Edgar Filing: DWS MULTI-MARKET INCOME TRUST

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 21, 2007

1933 ACT FILE NO. 33-______
1940 ACT FILE NO. 811-05689

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-2

(CHECK APPROPRIATE BOX OR BOXES)

[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

[ ] PRE-EFFECTIVE AMENDMENT NO. __

[ ] POST-EFFECTIVE AMENDMENT NO. __

AND

[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

[ ] AMENDMENT NO. __

DWS MULTI-MARKET INCOME TRUST

345 PARK AVENUE
NEW YORK, NY 10154
(212) 454-7190

AGENT FOR SERVICE
Michael G. Clark
345 Park Avenue
New York, NY 10154

COPIES OF COMMUNICATIONS TO:
David A. Sturms, Esq.
Cathy G. O'Kelly, Esq.
Vedder, Price, Kaufman & Kammholz, P.C.
222 N. LaSalle Street
Chicago, IL 60601

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of this Registration Statement

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If any of the securities being registered on this form are offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933,
other than securities offered in connection with a dividend reinvestment plan,
check the following box. [ ]

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

[ ] when declared effective pursuant to section 8(c)

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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED(1) UNIT(1) PRICE(2) REGISTRATION FEE(3)
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Common Shares...... $1,000,000 $30.70
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(1) Omitted pursuant to Rule 457(o) under the Securities Act of 1933.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.

(3) Transmitted prior to filing.

The Registrant intends to amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer is not permitted.

SUBJECT TO COMPLETION, DATED 2007

PROSPECTUS
SHARES

DWS MULTI-MARKET INCOME TRUST
ISSUABLE UPON EXERCISE OF NON-TRANSFERRABLE RIGHTS
TO SUBSCRIBE FOR SUCH COMMON SHARES

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DWS Multi-Market Income Trust (the "Fund") is issuing non-transferable
rights (the "Rights") to its shareholders of record as of , 2007.
These Rights will allow shareholders to subscribe to new shares of beneficial
interest of the Fund in an aggregate amount of approximately shares
(the "Offer"). For every three Rights that you receive, you may buy one new
common share of the Fund (3-for-1). You will receive one Right for each whole
share you own on , 2007 (the "Record Date"). If you receive less than
three Rights in total, you will be entitled to buy one new share. Shareholders
who fully exercise their Rights may purchase shares not acquired by other
shareholders in this offering, subject to the limitations and the allotment as
described in this prospectus (the "Over-Subscription Privilege"). The Rights are
non-transferable; however, the shares issued upon the exercise of the Rights
will be listed for trading on the New York Stock Exchange (the "NYSE").

The subscription price per share will be the greater of the (i) net asset
value ("NAV") per share of the Fund on (the "Expiration Date") or
(ii) 95% of the volume weighted average share price of the Fund on the NYSE on
the Expiration Date and the four preceding business days (the "Subscription
Price").

The Offer will expire at 5:00 p.m., Eastern time, on , 2007,
unless extended as described in this prospectus. Shareholders who choose to
exercise their Rights will not know the Subscription Price at the time they
exercise their Rights.

The Offer could reduce the Fund's current dividend yield if the Fund is
unable to invest the proceeds of the Offer in securities that provide a yield
higher than the current portfolio yield. It is possible that the costs of the
Offer could result in the dilution of the aggregate NAV of the Fund's shares if
the Offer is under-subscribed and/or the Subscription Price is at or near NAV.
Volatility in the market price of shares of the Fund may increase during the
Offer. In addition, as a result of the terms of the Offer, shareholders who do
not fully exercise their Rights, including the Over-Subscription Privilege
described in the section of this prospectus entitled "The Offer -- Over-
Subscription Privilege," will, upon the completion of the Offer, own a smaller
proportional interest in the Fund than they owned before the Offer. See "Special
Considerations and Risk Factors"

The Fund is a diversified, closed-end management investment company whose
common shares are listed and traded on the NYSE under the symbol "KMM." The
Fund's investment objective is to provide high current income consistent with
prudent total return asset management. The Fund seeks to achieve its objective
by investing its assets in a broad range of income producing securities, such as
U.S. corporate fixed income securities and debt obligations of foreign
governments and their agencies and instrumentalities, either of which may be
denominated in foreign currencies, debt obligations of the U.S. Government and
its agencies and instrumentalities and other income producing securities,
including securities which may be denominated in foreign currencies, any of
which securities may or may not be rated. There is no limitation on the
percentage of the Fund's portfolio which must be invested in any particular type
of income producing security; however, at least 65% of the Fund's assets will be
invested in at least two different securities sectors. The Fund has no
requirements regarding whether the income producing securities it purchases must
be rated or, if such securities are rated, what the minimum or maximum ratings
on such securities must be. (Continues on following page)

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BEFORE BUYING OUR COMMON SHARES, YOU SHOULD READ THE DISCUSSION OF THE MATERIAL
RISKS OF INVESTING IN THE FUND UNDER "SPECIAL CONSIDERATIONS AND RISK FACTORS"
BEGINNING ON PAGE _. CERTAIN OF THESE RISKS ARE SUMMARIZED IN "PROSPECTUS
SUMMARY -- SPECIAL CONSIDERATIONS AND RISK FACTORS" BEGINNING ON PAGE _.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

ESTIMATED SUBSCRIPTION ESTIMATED SALES ESTIMATED PROCEEDS
PRICE(1) LOAD(2) TO THE FUND(3)
---------------------- --------------- ------------------

Per Common Share........................ $0
Total Maximum(4)........................ $0

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(1) Estimated on the basis of the volume weighted average share price of a
share on the NYSE on , 2007 and the four preceding business
days.

(2) No sales load will be charged by the Fund in connection with this Offer.
However, Shareholders that choose to exercise their Rights through
broker-dealers, banks or other nominees may incur a servicing fee charged
by such broker-dealer, bank or nominee.

(3) Before deduction of expenses related to the Offer incurred by the Fund,
which are estimated at approximately $ .

(4) Assumes all Rights offered are exercised at the Estimated Subscription
Price. The Fund may increase the number of shares subject to subscription
by up to 25% of the shares offered hereby in connection with the Over-
Subscription Privilege, or up to an additional shares, for an
aggregate total of shares. If the Fund increases the number of
shares subject to subscription by 25%, the total maximum Estimated
Subscription Price will be approximately $ and the total maximum
Estimated Proceeds to the Fund, before expenses, to the Fund will be
approximately $ .

(continued from prior page)

Investment in securities of issuers in emerging markets involves special
considerations and risks that are not typically associated with investment in
securities of issuers in the United States or in other established markets. The
Fund may invest in securities denominated in currencies other than the U.S.
Dollar and may hold such currencies, which will involve special risks. A
substantial portion of the Fund's assets may be invested in lower rated fixed
income securities commonly referred to as "high yield bonds" or "junk bonds,"
which are predominantly speculative and involve greater volatility of price and
risk to principal and income than securities in higher rating categories. The
Fund may invest, without limitation, in securities that lack an established
trading market or are otherwise considered illiquid. Investors should carefully
assess the risks associated with an investment in the Fund. See "Special
Considerations and Risk Factors."

The Fund currently employs financial leverage in the form of borrowings
from financial institutions unrelated to the Fund. As of the date of this
prospectus, the Fund intends, but is not committed, to add incremental leverage
after the Offer so that the Fund's total leverage as a percentage of its total
assets will remain approximately the same after the Offer (as of the date of
this prospectus, approximately % of the Fund's total assets). The inability to
increase, or delays in increasing, the Fund's leverage could, depending on
market conditions, adversely affect the Fund's earnings, distributions and NAV.
Use of leverage is a speculative technique that creates special risks that may
adversely affect common shareholders. See "Special Considerations and Risk
Factors -- Leverage and Borrowing" and "Use of Leverage."

Please read this prospectus carefully before investing and keep it for
future reference. It contains important information that a prospective investor
ought to know before investing in the Fund. All questions and inquiries relating
to the Offer should be directed to the Information Agent, The Altman Group,
Inc., 60 East 42nd Street, Suite 405, New York, NY 10165, toll free at
(888) , or collect at (212) .

A Statement of Additional Information ("SAI"), dated , 2007,
containing additional information about the Fund has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference in
its entirety into this prospectus. A Table of Contents for the SAI is set forth
on page of this prospectus. A copy of the SAI can be obtained without charge
by writing to the Fund at or by calling The Altman Group, Inc. toll-
free at or from the SEC's website at http://www.sec.gov. Copies of
the Fund's Annual Report and Semi-Annual Report may be obtained upon request by
writing to DWS Multi-Market Income Trust, c/o The Altman Group, Inc., 1275
Valley Brook Ave., Lyndhurst, NJ 07071, attention: , by email
at @altmangroup.com, or by calling ( ) .

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the SAI contain "forward-looking statements." Forward-
looking statements can be identified by the words "may," "will," "intend,"
"expect," "estimate," "continue," "plan," "anticipate," and similar terms and
the negative of such terms. By their nature, all forward-looking statements
involve risks and uncertainties, and actual results could differ materially from
those contemplated by the forward-looking statements. Several factors that could
materially affect our actual results are the performance of the portfolio of
securities we hold, the conditions in the U.S. and international financial and
other markets, the price at which our shares will trade in the public markets
and other factors discussed in our periodic filings with the SEC.

Although we believe that the expectations expressed in our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in our forward-looking statements. Our future financial
condition and results of operations, as well as any forward-looking statements,
are subject to change and are subject to inherent risks and uncertainties, such
as those disclosed in the "Special Considerations and Risk Factors" section of
this prospectus. All forward-looking statements contained or incorporated by
reference in this prospectus are made as of the date of this prospectus. Except
for our ongoing obligations under the federal securities laws, we do not intend,
and we undertake no obligation, to update any forward-looking statement.

Currently known risk factors that could cause actual results to differ
materially from our expectations include, but are not limited to, the factors
described in the "Special Considerations and Risk Factors" section of this
prospectus. We urge you to review carefully that section for a more complete
discussion of the risks of an investment in our common shares.

PROSPECTUS SUMMARY

This summary highlights some information that is described more fully
elsewhere in this prospectus. It may not contain all of the information that is
important to you. To understand the Offer fully, you should read the entire
document carefully, including the "Special Considerations and Risk Factors"
section.

THE OFFER

The Offer................ DWS Multi-Market Income Trust (the ''Fund") is
issuing to its shareholders of record
("Shareholders") as of the close of business
on , 2007 (the ''Record Date") non-
transferable rights (''Rights") to subscribe for an
aggregate of approximately shares of
beneficial interest (''Shares") of the Fund, par
value $0.01 per share (the ''Offer"). You will
receive one Right for each whole share you hold as of
the Record Date. For every three Rights that you
receive, you may subscribe for one new Share of the
Fund (3-for-1). No fractional Shares will be issued.
If you receive less than three Rights in total, you
will be entitled to subscribe for one new Share. The
Rights of a Shareholder to acquire Shares during the
Subscription Period is referred to as the ''Primary
Subscription." See ''The Offer."

Subscription Price....... The subscription price per Share will be the greater
of the (i) net asset value ("NAV") per share of the
Fund on , 2007 (the "Expiration Date") or
(ii) 95% of the volume weighted average share price
of the Fund on the New York Stock Exchange ("NYSE")
on the Expiration Date and the four preceding
business days (the "Subscription Price"). See "The
Offer -- The Subscription Price."

Subscription Period...... Rights may be exercised at any time during the
subscription period (the "Subscription Period"),
which starts on , 2007 and ends at 5:00
p.m., Eastern time, on , 2007. See "The
Offer -- Terms of the Offer."

Over-Subscription
Privilege................ Each Shareholder who fully exercises all Rights
issued to him may be entitled to subscribe for Shares
which were not otherwise subscribed for by others in
the Primary Subscription (the "Over-Subscription
Privilege"). If enough Shares are available, all
Shareholders' requests to buy Shares pursuant to the
Over-Subscription Privilege will be honored in full.
If sufficient Shares are not available to honor all
over-subscription requests, the Fund may, at its
discretion, issue up to an additional 25% of the
Shares available in the Offer to honor over-
subscription requests. If sufficient Shares are not
available to honor all over-subscription requests,
the available Shares will be allocated pro-rata among
those who over-subscribe based on the number of
Rights originally issued to them by the Fund. The
allocation process may involve a series of
allocations to assure that the total number of Shares
available for over-subscriptions is distributed on a
pro-rata basis. See "The Offer -- Over-Subscription
Privilege."

