issuer/obligor with the
designation SPUR to distinguish them from the credit-enhanced rating that
applies to the debt issue. Standard & Poor's maintains surveillance of an issue
with a published SPUR.
STANDARD & POOR'S RATINGS SERVICES MUNICIPAL SHORT-TERM NOTE RATINGS
DEFINITIONS
A Standard & Poor's U.S. municipal note rating reflects Standard & Poor's
opinion about the liquidity factors and market access risks unique to the
notes. Notes due in three years or less will likely receive a note rating.
Notes with an original maturity of more than three years will most likely
receive a long-term debt rating. In determining which type of rating, if any,
to assign, Standard & Poor's analysis will review the following considerations:
o Amortization schedule - the larger the final maturity relative to other
maturities, the more likely it will be treated as a note; and
o Source of payment - the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.
Note rating symbols are as follows:
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
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SP-3 Speculative capacity to pay principal and interest.
DUAL RATINGS
Standard & Poor's may assign "dual" ratings to all debt issues that have a put
option or demand feature as part of their structure. The first component of the
rating addresses the likelihood of repayment of principal and interest as due,
and the second component of the rating addresses only the demand feature. The
first component of the rating can relate to either a short-term or long-term
transaction and accordingly use either short-term or long-term rating symbols.
The second component of the rating relates to the put option and is assigned a
short-term rating symbol (for example, 'AAA-1+' or 'A-1+/A-1'). With U.S.
municipal short-term demand debt, the U.S. municipal short-term note rating
symbols are used for the first component of the rating (for example,
'SP-1+/A-1+').
STANDARD & POOR'S DIVIDEND RANKINGS FOR COMMON STOCKS
Standard & Poor's has provided Earnings and Dividend Rankings, commonly
referred to as Quality Rankings, on common stocks since 1956. Quality Rankings
reflect the long-term growth and stability of a company's earnings and
dividends.
The Quality Rankings System attempts to capture the growth and stability of
earnings and dividends record in a single symbol. In assessing Quality
Rankings, Standard & Poor's recognizes that earnings and dividend performance
is the end result of the interplay of various factors such as products and
industry position, corporate resources and financial policy. Over the long run,
the record of earnings and dividend performance has a considerable bearing on
the relative quality of stocks.
The rankings, however, do not profess to reflect all of the factors, tangible
or intangible, that bear on stock quality.
The rankings are generated by a computerized system and are based on per-share
earnings and dividend records of the most recent 10 years - a period long
enough to measure significant secular growth, capture indications of basic
change in trend as they develop, encompass the full peak-to-peak range of the
business cycle, and include a bull and a bear market. Basic scores are computed
for earnings and dividends, and then adjusted as indicated by a set of
predetermined modifiers for change in the rate of growth, stability within
long-term trends, and cyclicality. Adjusted scores for earnings and dividends
are then combined to yield a final ranking.
The ranking system makes allowance for the fact that corporate size generally
imparts certain advantages from an investment standpoint. Conversely, minimum
size limits (in sales volume) are set for the various rankings. However, the
system provides for making exceptions where the score reflects an outstanding
earnings and dividend record. The following table shows the letter
classifications and brief descriptions of Quality Rankings.
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower LIQ Liquidation
|
The ranking system grants some exceptions to the pure quantitative ranking.
Thus, if a company has not paid any dividend over the past 10 years, it is very
unlikely that it will rank higher than A-. In addition, companies may receive a
bonus score based on their sales volume. If a company omits a dividend on
preferred stock, it will receive a rank of no better than C that year. If a
company pays a dividend on the common stock, it is highly unlikely that the
rank will be below B-, even if it has incurred losses. In addition, if a
company files for bankruptcy, the model's rank is automatically changed to D.
FITCH RATINGS LONG-TERM RATING SCALES
INVESTMENT GRADE
AAA: Highest credit quality. `AAA' ratings denote the lowest expectation of
default risk. They are assigned only in cases of exceptionally strong capacity
for payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA: Very high credit quality. `AA' ratings denote expectations of very low
default risk. They indicate very strong capacity for payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A: High credit quality. `A' ratings denote expectations of low default risk.
The capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to adverse business or economic
conditions than is the case for higher ratings.
BBB: Good credit quality. `BBB' ratings indicate that expectations of default
risk are currently low. The capacity for payment of financial commitments is
considered adequate but adverse business or economic conditions are more likely
to impair this capacity.
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SPECULATIVE GRADE
BB: Speculative. `BB' ratings indicate an elevated vulnerability to default
risk, particularly in the event of adverse changes in business or economic
conditions over time; however, business or financial flexibility exists which
supports the servicing of financial commitments.
B: Highly speculative. `B' ratings indicate that material default risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is vulnerable to
deterioration in the business and economic environment.
CCC: Substantial credit risk. Default is a real possibility.
CC: Very high levels of credit risk. Default of some kind appears probable.
C: Exceptionally high levels of credit risk. Default is imminent or inevitable,
or the issuer is in standstill. Conditions that are indicative of a `C'
category rating for an issuer include:
a. the issuer has entered into a grace or cure period following non-payment of
a material financial obligation;
b. the issuer has entered into a temporary negotiated waiver or standstill
agreement following a payment default on a material financial obligation; or
c. Fitch Ratings otherwise believes a condition of `RD' or `D' to be imminent
or inevitable, including through the formal announcement of a distressed debt
exchange.
RD: Restricted default. `RD' ratings indicate an issuer that in Fitch Ratings'
opinion has experienced an uncured payment default on a bond, loan or other
material financial obligation but which has not entered into bankruptcy
filings, administration, receivership, liquidation or other formal winding-up
procedure, and which has not otherwise ceased operating. This would include:
a. the selective payment default on a specific class or currency of debt;
b. the uncured expiry of any applicable grace period, cure period or default
forbearance period following a payment default on a bank loan, capital markets
security or other material financial obligation;
c. the extension of multiple waivers or forbearance periods upon a payment
default on one or more material financial obligations, either in series or in
parallel; or
d. execution of a distressed debt exchange on one or more material financial
obligations.
D: Default. `D' ratings indicate an issuer that in Fitch Ratings' opinion has
entered into bankruptcy filings, administration, receivership, liquidation or
other formal winding-up procedure, or which has otherwise ceased business.
Default ratings are not assigned prospectively to entities or their
obligations; within this context, non-payment on an instrument that contains a
deferral feature or grace period will generally not be considered a default
until after the expiration of the deferral or grace period, unless a default is
otherwise driven by bankruptcy or other similar circumstance, or by a
distressed debt exchange.
"Imminent" default typically refers to the occasion where a payment default has
been intimated by the issuer, and is all but inevitable. This may, for example,
be where an issuer has missed a scheduled payment, but (as is typical) has a
grace period during which it may cure the payment default. Another alternative
would be where an issuer has formally announced a distressed debt exchange, but
the date of the exchange still lies several days or weeks in the immediate
future.
In all cases, the assignment of a default rating reflects the agency's opinion
as to the most appropriate rating category consistent with the rest of its
universe of ratings, and may differ from the definition of default under the
terms of an issuer's financial obligations or local commercial practice.
NOTE: The modifiers "+" or "-" may be appended to a rating to denote relative
status within major rating categories. Such suffixes are not added to the `AAA'
Long-Term IDR category, or to Long-Term IDR categories below `B'.
FITCH RATINGS SHORT-TERM RATINGS
F1: Highest short-term credit quality. Indicates the strongest intrinsic
capacity for timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F2: Good short-term credit quality. Good intrinsic capacity for timely payment
of financial commitments.
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F3: Fair short-term credit quality. The intrinsic capacity for timely payment
of financial commitments is adequate.
B: Speculative short-term credit quality. Minimal capacity for timely payment
of financial commitments, plus heightened vulnerability to near term adverse
changes in financial and economic conditions.
C: High short-term default risk. Default is a real possibility.
RD: Restricted default. Indicates an entity that has defaulted on one or more
of its financial commitments, although it continues to meet other financial
obligations. Typically applicable to entity ratings only.
D: Default. Indicates a broad-based default event for an entity, or the default
of a short-term obligation.
FITCH RATINGS MUNICIPAL SHORT-TERM RATINGS
The highest ratings for state and municipal short-term obligations are "F-1+,"
"F-1," and "F-2."
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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 Kenneth C. Froewiss, Chairman, DWS
Mutual Funds, P.O. Box 78, Short Hills, NJ 07078. 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
NAME, YEAR OF BIRTH,
POSITION NUMBER OF
WITH THE TRUST/CORPORATION FUNDS IN DWS
AND LENGTH OF TIME BUSINESS EXPERIENCE AND FUND COMPLEX OTHER DIRECTORSHIPS
SERVED/(1)/ DIRECTORSHIPS DURING THE PAST 5 YEARS OVERSEEN HELD BY BOARD MEMBER
Kenneth C. Froewiss (1945) Adjunct Professor of Finance, NYU Stern 103 _
Chairperson since 2013/(8)/, School of Business (September 2009-
and Board Member since present; Clinical Professor from 1997-
2001 September 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)
William McClayton (1944) Private equity investor (since October 2009); 103 _
Vice Chairperson since previously: Managing Director, Diamond
2013/(8)/, and Board Member Management & Technology Consultants, Inc.
since 2004 (global consulting firm) (2001-2009);
Directorship: Board of Managers, YMCA of
Metropolitan Chicago; formerly: Senior
Partner, Arthur Andersen LLP (accounting)
(1966-2001); Trustee, Ravinia Festival
John W. Ballantine (1946) Retired; formerly: Executive Vice President 103 Chairman of the Board,
Board Member since 1999 and Chief Risk Management Officer, First Healthways Inc./(2)/ (provider
Chicago NBD Corporation/The First National of disease and care
Bank of Chicago (1996-1998); Executive Vice management services) (2003-
President and Head of International Banking present); Portland General
(1995-1996); former Directorships: Stockwell Electric/(2)/ (utility company)
Capital Investments PLC (private equity); (2003-present)
First Oak Brook Bancshares, Inc. and Oak
Brook Bank; Prisma Energy International
Henry P. Becton, Jr. (1943) Vice Chair and former President, WGBH 103 Lead Director, Becton
Board Member since 1990 Educational Foundation; Directorships: Public Dickinson and Company/(2)/
Radio International; Public Radio Exchange (medical technology
(PRX); North Bennett Street School (Boston); company); Lead Director, Belo
former Directorships: The PBS Foundation; Corporation/(2)/ (media
Association of Public Television Stations; company)
Boston Museum of Science; American
Public Television; Concord Academy; New
England Aquarium; Mass. Corporation for
Educational Telecommunications; Committee
for Economic Development; Public
Broadcasting Service; Connecticut College
|
II-50
NAME, YEAR OF BIRTH,
POSITION NUMBER OF
WITH THE TRUST/CORPORATION FUNDS IN DWS
AND LENGTH OF TIME BUSINESS EXPERIENCE AND FUND COMPLEX OTHER DIRECTORSHIPS
SERVED/(1)/ DIRECTORSHIPS DURING THE PAST 5 YEARS OVERSEEN HELD BY BOARD MEMBER
Dawn-Marie Driscoll (1946) President, Driscoll Associates (consulting 103 _
Board Member since 1987 firm); Emeritus Executive Fellow, Center for
Business Ethics, Bentley University;
formerly: Partner, Palmer & Dodge (1988-
1990); Vice President of Corporate Affairs
and General Counsel, Filene's (1978-1988);
Directorships: Director of ICI Mutual
Insurance Company (since 2007); Advisory
Board, Center for Business Ethics, Bentley
University; Chairman of the Board of
Trustees, Southwest Florida Community
Foundation (charitable organization); former
Directorships: Sun Capital Advisers Trust
(mutual funds) (2007-2012); Investment
Company Institute (audit, executive,
nominating committees) and Independent
Directors Council (governance, executive
committees)
Keith R. Fox, CFA (1954) Managing General Partner, Exeter Capital 103 _
Board Member since 1996 Partners (a series of private investment
funds) (since 1986); Directorships:
Progressive International Corporation
(kitchen goods importer and distributor); The
Kennel Shop (retailer); former Chairman,
National Association of Small Business
Investment Companies; former
Directorships: BoxTop Media Inc.
(advertising); Sun Capital Advisers Trust
(mutual funds) (2011-2012)
Paul K. Freeman (1950) Consultant, World Bank/Inter-American 103 _
Board Member since 1993, Development Bank; Executive and Governing
and Chairperson (2009 - Jan. Council of the Independent Directors Council
8, 2013) (Chairman of Education Committee);
formerly: Project Leader, International
Institute for Applied Systems Analysis (1998-
2001); Chief Executive Officer, The Eric
Group, Inc. (environmental insurance) (1986-
1998); Directorships: Denver Zoo Foundation
(December 2012-present); former
Directorships: Prisma Energy International
Richard J. Herring (1946) Jacob Safra Professor of International 103 Director, Japan Equity Fund,
Board Member since 1990 Banking and Professor, Finance Department, Inc. (since September 2007),
The Wharton School, University of Thai Capital Fund, Inc. (since
Pennsylvania (since July 1972); Co-Director, 2007), Singapore Fund, Inc.
Wharton Financial Institutions Center (since (since September 2007),
July 2000); Co-Chair, U.S. Shadow Financial Independent Director of
Regulatory Committee; Executive Director, Barclays Bank Delaware
Financial Economists Roundtable; formerly: (since September 2010)
Vice Dean and Director, Wharton
Undergraduate Division (July 1995-June
2000); Director, Lauder Institute of
International Management Studies (July
2000-June 2006)
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II-51
NAME, YEAR OF BIRTH,
POSITION NUMBER OF
WITH THE TRUST/CORPORATION FUNDS IN DWS
AND LENGTH OF TIME BUSINESS EXPERIENCE AND FUND COMPLEX OTHER DIRECTORSHIPS
SERVED/(1)/ DIRECTORSHIPS DURING THE PAST 5 YEARS OVERSEEN HELD BY BOARD MEMBER
Rebecca W. Rimel (1951) President and Chief Executive Officer, The 103 Director, Becton Dickinson
Board Member since 1995 Pew Charitable Trusts (charitable and Company/(2)/ (medical
organization) (1994 to present); formerly: technology company) (2012-
Executive Vice President, The Glenmede present); Director, CardioNet,
Trust Company (investment trust and wealth Inc./(2)/ (healthcare) (2009-
management) (1983-2004); Board Member, present)
Investor Education (charitable organization)
(2004-2005); Trustee, Executive Committee,
Philadelphia Chamber of Commerce (2001-
2007); Director, Viasys Health Care/(2)/
(January 2007-June 2007); Trustee, Thomas
Jefferson Foundation (charitable organization)
(1994 to 2012)
William N. Searcy, Jr. (1946) Private investor since October 2003; 103 _
Board Member since 1993 formerly: Pension & Savings Trust Officer,
Sprint Corporation/(2)/ (telecommunications)
(November 1989-September 2003); Trustee,
Sun Capital Advisers Trust (mutual funds)
(1998-2012)
Jean Gleason Retired; formerly: Consultant (1997-2001); 103 _
Stromberg(1943) Director, Financial Markets US Government
Board Member since 1997 Accountability Office (1996-1997); Partner,
Fulbright & Jaworski, L.L.P. (law firm) (1978-
1996); Directorships: The William and Flora
Hewlett Foundation; 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 & 106 _
Board Member since 1999 Associates, Inc. (consulting firm) (1983 to
present); Director, National Horizon, Inc.
(non-profit organization); Director and
Treasurer, The Phoenix Boys Choir
Association
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OFFICERS/(4)/
NAME, YEAR OF BIRTH, POSITION
WITH THE TRUST/CORPORATION BUSINESS EXPERIENCE AND
AND LENGTH OF TIME SERVED/(5)/ DIRECTORSHIPS DURING THE PAST 5 YEARS
Brian E. Binder/(9)(10)/ (1972) Managing Director/(3)/ and Head of Fund Administration, Deutsche Asset & Wealth
President and Chief Executive Management (2013-present); formerly: Head of Business Management and Consulting
Officer, 2013-present at Invesco, Ltd. (2010-2012); Chief Administrative Officer, Van Kampen Funds Inc.
(2008-2010); and Chief Administrative Officer, Morgan Stanley Investment
Management Americas Distribution (2003-2008)
John Millette/(7)/ (1962) Director/(3)/, Deutsche Asset & Wealth Management
Vice President and Secretary,
1999-present
Paul H. Schubert/(6)/ (1963) Managing Director/(3)/, Deutsche Asset & Wealth Management (since July 2004);
Chief Financial Officer, 2004- formerly: Executive Director, Head of Mutual Fund Services and Treasurer for UBS
present Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at
Treasurer, 2005-present UBS Global Asset Management (1994-1998)
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II-52
NAME, YEAR OF BIRTH, POSITION
WITH THE TRUST/CORPORATION BUSINESS EXPERIENCE AND
AND LENGTH OF TIME SERVED/(5)/ DIRECTORSHIPS DURING THE PAST 5 YEARS
Caroline Pearson/(7)/ (1962) Managing Director/(3)/, Deutsche Asset & Wealth Management; formerly: Assistant
Chief Legal Officer, 2010- Secretary for DWS family of funds (1997-2010)
present
Melinda Morrow/(6)/ (1970) Director/(3)/, Deutsche Asset & Wealth Management
Vice President, 2012-present
Hepsen Uzcan/(7)/ (1974) Vice President, Deutsche Asset & Wealth Management
Assistant Secretary, 2013-
present
Paul Antosca/(7) /(1957) Director/(3)/, Deutsche Asset & Wealth Management
Assistant Treasurer, 2007-
present
Jack Clark /(7)/ (1967) Director/(3)/, Deutsche Asset & Wealth Management
Assistant Treasurer, 2007-
present
Diane Kenneally/(7)/ (1966) Director/(3)/, Deutsche Asset & Wealth Management
Assistant Treasurer, 2007-
present
John Caruso/(6)/ (1965) Managing Director/(3)/, Deutsche Asset & Wealth Management
Anti-Money Laundering
Compliance Officer, 2010-
present
Robert Kloby/(6)/ (1962) Managing Director/(3)/, Deutsche Asset & Wealth Management
Chief Compliance Officer,
2006-present
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/(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: 60 Wall Street, New York, New York 10005.
/(7)/ Address: One Beacon Street, Boston, Massachusetts 02108.
/(8)/ Effective as of January 9, 2013.
/(9)/ Address: 222 South Riverside Plaza, Chicago, Illinois 60606.
/(10)/ Effective as of December 1, 2013.
Certain officers hold similar positions for other investment companies for
which DIMA or an affiliate serves as the Advisor.
OFFICER'S ROLE WITH PRINCIPAL UNDERWRITER: DWS INVESTMENTS DISTRIBUTORS, INC.
Paul H. Schubert: Vice President
Caroline Pearson: Secretary
John Caruso: AML Compliance Officer
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BOARD MEMBER QUALIFICATIONS
The Nominating and Governance Committee is responsible for recommending
proposed nominees for election to the full Board for its approval. In
recommending the election of the current Board Members, the Committee generally
considered the educational, business and professional experience of each Board
Member in determining his or her qualifications to serve as a Board Member,
including the Board Member's record of service as a director or trustee of
public and private organizations. In the case of most Board Members, this
included their many years of previous service as a trustee of certain of the
DWS funds. This previous service has provided these Board Members with a
II-53
valuable understanding of the history of the DWS funds and the DIMA
organization and has also served to demonstrate their high level of diligence
and commitment to the interests of fund shareholders and their ability to work
effectively and collegially with other members of the Board. The Committee also
considered, among other factors, the particular attributes described below with
respect to the various individual Board Members:
John W. Ballantine - Mr. Ballantine's experience in banking, financial risk
management and investments acquired in the course of his service as a senior
executive of a major US bank.
Henry P. Becton, Jr. - Mr. Becton's professional training and experience as an
attorney, his experience as the chief executive officer of a major public media
company and his experience as lead director of two NYSE companies, including
his service at various times as the chair of the audit, compensation and
nominating committees of one or both of such boards.
Dawn-Marie Driscoll - Ms. Driscoll's professional training and experience as an
attorney, her expertise as a consultant, professor and author on the subject of
business ethics, her service as a member of the executive committee of the
Independent Directors Council of the Investment Company Institute and her
experience as a director of an insurance company serving the mutual fund
industry.
Keith R. Fox - Mr. Fox's experience as the chairman and a director of various
private operating companies and investment partnerships and his experience as a
director and audit committee member of several public companies. In addition,
he holds the Chartered Financial Analyst designation.
Paul K. Freeman - Dr. Freeman's professional training and experience as an
attorney and an economist, his experience as the founder and chief executive
officer of an insurance company, his experience as a senior executive and
consultant for various companies focusing on matters relating to risk
management and his service on the Independent Directors Council of the
Investment Company Institute.
Kenneth C. Froewiss - Dr. Froewiss' professional training and experience as an
economist, his experience in finance acquired in various professional positions
with governmental and private banking organizations and his experience as a
professor of finance at a leading business school.
Richard J. Herring - Mr. Herring's experience as a professor of finance at a
leading business school and his service as an advisor to various professional
and governmental organizations.
William McClayton - Mr. McClayton's professional training and experience in
public accounting, including his service as a senior partner of a major public
accounting firm focusing on financial markets companies and his service as a
senior executive of a public management consulting firm.
Rebecca W. Rimel - Ms. Rimel's experience on a broad range of public policy
issues acquired during her service as the executive director of a major
foundation and her experience as a director of several public companies.
William N. Searcy, Jr. - Mr. Searcy's experience as an investment officer for
various major public company retirement plans, which included evaluation of
unaffiliated investment advisers and supervision of various administrative and
accounting functions.
Jean Gleason Stromberg - Ms. Stromberg's professional training and experience
as an attorney specializing in federal securities law, her service in a senior
position with the Securities and Exchange Commission and the US Government
Accountability Office and her experience as a director and audit committee
member of several major non-profit organizations.
Robert H. Wadsworth - Mr. Wadsworth's experience as an owner and chief
executive officer of various businesses serving the mutual fund industry,
including a registered broker-dealer and a registered transfer agent, and his
previous service as a director and/or senior executive officer of several
mutual funds.
II-54
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 paid on a Total Compensation basis, which includes: (i)
fixed pay (base salary), which is linked to job function, responsibilities and
internal and external peer comparison, and (ii) variable compensation, which is
linked to investment performance, individual contribution, and the overall
financial results of both Deutsche Asset & Wealth Management and Deutsche Bank
AG. Variable compensation can be delivered via a short-term and/or long-term
vehicle, namely cash, restricted equity awards, and/or restricted incentive
awards. Additionally, to better align the interests of investors and portfolio
managers, a portion of the long-term variable compensation that portfolio
managers receive will be designated for investment in shares of the funds they
manage. Variable compensation comprises a greater proportion of total
compensation as a portfolio manager's seniority and total compensation level
increase. The proportion of variable compensation delivered via a long-term
incentive award, which is subject to clawback, increases significantly as the
amount of variable compensation increases. All variable compensation delivered
via long-term incentive award is subject to clawback.
To evaluate its investment professionals, Deutsche Asset & Wealth Management
reviews investment performance for all accounts managed in relation to both
account peer group and benchmark related data (i.e., appropriate Morningstar
peer group universes and/or benchmark index(es) with respect to each account).
The ultimate goal of this process is to evaluate the degree to which investment
professionals deliver investment performance that meets or exceeds their
clients' risk and return objectives. When determining Total Compensation,
Deutsche Asset & Wealth Management considers a number of quantitative and
qualitative factors:
o Quantitative measures (e.g. one-, three- and five-year pre-tax returns
versus the benchmark and appropriate peer group, taking risk targets into
account) are utilized to measure performance.
o Qualitative measures (e.g. adherence to, as well as contributions to, the
enhancement of the investment process) are included in the performance
review.
o Other factors (e.g. non-investment related performance, teamwork, adherence
to compliance rules, risk management and 'living the values" of Deutsche
Asset & Wealth Management) are included as part of a discretionary
component of the review process, giving management the ability to consider
additional markers of performance on a subjective basis.
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:
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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 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.
II-56
FOR FUNDS ADVISED BY DREMAN
COMPENSATION
The Funds have been advised that Dreman has implemented a compensation plan
that is designed to attract and retain experienced and exceptional
professionals. Dreman has a competitive compensation plan made up of a fixed
salary component, a variable bonus component, and comprehensive benefits. A
profit sharing plan and ownership in the firm is currently offered to the
Dreman partners. The variable bonus allows Dreman to compensate its investment
professionals based on results, which aligns their interests directly with
their clients' interests.
Base salaries are a factor of job function. Dreman offers competitive pay by
many measures, including compensation surveys compiled for the asset management
industry and the broader financial services industry in the New York City area.
Variable bonuses, which are based on performance, may include cash and/or the
possibility of stock grants. There are many measures of performance. For
Portfolio Managers and associate Portfolio Managers, success is defined largely
by their ability to generate superior investment results for Dreman's clients
relative to their benchmarks, peer group and client objectives.
CONFLICTS
Dreman manages its clients' accounts using a contrarian value investment
strategy. For most of its investment strategies, Dreman uses a model portfolio
and rebalances its clients' accounts whenever changes are made to the model
portfolio. In addition, to the extent practicable Dreman aggregates its trades
and allocates them to client accounts in an equitable manner. Dreman strongly
believes that aggregating its trade orders protects all clients from being
disadvantaged by price or time of execution. The model portfolio approach and
the trade aggregation policy of Dreman seek to eliminate 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. Dreman does not
receive any performance-based fees from any of its accounts.
Dreman investment professionals are compensated in the same manner for all
client accounts irrespective of the type of account.
FOR FUNDS ADVISED BY FISCHER FRANCIS TREES & WATTS, INC. (FFTW)
COMPENSATION
FFTW aims to provide all staff with total compensation packages that are
competitive with the applicable local market. Aside from creating a positive
and supportive work environment, FFTW fully appreciates the need for financial
incentives to retain key individuals. Bonus allocations are based primarily on
quantitative parameters, specifically portfolio performance and asset growth -
and to a lesser extent on qualitative factors that include teamwork,
contribution to other portfolio teams, client service support, etc. The general
aim is to provide staff with total compensation packages that are competitive
with applicable markets across all functional areas.
In a typical year, FFTW would expect total compensation to be comprised of a
40% base salary and a 60% performance bonus. Major drivers of the performance
bonus are FFTW's business results and the individual's contribution to
achieving his or her team results. For retention purposes, a portion of the
cash bonus above a certain threshold is deferred over a three year period, with
50% of the ultimate payout tied to the performance of BNP Paribas stock (BNP
Paribas is the ultimate parent of FFTW). A second component of the bonus for
key investment professionals is a "top up" long term incentive plan that is
deferred over a three year period and is tied to the performance of BNP Paribas
Investment Partners, the global brand name for BNP Paribas' asset management
business (in effect, creating a phantom equity-like program). This creates an
overall compensation program that includes individual, FFTW, BNPP Investment
Partners and BNP Paribas performance components which FFTW believes aligns the
interests of all parties.
CONFLICTS
II-57
Conflicts of interest of the type that may arise when an investment adviser
serves as an adviser to both a mutual fund and to other segregated accounts are
minimized at FFTW by FFTW's investment management decision making process and
FFTW's trade allocation policy. FFTW's investment team is organized into teams
by product area. The teams are responsible for determining strategy for all
portfolios within their group. Views are debated and strategy is determined in
weekly strategy sessions. Strategy and positions are expressed in terms of risk
exposures relative to a benchmark which are then translated into portfolio
positions according to each client's benchmark and guideline parameters.
Every portfolio, including mutual fund portfolios, is assigned to a Portfolio
Manager within the relevant product area. The Portfolio Manager is responsible
for implementation of the product strategy in each portfolio, subject to
benchmark limitations and guideline parameters. The Portfolio Manager either
executes trades in the portfolio himself or delegates to another member of the
investment team who assumes responsibility for issue selection within that
sector. The process ensures that investment decisions for specific portfolios
are consistent with the strategy for the product area, taking into account the
individual portfolio's benchmark, risk parameters and investment guidelines.
In terms of setting a portfolio's risk parameters, these are established at the
portfolio's inception, based upon the client's investment guidelines and
overall risk preferences. The Portfolio Manager and the Client Portfolio
Manager monitor the portfolio's compliance with such parameters on an ongoing
basis, while ultimately the Compliance group assumes responsibility for
ensuring guideline compliance.
The process seeks to ensure that strategy is determined at the product level
and executed across all portfolios within that product grouping, subject only
to pre-determined risk parameters and to client guideline and benchmark
parameters.
In addition, FFTW executes trades on behalf of all similarly managed accounts
within a product group on a block basis. Block transactions are allocated
fairly and equitably across all participating accounts utilizing an automated,
non-preferential proprietary trade execution system that allocated the trades
according to each participating portfolio's size and pre-determined,
pre-programmed risk profiles. The automated allocation system seeks to ensure
that no managed account is favored with respect to the selection of securities
or timing of purchases or sales.
Trade allocation and best execution practices are monitored and reviewed on a
monthly basis as part of the Global Compliance Monitoring Program, which is
carried out independently by FFTW's Compliance group. This review takes into
consideration FFTW's trading procedures and the nature of the fixed income
markets. Trade execution prices, for a sampling of trades, are compared with an
independent source. An explanation is sought from the investment professional
in the event of significant variance between the trade execution price and the
price determined by the independent source. The variance is noted and is
included in a report issued to senior management on a quarterly basis. Any
deviations which occurred from FFTW's policy to allocate investment
opportunities fairly and equitably across all participating accounts, would be
identified during this review.
Finally, on an annual basis, the firm engages an independent auditor to perform
a SSAE 16 (formerly a SAS 70 Type II) review on the operating effectiveness of
the firm's internal controls.
FOR FUNDS ADVISED BY HENDERSON ALTERNATIVE INVESTMENT ADVISOR LIMITED
(HENDERSON)
COMPENSATION
Following is a summary of the compensation received by Henderson's investment
professionals for all accounts managed and not just for the Fund. Henderson's
investment professionals have significant short and long-term financial
incentives. In general, the compensation plan is based on:
o Pre-defined, objective, measurable investment performance
o Performance goals that are ambitious, but attainable
II-58
o The plan provides an incentive for appropriately aggressive portfolio
management to achieve maximum feasible results within the portfolio's risk
return parameters
The compensation structure consists of four primary elements. There is a
competitive base salary together with a short-term incentive bonus plan. In
addition, there are two further incentive-based packages for senior
international investment professionals that reward staff on both individual and
team performance, reflecting profitable asset growth. "Profitable asset growth"
refers to the increase in adviser revenues generated less the increase in
costs. It is typically calculated per adviser team on a calendar year basis.
Members of the relevant team receive a share of this growth, which is typically
paid over a three year period.
Some managers are granted an award in a long-term incentive program that is
based on several factors, including the profitability of Henderson Global
Investors. Additionally, some managers participate in the distribution of
performance-related fees if such funds are structured accordingly. Currently, a
fund does not charge performance-related fees.
A summary of the compensation package is as follows:
o Basic Salaries: in line with or better than the industry average
o Short Term Incentive Bonus (STI): the STI bonus is usually the majority of
the variable component, based largely on investment performance; for a
typical fund manager, it can vary between 50 percent and 150 percent of the
salary
o Growth Equity Bonus Plan (GEB): the GEB is based on a team's contribution to
a rise in profits, it is designed to reward profitable asset growth
o Long Term Incentive Plan: as described above
o Employee Share Plans: from year to year, managers may be able to invest part
of their remuneration in various share schemes which are then partially
matched by Henderson
Performance-related fees: for some funds, any performance related fee earned by
the firm is shared with individuals generating that performance. If a
performance-related fee applies, compensation is based solely on performance
and its terms are made public in the fund's relevant disclosure document (i.e.,
prospectus or offering memorandum). Performance-related fees may vary from fund
to fund but are typically measured over a one year period and compare the
fund's returns to either (i) a peer group, (ii) an index or (iii) an absolute
return.
CONFLICTS
Henderson seeks to foster a reputation for integrity and professionalism. That
reputation is a vital business asset. The confidence and trust placed in
Henderson by investors is something that is highly valued and must be
protected. As a result, any activity that creates any actual or potential
conflict of interest or even the appearance of any conflict of interest must be
avoided and is prohibited. A Code of Ethics has been adopted to seek to ensure
that those who have knowledge of portfolio transactions or other confidential
client information will not be able to act thereon to the disadvantage of
Henderson's clients. The Code of Ethics does not purport comprehensively to
cover all types of conduct or transactions which may be prohibited or regulated
by the laws and regulations applicable.
The portfolio manager responsible for managing a fund may currently or in the
future also manage one or more other accounts. Other than potential conflicts
between investment strategies, the side-by-side management of a fund and other
accounts may raise potential conflicts of interest due to certain trading
practices used by the portfolio manager (e.g. allocation of aggregated trades).
Henderson has policies and procedures reasonably designed to mitigate these
conflicts. The portfolio manager may advise certain accounts under a
performance fee arrangement. A performance fee arrangement may create an
incentive for the portfolio manager to make investments that are riskier or
more speculative than would be the case in the absence of performance fees.
II-59
FOR FUNDS ADVISED BY NORTHERN TRUST INVESTMENTS, INC. (NTI)
COMPENSATION
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 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 reasonably 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 FUNDS ADVISED BY PYRAMIS GLOBAL ADVISORS, LLC (PYRAMIS)
COMPENSATION
Portfolio managers receive compensation for their services. The portfolio
manager's compensation generally consists of a fixed base salary determined
periodically (typically annually), a bonus, in certain cases, participation in
several types of equity-based compensation plans, and, if applicable,
relocation plan benefits. A portion of the portfolio manager's compensation may
be deferred based on criteria established by Pyramis or at the election of the
portfolio manager.
The portfolio manager's base salary is determined by level of responsibility
and tenure at Pyramis, FMR (Pyramis' ultimate parent company) or its
affiliates. The primary components of the portfolio manager's bonus are based
on (i) the pre-tax investment performance of the portfolio manager's fund(s)
and account(s) measured against a benchmark index and within a defined peer
group assigned to each fund or account, if applicable and (ii) the investment
performance of other Pyramis equity accounts. The pre-tax investment
performance of the portfolio manager's fund(s) and account(s) is weighted
according to his tenure on those fund(s) and account(s) and the average asset
size of those fund(s) and account(s) over his tenure. Each component is
calculated separately over the portfolio manager's tenure on those fund(s) and
account(s) over a measurement period that initially is contemporaneous with his
tenure, but that eventually encompasses rolling periods of up to five years for
the comparison to a benchmark index and peer group, if applicable. A smaller,
subjective component of the portfolio manager's bonus is based on the portfolio
manager's overall contribution to and leadership within the Pyramis investment
platform. The portion of the portfolio manager's bonus that is linked to the
investment performance of the strategy is based on the pre-tax investment
performance of the strategy measured against a fund's benchmark, and the
pre-tax investment performance of the strategy within the peer group. The
portfolio manager also is compensated under equity-based compensation plans
linked to increases or decreases in the net
II-60
asset value of the stock of Pyramis Global Advisors Holdings Corp, the direct
parent company of Pyramis. If requested to relocate their primary residence,
portfolio managers also may be eligible to receive benefits, such as home sale
assistance and payment of certain moving expenses, under relocation plans for
most full-time employees of Pyramis and its affiliates.
CONFLICTS
The portfolio manager's compensation plan may give rise to potential conflicts
of interest. Although investors in a fund may invest through either
tax-deferred accounts or taxable accounts, the portfolio manager's compensation
is linked to the pre-tax performance of the fund, rather than its after-tax
performance. The portfolio manager's base pay tends to increase with additional
and more complex responsibilities that include increased assets under
management and a portion of the bonus relates to marketing efforts, which
together indirectly link compensation to sales. When a portfolio manager takes
over a fund or an account, the time period over which performance is measured
may be adjusted to provide a transition period in which to assess the
portfolio. The management of multiple funds and accounts (including proprietary
accounts) may give rise to potential conflicts of interest if the funds and
accounts have different objectives, benchmarks, time horizons, and fees as the
portfolio manager must allocate his time and investment ideas across multiple
funds and accounts. In addition, a fund's trade allocation policies and
procedures may give rise to conflicts of interest if the fund's orders do not
get fully executed due to being aggregated with those of other accounts managed
by Pyramis or an affiliate of Pyramis. The portfolio manager may execute
transactions for another fund or account that may adversely impact the value of
securities held by a fund. Securities selected for other funds or accounts may
outperform the securities selected for the fund. Portfolio managers may be
permitted to invest in the funds they manage, even if a fund is closed to new
investors. Trading in personal accounts, which may give rise to potential
conflicts of interest, is restricted by a fund's Code of Ethics.
II-61
PART II: APPENDIX II-C - FEE RATES OF SERVICE PROVIDERS
FEES PAYABLE TO DIMA FOR INVESTMENT MANAGEMENT SERVICES.
The management fee(s) for each fund, at the annual percentage rate of daily net
assets, are indicated below:
FUND NAME MANAGEMENT FEE RATE
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 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%
DWS Strategic High Yield Tax-Free Fund First $300 million 0.565%
Next $200 million 0.515%
Next $500 million 0.490%
Next $1 billion 0.470%
Thereafter 0.450%
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II-62
FUND NAME MANAGEMENT FEE RATE
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 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 Global High Income 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 Global Inflation 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 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 Short Duration 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%
|
II-63
FUND NAME MANAGEMENT FEE RATE
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%
DWS Ultra-Short Duration Fund First $500 million 0.400%
Next $500 million 0.385%
Next $1.0 billion 0.370%
Thereafter 0.355%
DWS Unconstrained 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%
Multi-Category/Asset Allocation Funds
DWS Alternative Asset Allocation Fund 0.200%/(1)/
DWS Global Income Builder 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 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 Select Alternative Allocation 0.00%/(1)/
Fund
DWS Target 2014 Fund 0.400 %
Value Funds
DWS Core Equity 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%
|
II-64
FUND NAME MANAGEMENT FEE RATE
DWS Diversified 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 Enhanced Commodity Strategy First $500 million 0.950%
Fund Next $500 million 0.900%
Next $500 million 0.850%
Thereafter 0.825%
DWS Equity Dividend 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%/(2)/
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 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%/(2)/
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%
DWS 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%/(2)/
Index-Related Funds
DWS EAFE (Reg. TM) Equity Index Fund 0.250 %
DWS Equity 500 Index Fund 0.000%/(3)/
DWS Equity 500 Index Portfolio 0.050 %
DWS S&P 500 Index Fund 0.000%/(3)/
DWS U.S. Bond Index Fund 0.150 %
|
II-65
FUND NAME MANAGEMENT FEE RATE
Growth Funds
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 Gold & Precious Metals Fund First $500 million 0.835%
Thereafter 0.785%
DWS Health Care Fund First $500 million 0.765%
Thereafter 0.715%
DWS Large Cap Focus 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 Enhanced Emerging Markets 0.590%
Fixed Income Fund
DWS Enhanced Global Bond Fund 0.410%
Global Growth Funds
DWS Emerging Markets Equity Fund First $250 million 1.015%
Next $500 million 0.990%
Thereafter 0.965%
|
II-66
FUND NAME MANAGEMENT FEE RATE
DWS Global Equity Fund First $1.5 billion 0.700%
Next $1.75 billion 0.685%
Next $1.75 billion 0.670%
Thereafter 0.655%
DWS Global Growth Fund First $500 million 0.915%
Next $500 million 0.865%
Next $500 million 0.815%
Next $500 million 0.765%
Thereafter 0.715%
DWS Global Small Cap Growth Fund First $500 million 0.915%
Next $500 million 0.865%
Thereafter 0.815%
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 International Value Fund First $500 million 0.800%
Next $500 million 0.780%
Next $1.0 billion 0.760%
Thereafter 0.740%
DWS Latin America Equity Fund First $400 million 1.165%
Next $400 million 1.065%
Thereafter 0.965%
DWS RREEF Global Infrastructure First $2 billion 0.900%
Fund Thereafter 0.875%
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 World Dividend 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%
Income and Capital Appreciation Fund
DWS RREEF Real Estate Securities 0.65 %
Income Fund
Insurance/Annuity Funds
DWS Alternative Asset Allocation VIP 0.200%/(4)/
DWS Bond VIP First $250 million 0.390%
Next $750 million 0.365%
Thereafter 0.340%
|
II-67
FUND NAME MANAGEMENT FEE RATE
DWS Capital Growth VIP First $250 million 0.390%
Next $750 million 0.365%
Thereafter 0.340%
DWS Core Equity VIP First $250 million 0.390%
Next $750 million 0.365%
Thereafter 0.340%
DWS Equity 500 Index VIP First $1 billion 0.200%
Next $1 billion 0.175%
Thereafter 0.150%
DWS Global Equity VIP First $1.5 billion 0.650%
Next $1.75 billion 0.635%
Next $1.75 billion 0.620%
Thereafter 0.605%
DWS Global Growth 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%
DWS Global Income Builder VIP First $250 million 0.370%
Next $750 million 0.345%
Thereafter 0.310%
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 Global Small Cap Growth VIP First $500 million 0.890%
Next $500 million 0.875%
Next $1.0 billion 0.860%
0.845% thereafter
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 International VIP First $500 million 0.790%
Thereafter 0.640%
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II-68
FUND NAME MANAGEMENT FEE RATE
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 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 Index VIP 0.350%
DWS Small Mid Cap Growth VIP First $250 million 0.550%
Next $750 million 0.525%
Thereafter 0.500%
DWS 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 Unconstrained 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%
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%/(5)/
Cash Account Trust - Money Market First $500 million 0.220%
Portfolio Next $500 million 0.200%
Next $1.0 billion 0.175%
Next $1.0 billion 0.160%
Thereafter 0.150%/(2)(5)/
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%/(5)/
|
II-69
FUND NAME MANAGEMENT FEE RATE
Cash Management Fund 0.00%/(6)/
Cash Management Portfolio First $3 billion 0.150%
Next $4.5 billion 0.1325%
Thereafter 0.120%
Cash Reserve Fund, Inc. - Prime 0.00%/(6)/
Series
Cash Reserves Fund Institutional 0.00%/(6)/
Daily Assets Fund Institutional 0.100 %
DWS Money Market Series 0.000%/(6)/
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%
DWS Variable NAV Money Fund First $1.0 billion 0.1500%
Next $3.0 billion 0.1325%
Thereafter 0.1200%
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 %
|
(1) Shareholders of a fund also indirectly bear their pro rata share of the
operating expenses, including the management fee paid to DIMA or other
investment advisor, of the underlying funds in which a fund invests.