Purpose of the Offer..... The purpose of the Offer is to increase the assets of
the Fund available for investment, thereby allowing
the Fund to more fully take advantage of available
investment opportunities consistent with the Fund's
investment objective.

The Board of Trustees of the Fund (the "Board")
determined that the Offer is in the best interests of
the Fund. In making this determination, the Board was
advised by Deutsche Investment Management Americas
Inc. ("DIMA" or "Investment Adviser") that the
current market environment and outlook is conducive
for high yield investing. In addition, DIMA advised
the Board that it believes the Offer may provide the
following benefits:

- Provide an opportunity for existing Shareholders to
purchase additional Shares at a price potentially
below market value;

- Increase investment opportunities available to the
Fund to enable the Fund to maintain or potentially
enhance its current dividend yield;

- Enable the Fund to pursue attractive investment
opportunities without selling portfolio securities;

- Reduce the Fund's per share expense ratio because
the Fund's operating expenses can be spread over a
larger asset base;

- Possibly increase the NAV of the Fund to the extent
the Subscription Price is greater than the NAV of
the Fund on the Expiration Date; and

- Potentially improve liquidity of the trading market
for the Fund's shares on the NYSE.

There can be no assurance that any of these benefits
will be realized. See "The Offer -- Purpose of the
Offer."

Costs of the Offer....... The costs of the Offer, which are estimated to be
$ , will be borne by the Fund. In the event the
Offer is cancelled, the costs of the Offer will be
split equally between the Fund and DIMA.

Notice of NAV Decline or
Increase................. The Fund will suspend the Offer until it amends this
prospectus if, after the effective date of this
prospectus, the Fund's NAV declines more than 10%
from its NAV as of that date or the NAV increases to
an amount greater than the net proceeds. If that
occurs, the Fund will notify Shareholders of the
decline or increase and permit Shareholders to cancel
the exercise of their Rights. Shareholders will have
their payment for additional Shares returned to them
if they opt to cancel the exercise of their Rights.
In addition, if the shares of the Fund begin to trade
at a discount to NAV, the officers of the Fund will
reexamine the Offer and may consider recommending the
cancellation of the Offer or a change in the terms of
the Offer. See "The Offer -- Notice of NAV Decline or
Increase."

How to Obtain
Subscription
Information.............. - Contact your broker, banker or trust company.

- Contact The Altman Group, Inc. (the "Information
Agent") toll-free at .

How to Subscribe......... Except as described under Foreign Restrictions, you
may subscribe in one of two ways:

- Complete and sign the subscription certificate
("Subscription Certificate"). Mail it in the
envelope provided or deliver the completed and
signed Subscription Certificate by the Expiration
Date to Colbent Corporation (the "Subscription
Agent").

- Contact your broker, banker or trust company, which
can arrange, on your behalf, to guarantee delivery
of a properly completed and executed Subscription
Certificate, pursuant to a notice of guaranteed
delivery ("Notice of Guaranteed Delivery"), to the
Subscription Agent by the Expiration Date. See "The
Offer -- Methods for Exercising of Rights" and "The
Offer -- Payment for Shares."

Federal Income Tax
Consequences............. For federal income tax purposes, neither the receipt
nor the exercise of the Rights will result in taxable
income to Shareholders. You will not realize a
taxable loss if your Rights expire without being
exercised. See "The Offer -- Certain Federal Income
Tax Consequences of the Offer."

Use of Proceeds.......... The net proceeds of the Offer, assuming all Shares
are sold, is estimated to be . The Fund
will invest the proceeds of the Offer in accordance
with the Fund's investment objective and policies.
DIMA anticipates that investment of the proceeds will
occur shortly after their receipt by the Fund,
depending on market conditions and the availability
of appropriate investments. To the extent there is
any delay in investing the proceeds of the Offer, the
Fund may invest in U.S. government securities or
high-quality, short-term money market instruments,
cash or cash equivalents, pending investment of the
proceeds. See "Use of Proceeds."

Non-Transferability of
Rights................... The Rights are non-transferable, and may not be
purchased or sold. Rights will expire without
residual value at the Expiration Date. The Rights
will not be listed for trading on the NYSE, and there
will not be any market for trading Rights. The Shares
to be issued pursuant to the Offer will be listed for
trading on the NYSE, subject to the NYSE being
officially notified of the issuance of those Shares.

Foreign Restrictions..... Subscription Certificates will not be mailed to
Shareholders whose record addresses are outside the
United States. Foreign Shareholders will receive
written notice of the Offer as set forth in this
prospectus. See "The Offer -- Foreign Restrictions."

IMPORTANT DATES TO REMEMBER

Record Date......................................... , 2007*
Subscription Period................................. , 2007 to , 2007*
Expiration Date..................................... , 2007*
Subscription Certificates and Payment for Shares
due**............................................. , 2007*
Notice of Guaranteed Delivery due................... , 2007*
Payment for Guarantees of Delivery due.............. , 2007*
Confirmation mailed to participant.................. , 2007*
Final payment for Shares***......................... , 2007*

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* Unless the Offer is extended.

** A Shareholder exercising Rights must deliver the (i) a Subscription
Certificate or (ii) a Notice of Guarantee Delivery by the Expiration
Date.

*** Additional amount due (in the event the Subscription Price exceeds the
Estimated Subscription Price).

THE FUND

The Fund................. The Fund has been engaged in business as a
diversified, closed-end management investment company
since January 23, 1989, when it completed an initial
public offering of 17,000,000 of its common shares.
The Fund was organized as a Massachusetts business
trust on August 3, 1988, and commenced operations on
January 23, 1989. As of , 2007, the Fund
had shares outstanding. Shares of the Fund
are traded on the NYSE under the symbol "KMM." As
of , 2007, the Fund's NAV was $
and the Fund's last reported sale price was
$ . See ''The Fund."

Investment Objective,
Strategies and Policies.. The Fund's investment objective is to provide high
current income consistent with prudent total return
asset management. The Fund seeks to achieve its
objective by investing its assets in a broad range of
income producing securities, such as U.S. corporate
fixed income securities and debt obligations of
foreign governments and their agencies and
instrumentalities, either of which may be denominated
in foreign currencies, debt obligations of the U.S.
Government and its agencies and instrumentalities and
other income producing securities, including
securities which may be denominated in foreign
currencies, any of which securities may or may not be
rated. There is no limitation on the percentage of
the Fund's portfolio which must be invested in any
particular type of income producing security;
however, at least 65% of the Fund's assets will be
invested in at least two different securities
sectors. The Fund has no requirements regarding
whether the income producing securities it purchases
must be rated or, if such securities are rated, what
the minimum or maximum ratings on such securities
must be. See "Investment Objective, Strategies and
Policies."

Information Regarding the
Investment Adviser....... DIMA serves as the investment adviser to the Fund.
DIMA provides a full range of investment advisory
services to retail and institutional clients, and as
of , 2007 had total assets of approximately
$ billion under management. DIMA is an indirect
wholly-owned subsidiary of Deutsche Bank A.G., an
international commercial and investment banking
institution that is engaged in a wide range of
financial services, including investment management,
mutual fund, retail, private and commercial banking,
investment banking and insurance. As of ,
2007, Deutsche Bank A.G. had more than $ billion
in assets under management. DIMA is part of Deutsche
Asset Management, which is the marketing name in the
United States for the asset management activities of
Deutsche Bank A.G.

DIMA, as investment adviser, receives a fee, paid
monthly, at the annual rate of .85% of the average
weekly net assets of the Fund. See "Management of the
Fund -- Investment Adviser."

Dividends and
Distributions............ The Fund's policy is to make monthly distributions to
shareholders. Monthly distribution may include net
short-term capital gains. Net long term capital
gains, if any, will be distributed at least annually.
See "Dividends and Distributions; Dividend
Reinvestment Plan."

Dividend Reinvestment
Plan..................... Shareholders will receive all dividends and capital
gains distributions in cash. However, the Fund has
established a dividend reinvestment plan (the "Plan")
under which all shareholders whose shares are
registered in their own name may elect to have all
such dividends and distributions automatically
reinvested in additional shares of the Fund.
Shareholders who elect to hold their shares in the
name of a broker or nominee should contact such
broker or nominee to determine whether they may
participate in the Plan. See "Dividends and
Distributions; Dividend Reinvestment Plan."

Provision for Conversion
to Open-End Fund......... The Board may at any time propose conversion of the
Fund to an open-end management investment company
depending on its judgment of the advisability of such
action in light of circumstances then prevailing.
Approval of such conversion would require a favorable
vote of the holders of a majority of the outstanding
shares. Conversion to an open-end investment company
would make the shares redeemable at their NAV upon
demand by shareholders. See "Description of
Shares -- Conversion to Open-End Fund."

Repurchase of Shares..... The Fund may, from time to time, take action to
attempt to reduce or eliminate any market value
discount from NAV. The Board, in consultation with
DIMA, will review on a quarterly basis the
possibility of open market repurchases or tender
offers for shares of the Fund. There can be no
assurance that the Board will, in fact, decide to
undertake either of these actions or, if undertaken,
that such repurchases or tender offers will result in
the shares trading at a price which is equal to or
close to NAV. The Fund may borrow to finance such
repurchases or tenders. See "Repurchase of Shares."

Custodian, Transfer Agent
and
Dividend -- Disbursing
Agent.................... State Street Bank and Trust Company acts as the
Fund's custodian and is the Fund's named transfer
agent. Pursuant to a sub-transfer agency agreement
between State Street Bank and Trust Company and DWS
Scudder Investments Service Company ("DWS-SISC"), an
affiliate of DIMA, DWS-SISC acts as the transfer
agent, dividend-disbursing agent and shareholder
service agent for the Fund. See "Custodian, Transfer
Agent and Dividend -- Disbursing Agent."

SPECIAL CONSIDERATIONS AND RISK FACTORS

The following summarizes some of the matters that you should consider
before investing in connection with this offer.

Risks of the Offer....... Potential Yield Reduction. The Offer could reduce
the Fund's current dividend yield if the Fund is
unable to invest the proceeds of the Offer in
securities that provide a yield higher than the
current portfolio yield.

Cost of the Offer. It is possible that the costs of
the Offer could result in the dilution of the
aggregate NAV of the Fund's shares if the Offer is
under-subscribed and/or the Subscription Price is at
or near NAV. The Fund cannot state precisely the
extent of such dilution, if any, at this time because
the Fund does not know what proportion of the Rights
will be exercised or what the NAV per share will be
when the Offer expires.

Share Price Volatility. Volatility in the market
price of the Fund's shares may increase during the
Offer. The Offer may result in some shareholders
selling their shares, which would exert downward
price pressure on the price of shares, while others
wishing to participate in the Offer may buy Shares,
having the opposite impact.

Non-Participation in the Offer. Shareholders who do
not fully exercise their Rights should expect that
they will, at the completion of the Offer, own a
smaller proportional interest in the Fund than they
owned before the Offer.

Under-Subscription. It is possible that the Offer
will not be fully subscribed. Under-subscription of
the Offer could have an impact on the net proceeds of
the Offer and whether the Fund achieves the benefits
described under "The Offer -- Purpose of the Offer."

Risks of Investing in the
Fund..................... The Fund is a closed-end investment company designed
primarily as a long-term investment and not as a
trading vehicle. The following are the general risks
of investing in the Fund that affect the Fund's
ability to achieve its investment objective. The
risks below could lower the returns and distributions
on the Fund's common shares.

Interest Rate Risk. The value of the fixed income
securities held by the Fund generally will vary
inversely with market interest rates. If interest
rates in a market fall, the Fund's fixed income
securities issued by governments or companies in that
market ordinarily will rise. If market interest rates
increase, however, the fixed income securities owned
by the Fund in that market will be likely to decrease
in value. Many of the fixed income securities in
which the Fund will invest, including certain types
of sovereign debt, such as Brady Bonds, have long
maturities. A longer average maturity generally is
associated with a higher level of volatility in the
market value of such securities in response to
changes in market conditions, including changes in
interest rates. In addition, securities issued at a
deep discount, such as certain types of Brady Bonds
and zero coupon obligations in which the Fund may
invest, are subject to greater fluctuations of market
value in response to changes in interest rates than
fixed income securities of comparable maturities that
were not issued at a deep discount.

Lower Rated Corporate Fixed Income Securities
Risk. The Fund may purchase debt securities that are
rated below investment-grade (commonly referred to as
"junk bonds"), and preferred stock that is rated
below investment grade. Securities rated below Baa by
Moody's Investors Services, Inc. ("Moody's") or below
BBB by Standard & Poor's Corporation ("S&P") or
similarly rated by another national recognized
statistical rating organization ("NRSRO") and unrated
securities judged to be of equivalent quality as
determined by the Investment Adviser are considered
below investment grade. 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. See Appendix -- Description of Bond Ratings
for a more complete description of the ratings
assigned by ratings organizations and their
respective characteristics. See "Special
Considerations and Risk Factors -- Lower Rated Fixed
Income Securities."

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

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

Investments in sovereign debt, such as Brady Bonds
(Brady Bonds are debt instruments issued under a plan
implemented to allow debtor Nations to restructure
their outstanding commercial bank indebtedness),
involve special risks. Foreign governmental issuers
of debt or the governmental authorities that control
the repayment of the debt may be unable or unwilling
to repay principal or pay interest when due. In the
event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults
must be pursued in the courts of the defaulting
party. Political conditions, especially a sovereign
entity's willingness to meet the terms of its fixed
income securities, are of considerable significance.
Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity
may

not contest payments to the holders of sovereign debt
in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy
proceeding with respect to sovereign debt on which a
sovereign has defaulted, and the Fund may be unable
to collect all or any part of its investment in a
particular issue.

Foreign investment in certain sovereign debt is
restricted or controlled to varying degrees,
including requiring governmental approval for the
repatriation of income, capital or proceeds of sales
by foreign investors. These restrictions or controls
may at times limit or preclude foreign investment in
certain sovereign debt and increase the costs and
expenses of the Fund. A significant portion of the
sovereign debt in which the Fund will invest,
including Brady Bonds, is issued as part of debt
restructurings and such debt is to be considered
speculative. There is a history of defaults with
respect to commercial bank loans by public and
private entities issuing Brady Bonds. All or a
portion of the interest payments and/or principal
repayment with respect to Brady Bonds may be
uncollateralized.

Foreign and Emerging Market Risk. Investments in
foreign securities involve certain risk
considerations not typically associated with
investing in securities of U.S. issuers, including:
(a) currency devaluations and other currency exchange
rate fluctuations; (b) political uncertainty and
instability, including military coups and armed
conflict; (c) more substantial government involvement
in the economy; (d) higher rates of inflation; (e)
less government supervision and regulation of the
securities markets and participants in those markets;
(f) controls on foreign investment and limitations on
repatriation of invested capital and on the Fund's
ability to exchange local currencies for U.S.
Dollars; (g) greater price volatility, substantially
less liquidity and significantly smaller
capitalization of securities markets; (h) absence of
uniform accounting and auditing standards; (i)
generally higher commission expenses; (j) delay in
settlement of securities transactions; and (k)
greater difficulty in enforcing shareholder rights
and remedies.

In addition, foreign securities may be subject to the
risks of nationalization, expropriation and other
confiscation which may be greater in emerging
markets. These and the other risks discussed above
could affect adversely the economies of such foreign
markets or the Fund's investments in such markets.
Because of the special considerations associated with
investing in foreign securities, an investment in the
Fund should be considered speculative.

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.

Income on foreign securities may be subject to
withholding and other taxes, which would reduce the
yield on such securities to the Fund and which may
not be recoverable by the Fund or its shareholders.
Because the Fund may invest in foreign currency
denominated securities, changes in foreign currency
exchange rates will affect the Fund's NAV, the value
of interest earned, and gains and losses realized on
the sale of securities denominated in foreign
currencies. The operating expense ratio of the Fund
can be expected to be higher than that of an
investment company investing exclusively in U.S.
securities because transaction expenses and other
costs of investing in emerging market securities,
such as custodial costs, are higher.

In certain markets there have been times when
settlements have been unable to keep pace with the
volume of securities transactions, making it
difficult to conduct such transactions.

Foreign Currency Risk. Because investments in
foreign securities usually will involve currencies of
foreign countries, and because the 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 the Fund as measured in U.S. dollars may be
affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control
regulations, and the 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.

Although the Fund values its assets daily in terms of
U.S. dollars, it does not intend to convert its
holdings of foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and
investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do 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 the Fund at one rate, while
offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer. The
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.

Illiquid Securities Risk. The Fund may invest in
securities for which there is no readily available
trading market or that are otherwise illiquid. It may
be difficult to sell such securities at a price
representing the fair value and, where registration
of such securities is required, a considerable period
may elapse between a decision to sell the securities
and the time when the Fund would be permitted to
sell.

Prepayment and Extension Risk. Preferred stock and
fixed income securities frequently have call features
that allow the issuer to repurchase the security
prior to its stated maturity. During periods of
declining interest rates, the issuer of a security
may exercise its option to prepay principal earlier
than scheduled, forcing the Fund to reinvest

in lower yielding securities. This is known as call
or prepayment risk. An issuer may redeem such a
security if the issuer can refinance it at a lower
cost due to declining interest rates or an
improvement in the credit standing of the issuer.
During periods of rising interest rates, the average
life of certain types of securities may be extended
because of slower than expected principal payments.
This may lock in a below market interest rate,
increase the security's duration, and reduce the
value of the security. This is known as extension
risk.

U.S. Government Securities Risk. Securities issued
by the U.S. Government, its agencies or
instrumentalities may vary in terms of the degree of
support afforded by the U.S. government. Some U.S.
Government securities may be supported by the full
faith and credit of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds and GNMA
certificates. Some agency securities are supported by
the agency's right to borrow from the U.S. Treasury
under certain circumstances, such as those issued by
the Federal Home Loan Banks. Still others are
supported only by the discretionary authority to
purchase the agency's obligations, such as those
issued by the Federal National Mortgage Association,
or by the credit of the agency that issued them, such
as those issued by the Student Loan Marketing
Association. Because there is no guarantee that the
U.S. Government will provide support to such
agencies, such securities may involve risk of loss of
principal and interest. Current market prices for
U.S. Government securities are not guaranteed and the
value of such securities will fluctuate.

Zero Coupon Securities Risk. Zero coupon securities
are subject to greater market value fluctuations from
changing interest rates than debt obligations of
comparable maturities which make current
distributions of interest (cash). Zero coupon
securities which are convertible into common stock
offer the opportunity for capital appreciation as
increases (or decreases) in market value of such
securities closely follow the movements in the market
value of the underlying common stock. Zero coupon
convertible securities generally are expected to be
less volatile than the underlying common stocks as
they usually are issued with maturities of 15 years
or less and are issued with options and/or redemption
features exercisable by the holder of the obligation
entitling the holder to redeem the obligation and
receive a defined cash payment.

Loan Participations and Assignment Risk. The Fund
may invest in fixed- and floating-rate loans
("Loans") arranged through private negotiations
between an issuer of emerging market debt instruments
and one or more financial institutions ("Lenders").
The Fund's investments in Loans are expected in most
instances to be in the form of participations in
Loans ("Participations") and assignments of portions
of Loans ("Assignments") from third parties. By
investing in the Participations the 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,
the 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. The Fund will acquire
Participations only if the Lender interpositioned
between the

Fund and the borrower is determined by the Investment
Adviser to be creditworthy.

When the Fund purchases Assignments from Lenders, it
will acquire direct rights against the borrower on
the Loan. Because Assignments are arranged through
private negotiations between potential assignees and
potential assignors, however, the rights and
obligations acquired by the Fund as the purchaser of
an Assignment may differ from, and may be more
limited than, those held by the assigning Lender.

The Fund may have difficulty disposing of Assignments
and Participations. Because no liquid market for
these obligations typically exists, the 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 the Fund's ability to dispose of
particular Assignments or Participations when
necessary to meet the 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 the Fund to assign a value to those
securities for purposes of valuing the Fund's
portfolio and calculating its net asset value.

Pay-in-kind Bond Risk. Similar to zero coupon
obligations, PIK bonds carry additional risk as
holders of these types of securities realize no cash
until the cash payment date unless a portion of such
securities is sold and, if the issuer defaults, the
Fund may obtain no return at all on its investment.
The market price of PIK bonds is affected by interest
rate changes to a greater extent, and therefore tends
to be more volatile, than that of securities which
pay interest in cash. Additionally, current federal
income tax law requires the holder of certain PIK
bonds to accrue income with respect to these
securities prior to the receipt of cash payments. To
maintain its qualification as a regulated investment
company and avoid liability for federal income and
excise taxes, the Fund may be required to distribute
income accrued with respect to these securities and
may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate
cash to satisfy these distribution requirements. See
"U.S. Federal Income Tax Matters" in the SAI.

typically is between six months and five years,
provided that there is no event of default. The Fund
will segregate assets in the form of cash and cash
equivalents in an amount equal to the aggregate
market value of the credit default swaps of which it
is the seller, marked to market on a daily basis. If
an event of default occurs, the seller must pay the
buyer the full notional value of the reference
obligation through either physical settlement or cash
settlement. Credit default swap transactions involve
greater risks than if the Fund had invested in the
reference obligation directly.

Leverage and Borrowing Risk. Although the Fund's use
of leverage creates an opportunity for increased net
income and capital appreciation for the Fund's
shares, it also results in additional risks and can
magnify the effect of any losses. The Fund will pay
(and the holders of the Fund's shares will bear) any
costs and expenses relating to any leverage. If the
income and gains earned on securities purchased with
leverage proceeds are greater than the cost of
leverage, the Fund's return will be greater than if
leverage had not been used. Conversely, if the income
or gain from the securities purchased with such
proceeds does not cover the cost of leverage, the
return to the Fund will be less than if leverage had
not been used. There is no assurance that a
leveraging strategy will be successful. Leverage
involves risks and special considerations for the
Fund's shareholders including:

- the likelihood of greater volatility of NAV and
market price of and dividends on the Fund's shares
than a comparable portfolio without leverage;

- the risk that fluctuations in interest rates on
borrowings and short-term debt or in the dividend
rates on any leverage that the Fund must pay will
reduce the return to the Fund's shareholders; and

- the effect of leverage in a declining market, which
is likely to cause a greater decline in the NAV of
the Fund's shares than if the Fund were not
leveraged, which may result in a greater decline in
the market price of the Fund's shares.

It is also possible that the Fund will be required to
sell assets at a time when it would otherwise not do
so, possibly at a loss, in order to redeem or meet
payment obligations on any leverage. Such a sale
would reduce the Fund's NAV and also make it
difficult for the NAV to recover. The Fund in its
best judgment nevertheless may determine to continue
to use leverage if it expects that the benefits to
the Fund's shareholders of maintaining the leveraged
position will outweigh the current reduced return.
The Fund's use of leverage may also impair the
ability of the Fund to maintain its qualification for
federal income tax purposes as a regulated investment
company.

portfolio turnover rate of 200% would be higher than
that experienced by most investment companies with a
similar investment objective. A high turnover rate
(over 100%) necessarily involves greater expenses to
the Fund. In prior years, the Fund's portfolio
turnover rate has exceeded 100%. The Fund will engage
in portfolio trading if DIMA believes that a
transaction will help achieve the Fund's investment
objective.