(2) 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.
(3) 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.
(4) The management fee paid to DIMA equals 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. Shareholders of the fund also indirectly bear their pro
rata share of the operating expenses, including the management fee paid
to DIMA or other investment advisor, of the underlying funds in which the
fund invests.
(5) 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
contractually 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.
II-70
(6) 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
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%.
FEE PAYABLE TO DIMA FOR ADMINISTRATIVE SERVICES. Money Market Portfolio, DWS
Mid Cap Value Fund, DWS Small Cap Value Fund and DWS Equity Dividend 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 DIMA FOR FUND ACCOUNTING SERVICES. Currently, DIMA receives no
fee for its services to Money Market Portfolio, a series of Cash Account Trust,
DWS Small Cap Value Fund, and DWS Equity Dividend Fund; however, subject to
Board approval, DIMA may seek payment from a fund for fund accounting services
in the future.
DIMA receives an annual fee from DWS Mid Cap Value Fund for fund accounting
services equal to 0.015% of its average daily net assets.
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 $15.10 to $22.04
per account, for open wholesale money funds the fee is $44.89 per account,
while for certain retirement accounts serviced on the recordkeeping system of
ExpertPlan, Inc., the fee is a flat fee up to $2.88 per account 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.
FEES PAYABLE TO SUB-ADVISORS BY DIMA FOR SUB-ADVISORY SERVICES.
The following sets forth information relating to sub-advisory fees paid by DIMA
to each of the applicable funds' Sub-Advisors. The sub-advisory fee paid by
DIMA for each of the following funds is computed daily and payable monthly, at
the annual percentage rate of the daily net assets overseen by the Sub-Advisor,
unless otherwise noted. This information is provided as of each fund's most
recent fiscal year end.
FUND NAME SUB-ADVISOR AGGREGATE SUB-ADVISOR FEE RATE
Taxable Income Funds
DWS Core Fixed Income Fund FFTW 50% of the investment management fee received by
DIMA under its Investment Management Agreement
with the fund, less 50% of any expense
reimbursements and/or fee waivers incurred by
DIMA.
Value Funds
DWS Diversified Market Neutral Fund Pyramis First $50 million 0.70%
Henderson Next $50 million 0.65%
Thereafter 0.55%
|
II-71
FUND NAME SUB-ADVISOR AGGREGATE SUB-ADVISOR FEE RATE
Index-Related Funds
DWS EAFE (Reg. TM) Equity Index Fund NTI First $100 million 0.0900%
Next $400 million 0.0675%
Thereafter 0.0300%
DWS Equity 500 Index Portfolio NTI First $2.0 billion 0.015%
Next $2 billion 0.010%
Thereafter 0.005%
DWS U.S. Bond Index Fund NTI First $100 million 0.040%
Next $400 million 0.020%
Thereafter 0.010%
Global Growth Funds
DWS International Value Fund Dreman - 50% of the investment management fee payable
to DIMA pursuant to the Investment Management
Agreement, as in effect from time to time, in
respect of the fund's first $500 million of average
daily net assets;
- 50% of the investment management fee payable
to DIMA pursuant to the Investment Management
Agreement, as in effect from time to time, in
respect of the fund's next $500 million of average
daily net assets;
- 50% of the investment management fee payable
to DIMA pursuant to the Investment Management
Agreement, as in effect from time to time, in
respect of the fund's next $1 billion of average
daily net assets;
- 50% of the investment management fee payable
to DIMA pursuant to the Investment Management
Agreement, as in effect from time to time, in
respect of the fund's average daily net assets over
$2 billion.
Insurance/Annuity Funds
DWS Equity 500 Index VIP NTI First $2 billion 0.015%
Next $2 billion 0.010%
Thereafter 0.005%
DWS Small Cap Index VIP NTI First $100 million 0.080%
Next $400 million 0.040%
Thereafter 0.20%
|
II-72
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:
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
$250,000 to $2,999,999 0.75%/(3)/ - -
$250,000 to $49,999,999 0.50%/(4)/ Over $3 million 0.00%-0.50%
$250,000 to $4,999,999 1.00%/(5)/ - -
$5,000,000 to $9,999,999 0.55%/(5)/ - -
$1 million to $2,999,999 0.85%/(6)/ - -
1.00%/(7)/
$3 million to $49,999,999 0.50%/(8)/ Over $3 million 0.00%-0.50%
$10,000,000 to $49,999,999 0.50%/(5)/ - -
$50 million and greater 0.25%/(9)/ - -
|
/(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 Schedule #2 applies to employer sponsored employee benefit
plans using the OmniPlus subaccount record keeping system made available
through ADP, Inc. under an alliance with DIDI and its affiliates.
II-73
/(3)/ Applicable to the following funds: DWS Alternative Asset Allocation Fund,
DWS Diversified Market Neutral Fund, DWS Global Growth Fund, DWS Large Cap
Value Fund and DWS Select Alternative Allocation Fund.
/(4)/ Applicable to the following funds: DWS Floating Rate Fund, DWS GNMA Fund,
DWS Intermediate Tax/AMT Free Fund, DWS Managed Municipal Bond Fund, DWS
Short Duration Fund, DWS Short-Term Municipal Bond Fund, DWS Strategic
Government Securities Fund, DWS Strategic High Yield Tax-Free Fund and DWS
Ultra-Short Duration Fund.
/(5)/ Applicable to the following funds: DWS California Tax-Free Income Fund,
DWS Massachusetts Tax-Free Fund, DWS New York Tax-Free Income Fund and DWS
Unconstrained Income Fund.
/(6)/ Applicable to income funds except those noted in footnotes (4) and (5),
and DWS U.S. Bond Index Fund.
/(7)/ Applicable to all equity funds except those in footnote (3).
/(8)/ Applicable to all income and equity funds except for those noted in
footnote (5) and DWS U.S. Bond Index Fund.
/(9)/ Applicable to all income and equity funds except DWS U.S. Bond Index
Fund.
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. In addition, Class A shares of
certain DWS mutual funds may participate in a no-load network, platform or
self-directed brokerage account offered by a financial service firm that has
entered into an agreement with DIDI as further indicated under "Purchases"
under Part II "Purchase and Redemption of Shares."The DWS mutual funds may
collectively pay a financial service firm a one-time set-up fee of up to
$25,000 to participate in such a no-load network, platform or self-directed
brokerage account.
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. 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. 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. 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 attributable to 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).
II-74
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 Money Market
Trust, 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: 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.
PREMIER MONEY MARKET SHARES-INVESTORS CASH TRUST: For the Premier Money Market
Shares classes 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 SHARES-CASH ACCOUNT TRUST: For the Capital Assets Funds
Shares of the Government & Agency Securities Portfolio and the Tax-Exempt
Portfolio of Cash Account Trust, DIDI normally pays the sole sub-distributor
for the classes, Apex Clearing Corporation, a fee for distribution services,
payable monthly, at a maximum annual rate
II-75
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 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.
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 and DWS Variable NAV Money Fund, each a series 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.
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.
MANAGED SHARES-PRIME SERIES: For the Managed Shares class of the Prime Series
of Cash Reserves Fund, Inc., 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.
SHAREHOLDER SERVICES PLAN FOR CASH MANAGEMENT FUND - INSTITUTIONAL CLASS, CASH
RESERVES FUND INSTITUTIONAL - INSTITUTIONAL CLASS, NY TAX FREE MONEY FUND -
INVESTMENT CLASS AND TAX-FREE MONEY FUND INVESTMENT - PREMIER SHARES: Cash
Management Fund - Institutional Class and Cash Reserves Fund Institutional -
Institutional Class, NY Tax Free Money Fund - Investment Class and Tax-Free
Money Fund Investment - Premier Shares, each a series and class of DWS Money
Market Trust, 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-76
PART II: APPENDIX II-E - FIRMS WITH WHICH DEUTSCHE ASSET & WEALTH MANAGEMENT
HAS REVENUE SHARING ARRANGEMENTS
CHANNEL: BROKER-DEALERS AND FINANCIAL ADVISORS
Advisor Group
Ameriprise
Axa Advisors
Cambridge Investment Research, Inc.
Cetera Financial Group
Citigroup Global Markets, Inc.
Commonwealth Equity Services, LLP (dba Commonwealth Financial Network)
Deutsche Bank Group
Fidelity Brokerage Services LLC/National Financial Services LLC
First Allied Securities
Goldman Sachs
HD Vest Investment Securities, Inc.
Hooker & Holcombe Retirement Services, Inc.
The Huntington Investment Company
ING Advisors Network
John Hancock Distributors LLC
Ladenburg Thalmann Group (Securities America, Investacorp, Triad Advisors)
LPL Financial
Meridien Financial Group
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley Wealth Management
Northwestern Mutual Investment Services
Oppenheimer & Co., Inc.
PlanMember Services
Raymond James & Associates
Raymond James Financial Services
RBC Wealth Management
UBS Financial Services
Wells Fargo Advisors, LLC
CHANNEL: CASH PRODUCT PLATFORM
Allegheny Investments LTD
Apex Clearing Corp.
Bank of America
Bank of New York Mellon
Barclays Capital Inc.
BMO Capital Markets
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange
Citibank Global Markets
Computershare Trust Company
COR Clearing LLC
D.A. Davidson & Company
Deutsche Bank Group
Fiduciary Trust Co. - International
First Southwest Company
Goldman Sachs & Co.
II-77
Institutional Cash Distributors, LLC
J.P. Morgan Clearing Corp.
J.P. Morgan Securities LLC
Lincoln Investment Planning
LPL Financial
My Treasury Ltd.
Pershing Choice Platform
ProFunds Distributors, Inc.
SAMCO Capital Markets
State Street Bank & Trust Company
State Street Global Markets
Sungard Institutional Brokerage Inc.
Treasury Curve LLC
Union Bank, NA
US Bank
William Blair & Company
CHANNEL: THIRD PARTY INSURANCE PLATFORMS
Allstate Life Insurance Company
Allstate Life Insurance Company of New York
American Maturity Life Insurance Company
Ameritas Life Insurance Group
Annuity Investors Life Insurance Company
Columbus 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
Prudential Insurance Company of America
RiverSource Life Insurance Company
II-78
Security Benefit Life Insurance Company
Sun Life Group
Symetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company
Any additions, modifications or deletions to the financial advisors identified
above that have occurred since the date hereof are not reflected.
II-79
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. Initial sales charges do not apply to Money
Market Funds and Variable Insurance Funds, which includes DWS Variable Series
I, DWS Variable Series II and DWS Investments VIT Funds.
INTERNATIONAL/GLOBAL FUNDS: Emerging Markets Equity, World Dividend, Global
Small Cap Growth, Latin America Equity, International, Global Equity,
International Value, RREEF Global Infrastructure, RREEF Global Real Estate;
INCOME AND CAPITAL APPRECIATION FUND: RREEF Real Estate Securities Income;
GROWTH FUNDS: Capital Growth, Communications, Gold & Precious Metals, Health
Care, Large Cap Focus Growth, Mid Cap Growth, Small Cap Growth, Technology;
VALUE FUNDS: Enhanced Commodity Strategy, Equity Dividend, Mid Cap Value, Small
Cap Value, Core Equity, RREEF Real Estate Securities, Small Cap Core and Small
Cap Value; MULTICATEGORY/ASSET ALLOCATION FUNDS: Global Income Builder,
LifeCompass Retirement, LifeCompass 2015, LifeCompass 2020, LifeCompass 2030
and LifeCompass 2040:
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
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****
|
INTERNATIONAL/GLOBAL FUNDS: Global Growth; VALUE FUNDS: Diversified Market
Neutral and Large Cap Value; MULTICATEGORY/
ASSET ALLOCATION FUNDS: Alternative Asset Allocation and Select Alternative
Allocation:
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
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 and over .00*** .00*** .00****
|
INTERNATIONAL/GLOBAL FUNDS: Enhanced Emerging Markets Fixed Income Fund,
Enhanced Global Bond; INCOME FUNDS: Core Fixed Income, High Income, Global High
Income, Core Plus Income; INDEX RELATED FUNDS: S&P 500 Index:
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
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****
|
II-80
INCOME FUNDS: Global Inflation and U.S. Bond Index
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
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****
|
TAX-FREE INCOME FUNDS: California Tax-Free Income, New York Tax-Free Income,
Massachusetts Tax-Free, Strategic High Yield Tax-Free, Managed Municipal Bond
and Intermediate Tax/AMT Free. INCOME FUNDS: GNMA, Short Duration,
Unconstrained Income, Strategic Government Securities and Ultra-Short Duration.
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
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****
|
INCOME FUNDS: Floating Rate.
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
Less than $100,000 2.75% 2.83% 2.25%
$100,000 but less than $250,000 2.25% 2.30% 1.75%
$250,000 but less than $500,000 1.25% 1.27% 1.00%
$500,000 but less than $1,000,000 1.00% 1.01% 1.00%
$250,000 and over 0.00*** 0.00*** 0.00****
|
MULTICATEGORY ASSET ALLOCATION FUND: Target 2014. This fund does not have a
share class but is similar in structure to Class A shares.
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
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
|
II-81
TAX FREE INCOME FUNDS: Short-Term Municipal Bond
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
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 and over 0.00*** 0.00*** 0.00****
|
* 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-82
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-83
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-84
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 SEC thereunder
and, to the extent deemed appropriate by a fund, interpretations and guidance
provided by the SEC staff.
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.
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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 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. Valuation
of such securities are highly speculative. Dividends on auction rate preferred
securities issued by a closed-end fund may be reported, generally on Form 1099,
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 at
the time of acquisition is sufficient to service the loan. These loans are
often issued in connection with recapitalizations, acquisitions, leveraged
buy-outs and refinancings. 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. Free cash flow shall be applied to prepay the bank loan in the 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.
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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 negotiated at the time of transaction, and are paid
from the initial commitment indication until loan closing.
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
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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.
Affiliates of the Advisor may participate in the primary and secondary market
for bank loans. Because of limitations imposed by applicable law, the presence
of the Advisor's affiliates in the bank loan market may restrict a fund's
ability to acquire some bank loans, or affect the timing or price of such
acquisitions. The Advisor does not believe that this will materially affect a
fund's ability to achieve its investment objective. Also, because the Advisor
may wish to invest in the publicly traded securities of a borrower, it may not
have access to material non-public information regarding the borrower to which
other lenders have access.
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.
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.
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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 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.
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.
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. Such
affiliated money market funds will operate in accordance with Rule 2a-7 under
the 1940 Act and will seek to maintain a stable net asset value ("NAV") or will
maintain a floating NAV. A fund indirectly bears its proportionate share of the
expenses of each affiliated money market fund in which it invests. The
affiliated money market funds in which a fund may invest are registered under
the 1940 Act or are excluded from the definition of "investment company" under
Section 3(c)(1) or 3(c)(7) of the 1940 Act. Investments in such affiliated
money market funds 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
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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.
COMMODITY POOL OPERATOR EXCLUSION. The Advisor currently intends to operate the
fund (unless otherwise noted) in compliance with the requirements of Rule 4.5
of the Commodity Futures Trading Commission (CFTC). As a result, a fund is not
deemed to be a "commodity pool" under the Commodity Exchange Act (CEA) and will
be limited in its ability to use futures and options on futures or commodities
or engage in swap transactions for other than bona fide hedging purposes.
Provided a fund operates within the limits of Rule 4.5 of the CFTC, a fund will
be excluded from registration with and regulation under the CEA and the Advisor
will not be deemed to be a "commodity pool operator" with respect to the
operations of a fund. If a fund were no longer able to claim the exclusion, the
fund and the Advisor would be subject to regulation under the CEA.
COMMODITY POOL OPERATOR REGULATION. DWS Enhanced Commodity Strategy Fund, DWS
Global Inflation Fund and DWS Gold & Precious Metals Fund are unable to rely on
the exclusion from CFTC Rule 4.5 and therefore will be subjected to regulation
under the CEA and CFTC rules as a commodity pool. The Advisor is currently
registered with the National Futures Association as a "commodity pool operator"
and a "commodity trading advisor" and the Advisor will act as such with respect
to the operation of a fund. As a result, the Advisor and the fund are subject
to dual regulation by the CFTC and the SEC. The CFTC recently adopted
regulations that seek to "harmonize" CFTC regulations with overlapping SEC
regulations. Pursuant to the CFTC harmonization regulations, the Advisor and
the fund may elect to meet the requirements of certain CFTC regulations by
complying with specific SEC rules and regulations relating to disclosure and
reporting requirements. The CFTC could deem the fund or the Advisor in
violation of an applicable CFTC regulation if the fund or the Advisor failed to
comply with a related SEC regulatory requirement under the CFTC harmonization
regulations. The fund and the Advisor will remain subject to certain
CFTC-mandated disclosure, reporting and recordkeeping regulations even if they
elect substitute compliance under the CFTC harmonization regulations.
Compliance with the CFTC regulations could increase the fund's expenses,
adversely affecting investment returns. Investors in a fund and their financial
advisers should consider whether a fund's status as a "commodity pool" impacts
their operations or status under the CEA in deciding whether to invest in a
fund.
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, 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.
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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 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.
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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.
CURRENCY STRATEGIES. In addition to a fund's main investment strategy, certain
funds seek to enhance returns by employing proprietary quantitative,
rules-based methodology currency strategies using derivatives (contracts whose
value are based on, for example, indices, currencies or securities), in
particular forward currency contracts. These currency strategies are long/short
rules-based strategies that offer a core approach to currency investing by
investing across a diversified pool of developed and emerging market
currencies. There are three strategies:
CARRY STRATEGY: Carry trades are widely known in currency markets. In a
carry trade low interest rate currencies are systematically sold and high
interest rate currencies are systematically bought. Such a strategy seeks
to exploit what academics call "forward-rate bias" or the "forward premium
puzzle," that is, circumstances where the forward rate is not an unbiased
estimate of the future spot. Positive returns may occur when an investor's
gain from interest rate differentials between the high yielding and low
yielding jurisdictions exceed any losses from currency rate movements
between the relevant currencies.
MOMENTUM STRATEGY: This strategy is based on the observation that many
exchange rates have followed multi-year trends. A strategy that follows a
multi-year trend may make positive returns over time. The segmentation of
currency market participants, with some acting quickly on news while
others respond more slowly is one reason why, in some circumstances,
trends may emerge and can be protracted.
VALUATION STRATEGY: This strategy is based on the observation that in the
long-term, currencies have tended to move toward their "fair value." The
goal of the valuation strategy is to seek a profit for the fund by
systematically buying "undervalued" currencies and selling "overvalued"
currencies in the medium-term. The success of the currency strategies
depends, in part, on the effectiveness and implementation of portfolio
management's proprietary models. If portfolio management's analysis proves
to be incorrect, losses to the fund may be significant and may
substantially exceed the intended level of market exposure for the
currency strategies. As part of the currency strategies, a fund will be
exposed to the risks of non-US currency 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. As a result, the fund's exposure to
foreign currencies 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 it will be able to do so.
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.
Custodial receipts include Treasury Receipts (TRs), Treasury Investment Growth
Receipts (TIGRs), and Certificates of Accrual on Treasury Securities (CATS).