Net Asset Value. Whether an investor will realize
gains or losses upon the sale of shares will not
depend directly upon changes in the Fund's net NAV,
but will depend upon whether the market price of the
shares at the time of sale is above or below the
investor's purchase price for the shares. The market
price of shares is determined by such factors as
relative demand for and supply of shares in the
market, general market and economic conditions,
changes in the Fund's net asset value and other
factors beyond the control of the Fund. This market
risk is separate and distinct from the risk that the
Fund's NAV may decrease. Since its initial public
offering, shares have traded at various times at both
a discount and a premium to NAV. See "Trading and Net
Asset Value Information." The risk that the shares
may trade at a discount to NAV may be greater for
investors expecting to sell their shares in a
relatively short period of time. Accordingly, the
Shares are designed primarily for long-term
investors. Investors in the shares should not view
the Fund as a vehicle for short-term trading
purposes.

FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of Subscription Price)(1).......... None
Dividend Reinvestment Plan Fees................................ None
ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Management Fee................................................. 0.85%
Interest Payments on Borrowed Funds(2)......................... %
Other Expenses(3).............................................. %
----
TOTAL ANNUAL EXPENSES(4).................................... %
====

--------

(1) No sales load will be charged by the Fund in connection with this Offer.
However, Shareholders that choose to exercise their Rights through
broker-dealers, banks or other nominees may incur a servicing fee charged
by such broker-dealer, bank or nominee.
(2) Assumes that the Fund's total leverage through borrowing will equal
approximately % of the Fund's total assets, including proceeds of the
Offer. However, assuming the Fund does not engage in additional
borrowings, the estimated annual operating expenses would be:

Management Fees................................................. %

Interest Payments on Borrowed Funds............................. %

Other Expenses.................................................. %

Total Annual Expenses........................................... %

(3) Amounts are based on estimated amounts for the Fund's current fiscal year
after giving effect to anticipated net proceeds of the Offer, assuming
that all of the Rights are exercised, and do not include the expense of
leverage.
(4) The % expense ratio assumes that the Offer is fully subscribed,
yielding estimated net proceeds of $ (assuming a Subscription Price
of $ per Share) and that, as a result of the Offer, (based on the
Fund's net assets attributable to Shareholders on , 2007 of
$ ) the net assets attributable to Shareholders would be $ . If
the subscription rate of the Offer is 50%, "Other Expenses" would be %
(a difference of basis points) and "Total Annual Expenses"
would be % (a difference of basis points).

EXAMPLE:

An investor would directly or indirectly pay the following expenses on a
$1,000 investment, assuming a 5% annual return throughout the period.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

Total Expenses Incurred: ..................... $ $ $ $

The foregoing fee table and example are intended to assist investors in
understanding the costs and expenses that an investor in the Fund will bear
directly or indirectly.

The Example set forth above assumes reinvestment of all dividends and
distributions at NAV, and an annual expense ratio of %. The table above and
the assumption in the Example of a 5% annual return are required by the
Securities and Exchange Commission ("SEC") regulations applicable to all
management investment companies. THE EXAMPLE SHOULD NOT BE CONSIDERED AS A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATES OF RETURN. ACTUAL
EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR
PURPOSES OF THE EXAMPLE. In addition, while the Example assumes reinvestment of
all dividends and distributions at NAV, participants in the Plan may receive
shares purchased or issued at a price or value different from NAV. See
"Dividends and Distributions; Dividend Reinvestment Plan."

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand
the Fund's financial performance. Certain information reflects financial results
from a single Fund share. In the table, "total investment return" represents the
rate that an investor would have earned on an investment in the Fund. The
information in the financial highlights for the ten years ended November 30,
2006 has been audited by , independent registered public accounting
firm, whose report appears in the Fund's Annual Report to Shareholders. The
Fund's financial statements are included in the Fund's Annual and Semi-Annual
Reports and are incorporated by reference into the Statement of Additional
Information "SAI." The Annual and Semi-Annual Reports may be obtained without
charge by calling .

FOR THE YEARS ENDED NOVEMBER 30
-------------------------------------------------------------------
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----

Net asset value, beginning of
period..........................
Net investment income.............
Net realized and unrealized gains
from investment and foreign
currency transactions...........
Net increase from investment
operations......................
Dividends from net investment
income..........................
Distributions from net realized
gains from investment
transactions....................
Distributions from paid-in-
capital.........................
Distributions in excess of net
investment income...............
Total dividends and distributions
to Shareholders.................
Net increase in net asset value
resulting from repurchase of
common stock....................
Net asset value, end of period....
Market value end of period........
Total investment return(1)........
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's).........................
Expenses to average net assets....
Net investment income to average
net assets......................
Portfolio turnover rate...........

INFORMATION REGARDING SENIOR SECURITIES

The Fund has outstanding a $ loan from at . The
loan is evidenced by a note which bears interest at the plus % ( %
at ) which is payable quarterly. The loan amount and rate are reset
periodically under a credit facility which is available until . The
outstanding senior securities as of for each of the last ten fiscal
years is as follows:

YEAR TOTAL AMOUNT OUTSTANDING ASSET COVERAGE PER $1,000 OF DEBT
---- ------------------------ ---------------------------------

2006...............................
2005...............................
2004...............................
2003...............................
2002...............................
2001...............................
2000...............................
1999...............................
1998...............................
1997...............................

TRADING AND NET ASSET VALUE INFORMATION

In the past, the Fund's shares have traded at both a premium and at a
discount in relation to NAV. Although the Fund's shares recently have been
trading at a premium above NAV, there can be no assurance that this premium will
continue after the Offer or that the shares will not again trade at a discount.
Shares of closed-end investment companies such as the Fund frequently trade at a
discount from NAV. See "Special Considerations and Risk Factors."

The Fund's shares are listed and traded on the NYSE. The average weekly
trading volume of the shares on the NYSE during the year ended , 2006
was shares. The following table shows for the quarters indicated: (1)
the high and low sale price of the shares on the NYSE; (2) the high and low NAV
per share; and (3) the high and low premium or discount to NAV at which the
Fund's shares were trading (as a percentage of NAV).

PREMIUM/(DISCOUNT)
PRICE NET ASSET VALUE TO NET ASSET VALUE
------------- --------------- ------------------
FISCAL QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
-------------------- ---- --- ---- --- ---- ---

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

Immediately prior to the Fund's announcement of the Offer on ,
the last reported sale price of a share of the Fund's shares on the NYSE was
$ . The Fund's NAV per share on was $ .

THE OFFER

TERMS OF THE OFFER

The Fund is issuing to its Shareholders, as of the close of business on the
Record Date, non-transferable Rights entitling the holders thereof to subscribe
for an aggregate of up to Shares of the Fund. Each Shareholder is
being issued one Right for each whole share of beneficial interest owned on the
Record Date. The Rights entitle the holders thereof to subscribe for one Share
for every three Rights held (3-for-1) (the "Primary Subscription"). Fractional
shares will not be issued upon the exercise of the Rights. Shareholders issued
fewer than three Rights are entitled to subscribe for one Share pursuant to the
Primary Subscription. If you exercise all of the Rights issued to you, you also
may subscribe for Shares which were not otherwise subscribed for by others in
the Primary Subscription pursuant to the Over-Subscription Privilege.

Rights may be exercised at any time during the Subscription Period, which
commences on and ends at 5:00 p.m., Eastern time, on ,
2007, unless extended by the Fund (such date, as it may be extended, is referred
to in this prospectus as the "Expiration Date"). The Rights are evidenced by a
Subscription Certificate that

will be mailed to Shareholders, except as discussed below under "Foreign
Restrictions." The methods by which Rights may be exercised and payments may be
made for Shares are set forth below in "Methods for Exercising Rights" and
"Payment for Shares."

Because the Expiration Date and the date upon which the price of the Rights
will be determined will be the same date, exercising Shareholders will not know
the purchase price of the Shares when they make their investment decision. If
the market price of the Fund's shares is below the Subscription Price, it may
not be in your interest to participate in the Offer. Once you subscribe for
Shares and the Fund receives payment or a guarantee of payment (as described
under "The Offer -- Payment for Shares"), you will not be able to change your
decision, except under the circumstances described under "Notice of NAV Decline
or Increase."

The Rights are non-transferable. Therefore, only the underlying Shares will
be listed for trading on the NYSE. For purposes of determining the maximum
number of Shares a Shareholder may acquire pursuant to the Offer, broker-dealer
whose shares are held of record by Cede & Co. ("Cede"), nominee for the
Depository Trust Company, or by any other depository or nominee, will be deemed
to be the holders of the Rights that are issued to Cede or such other depository
or nominee on their behalf. Shares acquired pursuant to the Over-Subscription
Privilege are subject to allotment, which is more fully discussed under "Over-
Subscription Privilege."

PURPOSE OF THE OFFER

The purpose of the Offer is to increase the assets of the Fund available
for investment, thereby allowing the Fund to more fully take advantage of
available investment opportunities consistent with the Fund's investment
objective. DIMA believes that the additional capital resulting from the Offer
would enable the Fund to purchase newly issued securities and/or provide the
ability to increase current holdings without the need to raise capital by
selling certain other existing positions. DIMA believes the Fund could realize
the following benefits as a result of the Offer:

Opportunity to Purchase Below Market Price. The Offer affords existing
shareholders the opportunity to purchase additional Shares at a price that
potentially will be below market value at the Expiration Date.

Increased Investment Opportunity. The proceeds of the Offer will enable
the Fund to purchase newly issued securities and/or provide the ability to
increase current holdings without the need to raise capital by selling certain
other existing positions and thus possibly paying transaction costs or incurring
capital gains when selling specific securities. Based on current market
conditions, DIMA believes that the additional opportunities will enable the Fund
to maintain or potentially enhance its current dividend yield, although there
can be no assurance that will be the case and, depending upon the actual yields
generated by the securities purchased with the proceeds of the Offer, the Fund's
ability to maintain current dividend levels could indeed be impeded. DIMA also
expects that the increased investment opportunities may result in increased
diversification.

Reduction in Expense Ratio. The increase in assets from the Offer may
reduce the Fund's expenses as a percentage of average net assets over time
because fixed costs would be spread over a greater number of shares.

Potential Increase in NAV. If shares of the Fund continue to trade at a
premium, the Offer could increase the NAV of the Fund if the Subscription Price,
less offering costs, exceeds the NAV.

Additional Liquidity. The Offer could also improve the liquidity of the
trading market for the Fund's shares on the NYSE.

The Board determined that the Offer was in the best interests of the Fund.
The Board considered information about the Offer provided by DIMA, including
materials on the current market environment and outlook for the Fund. DIMA
informed the Board that it believed that the potential benefits of conducting
the Offer, discussed above, mitigated the potential risks associated with the
Offer. In particular, the Board considered DIMA's representations that, based
upon current market conditions and available leverage opportunities, DIMA
believed that the Offer would enable the Fund to purchase portfolio securities
that would enable the Fund to maintain or enhance its current dividend yield,
although there could be no assurance that would be the case.

The Board also considered the proposed terms of the Offer, including the
advantages and disadvantages of conducting a non-transferable rights offering
versus a transferable rights offering, the pricing structure of the Offer, the
anticipated impact of the Offer on the market price, the expenses of the Offer
and the effect on non-exercising

Shareholders. The Board noted that DIMA will benefit from the Offer because its
fees for investment management services are based on the average weekly net
assets of the Fund. See "Management of the Fund -- Investment Adviser." It is
not possible to state precisely the amount of additional compensation DIMA will
receive as a result of the Offer because it is not known how many Rights will be
exercised and because the proceeds of the Offer will be invested in additional
portfolio securities that may fluctuate in value. However, in the event that all
the Rights are exercised in full, based on the estimated Subscription Price of
$ per Share, DIMA would receive additional fees for investment management
services of approximately $ per annum as a result of the increase in assets
under management.

The Fund may, in the future and at its discretion, choose to make
additional rights offerings of its shares or otherwise issue common shares from
time to time for a number of shares and on terms which may or may not be similar
to this Offer.

OVER-SUBSCRIPTION PRIVILEGE

Shares not subscribed for in the Primary Subscription will be offered, by
means of the Over-Subscription Privilege, to Shareholders who have exercised all
Rights issued to them [(other than those Rights which cannot be exercised
because they represent the Right to acquire less than one Share)] and who wish
to acquire more than the number of Shares for which the Rights issued to them
are exercisable. Shareholders should indicate, on the Subscription Certificate
that they submit with respect to the exercise of the Rights issued to them, how
many Shares they are willing to acquire pursuant to the Over- Subscription
Privilege. The Fund may, at its discretion, issue up to an additional 25% of the
Shares in the Offer to honor over-subscription requests if sufficient Shares are
not available from the Primary Subscription to honor all over-subscriptions. If
sufficient Shares remain, all over-subscriptions will be honored in full. If
sufficient Shares are not available to honor all over-subscriptions, the
available Shares will be allocated among those who over-subscribe based on the
number of Rights originally issued to them by the Fund, so that the number of
Shares issued to Shareholders who subscribe pursuant to the Over-Subscription
Privilege will generally be in proportion to the number of shares owned by them
in the Fund on the Record Date. The allocation process may involve a series of
allocations to assure that the total number of Shares available for over-
subscriptions is distributed on a pro-rata basis. The Over-Subscription
Privilege may result in additional dilution of a Shareholder's ownership
percentage and voting rights. For more information on how to exercise the Over-
Subscription Privilege, see "Methods for Exercising Rights" below.

Banks, broker-dealers, trustees and other nominee holders of rights will be
required to certify to the Subscription Agent, before any Over-Subscription
Privilege may be exercised with respect to any particular beneficial owner, as
to the aggregate number of Rights exercised pursuant to the Primary Subscription
and the number of Shares subscribed for pursuant to the Over-Subscription
Privilege by such beneficial owner and that such beneficial owner's Primary
Subscription was exercised in full.

THE SUBSCRIPTION PRICE

The Subscription Price per Share will be the greater of the (i) NAV per
share of the Fund on the Expiration Date or (ii) 95% of the volume weighted
average share price of the Fund on the NYSE on the Expiration Date and the four
preceding business days.

The Fund announced the Offer after the close of trading on the NYSE
on , 2007. The NAV per Share at the close of business on ,
2007 and , 2007 was $ and $ , respectively, and the last
reported sale price of a share on the NYSE on those dates was $ and $ ,
respectively. Because the Offer expires before the actual Subscription Price is
determined, Shareholders who decide to acquire Shares in the Primary
Subscription or pursuant to the Over-Subscription Privilege will not know the
purchase price of such Shares when they make such decision. Information about
the Fund's NAV may be obtained by calling ( ) .

NOTICE OF NAV DECLINE OR INCREASE

The Fund will suspend the Offer until it amends this prospectus if, after
the effective date of this prospectus, the Fund's NAV declines more than 10%
from its NAV as of the effective date or the NAV increases to an amount greater
than the net proceeds. In such event, the Fund will notify Shareholders of any
such decline or increase and permit

Shareholders to cancel the exercise of their Rights. In addition, if the Fund
begins to trade at a discount to NAV, it will reexamine the Offer and may
consider recommending the cancellation of the Offer or a change in terms of the
Offer. Shareholders will have their payment for additional Shares returned to
them if they opt to cancel the exercise of their Rights.

EXPIRATION OF THE OFFER

The Offer will expire at 5:00 p.m., Eastern time, on the Expiration Date.
The Rights will expire on the Expiration Date and thereafter may not be
exercised. Any extension of the Offer will be followed as promptly as
practicable by an announcement thereof. Such announcement will be issued no
later than 9:00 a.m., Eastern time, on the next business day following the
previously scheduled Expiration Date. Without limiting the manner in which the
Fund may choose to make such announcement, the Fund will not, unless otherwise
obligated by law, have any obligation to publish, advertise, or otherwise
communicate any such announcement other than by making a release to the Dow
Jones News Service or such other means of announcement as the Fund deems
appropriate.

SUBSCRIPTION AGENT

The Subscription Agent is Colbent Corporation. The Subscription Agent will
receive for its administrative, processing, invoicing and other services, a fee
estimated to be $ , which includes reimbursement for all out-of-pocket
expenses related to the Offer. Questions regarding the Subscription Certificates
should be directed to The Altman Group at ( ) .

Completed Subscription Certificates must be sent together with proper
payment of the Estimated Subscription Price for all shares subscribed for in the
Primary Subscription and pursuant to the Over-Subscription Privilege to the
Subscription Agent by one of the methods described below.

Alternatively, Notice of Guaranteed Delivery may be sent by facsimile to
( ) to be received by the Subscription Agent prior to 5:00 p.m.,
Eastern time, on the Expiration Date. Facsimiles should be confirmed by
telephone at ( ) . The Fund will accept only properly completed and
executed Subscription Certificates actually received at any of the addresses
listed below, prior to 5:00 p.m., Eastern time, on the Expiration Date or by the
close of business on the third Business Day after the Expiration Date following
timely receipt of a Notice of Guaranteed Delivery. See "Payment for Shares"
below.

SUBSCRIPTION CERTIFICATE DELIVERY METHOD ADDRESS
---------------------------------------- -------

By First-Class Mail P.O. Box 859208
Braintree, MA 02185-9208
By Overnight Courier or Express Mail 161 Bay Street Road
Braintree, MA 02184
By Hand Securities Transfer and Reporting
Service, Inc.
c/o Colbent Corporation
100 William Street Galleria
New York, NY 10038
By Broker-Dealer or other Nominee (Notice Shareholder whose shares are held in a
of Guaranteed Delivery) brokerage bank or trust account may
contact their broker or other nominee and
instruct them to submit a Notice of
Guaranteed Delivery and Payment on their
behalf.

Delivery to an address other than those listed above does not constitute a
valid delivery.

INFORMATION AGENT

Any questions or requests for assistance may be directed to the Information
Agent at its telephone number and address listed below:
The Altman Group, Inc.
1275 Valley Brook Avenue
Lyndhurst, New Jersey 07071
Toll Free: ( )

You may also contact your bank, broker or other nominee for information
with respect to the Offer.

The Information Agent will receive a fee estimated to be approximately
$ , which includes reimbursement for all out-of-pocket expenses related to
its services as Information Agent.

METHODS FOR EXERCISING RIGHTS

Rights are evidenced by Subscription Certificates that, except as described
below under "Foreign Restrictions," will be mailed to Shareholders or, if a
Shareholder's shares are held by Cede or any other depository or nominee on
their behalf, to Cede or such depository or nominee. Rights may be exercised by
completing and signing the Subscription Certificate that accompanies this
prospectus and mailing it in the envelope provided, or otherwise delivering the
completed and signed Subscription Certificate to the Subscription Agent,
together with payment in full for the Shares at the estimated Subscription Price
(as described below under "Payment for Shares") by the Expiration Date. Rights
may also be exercised by contacting your broker, banker or trust company, which
can arrange, on your behalf, to guarantee payment and delivery of a properly
completed and executed Subscription Certificate pursuant to a Notice of
Guaranteed Delivery by the close of business on the third business day after the
Expiration Date. A fee may be charged for this service. Fractional Shares will
not be issued upon the exercise of Rights. Shareholders issued fewer than three
Rights are entitled to subscribe for one Share pursuant to the Primary
Subscription. Completed Subscription Certificates must be received by the
Subscription Agent prior to 5:00 p.m., Eastern time, on the Expiration Date at
one of the addresses set forth above (unless the guaranteed delivery procedures
are complied with as described below under "Payment for Shares").

Shareholders Who are Record Owners. To exercise their Rights, Shareholders
may choose between either option set forth under "Payment for Shares" below. If
time is of the essence, option (2) under "Payment for Shares" below will permit
delivery of the Subscription Certificate and payment after the Expiration Date.

Shareholders Whose Shares are Held By a Nominee. Shareholders whose shares
are held by a nominee such as a bank, broker or trustee must contact that
nominee to exercise their Rights. In that case, the nominee will complete the
Subscription Certificate on behalf of the Shareholder and arrange for proper
payment by one of the methods set forth under "Payment for Shares" below.

Nominees. Nominees who hold shares for the account of others should notify
the respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the nominee should complete
the Subscription Certificate and submit it to the Subscription Agent with the
proper payment as described under "Payment for Shares" below.

PAYMENT FOR SHARES

Exercising Shareholders who acquire Shares pursuant to this Offer may
choose between the following methods of payments:

(1) DELIVER SUBSCRIPTION CERTIFICATE TO THE SUBSCRIPTION AGENT BY THE
EXPIRATION DATE:

Exercising Shareholders may deliver to the Subscription Agent in the manner
set forth above under "Subscription Agent" (i) a completed and executed
Subscription Certificate indicating the number of Rights they have been issued
and the number of Shares they are acquiring pursuant to the Primary
Subscription, as well as the number of any additional Shares they would like to
subscribe for under the Over-Subscription Privilege and (ii) payment for

all such ordered Shares based on the estimated Subscription Price of $ per
Share, both no later than 5:00 p.m., Eastern time, on the Expiration Date.

The Subscription Agent will deposit all checks received by it for the
purchase of Shares into a segregated interest bearing account of the Fund (the
interest from which will belong to the Fund) pending proration and distribution
of Shares.

A PAYMENT PURSUANT TO THIS METHOD MUST BE IN U.S. DOLLARS BY MONEY ORDER OR
CHECK DRAWN ON A BANK OR BRANCH LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO
DWS MULTI-MARKET INCOME TRUST AND MUST ACCOMPANY A PROPERLY COMPLETED AND
EXECUTED SUBSCRIPTION CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE
ACCEPTED. EXERCISE BY THIS METHOD IS SUBJECT TO ACTUAL COLLECTION OF CHECKS BY
5:00 P.M., EASTERN TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, SHAREHOLDERS ARE STRONGLY
URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A CERTIFIED OR CASHIER'S CHECK
OR MONEY ORDER.

(2) CONTACT YOUR BROKER, BANK OR TRUST COMPANY TO DELIVER NOTICE OF
GUARANTEED DELIVERY TO THE SUBSCRIPTION AGENT BY THE EXPIRATION DATE:

An exercising Shareholder may acquire Shares, and a subscription will be
accepted by the Subscription Agent if, prior to 5:00 p.m., Eastern time, on the
Expiration Date, the Subscription Agent has received a Notice of Guaranteed
Delivery by facsimile or otherwise from a bank, a trust company or NYSE member
guaranteeing delivery of (i) payment of the estimated Subscription Price of
$ per Share for the Shares subscribed for in the Primary Subscription and
any additional Shares subscribed for pursuant to the Over-Subscription
Privilege, and (ii) a properly completed and executed Subscription Certificate.
The Subscription Agent will not honor a Notice of Guaranteed Delivery unless a
properly completed and executed Subscription Certificate and full payment for
the Shares is received by the Subscription Agent by the close of business
on , 2007 (the third business day after the Expiration Date).

On , 2007 (the "Confirmation Date"), the Subscription Agent will
send a confirmation to each exercising Shareholder (or, if the shares are held
by a depository or other nominee, to such depository or other nominee), showing
(i) the number of Shares acquired pursuant to the Primary Subscription, (ii) the
number of Shares, if any, acquired pursuant to the Over-Subscription Privilege,
(iii) the per Share and total purchase price for the Shares, and (iv) any
additional amount payable by such exercising Shareholder to the Fund or any
excess to be refunded by the Fund to such exercising Shareholder, in each case
based upon the final Subscription Price. Any additional payment required from an
exercising Shareholder must be received by the Subscription Agent by ,
2007 (the "Final Payment Date"). Any excess payment to be refunded by the Fund
to an exercising Shareholder will be mailed by the Subscription Agent to the
holder as promptly as practicable after the Final Payment Date. In the case of
any Shareholder who exercises his or her right to acquire Shares pursuant to the
Over-Subscription Privilege, any excess payment which would otherwise be
refunded to the Shareholder will be applied by the Fund toward payment for
additional Shares acquired pursuant to the exercise of the Over-Subscription
Privilege. All payments by a Shareholder must be made in U.S. dollars by money
order or check drawn on a bank located in the United States and payable to "DWS
Multi-Market Income Trust."

WHICHEVER OF THE METHODS OF PAYMENT DESCRIBED ABOVE IS USED, ISSUANCE OF
THE SHARES IS SUBJECT TO COLLECTION OF CHECKS AND ACTUAL RECEIPT OF THE FINAL
SUBSCRIPTION PRICE BY THE FUND.