TIGRs and CATS are interests in private proprietary accounts while TRs and
STRIPS are interests in accounts sponsored by the US Treasury. Receipts are
sold as zero coupon securities (see Zero Coupon Securities). A fund may acquire
US Government securities and their unmatured interest coupons that have been
separated (stripped) by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the US Government securities, the holder will resell the stripped
securities in custodial receipt programs with a number of different names,
including TIGRs and CATS. The stripped coupons are sold separately from the
underlying principal, which is usually sold at a deep discount because the
buyer receives only the right to receive a future fixed payment on the security
and does not receive any rights to periodic interest (cash) payments. The
underlying US Treasury bonds and notes themselves are generally held in
book-entry form at a Federal Reserve Bank. Counsel to the underwriters of these
certificates or other evidences of ownership of US Treasury securities have
stated that, in their opinion, purchasers of the stripped securities most
likely will be deemed the beneficial holders of the underlying US Government
securities for federal tax and securities purposes. In the case of CATS and
TIGRs, the Internal Revenue Service (IRS) has reached a similar conclusion for
the purpose of applying the tax diversification requirements applicable to
regulated investment
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companies such as a fund. CATS and TIGRs 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. A fund is not aware of any binding
legislative, judicial or administrative authority on this issue.
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.
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, collars and contracts
for difference, 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
(including selling short) particular
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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 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
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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 a number of 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. A decision as to whether,
when and how to use options involves the exercise of skill and judgment, and
even a well-conceived transaction may be unsuccessful to some degree because of
market behavior or unexpected events. 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, in return for the premium on
the option, gives up the opportunity to profit from a price increase in the
underlying security or instrument above the sum of the option premium received
and the option's exercise price, but as long as its obligations as a writer
continue, retains the risk of loss, minus the option premium received, should
the price of the underlying security or instrument decline. In writing options,
a fund has no control over the time when it may be required to fulfill its
obligations as the writer of the option. Once a fund receives an exercise
notice for its option, it cannot effect a closing purchase transaction in order
to terminate its obligation under the option and must deliver the underlying
security at the exercise price. Thus, the use of covered call options may
require the fund to sell portfolio securities at inopportune times or for
prices other than current market values, will limit the amount of appreciation
the fund can realize above the exercise price of an option on a security, and
may cause the fund to hold a security that it might otherwise sell.
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.
The value of options may be adversely affected if the market for such options
becomes less liquid or smaller. 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. There can be no
assurance that a liquid market will exist when a fund seeks to close out an
option position either, in the case of a written call option, by buying the
option, or, in the case of a purchased put option, by selling the option. Among
the possible reasons for the absence of a liquid options 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 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 the OCC or an exchange 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. A fund's ability to terminate OTC options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. If a
fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security unless the
option expired without exercise.
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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.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. Call options are marked-to-market daily and their value
will be affected by changes in the value of and dividend rates of the
underlying securities, an increase in interest rates, changes in the actual or
perceived volatility of the stock market and the underlying securities and the
remaining time to the options' expiration. Additionally, the exercise price of
an option may be adjusted downward before the option's expiration as a result
of the occurrence of certain corporate events affecting the underlying
security, such as extraordinary dividends, stock splits, merger or other
extraordinary distributions or events. A reduction in the exercise price of an
option would reduce a fund's capital appreciation potential on the underlying
security.
The number of call options a fund can write is limited by the number of shares
of underlying securities that the fund holds. Furthermore, a fund's options
transactions will be subject to limitations established by each of the
exchanges, boards of trade or other trading facilities on which such options
are traded. These limitations govern the maximum number of options in each
class that may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or
more brokers. Thus, the number of options that a fund may write or purchase may
be affected by options written or purchased by other investment advisory
clients of the Advisor. An exchange, board of trade or other trading facility
may order the liquidation of positions found to be in excess of these limits,
and it may impose certain other sanctions.
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 of
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.
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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.
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. A fund may engage in currency transactions for any
purpose consistent with its investment strategy, policies and restrictions,
including, without limitation, for hedging purposes or to seek to enhance
returns. Certain currency transactions may expose a fund to the effects of
leverage. 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.
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A fund may engage in currency derivative transactions to seek to enhance
returns by taking a net long or net short position in one or more currencies,
in which case the fund may have currency exposure that is different (in some
cases, significantly different) from the currency exposure of its other
portfolio investments or the currency exposure of its performance index. These
overweight or underweight currency positions may increase the fund's exposure
to the effects of leverage, which may cause the fund to be more volatile. A
fund may realize a loss on a currency derivative in an amount that exceeds the
capital invested in such derivative, regardless of whether the fund entered
into the transaction to enhance returns or for hedging purposes.
"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 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 additional special risks that may not
apply to 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.
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"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. 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
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.
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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.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
and related regulatory developments have imposed several new requirements on
swap market participants, including registration and new business conduct
requirements on dealers that enter into swaps or non-deliverable forward
currency contracts with certain clients and the imposition of central clearing
for certain swap contracts. Central clearing is currently only required for
limited swap transactions, including some interest rate swaps and credit
default index swaps. Compliance with the central clearing requirements under
the Dodd-Frank Act is expected to occur over time as regulators, such as the
SEC and the CFTC, adopt new regulations requiring central clearing of
additional types of derivative transactions. In a cleared transaction, a fund
will enter into the transaction with a counterparty, and performance of the
transaction will be effected by a central clearinghouse. A clearing arrangement
reduces a fund's exposure to the credit risk of the counterparty, but subjects
the fund to the credit risk of the clearinghouse and a member of the
clearinghouse through which the fund holds its cleared position. A fund will be
required to post specific levels of margin which may be greater than the margin
a fund would have been required to post in the OTC market. In addition,
uncleared OTC swap transactions will be subject to regulatory collateral
requirements that could adversely affect a fund's ability to enter into swaps
in the OTC market. These regulations (or choice to no longer use a particular
derivative instrument that triggers additional regulations) could cause a fund
to change the derivative investments that it utilizes or to incur additional
expenses.
Contracts for Difference. A contract for difference offers exposure to price
changes in an underlying security without ownership of such security, typically
by providing investors the ability to trade on margin. A fund may purchase
contracts for difference (CFD). A CFD is a privately negotiated contract
between two parties, buyer and seller, stipulating that the seller will pay to
or receive from the buyer the difference between the notional value of the
underlying instrument at the opening of the contract and that instrument's
notional value at the end of the contract. The underlying instrument may be a
single security, stock basket or index. A CFD can be set up to take either a
short or long position on the underlying instrument. The buyer and seller are
typically both required to post margin, which is adjusted daily. The buyer will
also pay to the seller a financing rate on the notional amount of the capital
employed by the seller less the margin deposit. A CFD is usually terminated at
the buyer's initiative. The seller of the CFD will simply match the exposure of
the underlying instrument in the open market and the parties will exchange
whatever payment is due.
As is the case with owning any financial instrument, there is the risk of loss
associated with buying a CFD. For example, if a fund buys a long CFD and the
underlying security is worth less at the end of the contract, the fund would be
required to make a payment to the seller and would suffer a loss. Also, there
may be liquidity risk if the underlying instrument is illiquid because the
liquidity of a CFD is based on the liquidity of the underlying instrument. A
further risk is that adverse movements in the underlying security will require
the buyer to post additional margin. CFDs also carry counterparty risk, i.e.,
the risk that the counterparty to the CFD transaction may be unable or
unwilling to make payments or to otherwise honor its financial obligations
under the terms of the contract. If the counterparty were to do so, the value
of the contract, and of a fund's shares, may be reduced. CFDs are not
registered with the SEC or any US regulator, and are not subject to US
regulation.
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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 or securities, 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.
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.
Participatory Notes. Participatory notes or participation notes are issued by
banks or broker-dealers (often associated with non-US-based brokerage firms)
and are designed to replicate the performance of certain securities or markets.
Typically, purchasers of participatory notes are entitled to a return measured
by the change in value of an identified underlying security or basket of
securities. The price, performance, and liquidity of the participatory note are
all linked directly to the underlying security. The holder of a participatory
note may be entitled to receive any dividends paid in connection with the
underlying security, which may increase the return of a participatory note, but
typically does not receive voting or other rights as it would if it directly
owned the underlying security. A fund's ability to redeem or exercise a
participatory note generally is dependent on the liquidity in the local trading
market for the security underlying the note. Participatory notes are commonly
used when a direct investment in the underlying security is restricted due to
country-specific regulations.
Participatory notes are a type of equity-linked derivative, which are generally
traded over-the-counter and, therefore, will be subject to the same risks as
other over-the-counter derivatives. The performance results of participatory
notes will not replicate exactly the performance of the securities or markets
that the notes seek to replicate due to transaction costs and other expenses.
Investments in participatory notes involve the same risks associated with a
direct investment in the shares of the companies the notes seek to replicate.
Participatory notes constitute general unsecured contractual obligations of the
banks or broker-dealers that issue them. Consequently, a purchaser of a
participatory note is relying on the creditworthiness of such banks or
broker-dealers and has no rights under the note against the issuer of the
security underlying the note. In addition, there is no guarantee that a liquid
market for a participatory note will exist or that the issuer of the note will
be willing to repurchase the note when a fund wishes to sell it. Because a
participatory note is an obligation of the issuer of the note, rather than a
direct investment in shares of the underlying security, a fund may suffer
losses potentially equal to the full value of the participatory note if the
issuer of the note fails to perform its obligations.
In the case of Indian participatory notes, for example, Indian-based brokerages
buy Indian-based securities and then issue participatory notes to foreign
investors. In certain ways, such notes function similarly to ADRs except that
Indian-based brokerages, not US banks, are depositories for Indian-based
securities on behalf of foreign investors. Unlike ADRs, though, such notes are
subject to credit risk based on the uncertainty of the counterparty's (i.e.,
the Indian-based brokerage's) ability to meet its obligations.
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
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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.
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).
Income from certain commodity-linked derivatives does not constitute qualifying
income to a fund. The tax treatment of commodity-linked notes and certain other
derivative instruments in which a fund might invest is not certain, in
particular with respect to whether income and gains from such instruments
constitutes qualifying income. If the fund treats income from a particular
instrument as qualifying income and the income is later determined not to
constitute qualifying income, and, together with any other nonqualifying
income, causes the fund's nonqualifying income to exceed 10% of its gross
income in any taxable year, a fund will fail to qualify as a regulated
investment company unless it is eligible to and does pay a tax at the fund
level. Certain funds (including DWS Enhanced Commodity Strategy Fund, DWS Gold
and Precious Metals Fund, and DWS Global Inflation Fund) have obtained private
letter rulings from the IRS confirming that the income and gain earned through
a wholly-owned Subsidiary that invests in certain types of commodity-linked
derivatives constitute qualifying income under the Code. See "TAXES" in
APPENDIX II-H of this SAI.
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.
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
II-102
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 are 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
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.
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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 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.
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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.
European financial markets have recently experienced volatility and have been
adversely affected by concerns about economic downturns, credit rating
downgrades, rising government debt level and possible default on or
restructuring of government debt in several European countries. Most countries
in Western Europe are members of the European Union (EU), which faces major
issues involving its membership, structure, procedures and policies. European
countries that are members of the Economic and Monetary Union of the European
Union ((EMU), comprised of the EU members that have adopted the Euro currency)
are subject to restrictions on inflation rates, interest rates, deficits, and
debt levels, as well as fiscal and monetary controls. European countries are
significantly affected by fiscal and monetary controls implemented by the EMU,
and it is possible that the timing and substance of these controls may not
address the needs of all EMU member countries. In addition, the fiscal policies
of a single member state can impact and pose economic risks to the EU as a
whole. Investing in Euro-denominated securities also risks exposure to a
currency that may not fully reflect the strengths and weaknesses of the
disparate economies that comprise Europe. There is continued concern over
member state-level support for the Euro, which could lead to certain countries
leaving the EMU, the implementation of currency controls, or potentially the
dissolution of the Euro. The dissolution of the Euro would have significant
negative effects on European financial markets.
Additionally, the manner in which the EU responded to the global recession and
sovereign debt issues raised questions about its ability to react quickly to
rising borrowing costs and a potential default by Greece and other countries on
their sovereign debt and also revealed a lack of cohesion in dealing with the
fiscal problems of member states. Many European countries continue to suffer
from high unemployment rates. Since 2010, several countries, including Greece,
Italy, Spain, Ireland and Portugal, agreed to multi-year bailout loans from the
European Central Bank, International Monetary Fund, and other institutions. To
address budget deficits and public debt concerns, a number of European
countries have imposed strict austerity measures and comprehensive financial
and labor market reforms. In addition, social unrest, including protests
against the newly imposed austerity measures and domestic terrorism, could
decrease tourism, lower consumer confidence, and otherwise impede financial
recovery in Europe.
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.
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Many foreign countries are heavily dependent upon exports, particularly to
developed countries, and, accordingly, have been and may continue to be
adversely affected by trade barriers, managed adjustments in relative currency
values, and other protectionist measures imposed or negotiated by the US and
other countries with which they trade. These economies also have been and may
continue to be negatively impacted by economic conditions in the US and other
trading partners, which can lower the demand for goods produced in those
countries.
The risks described above, including the risks of nationalization or
expropriation of assets, typically are increased in connection with investments
in "emerging markets." For example, political and economic structures in these
countries may be in their infancy and developing rapidly, and such countries
may lack the social, political and economic stability characteristic of more
developed countries (including amplified risk of war and terrorism). Certain of
these countries have in the past failed to recognize private property rights
and have at times nationalized and expropriated the assets of private
companies. Investments in emerging markets may be considered speculative.
The currencies of certain emerging market countries have experienced
devaluations relative to the US dollar, and future devaluations may adversely
affect the value of assets denominated in such currencies. In addition,
currency hedging techniques may be unavailable in certain emerging market
countries. Many emerging market countries have experienced substantial, and in
some periods extremely high, rates of inflation or deflation for many years,
and future inflation may adversely affect the economies and securities markets
of such countries.
In addition, unanticipated political or social developments may affect the
value of investments in emerging markets and the availability of additional
investments in these markets. Any change in the leadership or politics of
emerging market countries, or the countries that exercise a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and adversely
affect existing investment opportunities. The small size, limited trading
volume and relative inexperience of the securities markets in these countries
may make investments in securities traded in emerging markets illiquid and more
volatile than investments in securities traded in more developed countries. For
example, limited market size may cause prices to be unduly influenced by
traders who control large positions. In addition, 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
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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 paying a tax at the fund level, or 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.
HIGH YIELD FIXED INCOME SECURITIES - JUNK BONDS. A fund may purchase debt
securities which are rated below investment-grade (junk bonds), that is, rated
Ba and below by Moody's or BB and below 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 "Ratings of
Investments" in 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.
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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.
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.
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).
II-108
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.
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.
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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.
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
II-110
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.
INTEREST RATE STRATEGIES. In addition to a fund's main investment strategy,
certain funds seek to enhance returns by employing a rules-based methodology to
identify interest rate trends across developed markets using derivatives
(contracts whose value are based on, for example, indices, currencies or
securities), in particular buying and selling interest rate futures contracts.
The success of the interest rate futures strategies depends, in part, on the
effectiveness and implementation of the Advisor's proprietary models. If the
Advisor's analysis proves to be incorrect, losses to a fund may be significant,
possibly exceeding the amounts invested in the interest rate futures contracts.
The risk of loss is heightened during periods of rapid increases in interest
rates.
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
II-111
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.
INVESTMENT COMPANIES AND OTHER POOLED INVESTMENT VEHICLES. A fund may acquire
securities of other registered investment companies and other pooled investment
vehicles (collectively, investment funds) to the extent that such investments
are consistent with its investment objective, policies, strategies and
restrictions and the limitations of the 1940 Act. A money market fund that is
operated in accordance with Rule 2a-7 under the 1940 Act may acquire shares of
other money market mutual funds to the extent consistent with its investment
policies and restrictions set forth in its prospectus. Investment funds may
include mutual funds, closed-end funds, exchange-traded funds (ETFs) and hedge
funds (including investment funds managed by the Advisor and its affiliates). A
fund will indirectly bear its proportionate share of any management fees and
other expenses paid by such other investment funds.
Because a fund may acquire securities of investment funds managed by the
Advisor or an affiliate of the Advisor, the Advisor may have a conflict of
interest in selecting investment funds. The Advisor considers such conflicts of
interest as part of its investment process and has established practices
designed to minimize such conflicts. The Advisor, any subadvisor and any
affiliates of the Advisor, as applicable, earn fees at varying rates for
providing services to underlying DWS investment funds. The Advisor and any
subadvisor may, therefore, have a conflict of interest in selecting underlying
DWS investment funds and in determining whether to invest in an unaffiliated
investment fund from which they will not receive any fees. However, the Advisor
and any subadvisor to a fund will select investments that it believes are
appropriate to meet the fund's investment objectives.
ETFs and closed-end funds trade on a securities exchange and their shares may
trade at a premium or discount to their net asset value. A fund will incur
brokerage costs when it buys and sells shares of ETFs and closed-end funds.
ETFs that seek to track the composition and performance of a specific index may
not replicate exactly the performance of their specified index because of
trading costs and operating expenses incurred by the ETF. At times, there may
not be an active trading market for shares of some ETFs and closed-end funds
and trading of ETF and closed-end fund shares may be halted or delisted by the
listing exchange.
To the extent consistent with its investment objective, policies, strategies
and restrictions, a fund may invest in commodity-related ETFs. Certain
commodity-related ETFs may not be registered as investment companies under the
1940 Act and shareholders of such commodity-related ETFs, including the
investing DWS fund, will not have the regulatory protections provided to
investors in registered investment companies. Commodity-related ETFs may invest
in commodities directly (such as purchasing gold) or they may seek to track a
commodities index by investing in commodity-linked derivative instruments.
Commodity-related ETFs are subject to the risks associated with the commodities
or commodity-linked derivative instruments in which they invest. A fund's
ability to invest in commodity-related ETFs may be limited by its intention to
qualify as a regulated investment company under the Internal Revenue Code. In
addition, under recent amendments to rules of the Commodity Futures Trading
Commission (CFTC), a fund's investment in commodity-related ETFs may subject
the fund and/or the Advisor to certain registration, disclosure and reporting
requirements of the CFTC. The Advisor will monitor a fund's use of
commodity-related ETFs to determine whether the fund and/or the Advisor will
need to comply with CFTC rules.
To the extent consistent with its investment objective, policies, strategies
and restrictions, a fund may seek exposure to alternative asset classes or
strategies through investment in private funds, including 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 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
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a registered investment company. 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.
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, including a securities lending agent that is an
affiliate of the Advisor. 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.
MASTER LIMITED PARTNERSHIPS (MLPS). Master Limited Partnerships, or MLPs, are
generally organized under state law as limited partnerships or limited
liability companies. An MLP consists of a general partner and limited partners
(or in the case of MLPs organized as limited liability companies, a managing
member and members). The general partner or managing member typically controls
the operations and management of the MLP and has an ownership
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stake in the MLP. The limited partners or members, through their ownership of
limited partner or member interests, provide capital to the entity, are
intended to have no role in the operation and management of the entity, and
receive cash distributions. Equity securities issued by MLPs currently consist
of common units, subordinated units and preferred units.
MLP common units are typically listed and traded on U.S. securities exchanges,
including the NYSE and the NASDAQ Stock Market (NASDAQ). A fund may purchase
such common units through open market transactions and underwritten offerings,
but may also acquire common units through direct placements and privately
negotiated transactions. Holders of MLP common units have limited control and
voting rights. Holders of MLP common units are typically entitled to receive a
minimum quarterly distribution (MQD), including arrearage rights, from the
issuer. Generally, an MLP must pay (or set aside for payment) the MQD to
holders of common units before any distributions may be paid to subordinated
unit holders. In addition, incentive distributions are typically not paid to
the general partner or managing member unless the quarterly distributions on
the common units exceed specified threshold levels above the MQD. In the event
of a liquidation, common unit holders are intended to have a preference to the
remaining assets of the issuer over holders of subordinated units. MLPs also
issue different classes of common units that may have different voting,
trading, and distribution rights.
MLP subordinated units, which, like common units, represent limited partner or
member interests, are not typically listed or traded on an exchange. A fund may
purchase outstanding subordinated units through negotiated transactions
directly with holders of such units or newly issued subordinated units directly
from the issuer. Holders of such subordinated units are generally entitled to
receive a distribution only after the MQD and any arrearages from prior
quarters have been paid to holders of common units. Holders of subordinated
units typically have the right to receive distributions before any incentive
distributions are payable to the general partner or managing member.
Subordinated units generally do not provide arrearage rights. Most MLP
subordinated units are convertible into common units after the passage of a
specified period of time or upon the achievement by the issuer of specified
financial goals. MLPs also issue different classes of subordinated units that
may have different voting, trading, and distribution rights.
MLP preferred units are not typically listed or traded on an exchange. A fund
may purchase MLP preferred units through negotiated transactions directly with
MLPs, affiliates of MLPs and institutional holders of such units. Holders of
MLP preferred units can be entitled to a wide range of voting and other rights,
depending on the structure of each separate security.