If an exercising Shareholder does not make payment of any additional
amounts due by , 2007, the Fund reserves the right to take any or all
of the following actions: (i) apply any payment received by it toward the
purchase of the greatest whole number of Shares which could be acquired by such
exercising Shareholder upon exercise of the Primary Subscription and/or Over-
Subscription Privilege based on the amount of such payment; (ii) allocate the
Shares subject to subscription rights to one or more other Shareholders; (iii)
sell all or a portion of the Shares deliverable upon exercise of subscription
rights on the open market and apply the proceeds thereof to the amount owed;
and/or (iv) exercise any and all other rights or remedies to which it may be
entitled, including, without limitation, the right to set-off against payments
actually received by it with respect to such subscribed Shares.

AN EXERCISING SHAREHOLDER WILL NOT HAVE THE RIGHT TO CANCEL THE EXERCISE OF
RIGHTS OR RESCIND A PURCHASE AFTER THE SUBSCRIPTION AGENT HAS RECEIVED PAYMENT,
EITHER BY MEANS OF A NOTICE OF GUARANTEED DELIVERY OR A CHECK OR MONEY ORDER,
EXCEPT UNDER THE CIRCUMSTANCES DESCRIBED UNDER "NOTICE OF NAV DECLINE OR
INCREASE."

The risk of delivery of Subscription Certificates and payments to the
Subscription Agent will be borne by the exercising Shareholder and not the Fund,
the Subscription Agent or the Information Agent. If the mail is used to exercise
Rights, it is recommended that such Subscription Certificate and payment be sent
by registered mail, properly insured, with return receipt requested, and that a
sufficient number of days be allowed to ensure delivery to the Fund and
clearance of payment before 5:00 p.m., Eastern time, on the Expiration Date.
Because uncertified personal checks may take at least five business days to
clear and may, at the discretion of the Fund, not be accepted if not cleared
before the Expiration Date, you are strongly encouraged to pay, or arrange for
payment, by means of certified or bank cashier's check.

All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Fund, whose determinations will
be final and binding. The Fund in its sole discretion may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Subscription
Agent determines in its sole discretion. The Subscription Agent will not be
under any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Certificates or incur any liability for
failure to give such notification.

EXERCISING SHAREHOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTION
AFTER RECEIPT OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT, EXCEPT
UNDER THE CIRCUMSTANCES DESCRIBED UNDER "NOTICE OF NAV DECLINE OR INCREASE."

DELIVERY OF SHARE CERTIFICATES

Certificates representing Shares acquired in the Primary Subscription and
representing Shares acquired pursuant to the Over-Subscription Privilege will be
mailed promptly after the expiration of the Offer once full payment for such
Shares has been received and cleared. Participants in the Fund's Plan will have
any Shares acquired in the Primary Subscription and pursuant to the Over-
Subscription Privilege credited to their shareholder dividend reinvestment
accounts in the Plan. Participants in the Plan wishing to exercise Rights for
the shares held in their accounts in the Plan must exercise such Rights in
accordance with the procedures set forth above. Shareholders whose shares of
beneficial interest are held of record by Cede or by any other depository or
nominee on their behalf or their broker-dealer's behalf will have any Shares
acquired in the Primary Subscription credited to the account of Cede or such
other depository or nominee. Shares acquired pursuant to the Over-Subscription
Privilege will be certificated and certificates representing such shares will be
sent directly to Cede or such other depository or nominee. Share certificates
will not be issued for Shares credited to Plan accounts.

EMPLOYEE PLAN CONSIDERATIONS

Shareholders that are, or acting on behalf of, employee benefit plans
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including corporate savings and 401(k) plans), and plans that are
subject to Section 4975 of the Code (as defined below), such as profit
sharing/retirement plans for self-employed individuals and Individual Retirement
Accounts (collectively, "Retirement Plans") should be aware that additional
contributions of cash to Retirement Plans (other than rollover contributions or
trustee-to-trustee transfers from other Retirement Plans) to exercise Rights
would be treated as Retirement Plan contributions and therefore, when taken
together with contributions previously made, may be treated as excess or
nondeductible contributions and may be subject to excise taxes. In the case of
Retirement Plans qualified under Section 401(a) of the Code (as defined below),
additional cash contributions could cause violations of the maximum contribution
limitations of Section 415 of the Code or other qualification rules. Retirement
Plans in which contributions are so limited should consider whether there is an
additional source of funds available within the Retirement Plan, such as a
reallocation from another investment option or other liquidation of assets, with
which to exercise the Rights. Because the rules

governing Retirement Plans are extensive and complex, Retirement Plans
contemplating the exercise of Rights should consult with their counsel before
such exercise.

Retirement Plans and other tax exempt entities should also be aware that if
they borrow to finance their exercise of Rights, they may become subject to the
tax on unrelated business taxable income under Section 511 of the Code. If any
portion of an Individual Retirement Account is used as security for a loan, the
portion so used will be treated as a distribution to the IRA depositor.

ERISA contains fiduciary responsibility requirements, and ERISA and the
Code contain prohibited transactions rules that may affect the exercise of
Rights. Due to the complexity of these rules and the penalties for
noncompliance, Retirement Plans should consult with their counsel regarding the
consequences of their exercise of Rights under ERISA and the Code.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER

The following discussion summarizes the principal federal income tax
consequences of the Offer to Shareholders and exercising Shareholders. It is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), U.S.
Treasury regulations, Internal Revenue Service rulings and policies and judicial
decisions in effect on the date of this prospectus, all of which may be subject
to change or differing interpretation, possibly with retroactive effect. This
discussion does not address all federal income tax aspects of the Offer that may
be relevant to a particular Shareholder in light of his individual circumstances
or to Shareholders subject to special treatment under the Code (such as
insurance companies, financial institutions, tax-exempt entities, dealers in
securities, foreign corporations, and persons who are not citizens or residents
of the United States), and it does not address any state, local or foreign tax
consequences. Accordingly, each Shareholder should consult his own tax advisor
as to the specific tax consequences of the Offer to him. Each shareholder should
also review the discussion of certain tax considerations affecting the Fund and
its shareholders set forth under "Federal Income Taxation" below and under "U.S.
Federal Income Tax Matters" in the SAI.

For federal income tax purposes, neither the receipt nor the exercise of
the Rights by Shareholders will result in taxable income (or loss) to those
Shareholders, and no gain or no loss will be realized if the Rights expire
without exercise.

A Shareholder's basis in a Right will be zero unless either (i) the fair
market value of the Right at the time of the distribution is 15% or more of the
fair market value at such time of the shares with respect to which the Right was
issued, or (ii) the Shareholder elects, on its federal income tax return for the
taxable year in which the Right is received, to allocate part of the basis of
such shares to the Right. If either of clauses (i) and (ii) is applicable, then
if the Right is exercised, the Shareholder will allocate its basis in the shares
with respect to which the Right was distributed between such shares and the
Right in proportion to the fair market values of each on the date of issuance.
If a Shareholder makes the election described in clause (ii), the election is
irrevocable and, if made, must be made with respect to all Rights issued to the
Shareholder in the Offer.

The holding period of a Right received by a Shareholder includes the
holding period of the shares with regard to which the Right is issued. If the
Shareholder exercises a Right, the holding period of the Share acquired begins
on the date the Right is exercised.

In the event a Shareholder allows Rights to expire without exercising them,
the Rights will be deemed to have a zero basis and, therefore, the Shareholder
will not recognize any loss upon the expiration of the Rights. In addition, the
tax basis of the Shares with respect to which the expired Rights were
distributed will remain unchanged as compared to their basis prior to the
distribution of the Rights.

A Shareholder's basis for determining gain or loss upon the sale of a Share
acquired upon the exercise of a Right will be equal to the sum of the
Shareholder's basis in the Right, as described above, and the Subscription
Price. Gain or loss recognized by a Shareholder upon the sale of a Share
acquired through the Offer will be capital gain or loss (assuming the Share was
held as a capital asset at the time of sale) and will be long-term capital gain
or loss if the Share was held at the time of the sale for more than one year.

The foregoing is a general summary of the principal federal income tax
consequences of the Offer to Shareholders and exercising holders under federal
income tax laws presently in effect, and does not cover any state, local or
foreign tax consequences of the Offer. Shareholders should consult their own tax
advisors concerning the tax consequences of this transaction. See "Federal
Income Taxation."

FOREIGN RESTRICTIONS

Subscription Certificates will not be mailed to Shareholders whose record
addresses are outside the United States (the term "United States" includes the
states, the District of Columbia, and the territories and possessions of the
United States). However, foreign Shareholders will receive written notice of the
Offer. The Rights to which such Subscription Certificates relate will be held by
the Subscription Agent for such foreign Shareholders' accounts until
instructions are received to exercise the Rights. If no instructions have been
received by the Expiration Date, the Rights of those foreign Shareholders will
expire.

USE OF PROCEEDS

Assuming all Shares offered hereby are sold at the estimated Subscription
Price of $ per Share, the net proceeds of the Offer will be approximately
$ . The net proceeds of the Offer will be invested in accordance with the
Fund's investment objective and policies. DIMA anticipates that investment of
the net proceeds will occur shortly after their receipt by the Fund, depending
on market conditions and the availability of appropriate securities. To extent
there is any delay in investing the proceeds, the proceeds may be invested in
U.S. government securities or high-quality, short-term money market instruments,
cash or cash equivalents, pending investments of the proceeds. See "Investment
Objective and Policies."

THE FUND

The Fund is a closed-end, diversified management investment company. The
Fund was organized as a business trust under the laws of the Commonwealth of
Massachusetts on August 3, 1988, and is registered under the 1940 Act. The
Fund's principal office is located at 345 Park Avenue, New York, New York 10154
and its telephone number is 1-800-728-3337.

On January 23, 1989, the Fund issued an aggregate of 17,000,000 common
shares of beneficial interest, par value $0.01, pursuant to the initial public
offering and commenced our investment operations. As of , 2007, the
Fund had shares outstanding and total assets of $ .

The following provides information about the Fund's outstanding securities
as of , 2007:

AMOUNT
AMOUNT HELD OUTSTANDING
BY THE EXCLUSIVE OF
FUND OR AMOUNT HELD
AMOUNT FOR ITS BY THE FUND OR
TITLE OF CLASS AUTHORIZED ACCOUNT FOR ITS ACCOUNT
-------------- ---------- ----------- ---------------

Common Shares.............................. Unlimited

INVESTMENT OBJECTIVE, STRATEGIES AND POLICIES

INVESTMENT OBJECTIVE

The Fund's investment objective is to provide high current income
consistent with prudent total return asset management.

PRINCIPAL STRATEGIES AND POLICIES

The Fund seeks to achieve its objective by investing its assets in a broad
range of income producing securities, such as U.S. corporate fixed income
securities and debt obligations of foreign governments and their agencies and
instrumentalities, either of which may be denominated in foreign currencies,
debt obligations of the

U.S. Government and its agencies and instrumentalities and other income
producing securities, including securities which may be denominated in foreign
currencies, any of which securities may or may not be rated. There is no
limitation on the percentage of the Fund's portfolio which must be invested in
any particular type of income producing security; however, at least 65% of the
Fund's assets will be invested in at least two different securities sectors. The
Fund has no requirements regarding whether the income producing securities it
purchases must be rated or, if such securities are rated, what the minimum or
maximum ratings on such securities must be.

In deciding which types of securities to buy and sell, DIMA 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 U.S.
and foreign fixed income markets. In choosing individual fixed income
securities, DIMA considers how they are structured and uses independent analysis
of issuers' creditworthiness. However, DIMA may rely on its own analysis instead
of other independent analysis or published ratings. As a result, achievement of
the Fund's goals may depend more upon the abilities of DIMA than would otherwise
be the case.

DIMA may shift the proportion 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.

The Fund has elected to be classified as a diversified closed-end
investment management company. A diversified fund may not, with respect to 75%
of total assets, invest more than 5% of total assets in the securities of a
single issuer or invest in more than 10% of the outstanding voting securities of
such issuer.

During temporary defensive periods, the Fund may invest all or a portion of
its assets in cash (including foreign currencies) or money market instruments,
such as: short-term obligations of the U.S. Government, its agencies or
instrumentalities; other short-term debt securities; commercial paper; bank
certificates of deposit or bankers' acceptances of domestic or Canadian
chartered banks having total assets in excess of $1 billion; and any of the
foregoing investments subject to short-term repurchase agreements.

TYPES OF SECURITIES AND INVESTMENT TECHNIQUES

The Fund's portfolio will be composed principally of the following
investments:

Fixed Income Securities. The Fund may invest in fixed income securities.
Fixed income securities include government, corporate or municipal bonds, which
pay a fixed rate of interest until the bonds mature, and preferred stock paying
a fixed dividend.

Lower Rated Fixed Income Securities. The Fund may invest in fixed income
securities of below investment grade quality. These securities are predominantly
speculative and involve major risk exposure to adverse conditions. Securities
that are rated lower than "Baa" by Moody's or "BBB" by S&P, or which are of
comparable quality, are commonly referred to as "high yield bonds" or "junk
bonds."

Foreign Fixed Income Securities. The Fund may invest in foreign fixed
income securities, including emerging market sovereign debt such as Brady Bonds
(Brady Bonds are debt securities issued under a plan implemented to allow debtor
nations to restructure their outstanding commercial bank indebtedness), which
may be denominated in U.S. or foreign currencies.

Emerging Market Securities. The Fund may invest in countries considered by
DIMA to have developing or "emerging" markets. A developing or emerging market
country can be considered to be a country that is in the initial stages of its
industrialization cycle. Currently, emerging markets generally include every
country in the world other than the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most Western European countries. Investing in
many countries may not be desirable or feasible, because of the lack of
organized and liquid securities markets, unacceptable political risk or other
reasons.

Illiquid Securities. The Fund may invest, without limitation, in
securities that lack an established secondary trading market or are otherwise
considered illiquid. An illiquid security is a security that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which the Fund has valued the security.

U.S. Government Securities. The Fund may invest in U.S. Government
securities, including direct obligations of the U.S. Treasury, and securities
issued or guaranteed by U.S. Government agencies. Some of these securities may
be backed by the full faith and credit of the United States while others may be
backed only by the rights of the issuer to borrow from the U.S. Treasury, while
still others, such as the securities of the Federal Farm Credit Bank, may be
supported only by the credit of the issuer. U.S. Government securities may
include "zero coupon" securities that have been stripped by the U.S.

Government of their unmatured interest coupons and collateralized
obligations issued or guaranteed by a U.S. Government agency or instrumentality.

Collateralized Mortgage Obligations ("CMOs"). The Fund may invest in CMOs.
CMOs are hybrids between mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal are paid, in most
cases, semiannually. CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by Government National Mortgage Association ("GNMA"), Federal Home
Loan Mortgage Corporation ("FHLMC"), or Fannie Mae, and their income streams.

Zero Coupon Securities. The Fund may invest in zero coupon securities,
which pay no cash income and are sold at substantial discounts from their value
at maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero coupon securities include municipal securities,
securities issued directly by the U.S. Treasury, and U.S. Treasury bonds or
notes and their unmatured interest coupons and receipts for their underlying
principal ("coupons") which have been separated by their holder, typically a
custodian bank or investment brokerage firm, from the underlying principal (the
"corpus") of the U.S. Treasury security. A number of securities firms and banks
have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including Treasury
Income Growth Receipts ("TIGRS(TM)") and Certificate of Accrual on Treasuries
("CATS(TM)").

Loan Participations and Assignments. The Fund may invest in Loans arranged
through private negotiations between an issuer of emerging market debt
instruments and one or more Lenders. The Fund's investments in Loans are
expected in most instances to be in the form of Participations and Assignments
from third parties.

Participations typically will result in the Fund having a contractual
relationship only with the Lender and not with the borrower. The 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, the Fund generally will have no right to enforce compliance by
the borrower with the terms of the loan agreement relating to the Loan, nor any
rights of set-off against the borrower, and the Fund may not directly benefit
from any collateral supporting the Loan in which it has purchased the
Participation.

Pay-in-kind Bonds. The Fund may invest in Pay-in-kind, or "PIK" bonds. PIK
bonds are bonds which pay interest through the issuance of additional debt or
equity securities.

Credit Default Swaps. The Fund may invest up to 15% of its total assets in
credit default swaps (measured by the notional amount of the credit default
swap). A credit default swap is a contract between a buyer and a seller of
protection against a pre-defined credit event. The buyer of protection pays the
seller a fixed regular fee provided that no event of default on an underlying
reference obligation has occurred. If an event of default occurs, the seller
must pay the buyer the full notional value, or "par value," of the reference
obligation in exchange for the reference obligation. Credit default swaps are
used as a means of "buying" credit protection, i.e., attempting to mitigate the
risk of default or credit quality deterioration in some portion of the Fund's
holdings, or "selling" credit protection, i.e., attempting to gain exposure to
an underlying issuer's credit quality characteristics without directly investing
in that issuer. Where the Fund is a seller of credit protection, it effectively
adds leverage to its portfolio because, in addition, to its total net assets,
the Fund would be subject to investment exposure on the notional amount of the
swap. The Fund will only sell credit protection with respect to securities in
which it would be authorized to invest directly. No more than 5% of the Fund's
assets may be invested in credit default swaps for purposes of buying credit
protection if the Fund does not own the underlying security or securities at the
time of investment.

If the Fund is a buyer of a credit default swap and no event of default
occurs, the Fund will lose its investment and recover nothing. However, if the
Fund is a buyer and an event of default occurs, the Fund will receive the full
notional value of the reference obligation that may have little or no value. As
a seller, the Fund receives a fixed rate of income through the term of the
contract (typically between six months and three years), provided that there is
no default event. If an event of default occurs, the seller must pay the buyer
the full notional value of the reference obligation. Credit default swaps
involve greater risks than if the Fund had invested in the reference obligation
directly.

The Fund may use credit default swaps to gain exposure to particular
issuers or particular markets through investments in portfolios of credit
default swaps, such as Dow Jones CDX.NA.HY certificates. By investing in
certificates representing interests in a basket of credit default swaps, the
Fund is taking credit risk with respect to an entity or group of entities and
providing credit protection to the swap counterparties. For example, the CDX EM
is a tradable basket of 19 credit default swaps on country credits which seeks
to replicate the returns on the indices of a broad group of emerging markets
countries. The credits are a subset of the countries represented by the JPMorgan
Emerging Markets Bond Index Global Diversified. By purchasing interests in CDX
EM, the Fund is gaining emerging markets exposure through a single investment.
Unlike other types of credit default swaps which are generally considered
illiquid, credit default swap certificates generally can be sold within seven
days and are not subject to the Fund's restrictions on investing in illiquid
securities.

Lending of Portfolio Securities. The Fund may lend its investment
securities in an amount up to 33 1/3% of total assets to approved institutional
borrowers. The Fund may lend its investment securities so long as the terms,
structure and the aggregate amount of such loans are not inconsistent with the
1940 Act or the rules and regulations or interpretations of the SEC thereunder,
which currently require that (a) the borrower pledge and maintain with the Fund
collateral consisting of liquid, unencumbered assets having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis), (c) the loan be made subject
to termination by the Fund at any time, and (d) the Fund receives reasonable
interest on the loan (which may include the Fund investing any cash collateral
in interest bearing short-term investments), and distributions on the loaned
securities and any increase in their market value. Loans may be made only to
borrowers selected by the Fund's delegate after a commercially reasonable review
of relevant facts and circumstances, including the creditworthiness of the
borrower.

Leverage and Borrowing. The Fund may borrow money from financial
institutions unrelated to the Fund in an amount up to 33 1/3% of the Fund's
total assets (including the amount borrowed), less its liabilities not including
such borrowings. The Fund also reserves the right to borrow by issuing
commercial paper, bonds, debentures, notes or preferred shares, in series or
otherwise, with such interest rates, conversion rights, preferences and other
terms and provisions as are determined by the Fund's Board.

Discount Securities. When and if available, fixed income securities may be
purchased at a discount from face value. The market value of fixed income
securities generally fluctuates inversely with changes in interest rates; as
market interest rates increase, the market value of fixed income securities
tends to decrease so that the yields to maturity on such securities tend to
equal the stated interest rates on newly issued fixed income securities with
comparable characteristics. To the extent fixed income securities are purchased
at a price less than the face (principal) value thereof, the yield to the Fund
will exceed the stated coupon rate on such securities and will provide the Fund
with a return comparable to newly issued fixed income obligations of like
characteristics. In addition, discounted securities may provide a greater
opportunity for capital gains in the event that interest rates decline than
securities trading at par or at a premium over par. Consequently, the ability of
the Fund to purchase fixed income securities at less than their face value
provides an increased supply of income producing securities available for
purchase, provides a potential for ordinary gains and does not necessarily
increase the risks to the Fund's portfolio.

Other Investment Practices. In connection with the investment objective,
principal strategies and policies described above, the Fund may also purchase
and sell options on fixed income securities and on indices based upon

fixed income securities; engage in interest rate, foreign currency and other
hedging transactions; purchase and sell fixed income securities on a "when-
issued" or "delayed delivery" basis; and enter into repurchase agreements and
reverse repurchase agreements. These and other investment practices and their
risks are described in detail in the SAI.

USE OF LEVERAGE

The Fund may borrow money and/or issue preferred shares, commercial paper
or debt securities to the extent permitted by the 1940 Act. These practices are
known as leveraging. The issuance of additional shares through the Offer will
enable the Fund to increase the aggregate amount of its leverage. The Fund
currently employs financial leverage in the form of borrowings from financial
institutions unrelated to the Fund. As of the date of this prospectus, the Fund
intends, but is not committed, to add incremental leverage after the Offer so
that the Fund's total leverage as a percentage of its total assets will remain
approximately the same after the Offer (as of the date of this prospectus,
approximately % of the Fund's total assets). The Fund does not currently
anticipate leveraging the Fund by issuing preferred shares or other debt
securities.

Leverage creates risks for the Fund's shareholders, including the
likelihood of greater volatility of the Fund's NAV and market price. There is a
risk that fluctuations in the dividend rates on any preferred shares or in the
interest rates on any borrowings may adversely affect the return to the Fund's
shareholders. If the return on the securities purchased with such funds is not
sufficient to cover the cost of leverage, the return on the Fund will be less
than if leverage had not been used, and therefore the amount available for
distribution to Fund's shareholders as dividends and other distributions will be
reduced. The Fund in its best judgment nevertheless may determine to maintain
the Fund's leveraged position if it deems such action to be appropriate in the
circumstances.

Changes in the value of the Fund's portfolio (including investments bought
with the leverage proceeds) will be borne entirely by the Fund's shareholders.
If there is a net decrease (or increase) in the value of the Fund's investment
portfolio, the leverage will decrease (or increase) the NAV per share to a
greater extent than if the Fund were not leveraged.

The Fund may be subject to certain restrictions on investments imposed by
guidelines of one or more rating agencies that may issue ratings for any
leverage issued by the Fund. These guidelines may impose asset coverage or Fund
composition requirements that are more stringent than those imposed on the Fund
by the 1940 Act. It is not anticipated that these covenants or guidelines will
impede DIMA from managing the Fund's portfolio in accordance with the Fund's
investment objective and policies.

Under the 1940 Act, the Fund is not permitted to incur indebtedness unless
immediately after such borrowing the Fund has an asset coverage of at least 300%
of the aggregate outstanding principal balance of indebtedness (i.e., such
indebtedness may not exceed 33 1/3% of the value of the Fund's total assets).
Additionally, under the 1940 Act, the Fund may not declare any dividend or other
distribution upon any class of its shares, or purchase any such shares, unless
the aggregate indebtedness of the Fund has, at the time of the declaration of
any such dividend or distribution or at the time of any such purchase, an asset
coverage of at least 300% after deducting the amount of such divided,
distribution, or purchase price, at the case may be.