Investments in MLPs are generally subject to many of the risks that apply to
partnerships. For example, holders of the units of MLPs may have limited
control and limited voting rights on matters affecting the partnership. There
may be fewer corporate protections afforded investors in an MLP than investors
in a corporation. Conflicts of interest may exist among unit holders,
subordinated unit holders and the general partner of an MLP, including those
arising from incentive distribution payments. MLPs that concentrate in a
particular industry or region are subject to risks associated with such
industry or region. MLPs holding credit-related investments are subject to
interest rate risk and the risk of default on payment obligations by debt
issuers. Investments held by MLPs may be illiquid. MLP units may trade
infrequently and in limited volume, and they may be subject to more abrupt or
erratic price movements than securities of larger or more broadly based
companies.
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.
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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 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 senior preferred stock purchase agreements ("SPSPAs") 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 SPSPAs 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, which terminated on
December 31, 2009. Third, the US Treasury initiated a temporary program to
purchase FNMA and FHLMC mortgage-backed securities, which terminated on
December 31, 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, or, with respect to initiatives that have
expired, that the US Treasury would undertake similar initiatives in the
future.
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
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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 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
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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.
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
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(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. To the extent that a CMO or REMIC Certificate is
collateralized by Ginnie Mae guaranteed mortgage-backed securities, holders of
the CMO or REMIC Certificate receive all interest and principal payments owed
on the mortgage pool, net of certain fees, regardless of whether the mortgagor
actually makes the payments, as a result of the GNMA guaranty, which is backed
by the full faith and credit of the US government. 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.
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
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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. In addition, the value of a CMO or REMIC
Certificate, including those collateralized by mortgage-backed securities
issued or guaranteed by US government agencies or instrumentalities, may be
affected by other factors, such as the availability of information concerning
the pool and its structure, the creditworthiness of the servicing agent for the
pool, the originator of the underlying assets, or the entities providing credit
enhancement. The value of these securities also can depend on the ability of
their servicers to service the underlying collateral and is, therefore, subject
to risks associated with servicers' performance, including mishandling of
documentation. 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.
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.
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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.
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 and bonds have different maturities and a
fund may acquire "notes" and "bonds" with maturities that meets its particular
investment policies and restrictions set forth in its prospectus.
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
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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.
Adverse political and economic conditions and developments affecting any
territory or Commonwealth of the US may, in turn, negatively affect the value
of the fund's holdings in such obligations. In recent years, Puerto Rico has
experienced a recession and difficult economic conditions, which may negatively
affect the value of the fund's holdings in Puerto Rico municipal obligations.
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.
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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.
On August 2, 2011, President Obama signed the Budget Control Act of 2011, which
requires the federal government to reduce expenditures by over $2 trillion over
the next ten years. Since the specifics of the federal reductions have yet to
be identified, a detailed assessment of the impact on states cannot be made.
Insured Municipal Securities. A fund may purchase municipal securities that are
insured under policies issued by certain insurance companies. Insured municipal
securities typically receive a higher credit rating which means that the issuer
of the securities pays a lower interest rate. In purchasing such insured
securities, the Advisor gives consideration both to the insurer and to the
credit quality of the underlying issuer. The insurance reduces the credit risk
for a particular municipal security by supplementing the creditworthiness of
the underlying bond and provides additional security for payment of the
principal and interest of a municipal security. Certain of the insurance
companies that provide insurance for municipal securities provide insurance for
other types of securities, including some involving subprime mortgages. The
value of subprime mortgage securities has declined recently and some may
default, increasing a bond insurer's risk of having to make payments to holders
of subprime mortgage securities. Because of this risk, the ratings of some
insurance companies have been, or may be, downgraded and it is possible that an
insurance company may become insolvent. If an insurance company's rating is
downgraded or the company becomes insolvent, the prices of municipal securities
insured by the insurance company may decline.
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
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securities are typically paid from an escrow fund consisting of obligations
issued or guaranteed by the US Government. The assets in the escrow fund are
derived from the proceeds of refunding bonds issued by the same issuer as the
pre-refunded municipal securities. Issuers of municipal securities use this
advance refunding technique to obtain more favorable terms with respect to
securities that are not yet subject to call or redemption by the issuer. For
example, advance refunding enables an issuer to refinance debt at lower market
interest rates, restructure debt to improve cash flow or eliminate restrictive
covenants in the indenture or other governing instrument for the pre-refunded
municipal securities. However, except for a change in the revenue source from
which principal and interest payments are made, the pre-refunded municipal
securities remain outstanding on their original terms until they mature or are
redeemed by the issuer. Pre-refunded municipal securities are usually purchased
at a price which represents a premium over their face value.
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 affect the
performance of a fund or shareholder investment returns. 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, commercial and savings banks, savings and loan associations and other
institutions.
Certificates of deposit are negotiable certificates evidencing the obligations
of a bank to repay funds deposited with it for a specified period of time.
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, but may be subject to early withdrawal penalties
that vary with market conditions and the remaining maturity of the obligation.
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.
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
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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.
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. 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.
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 Rating Services (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.
In summary, there are a number of special risks associated with investing in
preferred stocks, including:
Credit and Subordination Risk. Credit risk is the risk that a preferred stock
in a fund's portfolio will decline in price or the issuer of the preferred
stock will fail to make dividend, interest, or principal payments when due
because the issuer experiences a decline in its financial status. As noted
above, preferred stocks are generally subordinated to bonds and other debt
instruments in a company's capital structure in terms of having priority to
corporate income, claims to corporate assets, and liquidation payments and,
therefore, will be subject to greater credit risk than more senior debt
instruments.
Interest Rate Risk. Interest rate risk is the risk that a preferred stock will
decline in value because of changes in market interest rates. As described
above, when market interest rates rise, the market value of a preferred stock
generally will generally fall. Preferred stocks with longer periods before
maturity may be more sensitive to interest rate changes.
Deferral and Omission Risk. Preferred stocks may have provisions that permit
the issuer, at its discretion, to defer or omit distributions for a stated
period without any adverse consequences to the issuer. In certain cases,
deferring or omitting distributions may be mandatory. If a fund owns a
preferred stock that is deferring its distributions, the fund may be required
to report income for tax purposes although it has not yet received such income.
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Call, Reinvestment, and Income Risk. During periods of declining interest
rates, an issuer may be able to exercise an option to redeem its outstanding
preferred stock at par earlier than scheduled, which is generally known as call
risk. If this occurs, a fund may be forced to reinvest in lower yielding
securities. This is known as reinvestment risk. Preferred stocks frequently
have call features that allow the issuer to repurchase the stock prior to its
stated maturity. An issuer may redeem an obligation if the issuer can refinance
the obligation at a lower cost due to declining interest rates or an
improvement in the credit standing of the issuer, or in the event of regulatory
changes affecting the capital treatment of its outstanding preferred stock.
Another risk associated with a declining interest rate environment is that the
income from a fund's portfolio may decline over time when the fund invests the
proceeds from share sales at market interest rates that are below the
portfolio's current earnings rate.
Liquidity Risk. Certain preferred stocks may be substantially less liquid than
many other stocks, such as common stocks or US Government securities. Illiquid
preferred stocks involve the risk that the stock may not be able to be sold at
the time desired by a fund or at prices approximating the value at which the
fund is carrying the stock on its books.
Limited Voting Rights Risk. Generally, traditional preferred stocks offer no
voting rights with respect to the issuer unless preferred dividends have been
in arrears for a specified number of periods, at which time the preferred stock
holders may elect a number of directors to the issuer's board. Generally, once
all the arrearages have been paid, the preferred stock holders no longer have
voting rights.
Special Redemption Rights Risk. In certain varying circumstances, an issuer of
preferred stock may redeem the stock prior to a specified date. For instance,
for certain types of preferred stocks, a redemption may be triggered by a
change in US federal income tax or securities laws. As with call provisions, a
redemption by the issuer may negatively impact the return of the preferred
stock held by a fund.
Lastly, dividends from certain preferred stocks may not be eligible for the
corporate dividends-received deduction or for treatment.
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.
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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.
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.
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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.
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
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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 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
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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.
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
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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 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. The following
applies to the extent that the fund employs the 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.
STABLE NET ASSET VALUE (FOR ALL MONEY MARKET FUNDS EXCEPT DWS VARIABLE NAV
MONEY FUND). 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, maturity, diversity and
liquidity of portfolio instruments held by a fund as described in the
prospectus, those 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
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also provide for certain action to be taken with respect to portfolio
securities which experience a downgrade in rating or suffer a default. In
addition, a low interest rate environment may prevent the fund from providing a
positive yield or paying fund expenses out of current income and, at times,
could impair a fund's ability to maintain a stable $1.00 share price. There is
no assurance that a fund's net asset value per share will be maintained at
$1.00.
In June 2013, the SEC proposed money market fund reform intended to address
perceived systemic risks associated with money market funds and to improve
transparency for money market fund investors. The Financial Stability Oversight
Council (FSOC), a board of U.S. regulators established by the Dodd-Frank Act,
had also previously proposed similar recommendations for money market fund
reform. If one or more of the SEC or FSOC proposals for money market fund
reform were to be adopted in the future, such regulatory action may affect the
fund's operations and/or return potential.
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.
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.
SUBSIDIARY COMPANIES. A fund may gain exposure to the commodity markets in part
by investing a portion of a fund's assets in a wholly-owned subsidiary
(Subsidiary). Investments in a Subsidiary are expected to provide exposure to
the commodity markets within the limitations of the Code and IRS rulings (see
Taxes in Appendix II-H of this SAI). The Subsidiaries are companies organized
under the laws of the Cayman Islands, and each is overseen by its own board of
directors.
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Among other investments, the Subsidiaries are expected to invest in
commodity-linked derivative instruments, such as swaps and futures. The
Subsidiaries will also invest in fixed income instruments, cash, cash
equivalents and affiliated money market funds. In monitoring compliance with
its investment restrictions, a fund will consider the assets of its Subsidiary
to be assets of the fund. A Subsidiary must, however, comply with the asset
segregation requirements (described elsewhere in this SAI) with respect its
investments in commodity-linked derivatives.
To the extent that a fund invests in its Subsidiary, a fund may be subject to
the risks associated with those derivative instruments and other securities,
which are discussed elsewhere in a fund's prospectuses and this SAI. While the
Subsidiaries may be considered similar to investment companies, they are not
registered under the 1940 Act and are not directly subject to all of the
investor protections of the 1940 Act and other US regulations. Changes in the
laws of the US or the Cayman Islands could result in the inability of a fund or
a Subsidiary to operate as intended or may subject the fund or its advisor to
new or additional regulatory requirements, and could negatively affect a fund
and its shareholders.
In order to qualify for the special tax treatment accorded regulated investment
companies and their shareholders, a fund must, among other things, satisfy
several diversification requirements, including the requirement that not more
than 25% of the value of the fund's total assets may be invested 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.
Therefore, so long as a fund is subject to this limit, the fund may not invest
any more than 25% of the value of its total assets in a Subsidiary. Absent this
diversification requirement, a fund would be permitted to invest more than 25%
of the value of its total assets in a Subsidiary.
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 gross income from certain specified sources (qualifying
income). Income from certain commodity-linked derivatives does not constitute
qualifying income to a fund. The tax treatment of commodity-linked notes and
certain other derivative instruments in which a fund might invest is not
certain, in particular with respect to whether income and gains from such
instruments constitutes qualifying income. If the Fund treats income from a
particular instrument as qualifying income and the income is later determined
not to constitute qualifying income, and, together with any other nonqualifying
income, causes the fund's nonqualifying income to exceed 10% of its gross
income in any taxable year, a fund will fail to qualify as a regulated
investment company unless it is eligible to and does pay a tax at the fund
level. Certain funds (including DWS Enhanced Commodity Strategy Fund, DWS Gold
and Precious Metals Fund, and DWS Global Inflation Fund) have obtained private
letter rulings from the IRS confirming that the income and gain earned through
a wholly-owned Subsidiary that invests in certain types of commodity-linked
derivatives constitute qualifying income under the Code.
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
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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.
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.
TO BE ANNOUNCED (TBA) PURCHASE COMMITMENTS. Similar to When-Issued or
Delayed-Delivery securities, a TBA purchase commitment is a security that is
purchased or sold for a fixed price with the underlying securities to be
announced at a future date. However, the seller does not specify the particular
securities to be delivered. Instead, a fund agrees to accept any securities
that meets the specified terms. For example, in a TBA mortgage-backed
transaction, a fund and seller would agree upon the issuer, interest rate and
terms of the underlying mortgages, but the seller would not identify the
specific underlying security until it issues the security. TBA purchase
commitments involve a risk of loss if the value of the underlying security to
be purchased declines prior to delivery date. The yield obtained for such
securities may be higher or lower than yields available in the market on
delivery date. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities.
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
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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 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,
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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.
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.
VARIABLE RATE DEMAND PREFERRED SECURITIES. A fund may purchase certain variable
rate demand preferred securities (VRDPs) issued by closed-end municipal bond
funds, which, in turn, invest primarily in portfolios of tax-exempt municipal
bonds. A fund may invest in securities issued by single-state or national
closed-end municipal bond funds. VRDPs are issued by closed-end funds to
leverage returns for common shareholders. Under the 1940 Act, a closed-end fund
that issues preferred shares must maintain an asset coverage ratio of at least
200% immediately after the time of issuance and at the time of certain
distributions on repurchases of its common stock. It is anticipated that the
interest on the VRDPs will be exempt from federal income tax and, with respect
to any such securities issued by single-state municipal bond funds, exempt from
the applicable state's income tax, although interest on VRDPs may be subject to
the federal alternative minimum tax. The VRDPs will pay a variable dividend
rate, determined weekly, typically through a remarketing process, and include a
demand feature that provides a fund with a contractual right to tender the
securities to a liquidity provider. A fund could lose money if the liquidity
provider fails to honor its obligation, becomes insolvent, or files for
bankruptcy. A fund has no right to put the securities back to the closed-end
municipal bond funds or demand payment or redemption directly from the
closed-end municipal bond funds. Further, the VRDPs are not freely transferable
and, therefore, a fund may only transfer the securities to another investor in
compliance with certain exemptions under the 1933 Act, including Rule 144A.
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A fund's purchase of VRDPs issued by closed-end municipal bond funds is subject
to the restrictions set forth under the heading "Investment Company and Other
Pooled Investment Vehicles."
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.
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.
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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, S&P and Fitch Ratings (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 "Ratings of Investments" for
descriptions 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
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. This discussion does not address all
aspects of taxation (including state, local, and foreign taxes) that may be
relevant to particular shareholders in light of their own investment or tax
circumstances, or to particular types of shareholders (including insurance
companies, tax-deferred retirement plans, financial institutions or
broker-dealers, foreign corporations, and persons who are not citizens or
residents of the United States) that are subject to special treatment under the
US federal income tax laws. 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.
Feeder Funds. Certain funds (Feeder Funds) invest all or substantially all of
their assets in either the DWS Equity 500 Index Portfolio or the Cash
Management Portfolio (each, a Master Portfolio), which are partnerships for US
federal income tax purposes. For a discussion of the US federal income tax
treatment of a Master Portfolio, please see the registration statement for that
Master Portfolio. The amount and character of a Feeder Fund's income, gains,
losses, deductions and other tax items will generally be determined at the
Master Portfolio level and the Feeder Fund will be allocated, and is required
to take into account, its share of its Master Portfolio's income, gains, losses
and other tax items for each taxable year. Consequently, references herein to a
fund's income, gains, losses and other tax items, as well as its activities,
investment and holdings, as applied to a Feeder Fund, generally include the tax
items, activities, investments and holdings realized, recognized, conducted or
held, as applicable, either by the Feeder Fund directly or through its Master
Portfolio. See "Investments in the Master Portfolios" for more information.
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 Internal
Revenue Code of 1986 (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 for each taxable year 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 are 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.
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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.
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 will be master limited
partnerships constituting qualified publicly traded partnerships. Such
investments will be limited by a fund's intention to qualify as a regulated
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.
Pursuant to current Internal Revenue Service (IRS) guidance, a Feeder Fund
investing in a Master Portfolio will be treated as holding directly the
underlying assets of the Master Portfolio for purposes of the diversification
test in (b) above.
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 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 a fund were to fail to
meet the income, diversification or distribution tests described above, the
fund could in some cases cure such failure, including by paying a fund-level
tax, paying interest, making additional distributions or disposing of certain
assets. If a fund were ineligible to or otherwise did not cure such failure for
any year, the fund would fail to qualify as a "regulated investment company"
for such year. All of the fund's 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 provided, in both cases, the shareholder meets
certain holding period and other requirements in respect of the fund's shares
(as described below). 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 98.2% 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 purposes of the required excise tax distribution,
ordinary gains and losses from the sale, exchange or other taxable disposition
of property that would be taken into account after October 31 (or later if the
fund is permitted to so elect and does so elect) are treated as arising on
January 1 of the following calendar year. Also for purposes of the excise tax,
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, 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.
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SPECIAL TAX PROVISIONS THAT APPLY TO CERTAIN INVESTMENTS. 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. Some debt obligations with a fixed maturity date of
more than one year from the date of issuance (and zero-coupon debt obligations
with a fixed maturity date of more than one year from the date of issuance)
that are acquired by a fund will be treated as debt obligations that are issued
originally at a discount. Generally, the amount of the original issue discount
(OID) is treated as interest income and is included in a fund's income (and
required to be distributed by a fund) over the term of the debt security, even
though payment of that amount is not received until a later time, upon partial
or full repayment or disposition of the debt security. In addition,
payment-in-kind debt securities will give rise to income which is required to
be distributed and is taxable even though a fund holding the security receives
no interest payment in cash on the security during the year.
Some debt obligations with a fixed maturity date of more than one year from the
date of issuance that are acquired by a fund in the secondary market may be
treated as having "market discount." Very generally, market discount is the
excess of the stated redemption price of a debt obligation (or in the case of
an obligation issued with OID, its "revised issue price") over the purchase
price of such obligation. Generally, any gain recognized on the disposition of,
and any partial payment of principal on, a debt security having market discount
is treated as ordinary income to the extent the gain, or principal payment,
does not exceed the "accrued market discount" on such debt security.
Alternatively, a fund may elect to accrue market discount currently, in which
case a fund will be required to include the accrued market discount in a fund's
income (as ordinary income) and thus distribute it over the term of the debt
security, even though payment of that amount is not received until a later
time, upon partial or full repayment or disposition of the debt security. The
rate at which the market discount accrues, and thus is included in a fund's
income, will depend upon which of the permitted accrual methods a fund elects.
Some debt obligations with a fixed maturity date of one year or less from the
date of issuance that are acquired by a fund may be treated as having OID or,
in certain cases, "acquisition discount" (very generally, the excess of the
stated redemption price over the purchase price). A fund will be required to
include the OID or acquisition discount in income (as ordinary income) and thus
distribute it over the term of the debt security, even though payment of that
amount is not received until a later time, upon partial or full repayment or
disposition of the debt security. The rate at which OID or acquisition discount
accrues, and thus is included in a fund's income, will depend upon which of the
permitted accrual methods a fund elects.
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 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.
A portion of the OID accrued on certain high yield discount obligations may not
be deductible to the issuer and will instead be treated as a dividend paid by
the issuer for purposes of the dividends received deduction. In such cases, if
the issuer of the high yield discount obligations is a domestic corporation,
dividend payments by a fund may be eligible for the dividends received
deduction to the extent attributable to the deemed dividend portion of such
OID.
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, OID or market discount, when and to what extent deductions may be
taken for bad debts or worthless securities, how payments received on
obligations
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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.
Very generally, where a fund purchases a bond at a price that exceeds the
redemption price at maturity (i.e., a premium), the premium is amortizable over
the remaining term of the bond. In the case of a taxable bond, if a fund makes
an election applicable to all such bonds it purchases, which election is
irrevocable without consent of the IRS, the fund reduces the current taxable
income from the bond by the amortized premium and reduces its tax basis in the
bond by the amount of such offset; upon the disposition or maturity of such
bonds acquired on or after January 4, 2013, the fund is permitted to deduct any
remaining premium allocable to a prior period. In the case of a tax-exempt
bond, tax rules require such a fund to reduce its tax basis by the amount of
amortized premium.
Derivatives. In addition to the special rules described below in respect of
options transactions and futures, a fund's transactions in other derivative
instruments (e.g. forward contracts and swap agreements), as well as any of its
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.
A fund's options activities may include transactions constituting straddles for
US federal income tax purposes, that is, that trigger the US federal income tax
straddle rules contained primarily in Section 1092 of the Code. Such straddles
include, for example, positions in a particular security, or an index of
securities, and one or more options that offset the former position, including
options that are "covered" by a fund's long position in the subject security.
Very generally, where applicable, Section 1092 requires (i) that losses be
deferred on positions deemed to be offsetting positions with respect to
"substantially similar or related property," to the extent of unrealized gain
in the latter, and (ii) that the holding period of such a straddle position
that has not already been held for the long-term holding period be terminated
and begin anew once the position is no longer part of a straddle. The straddle
rules apply in modified form to so-called "qualified covered calls." Very
generally, where a taxpayer writes an option a single stock that is "in the
money" but not "deep in the money," the holding period on the stock will not be
terminated, as it would be under the general straddle rules, but will be
suspended during the period that such calls are outstanding. These straddle
rules could cause gains that would otherwise constitute long-term capital gains
to be treated as short-term capital gains, and
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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.
In summary, a fund's options activities can cause a substantial portion of the
fund's income to consist of short-term capital gains, taxable to shareholders
at ordinary income rates when distributed to them.
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 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.
Income from certain commodity-linked derivatives does not constitute qualifying
income to a fund. The federal income tax treatment of commodity-linked notes
and certain other derivative instruments in which a fund might invest is not
certain, in particular with respect to whether income and gains from such
instruments constitutes qualifying income. If a fund treats income from a
particular instrument as qualifying income and the income is later determined
not to constitute qualifying income, and, together with any other nonqualifying
income, causes the fund's nonqualifying income to exceed 10% of its gross
income in any taxable year, the fund will fail to qualify as a regulated
investment company unless it is eligible to and does pay a tax at the fund
level. Certain funds (including the DWS Enhanced Commodity Strategy Fund, DWS
Gold and Precious Metals Fund, and DWS Global Inflation Fund) have obtained
private letter rulings from the IRS confirming that the income and gain earned
through a wholly owned subsidiary that invests in certain types of
commodity-linked derivatives constitute qualifying income under the Code. The
IRS has currently suspended the issuance of such private letter rulings. An
opinion of counsel is not binding on the IRS or the courts. See "Investment in
Wholly Owned Foreign Subsidiary" below for more information.
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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 residual interest in a real estate mortgage investment conduit (REMIC)
or an equity interest in a taxable mortgage pool (TMP) including such income
received indirectly through a REIT or other pass-through entity (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
and see also Tax-exempt Shareholders for a summary of certain federal income
tax consequences to shareholders of distributions reported 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 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.
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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 will, 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. Payment of such taxes will reduce a fund's yield on
those investments.
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 whether the foreign taxes paid by a fund will "pass through" for that
year and, if so, such notification will report the shareholder's portion of (i)
the foreign taxes paid by a fund and (ii) a fund's foreign source income.
Certain fund of funds also may qualify to pass through to shareholders foreign
taxes paid by underlying funds in which the fund of funds invests. See
Fund-of-Funds Structure, below.
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, 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. Shareholders that are not subject to US federal
income tax, and those who invest in a fund through tax-advantaged accounts
(including those who invest through individual retirement accounts or other
tax-advantaged retirement plans), generally will receive no benefit from any
tax credit or deduction passed through by a fund.
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 and will not be required to include
such taxes in their gross income.
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
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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. Because it is not always possible to identify a foreign
corporation as a PFIC, a fund may incur the tax and interest charges described
above in some instances. Dividends paid by PFICs will not be eligible to be
treated as "qualified dividend income."
Investment in Wholly Owned Foreign Subsidiary. Certain funds may invest a
portion of their assets (but not more than 25% of the value of the fund's total
assets as of the end of each quarter of such fund's taxable year) in a wholly
owned foreign subsidiary that will invest in certain types of commodity-linked
derivatives (each a "Subsidiary"). Each Subsidiary was formed under the laws of
the Cayman Islands and is classified as a corporation for federal income tax
purposes.
For federal income tax purposes, each Subsidiary will be treated as a
controlled foreign corporation and the applicable fund will be treated as a "US
shareholder" of the Subsidiary. As a result, each fund will be required to
include in gross income for US federal income tax purposes all of its
Subsidiary's "subpart F income," whether or not such income is distributed by
the Subsidiary. It is expected that all or substantially all of each
Subsidiary's income will be "subpart F income." Each fund's recognition of its
Subsidiary's "subpart F income" will increase the Subsidiary's basis in its
shares of the Subsidiary. Distributions by a Subsidiary to the applicable fund
will be tax-free, to the extent of its previously undistributed "subpart F
income," and will correspondingly reduce the fund's basis in its shares of the
Subsidiary. "Subpart F income" is generally treated as ordinary income,
regardless of the character of a Subsidiary's underlying income. Therefore,
each fund's investment in its Subsidiary may cause the fund to realize more
ordinary income than would be the case if the fund invested directly in the
investments held by its Subsidiary. If a net loss is realized by a Subsidiary,
such loss is not generally available to offset other income earned by the
applicable fund.
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As noted above, to qualify as a regulated investment company, a fund must
derive at least 90% of its gross income each taxable year from certain
specified sources. Income from direct investments in commodities and certain
commodity-linked derivatives generally does not constitute qualifying income.
The IRS has formerly issued a number of private letter rulings to investment
companies concluding that income derived from an investment in a wholly owned
foreign subsidiary that invests in commodity-linked derivatives constitutes
qualifying income but each of these private letter rulings applies only to the
taxpayer that received it and may not be used or cited as precedent. DWS
Enhanced Commodity Strategy Fund, DWS Gold and Precious Metals Fund and DWS
Global Inflation Fund each obtained a ruling. The IRS has since suspended the
issuance of such rulings and is reviewing its policy in this area. It is
possible that, as a consequence of its current review of this area, the IRS
will reverse its prior position and publish guidance under which it will take
the position that income and gains a fund derives from its investment in its
Subsidiary do or will not constitute qualifying income. In such a case, a fund
could fail to qualify as a regulated investment company, could be limited in
its ability to implement its current investment strategies and may need to
significantly change its investment strategies, which could adversely affect
the fund. A fund also may incur transaction and other costs to comply with any
new or additional guidance from the IRS.
Investments in the Master Portfolios. Special tax considerations apply to a
Feeder Fund investing in a Master Portfolio. As noted above, each Master
Portfolio is treated as a partnership for US federal income tax purposes. For
US federal income tax purposes, a Feeder Fund generally will be allocated its
distributive share (as determined in accordance with the governing instruments
of the applicable Master Portfolio, as well as with the Code, the Treasury
regulations thereunder, and other applicable authority) of the income, gains,
losses, deductions, credits, and other tax items of its Master Portfolio so as
to reflect the Feeder Fund's interests in the Master Portfolio. A Master
Portfolio may modify its partner allocations to comply with applicable tax
regulations, including, without limitation, the income tax regulations under
Sections 704, 734, 743, 754, and 755 of the Code. It also may make special
allocations of specific tax items, including gross income, gain, deduction, or
loss. These modified or special allocations could result in a Feeder Fund, as a
partner, receiving more or less items of income, gain, deduction, or loss
(and/or income, gain, deduction, or loss of a different character) than it
would in the absence of such modified or special allocations. A Feeder Fund
will be required to include in its income its share of its Master Portfolio's
tax items, including gross income, gain, deduction, or loss, for any taxable
year regardless of whether or not the Master Portfolio distributes any cash to
the Feeder Fund in such year.
A Master Portfolio is not required, and generally does not expect, to make
distributions (other than distributions in redemption of Master Portfolio
interests) to its investors each year. Accordingly, the income recognized by a
Feeder Fund in respect of its investment in a Master Portfolio could exceed
amounts distributed (if any) by the Master Portfolio to the Feeder Fund in a
particular taxable year, and thus the Feeder Fund could be required to redeem a
portion of its interests in the Master Portfolio in order to obtain sufficient
cash to satisfy its annual distribution requirements (described above) and to
otherwise avoid fund-level US federal income and excise taxes.
A Feeder Fund's receipt of a non-liquidating cash distribution from a Master
Portfolio generally will result in recognized gain (but not loss) only to the
extent that the amount of the distribution exceeds the Feeder Fund's adjusted
basis in its interests of the Master Portfolio before the distribution. A
Feeder Fund that receives a liquidating cash distribution from a Master
Portfolio generally will recognize capital gain to the extent of the difference
between the proceeds received by the Feeder Fund and the Feeder Fund's adjusted
tax basis in interests of such Master Portfolio; however, the Feeder Fund
generally will recognize ordinary income, rather than capital gain, to the
extent that the Feeder Fund's allocable share of "unrealized receivables"
(including any accrued but untaxed market discount) and substantially
appreciated inventory, if any, exceeds the Feeder Fund's share of the basis in
those unrealized receivables and substantially appreciated inventory. Any
capital loss realized on a liquidating cash distribution may be recognized by a
Feeder Fund only if it redeems all of its Master Portfolio interests for cash.
A Feeder Fund generally will not recognize gain or loss on an in-kind
distribution of property from a Master Portfolio, including on an in-kind
redemption of Master Portfolio interests. However, certain exceptions to this
general rule may apply.
TAXATION OF US SHAREHOLDERS
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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 on or before January 31 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. However,
withdrawals from such retirement plans may 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 (other than
"exempt-interest dividends," see below) 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
reported by a fund as capital gain dividends (Capital Gain Dividends) will be
taxable as long-term capital gains includible in and taxed at the reduced rates
applicable to net capital gain. Distributions from capital gains are generally
made after applying any available capital loss carryovers. 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.
Section 1411 of the Code generally imposes a 3.8% Medicare contribution tax on
the net investment income of certain individuals whose income exceeds certain
threshold amounts, and of certain trusts and estates under similar rules. For
these purposes, "net investment income" generally includes, among other things,
(i) distributions paid by a fund of net investment income and capital gains
(other than exempt-interest dividends, described below) as described above, and
(ii) any net gain from the sale, redemption or exchange of a fund's shares.
Shareholders are advised to consult their tax advisors regarding the possible
implications of this additional tax on their investment in a fund.
Qualified dividend income. Dividends reported by a fund as derived from
"qualified dividend income" will be taxed to individuals and other noncorporate
shareholders at the reduced federal income tax rates generally applicable to
net 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 offset by capital losses.
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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 reported 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 reported 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
constitute 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 (i) 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 (ii) 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 (i) if a corporate shareholder fails to
satisfy the foregoing requirements with respect to its shares of a fund or (ii)
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 fund dividends that
so qualifies.
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Capital gains. In determining its net capital gain, including in connection
with determining the amount available to support a Capital Gain Dividend, its
taxable income and its earnings and profits, a fund may elect to treat any
post-October capital loss (defined as the greatest of net capital loss, net
long-term capital loss, or net short-term capital loss, in each case
attributable to the portion of the taxable year after October 31) and late-year
ordinary loss (generally, (i) net ordinary losses from the sale, exchange or
other taxable disposition of property, attributable to the portion of the
taxable year after October 31, plus (ii) other net ordinary losses attributable
to the portion of the taxable year after December 31) as if incurred in the
succeeding taxable 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. Instead, subject to certain limitations, a fund may carry
forward a net capital loss from any taxable year to offset capital gains, if
any, realized during a subsequent taxable year. If a fund incurs or has
incurred net capital losses in taxable years beginning after December 22, 2010
("post-2010 losses"), those losses will be carried forward to one or more
subsequent taxable years without expiration; any such carryforward losses will
retain their character as short-term or long-term. If a fund incurred net
capital losses in a taxable year beginning on or before December 22, 2010
("pre-2011 losses"), the fund is permitted to carry such losses forward for
eight taxable years; in the year to which they are carried forward, such losses
are treated as short-term capital losses that first offset any short-term
capital gains, and then offset any long-term capital gains. A fund must use any
post-2010 losses, which will not expire, before it uses any pre-2011 losses.
This increases the likelihood that pre-2011 losses will expire unused at the
conclusion of the eight-year carryforward period. Capital loss carryforwards
are reduced to the extent they offset current-year net realized capital gains,
whether the fund retains or distributes such gains. 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 reported 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. A shareholder will be subject to US federal income tax on such
inclusions notwithstanding any exemption from such income tax otherwise
available under the Code. See Tax-exempt shareholders below.
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.
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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 reported by a
fund 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 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 Code section 103(a). Distributions that a fund reports 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.
Certain funds of funds may also qualify to pay exempt-interest dividends to
shareholders, to the extent of exempt-interest dividends received from
underlying funds in which the fund of funds invests. See Fund-of-Funds
structure, below.
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.
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Any loss realized upon a taxable disposition of a fund's shares held by a
shareholder for six months or less will be treated as long-term, rather than
short-term, to the extent of any capital gain dividends received (or deemed
received) by the shareholder with respect to the shares. 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, unless a fund declares
exempt-interest dividends on a daily basis in an amount equal to at least 90%
of its net tax-exempt interest and distributes such dividends on a monthly or
more frequent basis. 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 by
January 31 of the calendar year following the calendar year in which the
disposition occurred 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
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. However, withdrawals from such retirement plans may 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.
COST BASIS REPORTING. A fund or, for a shareholder that purchased fund shares
through a financial intermediary, the financial intermediary, is generally
required to report to the IRS, and furnish to such shareholder "cost basis" and
"holding period" information for fund shares the shareholder acquired on or
after January 1, 2012 and redeemed on or after that date (covered shares).
These requirements do not apply to investments through a tax-deferred
arrangement or to shares of money market funds (except DWS Variable NAV Money
Fund). For covered shares, the fund or the financial intermediary, as
appropriate, will report the following information to the IRS and to the
shareholder on Form 1099-B: (i) the adjusted basis of such shares, (ii) the
gross proceeds received on the redemption, and (iii) whether any gain or loss
with respect to the redeemed shares is long-term or short-term.
With respect to fund shares in accounts held directly with a fund, the fund
will calculate and report cost basis using a fund's default method of average
cost, unless the shareholder instructs the fund to use a different calculation
method. Please visit the DWS Investments Web site at dws-investments.com (the
Web site does not form a part of this Statement of Additional Information) for
more information.
Shareholders who hold fund shares through a financial intermediary should
contact the financial intermediary regarding the cost basis reporting default
method used by the financial intermediary and the reporting elections
available.
Shareholders should contact a tax advisor regarding the application of the cost
basis reporting rules to their particular situation, including whether to elect
a cost basis calculation method or use a fund's default method of average cost.
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 (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.
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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 generally is 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 currently 28%. 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.
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.
SHAREHOLDER REPORTING OBLIGATIONS WITH RESPECT TO FOREIGN BANK AND FINANCIAL
ACCOUNTS. Shareholders that are US persons and own, directly or indirectly,
more than 50% of a fund by vote or value could be required to report annually
their "financial interest" in a fund's "foreign financial accounts," if any, on
Treasury Department Form TD F 90-22.1, Report of Foreign Bank and Financial
Accounts (FBAR). Shareholders should consult a tax advisor regarding the
applicability to them of this reporting requirement.
OTHER REPORTING AND WITHHOLDING REQUIREMENTS.
The Foreign Account Tax Compliance Act (FATCA) generally requires a fund to
obtain information sufficient to identify the status of each of its
shareholders under FATCA. If a shareholder fails to provide this information or
otherwise fails to comply with FATCA, a fund may be required to withhold under
FATCA at a rate of 30% with respect to that shareholder on dividends (other
than exempt-interest dividends), including Capital Gain Dividends, and the
proceeds of the sale,
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redemption or exchange of fund shares. If a payment by a fund is subject to
FATCA withholding, the fund is required to withhold even if such payment would
otherwise be exempt from withholding under the rules applicable to non-US
shareholders described below (e.g., Capital Gain Dividends and short-term
capital gain and interest-related dividends), beginning as early as July 1,
2014.
Each prospective investor is urged to consult its tax adviser regarding the
applicability of FATCA and any other reporting requirements with respect to the
prospective investor's own situation, including investments through an
intermediary.
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 (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 reported as Capital Gain
Dividends and exempt-interest dividends generally are not subject to
withholding of federal income tax.
Effective for distributions with respect to taxable years of a fund beginning
before January 1, 2014, 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
reported by a 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 reported 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. This exemption from withholding for
interest-related and short-term capital gain dividends has expired for
distributions with respect to taxable years of a fund beginning on or after
January 1, 2014. It is currently unclear whether Congress will extend this
exemption for taxable years of a fund beginning on or after January 1, 2014 or
what the terms of any such extension would be, including whether such extension
would have retroactive effect.
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 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.
The 30% 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, foreign shareholders with respect
to whom income from a fund is effectively connected with a trade or business
conducted by the foreign shareholder within the United States will in general
be subject to US federal income tax on the income derived from a fund at the
graduated rates applicable to US citizens, residents or domestic corporations,
whether such income is received in cash or reinvested in shares of a fund and,
in the case of a foreign corporation, may also be subject to a branch profits
tax. If a foreign shareholder is eligible for the benefits
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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 shareholder in the US. More
generally, foreign shareholders who are residents in a country with an income
tax treaty with the US may obtain different tax results than those described
herein, and are urged to consult their tax advisors.
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 reports 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.
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 in this subsection, US 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 non-US shareholders 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 or former USRPHC. Very generally, a USRPHC is a
domestic 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
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 prior to January 1, 2014, 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), under a "look-through" rule,
distributions by a fund that are attributable directly or indirectly to
distributions received by a fund from a lower-tier 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 a fund's non-US shareholders. If the
non-US 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 non-US persons (i.e., those whose interest in a fund
did not exceed 5% at any time during the prior year), the USRPI distribution
generally will be treated as ordinary income (regardless of any reporting by a
fund that such distribution is qualified short-term capital gain or a Capital
Gain Dividend), and a fund must withhold 30% (or a lower applicable treaty
rate) of the amount of the distribution paid to such non-US shareholder. Prior
to January 1, 2014, the special "look-through" rule discussed above for
distributions by a fund to foreign shareholders also applied to distributions
attributable to (i) gains realized on the disposition of USRPIs by a fund and
(ii) distributions received by a fund from a lower-tier RIC that a fund was
required to treat as USRPI gain in its hands. It is currently unclear whether
Congress will extend these former "look-through" provisions to distributions
made on or after January 1, 2014, and what the terms of any such extension
would be, including whether any such extension would have retroactive effect.
Non-US shareholders 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.
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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 non-US shareholder, 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. Prior to January 1, 2014, no such withholding
is generally required with respect to amounts paid in redemption of shares of a
fund if a fund was a domestically controlled qualified investment entity, or,
in certain other limited cases, if a fund (whether or not domestically
controlled) held substantial investments in regulated investment companies that
were domestically controlled qualified investment entities. The exemption from
withholding for redemptions and distributions has expired and such withholding
is required, without regard to whether a fund or any RIC in which it invests is
domestically controlled. It is currently unclear whether Congress will extend
the exemptions from withholding described above for redemptions made on or
after January 1, 2014, and what the terms of any such extension would be,
including whether any such extension would have retroactive effect..
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.
Fund-of-Funds Structure. If a fund invests substantially all of its assets in
shares of other mutual funds, Exchange Traded Funds or other companies that are
regulated investment companies (collectively, "underlying funds"), its
distributable income and gains will normally consist entirely of distributions
from underlying funds and gains and losses on the disposition of shares of
underlying funds. To the extent that an underlying fund realizes net losses on
its investments for a given taxable year, a fund will not be able to benefit
from those losses until (i) the underlying fund realizes gains that it can
reduce by those losses, or (ii) the fund recognizes its shares of those losses
(so as to offset distributions of net income or capital gains from other
underlying funds) when it disposes of shares of the underlying fund. Moreover,
even when a fund does make such a disposition, a portion of its loss may be
recognized as a long-term capital loss, which will not be treated as favorably
for US federal income tax purposes as a short-term capital loss or an ordinary
deduction. In particular, a fund will not be able to offset any capital losses
from its dispositions of underlying fund shares against its ordinary income
(including distributions of any net short-term capital gains realized by an
underlying fund).
In addition, in certain circumstances, the "wash sale" rules under Section 1091
of the Code may apply to a fund's sales of underlying fund shares that have
generated losses. A wash sale occurs if shares of an underlying fund are sold
by a fund at a loss and the fund acquires additional shares of that same
underlying fund or other substantially identical stock or securities 30 days
before or after the date of the sale. The wash-sale rules could defer losses in
the fund's hands on sales of underlying fund shares (to the extent such sales
are wash sales) for extended (and, in certain cases, potentially indefinite)
periods of time.
As a result of the foregoing rules, and certain other special rules, it is
possible that the amounts of net investment income and net capital gain that a
fund will be required to distribute to shareholders will be greater than such
amounts would have been had the fund invested directly in the securities held
by the underlying funds, rather than investing in shares of the underlying
funds. For similar reasons, the character of distributions from a fund (e.g.,
long-term capital gain, exempt interest, eligibility for dividends-received
deduction, etc.) will not necessarily be the same as it would have been had the
fund invested directly in the securities held by the underlying funds.
If a fund receives dividends from an underlying fund, and the underlying fund
reports such dividends as "qualified dividend income," then the fund is
permitted, in turn, to report a portion of its distributions as "qualified
dividend income," provided the fund meets the holding period and other
requirements with respect to shares of the underlying fund.
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If a fund receives dividends from an underlying fund, and the underlying fund
reports such dividends as eligible for the dividends-received deduction, then
the fund is permitted, in turn, to report a portion of its distributions as
eligible for the dividends-received deduction, provided the fund meets the
holding period and other requirements with respect to shares of the underlying
fund.
If a fund receives tax credit bond credits from an underlying fund, and the
underlying fund made an election to pass through such tax credits to its
shareholders, then the fund is permitted in turn to elect to pass through its
proportionate share of those tax credits to its shareholders, provided that the
fund meets the shareholder notice and other requirements.
If at the close of each quarter of a fund's taxable year, at least 50% of its
total assets consists of interests in other regulated investment companies, a
fund will be a "qualified fund of funds." In that case, the fund is permitted
to elect to pass through to its shareholders foreign income and other similar
taxes paid by the fund of funds or by an underlying fund that itself elected to
pass such taxes through to shareholders, so that shareholders of the qualified
fund of funds will be eligible to claim a tax credit or deduction for such
taxes.
A qualified fund of funds (defined above) is permitted to distribute
exempt-interest dividends and thereby pass through to its shareholders the
tax-exempt character of interest on tax-exempt obligations and exempt-interest
dividends it receives from underlying funds.
Variable annuity funds. Certain special tax considerations apply to the
variable annuity funds (DWS Variable Series I, DWS Variable Series II and DWS
Investments VIT Funds). These funds intend to comply with the separate
diversification requirements imposed by Section 817(h) of the Code and the
regulations thereunder on certain insurance company separate accounts. These
requirements limit the percentage of total assets used to fund variable
contracts that an insurance company separate account may invest in any single
investment. Because Section 817(h) and those regulations treat the assets of a
regulated investment company owned exclusively by insurance company separate
accounts and certain other permitted investors as assets of the separate
accounts investing in that regulated investment company, these regulations are
imposed on the assets of the variable annuity funds in addition to the
diversification requirements imposed on the funds by the 1940 Act and
Subchapter M of the Code. Specifically, the regulations provide that, except as
permitted by the "safe harbor" described below (and, in general, during a one
year start-up period), as of the end of each calendar quarter or within 30 days
thereafter no more than 55% of the total assets of a separate account may be
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments, and no more than 90% by any four
investments. For this purpose, all securities of the same issuer are generally
considered a single investment, and each US Government agency and
instrumentality is considered a separate issuer. Section 817(h) provides, as a
safe harbor, that a separate account will be treated as being adequately
diversified if the diversification requirements under Subchapter M are
satisfied and no more than 55% of the value of the account's total assets is
attributable to cash and cash items (including receivables), US Government
securities and securities of other regulated investment companies.
Failure by a variable annuity fund to qualify as a regulated investment company
or to satisfy the Section 817(h) requirements by failing to comply with the
"55%-70%-80%-90%" diversification test or the safe harbor described above could
cause the variable contracts to lose their favorable tax status and require a
contract holder to include in ordinary income any income accrued under the
contracts for the current and all prior taxable years. Under certain
circumstances described in the applicable Treasury regulations, inadvertent
failure to satisfy the Section 817(h) diversification requirements may be
corrected, but such a correction could require a payment to the IRS with
respect to the period or periods during which the investments of the account
did not meet the diversification requirements. The amount of any such payment
could be based on the tax contract holders would have incurred if they were
treated as receiving the income on the contract for the period during which the
diversification requirements were not satisfied. Any such failure could also
result in adverse tax consequences for the insurance company issuing the
contracts.
The 4% excise tax described above does not apply to any regulated investment
company whose sole shareholders are tax-exempt pension trusts, separate
accounts of life insurance companies funding variable contracts and certain
other tax-exempt entities. In determining the sole shareholders of a regulated
investment company for purposes of this exception to the excise tax, shares
attributable to an investment in the regulated investment company (not
exceeding $250,000) made in connection with the organization of the regulated
investment company are not taken into account.
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The IRS has indicated that too great a degree of investor control over the
investment options underlying variable contracts may result in the loss of
tax-deferred treatment for such contracts. The Treasury Department has issued
rulings addressing the circumstances in which a variable contract owner's
control of the investments of the separate account may cause the contract
owner, rather than the insurance company, to be treated as the owner of the
assets held by the separate account, and is likely to issue additional rulings
in the future. If the contract owner is considered the owner of the securities
underlying the separate account, income and gains produced by those securities
would be included currently in the contract owner's gross income.
In determining whether an impermissible level of investor control is present,
one factor the IRS considers when a separate account invests in one or more
regulated investment companies is whether a regulated investment company's
investment strategies are sufficiently broad to prevent a contract holder from
being deemed to be making particular investment decisions through its
investment in the separate account. Current IRS guidance indicates that typical
regulated investment company investment strategies, even those with a specific
sector or geographical focus, are generally considered sufficiently broad to
prevent a contract holder from being deemed to be making particular investment
decisions through its investment in a separate account. For example, the IRS
has issued a favorable ruling concerning a separate account offering
sub-accounts (each funded through a single regulated investment company) with
the following investment strategies: money market, bonds, large company stock,
international stock, small company stock, mortgage-backed securities, health
care industry, emerging markets, telecommunications, financial services, South
American stock, energy, and Asian markets. Each variable annuity fund has an
investment objective and strategies that are not materially narrower than the
investment strategies described in this IRS ruling.
The above discussion addresses only one of several factors that the IRS
considers in determining whether a contract holder has an impermissible level
of investor control over a separate account. Contract holders should consult
with their insurance companies, their tax advisers, as well as the prospectus
relating to their particular contract for more information concerning this
investor control issue.
In the event that additional rules, regulations or other guidance are issued by
the IRS or the Treasury Department concerning this issue, such guidance could
affect the treatment of a variable annuity fund as described above, including
retroactively. In addition, there can be no assurance that a variable annuity
fund will be able to continue to operate as currently described, or that a
variable annuity fund will not have to change its investment objective or
investment policies in order to prevent, on a prospective basis, any such rules
and regulations from causing variable contract owners to be considered the
owners of the shares of the variable annuity fund.
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, INCLUDING
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
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PART II: APPENDIX II-I - PROXY VOTING POLICY AND 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 (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-US 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.
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.
/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.
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 (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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(i) adopting, monitoring and updating guidelines, attached as Exhibit A
(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 an 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.
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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/
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.
/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.
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.
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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, 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/
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 (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 cannot be sufficiently completed by the Conflicts of Interest Management
Sub-Committee the proxies will be voted in accordance with the standard
guidelines.
The information considered by the Conflicts of Interest Management
Sub-Committee may include without limitation information regarding (i) AM
client relationships; (ii) any relevant personal conflict known by the
Conflicts of Interest Management Sub-Committee or brought to the attention of
that sub-committee; (iii) and any communications with members of the GPVSC (or
anyone participating or providing information to the GPVSC) and any person
outside of the AM organization (but within Deutsche Bank and its affiliates) or
any entity that identifies itself as a AM advisory client regarding the vote at
issue. In the context of any determination, the Conflicts of Interest
Management Sub-Committee may consult with, and shall be entitled to rely upon,
all applicable outside experts, including legal counsel.
Upon completion of the investigation, the Conflicts of Interest Management
Sub-Committee will document its findings and conclusions. If the Conflicts of
Interest Management Sub-Committee determines that (i) AM has a material
conflict of interest that would prevent it from deciding how to vote the
proxies concerned without further client consent or (ii) certain individuals
should be recused from participating in the proxy vote at issue, the Conflicts
of Interest Management Sub-Committee will so inform the GPVSC chair.
If notified that AM has a material conflict of interest as described above, the
GPVSC chair will obtain instructions as to how the proxies should be voted
either from (i) if time permits, the affected 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.
/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.
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/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.
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 an 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 affected 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 an 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 affect 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 affected clients and otherwise from ISS.
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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 Central Cash Management Fund (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 Central Cash Management Fund, 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 but not limited to:
o Code of Business Conduct and Ethics - DB Group
o Conflicts of Interest Policy - DB Group
o Information Sharing Procedures - DeAM
o Code of Ethics - DeAM
o Code of Professional Conduct - US
The GPVSC expects that these policies, procedures and internal controls will
greatly reduce the chance that the GPVSC (or, its members) would be involved
in, aware of or influenced by, an actual or apparent conflict of interest.
V. RECORDKEEPING
At a minimum, the following types of records must be properly maintained and
readily accessible in order to evidence compliance with this policy.
o AM will maintain a record of each vote cast by AM that includes among other
things, company name, meeting date, proposals presented, vote cast and
shares voted.
o The Proxy Vendor Oversight maintains records for each of the proxy ballots
it votes. Specifically, the records include, but are not limited to:
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- 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.
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.
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.
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.
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ATTACHMENT A - GLOBAL PROXY VOTING GUIDELINES
DEUTSCHE ASSET MANAGEMENT
GLOBAL PROXY VOTING GUIDELINES
AS AMENDED FEBRUARY 2013
[GRAPHIC OMITTED]
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TABLE OF CONTENTS
I BOARD OF DIRECTORS AND EXECUTIVES
A Election Of Directors
B Classified Boards Of Directors
C Board And Committee Independence
D Liability And Indemnification Of Directors
E Qualifications Of Directors
F Removal Of Directors And Filling Of Vacancies
G Proposals To Fix The Size Of The Board
H Proposals to Restrict Chief Executive Officer's
Service on Multiple Boards
I Proposals to Restrict Supervisory Board
Members Service on Multiple Boards
J Proposals to Establish Audit Committees
II CAPITAL STRUCTURE
A Authorization Of Additional Shares
B Authorization Of "Blank Check" Preferred Stock
C Stock Splits/Reverse Stock Splits
D Dual Class/Supervoting Stock
E Large Block Issuance
F Recapitalization Into A Single Class Of Stock
G Share Repurchases
H Reductions In Par Value
III CORPORATE GOVERNANCE ISSUES
A Confidential Voting
B Cumulative Voting
C Supermajority Voting Requirements
D Shareholder Right To Vote
IV COMPENSATION
A Establishment of a Remuneration Committee
B Executive And Director Stock Option Plans
C Employee Stock Option/Purchase Plans
D Golden Parachutes
E Proposals To Limit Benefits Or Executive
Compensation
F Option Expensing
G Management board election and motion
H Remuneration (variable pay)
I Long-term incentive plans
J Shareholder Proposals Concerning "Pay For
Superior Performance"
K Executive Compensation Advisory
L Advisory Votes on Executive Compensation
M Frequency of Advisory Vote on Executive
Compensation
V ANTI-TAKEOVER RELATED ISSUES
A Shareholder Rights Plans ("Poison Pills")
B Reincorporation
C Fair-Price Proposals
D Exemption From State Takeover Laws
|
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E Non-Financial Effects Of Takeover Bids
VI MERGERS & ACQUISITIONS
VII ENVIRONMENTAL, SOCIAL & POLITICAL ISSUES
A Principles for Responsible Investment ("PRI")
B ESG Issues
C Labor & Human Rights
D Diversity & Equality
E Health & Safety
F Government/Military
G Tobacco
VIII 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
|
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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.
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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 affect 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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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.
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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 affect 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/or 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.
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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 affect 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.
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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.
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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.
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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 optimize 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.
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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.
L. ADVISORY VOTES ON EXECUTIVE COMPENSATION
AM policy is to evaluate Executive Compensation proposals on a case-by-case
basis, where locally defined this may be done by incorporating the
recommendation of an independent third party proxy research firm. AM will
oppose Advisory Votes on Executive Compensation if:
o there is a significant misalignment between CEO pay and company performance;
o the company maintains significant problematic pay practices;
o the board exhibits a significant level of poor communication and
responsiveness to shareholders.
Rationale: While AM agrees that compensation issues are better left to the
discretion of management, they appreciate the need to take action on this
nonbinding proposal if excessive compensation practices exist.
M. FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION
AM policy is to vote "for" annual advisory votes on compensation, which provide
the most consistent and clear communication channel for shareholder concerns
about companies' executive pay programs.
Rationale: AM believes that annual advisory vote gives shareholders the
opportunity to express any compensation concerns to the Executive Compensation
proposal which is an advisory voting.
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.
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A vote is cast for shareholder proposals that would modify or repeal existing
fair-price requirements that do not meet these standards.
Rationale: While fair price provisions may be used as anti-takeover devices, if
adequate provisions are included, they provide some protection to shareholders
who have some say in their application and the ability to reject those
protections if desired.
D. EXEMPTION FROM STATE TAKEOVER LAWS
AM policy is to vote "for" shareholder proposals to opt out of state takeover
laws and to vote "against" management proposals requesting to opt out of state
takeover laws.
Rationale: Control share statutes, enacted at the state level, may harm
long-term share value by entrenching management. They also unfairly deny
certain shares their inherent voting rights.
E. NON-FINANCIAL EFFECTS OF TAKEOVER BIDS
Policy is to vote "against" shareholder proposals to require consideration of
non-financial effects of merger or acquisition proposals.
Rationale: Non-financial effects may often be subjective and are secondary to
AM's stated purpose of acting in its client's best economic interest.
VI. MERGERS & ACQUISITIONS
Evaluation of mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings
and recapitalizations) are performed on a case-by-case basis incorporating
information from an independent proxy research source (currently ISS.)
Additional resources including portfolio management and research analysts may
be considered as set forth in AM's Policies and Procedures.
VII. ENVIRONMENTAL, SOCIAL & GOVERNANCE ISSUES
Environmental, social and governance issues (ESG) are becoming increasingly
important to corporate success. We incorporate ESG considerations into both our
investment decisions and our proxy voting decisions - particularly if the
financial performance of the company could be impacted. Companies or states
that seriously contravene internationally accepted ethical principles will be
subject to heightened scrutiny.
A. PRINCIPLES FOR RESPONSIBLE INVESTMENT
AM policy is to actively engage with companies on ESG issues and participate in
ESG initiatives. In this context, AM (a) votes "for increased disclosure on ESG
issues; (b) is willing to participate in the development of policy, regulation
and standard setting (such as promoting and protecting shareholder rights); (c)
could support shareholder initiatives and also file shareholder resolutions
with long term ESG considerations and improved ESG disclosure, when applicable;
(d) could support standardized ESG reporting and issues to be integrated within
annual financial reports; and (e) on a case by case basis, will generally
follow management's recommended vote on other matters related to ESG issues.
Rationale: ESG issues can affect the performance of investment portfolios (to
varying degrees across companies, sectors, regions, asset classes and through
time).
B. ESG ISSUES
AM policy is to vote in line with the CERES recommendation on Environmental
matters covered under the CERES Principles, and Social and Sustainability
issues not specifically addressed elsewhere in the Guidelines. AM will rely on
ISS to identify shareholder proposals addressing CERES Principles and proxies
will be voted in accordance with ISS's predetermined voting guidelines on CERES
Principles.
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Any matter that is to be voted on, consented to or approved by the voting
members, may take place in person, telephonically or via other electronic
means. In addition, voting members may act in writing, including without
limitation, via e-mail.
Rationale: Deutsche Asset Management supports the CERES Principles and as such
generally votes proxies in line with the CERES recommendation.
C. 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
D. 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.
E. HEALTH & SAFETY
1. AM policy is to vote "against" adopting a pharmaceutical price restraint
policy or reporting pricing policy changes.
Rationale: Pricing is an integral part of business for pharmaceutical companies
and should not be dictated by shareholders (particularly pursuant to an
arbitrary formula). Disclosing pricing policies may also jeopardize a company's
competitive position in the marketplace.
2. AM policy is to vote "against" shareholder proposals to control the use or
labeling of and reporting on genetically engineered products.
Rationale: Additional requirements beyond those mandated by law are deemed
unnecessary and potentially burdensome to companies.
F. 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.
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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.
G. 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 affect 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. MISCELLANEOUS ITEMS
A. RATIFICATION OF AUDITORS
AM policy is to vote "for" a) the management recommended selection of auditors
and b) proposals to require shareholder approval of auditors.
Rationale: Absent evidence that auditors have not performed their duties
adequately, support for management's nomination is warranted.
B. LIMITATION OF NON-AUDIT SERVICES PROVIDED BY INDEPENDENT AUDITOR
AM policy is to support proposals limiting non-audit fees to 50% of the
aggregate annual fees earned by the firm retained as a company's independent
auditor.
Rationale: In the wake of financial reporting problems and alleged audit
failures at a number of companies, AM supports the general principle that
companies should retain separate firms for audit and consulting services to
avoid potential conflicts of interest. However, given the protections afforded
by the recently enacted Sarbanes-Oxley Act of 2002 (which requires Audit
Committee pre-approval for non-audit services and prohibits auditors from
providing specific types of services), and the fact that some non-audit
services are legitimate audit-related services, complete separation of audit
and consulting fees may not be warranted. A reasonable limitation is
appropriate to help ensure auditor independence and it is reasonable to expect
that audit fees exceed non-audit fees.
C. AUDIT FIRM ROTATION
AM policy is to vote against proposals seeking audit firm rotation.
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 be costly and disruptive.
D. TRANSACTION OF OTHER BUSINESS
AM policy is to vote against "transaction of other business" proposals.
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Rationale: This is a routine item to allow shareholders to raise other issues
and discuss them at the meeting. As the nature of these issues may not be
disclosed prior to the meeting, we recommend a vote against these proposals.
This protects shareholders voting by proxy (and not physically present at a
meeting) from having action taken at the meeting that they did not receive
proper notification of or sufficient opportunity to consider.
E. MOTIONS TO ADJOURN THE MEETING
AM Policy is to vote against proposals to adjourn the meeting.
Rationale: Management may seek authority to adjourn the meeting if a favorable
outcome is not secured. Shareholders should already have had enough information
to make a decision. Once votes have been cast, there is no justification for
management to continue spending time and money to press shareholders for
support.
F. BUNDLED PROPOSALS
AM policy is to vote against bundled proposals if any bundled issue would
require a vote against it if proposed individually.
Rationale: Shareholders should not be forced to "take the good with the bad" in
cases where the proposals could reasonably have been submitted separately.
G. CHANGE OF COMPANY NAME
AM policy is to support management on proposals to change the company name.
Rationale: This is generally considered a business decision for a company.
H. PROPOSALS RELATED TO THE ANNUAL MEETING
AM Policy is to vote in favor of management for proposals related to the
conduct of the annual meeting (meeting time, place, etc.)
Rationale: These are considered routine administrative proposals.
I. REIMBURSEMENT OF EXPENSES INCURRED FROM CANDIDATE NOMINATION
AM policy is to follow management's recommended vote on shareholder proposals
related to the amending of company bylaws to provide for the reimbursement of
reasonable expenses incurred in connection with nominating one or more
candidates in a contested election of directors to the corporation's board of
directors.
Rationale: Corporations should not be liable for costs associated with
shareholder proposals for directors.
J. INVESTMENT COMPANY PROXIES
Proxies solicited by investment companies are voted in accordance with the
recommendations of an independent third party, currently ISS. However,
regarding investment companies for which AM or an affiliate serves as
investment adviser or principal underwriter, such proxies are voted in the same
proportion as the vote of all other shareholders. Proxies solicited by master
funds from feeder funds will be voted in accordance with applicable provisions
of Section 12 of the Investment Company Act of 1940.
Investment companies, particularly closed-end investment companies, are
different from traditional operating companies. These differences may call for
differences in voting positions on the same matter. For example, AM could vote
"for" staggered boards of closed-end investment companies, although AM
generally votes "against" staggered boards for operating companies. Further,
the manner in which AM votes investment company proxies may differ from
proposals for which a AM-advised investment company solicits proxies from its
shareholders. As reflected in the Guidelines, proxies solicited by closed-end
(and open-end) investment companies are voted in accordance with the
pre-determined guidelines of an independent third-party.
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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 Central Cash Management Fund (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 Central Cash Management Fund, 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.
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DWS INCOME TRUST
PART C. OTHER INFORMATION
Item 28. Exhibits.
(a) (1) Amended and Restated Declaration of Trust dated June 2, 2008. (Incorporated
by reference to Post-Effective Amendment No. 44 to the Registration
Statement, as filed on January 28, 2009.)
(2) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest dated January 22, 2009. (Incorporated by
reference to Post-Effective Amendment No. 48 to the Registration Statement,
as filed on November 18, 2010.)
(3) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest dated January 30, 2009 (Incorporated by
reference to Post-Effective Amendment No.45 to the Registration Statement,
as filed on January 30, 2009.)
(4) Establishment and Designation of Series and Classes of Shares of Beneficial
Interest dated February 2, 2009. (Incorporated by reference to
Post-Effective Amendment No. 45 to the Registration Statement, as filed on
January 30, 2009.)
(5) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest. (Incorporated by reference to Post-Effective
Amendment No. 51 to the Registration Statement, as filed on February 1,
2011.)
(6) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest. (Incorporated by reference to Post-Effective
Amendment No. 56 to the Registration Statement, as filed on April 14, 2011.)
(7) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest. (Incorporated by reference to Post-Effective
Amendment No. 61 to the Registration Statement, as filed on December 2,
2011.)
(8) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest. (Incorporated by reference to Post-Effective
Amendment No. 68 to the Registration Statement, as filed on January 28,
2013.)
(9) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest. (Incorporated by reference to Post-Effective
Amendment No. 68 to the Registration Statement, as filed on January 28,
2013.)
(10) Amended and Restated Establishment and Designation of Series and Classes of
Shares of Beneficial Interest. (Incorporated by reference to Post-Effective
Amendment No. 68 to the Registration Statement, as filed on January 28,
2013.)
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(11) Amendment to the Declaration of Trust, dated September 7, 2012.
(Incorporated by reference to Post-Effective Amendment No. 68 to the
Registration Statement, as filed on January 28, 2013.)
(b) Amended and Restated By-laws dated April 1, 2011. (Incorporated by
reference to Post-Effective Amendment No. 56 to the Registration Statement,
as filed on April 14, 2011.)
(c) Instruments defining the rights of shareholders, including the relevant
portions of: the Amended and Restated Declaration of Trust, dated June 2,
2008, as amended through September 7, 2012 (see Section 5.2), and the
Amended and Restated By-Laws, dated April 1, 2011 (see Article 9).
(Incorporated by reference as noted above.)
(d) (1) Amended and Restated Investment Management Agreement between the Registrant
and Deutsche Investment Management Americas Inc. (Incorporated by reference
to Post-Effective Amendment No. 56 to the Registration Statement, as filed
on April 14, 2011.)
(2) Investment Sub-Advisory Agreement between Deutsche Investment Management
Americas Inc. and Fischer Francis Trees & Watts, Inc, relating to DWS Core
Fixed Income Fund, dated February 1, 2011. (Incorporated by reference to
Post-Effective Amendment No. 50 to the Registration Statement, as filed on
January 26, 2011.)
(e) (1) Master Distribution Agreement between the Registrant and DWS Investments
Distributors, Inc., dated January 13, 2010. (Incorporated by reference to
Post-Effective Amendment No. 49 to the Registration Statement, as filed on
January 3, 2010.)
(2) Appendix A, effective September 20, 2013, to Master Distribution Agreement
dated January 13, 2010. (Incorporated by reference to Post-Effective
Amendment No. 70 to the Registration Statement, as filed on December 3,
2013.)
(3) Form of Selling Group Agreement. (Incorporated by reference to
Post-Effective Amendment No. 70 to the Registration Statement, as filed on
December 3, 2013.)
(f) Not applicable.
(g) (1) Master Custodian Agreement between the Registrant and State Street Bank and
Trust Company dated November 17, 2008. (Incorporated by reference to
Post-Effective Amendment No. 44 to the Registration Statement, as filed on
January 28, 2009.)
(2) Appendix A, effective September 20, 2013, to the Master Custodian Agreement
dated November 17, 2008. (Incorporated by reference to Post-Effective
Amendment No. 70 to the Registration Statement, as filed on December 3,
2013.)
(h) (1) Agency Agreement between the Registrant and DWS Scudder Investments Service
Company dated April 1, 2007. (Incorporated by reference to Post-Effective
Amendment No. 43, as filed on January 28, 2008.)
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(2) Letter of Indemnity to the Scudder Funds dated October 13, 2004.
(Incorporated by reference to Post-Effective Amendment No. 42 to the
Registration Statement, as filed on February 1, 2007.)
(3) Letter of Indemnity to the Scudder Funds dated October 13, 2004.
(Incorporated by reference to Post-Effective Amendment No. 42 to the
Registration Statement, as filed on February 1, 2007.)
(4) Letter of Indemnity to the Independent Directors/Trustees dated October 13,
2004. (Incorporated by reference to Post-Effective Amendment No. 42 to the
Registration Statement, as filed on February 1, 2007.)
(5) Amended and Restated Administrative Services Agreement, between the
Registrant, and Deutsche Investment Management Americas Inc. dated October
1, 2008. (Incorporated by reference to Post-Effective Amendment No. 56 to
the Registration Statement, as filed on April 14, 2011.)
(6) Form of Mutual Fund Rule 22c-2 Information Sharing Agreement among
Registrant, DWS Investments Distributors, Inc. and certain financial
intermediaries. (Filed herein.)
(7) Form of Expense Limitation Agreement, dated October 1, 2007, between the
Registrant and Deutsche Investment Management Americas Inc. (Filed herein.)
(8) Amended and Restated Shareholder Services Agreement for Class A, Class B,
Class C Shares and Class R Shares, between the Registrant and DWS
Investments Distributors, Inc., dated February 2, 2009 (as revised on
February 1, 2011). (Incorporated by reference to Post-Effective Amendment
No. 56 to the Registration Statement, as filed on April 14, 2011.)
(9) Delegation Agreement between the Registrant, on behalf of DWS Global
Inflation Fund, and Deutsche Investment Management Americas Inc., dated
December 31, 2012. (Incorporated by reference to Post-Effective Amendment
No. 68 to the Registration Statement, as filed on January 28, 2013.)
(i) (1) Legal Opinion and Consent of Counsel. (Previously filed as Exhibit (i) to
Post-Effective Amendment No. 34 to the Registration Statement, as filed on
December 27, 2001.)
(2) Legal Opinion and Consent of Counsel with respect to DWS Core Fixed Income
Fund. (Incorporated by reference to Post-Effective Amendment No. 50 to the
Registration Statement, as filed on January 26, 2011.)
(3) Legal Opinion and Consent of Counsel with respect to DWS Global Inflation
Plus Fund, DWS High Income Fund, DWS High Income Plus Fund, DWS Short
Duration Fund, DWS Short Duration Plus Fund (now known as DWS Ultra-Short
Duration Fund), DWS Strategic Government Securities Fund and DWS Strategic
Income Fund. (Incorporated by reference to Post-Effective Amendment No. 51
to the Registration Statement, as filed on February 1, 2011.)
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(4) Legal Opinion and Consent of Counsel with respect to Class R shares of DWS
GNMA Fund and Class R and Class S shares of DWS High Income Fund.
(Incorporated by reference to Post-Effective Amendment No. 66 to the
Registration Statement, as filed on April 30, 2012.)
(j) (1) Consents of Independent Registered Public Accounting Firms.) (Filed herein.)
(2) Forms of Tax Opinions of Vedder Price P.C. (Incorporated by reference to
Post-Effective Amendment No. 51 to the Registration Statement, as filed on
February 1, 2011.)
(k) Not applicable.
(l) Not applicable.
(m) (1) Rule 12b-1 Plan for DWS GNMA Fund - Class A shares, dated February 2, 2009.
(Incorporated by reference to Post-Effective Amendment No. 45 to the
Registration Statement, as filed on January 30, 2009.)
(2) Rule 12b-1 Plan for DWS GNMA Fund - Class C shares, dated February 2, 2009.
(Incorporated by reference to Post-Effective Amendment No. 45 to the
Registration Statement, as filed on January 30, 2009.)
(3) Rule 12b-1 Plan for DWS Core Fixed Income Fund - Class A shares, dated
February 1, 2011 (Incorporated by reference to Post-Effective Amendment No.
50 to the Registration Statement, as filed on January 26, 2011.)
(4) Rule 12b-1 Plan for DWS Core Fixed Income Fund - Class B shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment
No. 50 to the Registration Statement, as filed on January 26, 2011.)
(5) Rule 12b-1 Plan for DWS Core Fixed Income Fund - Class C shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment
No. 50 to the Registration Statement, as filed on January 26, 2011.)
(6) Rule 12b-1 Plan for DWS Core Fixed Income Fund - Class R shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment
No. 50 to the Registration Statement, as filed on January 26, 2011.)
(7) Rule 12b-1 Plan for DWS High Income Plus Fund - Class A shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(8) Rule 12b-1 Plan for DWS High Income Plus Fund - Class B shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(9) Rule 12b-1 Plan for DWS High Income Plus Fund - Class C shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(10) Rule 12b-1 Plan for DWS Short Duration Fund - Class A shares, dated February
1, 2011. (Incorporated by reference to Post-Effective Amendment No. 51 to
the Registration Statement, as filed on February 1, 2011.)
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(11) Rule 12b-1 Plan for DWS Short Duration Fund - Class B shares, dated February
1, 2011. (Incorporated by reference to Post-Effective Amendment No. 51 to
the Registration Statement, as filed on February 1, 2011.)
(12) Rule 12b-1 Plan for DWS Short Duration Fund - Class C shares, dated February
1, 2011. (Incorporated by reference to Post-Effective Amendment No. 51 to
the Registration Statement, as filed on February 1, 2011.)
(13) Rule 12b-1 Plan for DWS Short Duration Plus Fund - Class A shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(14) Rule 12b-1 Plan for DWS Short Duration Plus Fund - Class B shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(15) Rule 12b-1 Plan for DWS Short Duration Plus Fund - Class C shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(16) Rule 12b-1 Plan for DWS Global Inflation Plus Fund - Class A shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(17) Rule 12b-1 Plan for DWS Global Inflation Plus Fund - Class B shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(18) Rule 12b-1 Plan for DWS Global Inflation Plus Fund - Class C shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(19) Rule 12b-1 Plan for DWS High Income Fund - Class A shares, dated February 1,
2011. (Incorporated by reference to Post-Effective Amendment No. 51 to the
Registration Statement, as filed on February 1, 2011.)
(20) Rule 12b-1 Plan for DWS High Income Fund - Class B shares, dated February 1,
2011. (Incorporated by reference to Post-Effective Amendment No. 51 to the
Registration Statement, as filed on February 1, 2011.)
(21) Rule 12b-1 Plan for DWS High Income Fund - Class C shares, dated February 1,
2011. (Incorporated by reference to Post-Effective Amendment No. 51 to the
Registration Statement, as filed on February 1, 2011.)
(22) Rule 12b-1 Plan for DWS Strategic Income Fund - Class A shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(23) Rule 12b-1 Plan for DWS Strategic Income Fund - Class B shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
(24) Rule 12b-1 Plan for DWS Strategic Income Fund - Class C shares, dated
February 1, 2011. (Incorporated by reference to Post-Effective Amendment No.
51 to the Registration Statement, as filed on February 1, 2011.)
7
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(25) Rule 12b-1 Plan for DWS Strategic Government Securities Fund - Class A
shares, dated February 1, 2011. (Incorporated by reference to Post-Effective
Amendment No. 51 to the Registration Statement, as filed on February 1,
2011.)
(26) Rule 12b-1 Plan for DWS Strategic Government Securities Fund - Class B
shares, dated February 1, 2011. (Incorporated by reference to Post-Effective
Amendment No. 51 to the Registration Statement, as filed on February 1,
2011.)
(27) Rule 12b-1 Plan for DWS Strategic Government Securities Fund - Class C
shares, dated February 1, 2011. (Incorporated by reference to Post-Effective
Amendment No. 51 to the Registration Statement, as filed on February 1,
2011.)
(28) Rule 12b-1 Plan for DWS High Income Fund - Class R shares, dated May 1,
2012. (Incorporated by reference to Post-Effective Amendment No. 66 to the
Registration Statement, as filed on April 30, 2012.)
(29) Rule 12b-1 Plan for DWS GNMA Fund - Class R shares, dated May 1, 2012.
(Incorporated by reference to Post-Effective Amendment No. 66 to the
Registration Statement, as filed on April 30, 2012.)
(n) Amended and Restated Multi-Distribution System Plan with respect to DWS
Income Trust, pursuant to Rule 18f-3, dated February 1, 2011. (Incorporated
by reference to Post-Effective Amendment No. 51 to the Registration
Statement, as filed on February 1, 2011.)
(p) (1) Code of Ethics for Deutsche Asset & Wealth Management -- U.S., dated July 1,
2013. (Incorporated by reference to Post-Effective Amendment No. 70 to the
Registration Statement, as filed on December 3, 2013.)
(2) Consolidated Fund Code of Ethics - All Funds, dated September 6, 2013.
(Incorporated by reference to Post-Effective Amendment No. 70 to the
Registration Statement, as filed on December 3, 2013.)
(3) BNP Paribas Investment Partners USA Code of Ethics (on behalf of Fisher
Francis Trees & Watts, Inc). (Incorporated by reference to Post-Effective
Amendment No. 62 to the Registration Statement, as filed on January 31,
2012.)
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Item 29. Persons Controlled by or under Common Control with Fund.
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 Article of the 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.
8
The Registrant has purchased insurance policies insuring its
officers and trustees against certain liabilities which such
officers and trustees may incur while acting in such
capacities and providing reimbursement to the Registrant for
sums which it may be permitted or required to pay to its
officers and trustees by way of indemnification against such
liabilities, subject to certain deductibles.
On April 5, 2002, Zurich Scudder Investments, Inc.
("Scudder"), the investment adviser, now known as Deutsche
Investment Management Americas Inc., was acquired by Deutsche
Bank AG, not including certain U.K. Operations (the
"Transaction"). In connection with the Trustees' evaluation of
the Transaction, Deutsche Bank agreed to indemnify, defend and
hold harmless Registrant and the trustees who were not
"interested persons" of Scudder, Deutsche Bank or Registrant
(the "Independent Trustees") for and against any liability and
claims and expenses based upon or arising from, whether in
whole or in part, or directly or indirectly, any untrue
statement or alleged untrue statement of a material fact made
to the Independent Trustees by Deutsche Bank in connection
with the Independent Trustees' consideration of the
Transaction, or any omission or alleged omission of a material
fact necessary in order to make statements made, in light of
the circumstances under which they were made, not misleading.
Deutsche Investment Management Americas Inc. (hereafter,
"DIMA"), the investment advisor, has agreed, subject to
applicable law and regulation, to indemnify and hold harmless
the Registrant against any loss, damage, liability and
expense, including, without limitation, the advancement and
payment, as incurred, of reasonable fees and expenses of
counsel (including counsel to the Registrant and counsel to
the Independent Trustees) and consultants, whether retained by
the Registrant or the Independent Trustees, and other
customary costs and expenses incurred by the Registrant in
connection with any litigation or regulatory action related to
possible improper market timing or other improper trading
activity or possible improper marketing and sales activity in
the Registrant ("Private Litigation and Enforcement Actions").
In the event that this indemnification is unavailable to the
Registrant for any reason, then DIMA has agreed to contribute
to the amount paid or payable by the Registrant as a result of
any loss, damage, liability or expense in such proportion as
is appropriate to reflect the relative fault of DIMA and the
Registrant with respect to the matters which resulted in such
loss, damage, liability or expense, as well as any other
relevant equitable considerations; provided, that if no final
determination is made in such action or proceeding as to the
relative fault of DIMA and the Registrant, then DIMA shall pay
the entire amount of such loss, damage, liability or expense.
In recognition of its undertaking to indemnify the Registrant,
and in light of the rebuttable presumption generally afforded
to non-interested board members of an investment company that
they have not engaged in disabling conduct, DIMA has also
agreed, subject to applicable law and regulation, to indemnify
and hold harmless each of the Independent Trustees against any
and all loss, damage, liability and expense, including without
limitation the advancement and payment as incurred of
reasonable fees and expenses of counsel and consultants, and
other customary costs and expenses incurred by the Independent
Trustees, arising from the matters alleged in any Private
Litigation and Enforcement Actions or matters arising from or
similar in subject matter to the matters alleged in the
Private Litigation and Enforcement Actions (collectively,
"Covered Matters"), including without limitation:
1. all reasonable legal and other expenses incurred by
the Independent Trustees in connection with the
Private Litigation and Enforcement Actions, and any
actions that may be threatened or commenced in the
future by any person (including any governmental
authority), arising from or similar to the matters
alleged in the Private Litigation and Enforcement
Actions, including without limitation expenses
related to the defense of, service as a witness in,
or monitoring of such proceedings or actions;
2. all liabilities and reasonable legal and other
expenses incurred by any Independent Trustee in
connection with any judgment resulting from, or
settlement of, any such proceeding, action or matter;
3. any loss or reasonable legal and other expenses
incurred by any Independent Trustee as a result of the
denial of, or dispute about, any insurance claim under,
or actual or
9
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.
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.
10
(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.
(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
---------------- ---------------------------------- -----------------------
Robert Kendall Director, Chairman of the Board, CEO None
222 South Riverside Plaza and President
Chicago, IL 60606
Cynthia P. Nestle Director, Chief Operating Officer and None
345 Park Avenue Vice President
New York, NY 10154
Christine Rosner Director and Vice President None
345 Park Avenue
New York, NY 10154
Judith Irish Director and Vice President None
345 Park Avenue
New York, NY 10154
Joseph Sarbinowski Vice President None
345 Park Avenue
New York, NY 10154
Michael Interrante Chief Financial Officer and Treasurer None
60 Wall Street
New York, NY 10005
Paul Schubert Vice President Chief Financial Officer
60 Wall Street and Treasurer
New York, NY 10005
Donna White Chief Compliance Officer None
60 Wall Street
New York, NY 10005
Caroline Pearson Secretary Chief Legal Officer
One Beacon Street
Boston, MA 02108
Anjie LaRocca Assistant Secretary None
60 Wall Street
New York, NY 10005
(c) Not applicable
|
11
Item 33. Location of Accounts and Records.
The accounts and records of the Registrant are located, in
whole or in part, at the office of the Registrant and the
following locations:
Advisor and Administrator (Accounting Agent, as Deutsche Investment Management Americas Inc.
applicable) 345 Park Avenue
New York, NY 10154
Custodian and Sub-Administrator (Sub-Accountant, State Street Bank & Trust Company
as applicable) State Street Financial Center
One Lincoln Street
Boston, MA 02111
Transfer Agent DWS Investments Service Company
210 West 10th Street
Kansas City, MO 64105
Sub-Transfer Agent DST Systems, Inc.
210 West 11th Street
Kansas City, MO 64105
Distributor DWS Investments Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606
Storage Vendor Recall Corporation
5 Beeman Road
Boston, MA 01532
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Item 34. Management Services.
Inapplicable.
Item 35. Undertakings.
None.
12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and the State of New York on
the 28th day of January 2014.
DWS INCOME TRUST
By: /s/Brian E. Binder
-------------------------
Brian E. Binder*
President
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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:
SIGNATURE TITLE DATE
--------- ----- ----
/s/Brian E. Binder
-------------------------------------
Brian E. Binder* President January 28, 2014
/s/Paul H. Schubert
-------------------------------------
Paul H. Schubert Chief Financial Officer and Treasurer January 28, 2014
/s/John W. Ballantine
-------------------------------------
John W. Ballantine* Trustee January 28, 2014
/s/Henry P. Becton, Jr.
-------------------------------------
Henry P. Becton, Jr.* Trustee January 28, 2014
/s/Dawn-Marie Driscoll
-------------------------------------
Dawn-Marie Driscoll* Trustee January 28, 2014
/s/Keith R. Fox
-------------------------------------
Keith R. Fox* Trustee January 28, 2014
/s/Paul K. Freeman
-------------------------------------
Paul K. Freeman* Trustee January 28, 2014
/s/Kenneth C. Froewiss
-------------------------------------
Kenneth C. Froewiss* Chairperson and Trustee January 28, 2014
/s/Richard J. Herring
-------------------------------------
Richard J. Herring* Trustee January 28, 2014
/s/William McClayton
-------------------------------------
William McClayton* Vice Chairperson and Trustee January 28, 2014
/s/Rebecca W. Rimel
-------------------------------------
Rebecca W. Rimel* Trustee January 28, 2014
/s/William N. Searcy, Jr.
-------------------------------------
William N. Searcy, Jr.* Trustee January 28, 2014
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/s/Jean Gleason Stromberg
-------------------------------------
Jean Gleason Stromberg* Trustee January 28, 2014
/s/Robert H. Wadsworth
-------------------------------------
Robert H. Wadsworth* Trustee January 28, 2014
*By: /s/Caroline Pearson
-----------------------------
Caroline Pearson**
Chief Legal Officer
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** Attorney-in-fact pursuant to the powers of attorney that are incorporated
herein by reference to Post-Effective Amendment No. 70, as filed on
December 3, 2013; and as filed on January 28, 2009 in Post-Effective
Amendment No. 44 to the Registration Statement.
File No. 002-91577
File No. 811-04049
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 71
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 73
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
DWS INCOME TRUST
13
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