Under the 1940 Act, the Fund is not permitted to issue preferred shares
unless immediately after such issuance the total asset value of the Fund's
portfolio is at least 200% of the liquidation value of the outstanding preferred
shares (i.e., such liquidation value may not exceed 50% of the Fund's total
assets). In addition, if the Fund issues preferred shares, the Fund is not
permitted to declare any cash dividend or other distribution on its common
shares unless, at the time of such declaration, the net asset value of the
Fund's portfolio (determined after deducting the amount of such dividend or
other distribution) is at least 200% of such liquidation value of the preferred
shares. If preferred shares is issued, the Fund intends, to the extent possible,
to purchase or redeem preferred shares, from time to time, to maintain coverage
of any preferred shares of at least 200%. Normally, holders of the common shares
will elect the trustees of the Fund except, that the holders of any preferred
shares will elect two directors. In the event the Fund failed to pay dividends
on its preferred shares for two years, holders of preferred shares would be
entitled to elect a majority of the trustees until the dividends are paid.

Assuming the use of leverage in the amount of % of the Fund's total
assets after the Offer (including the proceeds of the leverage) and an annual
interest rate on leverage of % payable on such leverage (based on the
interest rate on the Fund's outstanding leverage on , 2007), the
additional income that the Fund must earn in order to cover such interest
payments is %. The Fund's actual cost of leverage may be higher or lower
than that assumed in the previous example.

The following table is furnished pursuant to requirements of the SEC. It is
designed to illustrate the effect of leverage on total return on the Fund's
shares, assuming investment portfolio total returns (comprised of income, net
expenses and changes in the value of investments held in the Fund's portfolio)
of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are
hypothetical figures and are not necessarily indicative of what the Fund's
investment portfolio returns will be. The table further reflects the use of
leverage representing approximately % of the Fund's total assets after the
Offer (including the proceeds of the leverage) and an interest rate of %
(based on the interest rate on the Fund's outstanding leverage on ,
2007). The table does not reflect any costs of the Offer.

Assumed Portfolio Return.................... (10.00)% (5.00)% 0.00% 5.00% 10.00%
Common Share Total Return................... % % % % %

Total return is composed of two elements -- dividends paid to the Fund's
shareholders (the amount of which is largely determined by the Fund's net
investment income after paying the cost of leverage) and realized and unrealized
gains or losses on the value of the securities the Fund owns. As required by SEC
rules, the table assumes that the Fund is more likely to suffer capital loss
than to enjoy capital appreciation.

SPECIAL CONSIDERATIONS AND RISK FACTORS

An investment in the Shares of the Fund involves a high degree of risk. You
should carefully consider the following risk factors in addition to the other
information set forth in this Prospectus. For additional information about the
risks that may be associated with an investment in the Fund, see "Investment
Policies and Techniques" in the SAI.

RISKS OF THE OFFER

Potential Yield Reduction. The Offer could reduce the Fund's current
dividend yield if the Fund is unable to invest the proceeds of the Offer in
securities that provide a yield higher than the current portfolio yield.

Cost of the Offer. It is possible that the costs of the Offer could result
in the dilution of the aggregate NAV of the Fund's shares if the Offer is under-
subscribed and/or the Subscription Price is at or near NAV. The Fund cannot
state precisely the extent of such dilution, if any, at this time because the
Fund does not know what proportion of the Rights will be exercised or what the
NAV per share will be when the Offer expires.

Share Price Volatility. Volatility in the market price of the Fund's
shares may increase during the Offer. The Offer may result in some shareholders
selling their shares, which would exert downward price pressure on the price of
shares, while others wishing to participate in the Offer may buy Shares, having
the opposite impact.

Non-Participation in the Offer. Shareholders who do not fully exercise
their Rights should expect that they will, at the completion of the Offer, own a
smaller proportional interest in the Fund than they owned before the Offer.

Under-Subscription Risk. It is possible that the Offer will not be fully
subscribed. Under-subscription of the Offer could have an impact on the net
proceeds of the Offer and whether the Fund achieves the benefits described under
"The Offer -- Purpose of the Offer."

RISKS OF INVESTING IN THE FUND

securities owned by the Fund in that market will be likely to decrease in value.
Many of the fixed income securities in which the Fund will invest, including
certain types of sovereign debt, such as Brady Bonds, have long maturities. A
longer average maturity generally is associated with a higher level of
volatility in the market value of such securities in response to changes in
market conditions, including changes in interest rates. In addition, securities
issued at a deep discount, such as certain types of Brady Bonds and zero coupon
obligations in which the Fund may invest, are subject to greater fluctuations of
market value in response to changes in interest rates than fixed income
securities of comparable maturities that were not issued at a deep discount.

Lower Rated Fixed Income Securities Risk. Lower rated fixed income
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. See the Appendix -- Description of Bond Ratings for a more complete
description of the ratings assigned by ratings organizations and their
respective characteristics.

Issuers of such lower rated 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 lower rated 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 lower rated securities
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer. Prices and yields of lower rated securities will
fluctuate over time and, during periods of economic uncertainty, volatility of
lower rated securities may adversely affect the Fund's net asset value. In
addition, investments in lower rated zero coupon or pay-in-kind bonds, rather
than income-bearing lower rated securities, may be more speculative and may be
subject to greater fluctuations in value due to changes in interest rates.

The Fund may have difficulty disposing of certain lower rated securities
because it may have a thin trading market. Because not all dealers maintain
markets in all lower rated securities, the 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 the Fund's ability to dispose of particular issues and may also make
it more difficult for the Fund to obtain accurate market quotations for purposes
of valuing assets. Market quotations generally are available on many lower rated
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 lower rated
securities. These securities may also involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties.

Credit quality in the lower rated 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. For these reasons, it is
generally the policy of the DIMA not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the Fund's
investment objective by investment in such securities may be more dependent on
the DIMA's credit analysis than is the case for higher quality bonds. Should the
rating of a portfolio security be downgraded, the DIMA will determine whether it
is in the best interests of the Fund to retain or dispose of such security.

Prices for lower rated 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.

A portion of the lower rated securities acquired by the Fund may be
purchased upon issuance, which may involve special risks because of the
securities so acquired are new issues. In such instances that the Fund may be a
substantial purchaser of the issue and therefore have the opportunity to
participate in structuring the terms of the

offering. Although this may enable the Fund to seek to protect itself against
certain of such risks, the considerations discussed herein would nevertheless
remain applicable.

The Fund may hold distressed securities, which are securities that are in
default or risk of being in default. In connection with an exchange or workout
of such securities, the Fund may accept various instruments if the DIMA
determines it is in the best interest of the Fund and consistent with the Fund's
investment objective and policies. Such instruments may include, but are not
limited to, warrants, rights, participation interests in asset sales and
contingent-interest obligations.

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

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

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

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

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

exchange readily available for external debt payments and thus could have a
bearing on the capacity of emerging market countries to make payments on these
debt obligations.

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

Foreign and Emerging Market Risk. Investments in foreign securities
involve certain risk considerations not typically associated with investing in
securities of U.S. issuers, including: (a) currency devaluations and other
currency exchange rate fluctuations; (b) political uncertainty and instability,
including military coups and armed conflict; (c) more substantial government
involvement in the economy; (d) higher rates of inflation; (e) less government
supervision and regulation of the securities markets and participants in those
markets; (f) controls on foreign investment and limitations on repatriation of
invested capital and on the Fund's ability to exchange local currencies for U.S.
Dollars; (g) greater price volatility, substantially less liquidity and
significantly smaller capitalization of securities markets; (h) absence of
uniform accounting and auditing standards; (i) generally higher commission
expenses; (j) delay in settlement of securities transactions; and (k) greater
difficulty in enforcing shareholder rights and remedies.

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

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

Of particular importance, many foreign countries are heavily dependent upon
exports, particularly to developed countries, and, accordingly, have been and
may continue to be adversely affected by trade barriers, managed adjustments in
relative currency values, and other protectionist measures imposed or negotiated
by the U.S. and other countries with which they trade. These economies also have
been and may continue to be negatively impacted by economic conditions in the
U.S. 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 U.S. dollar, and future devaluations may adversely
affect the value of assets denominated in such currencies. In addition, currency
hedging techniques may be unavailable in certain emerging market countries. Many
emerging market

countries have experienced substantial, and in some periods extremely high,
rates of inflation or deflation for many years, and future inflation may
adversely affect the economies and securities markets of such countries.

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

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

Foreign Currency Risk. Because investments in foreign securities may
involve currencies of foreign countries, and because the 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
the Fund as measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
the 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 U.S. dollar against these currencies is
responsible for part of the 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 the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do 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 the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The 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.

Illiquid Securities Risk. The Fund may invest in securities for which
there is no readily available trading market or that are otherwise illiquid. It
may be difficult to sell such securities at a price representing the fair value
and, where registration of such securities is required, a considerable period
may elapse between a decision to sell the securities and the time when the Fund
would be permitted to sell.

Prepayment and Extension Risk. Preferred stock and fixed income securities
frequently have call features that allow the issuer to repurchase the security
prior to its stated maturity. During periods of declining interest rates, the
issuer of a security may exercise its option to prepay principal earlier than
scheduled, forcing the Fund to reinvest in lower yielding securities. This is
known as call or prepayment risk. An issuer may redeem such a security

if the issuer can refinance it at a lower cost due to declining interest rates
or an improvement in the credit standing of the issuer. During periods of rising
interest rates, the average life of certain types of securities may be extended
because of slower than expected principal payments. This may lock in a below
market interest rate, increase the security's duration, and reduce the value of
the security. This is known as extension risk.

U.S. Government Securities Risk. Securities issued by the U.S. Government,
its agencies or instrumentalities may vary in terms of the degree of support
afforded by the U.S. government. Some U.S. Government securities may be
supported by the full faith and credit of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds and GNMA certificates. Some agency securities
are supported by the agency's right to borrow from the U.S. Treasury under
certain circumstances, such as those issued by the Federal Home Loan Banks.
Still others are supported only by the discretionary authority to purchase the
agency's obligations, such as those issued by the Federal National Mortgage
Association, or by the credit of the agency that issued them, such as those
issued by the Student Loan Marketing Association. Because there is no guarantee
that the U.S. Government will provide support to such agencies, such securities
may involve risk of loss of principal and interest. Current market prices for
U.S. Government securities are not guaranteed and the value of such securities
will fluctuate.

Zero Coupon Securities Risk. Zero coupon securities are subject to greater
market value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest (cash). Zero
coupon securities which are convertible into common stock offer the opportunity
for capital appreciation as increases (or decreases) in market value of such
securities closely follow the movements in the market value of the underlying
common stock. Zero coupon convertible securities generally are expected to be
less volatile than the underlying common stocks as they usually are issued with
maturities of 15 years or less and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.

Loan Participations and Assignment Risk. By investing in the
Participations the 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, the 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. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is determined by the
Investment Adviser to be creditworthy.

When the Fund purchases Assignments from Lenders, it will acquire direct
rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and may be more limited than, those
held by the assigning Lender.

The Fund may have difficulty disposing of Assignments and Participations.
Because no liquid market for these obligations typically exists, the 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 the Fund's ability to dispose of particular Assignments or
Participations when necessary to meet the 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 the Fund to assign a value to
those securities for purposes of valuing the Fund's portfolio and calculating
its net asset value.

Pay-in-kind Bond Risk. Similar to zero coupon obligations, PIK bonds carry
additional risk as holders of these types of securities realize no cash until
the cash payment date unless a portion of such securities is sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment. The
market price of PIK bonds is affected by interest rate changes to a greater
extent, and therefore tends to be more volatile, than that of securities which
pay interest in cash. Additionally, current federal income tax law requires the
holder of certain PIK bonds to accrue income with respect to these securities
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for federal income and excise
taxes, the Fund may be required to distribute income accrued with respect to
these securities and may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements. See "U.S. Federal Income Tax Matters" in the SAI.

Credit Default Swap Risk. The Fund may invest in credit default swap
transactions for hedging or investment purposes. The buyer in a credit default
swap contract is obligated to pay the seller a periodic stream of payments over
the term of the contract 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. The Fund may be either the buyer or seller in a credit default swap
transaction. If the Fund is a buyer and no event of default occurs, the Fund
will have made a series of periodic payments and recover nothing of monetary
value. However, if an event of default occurs, the Fund (if the buyer) will
receive the full notional value of the reference obligation either through a
cash payment in exchange for the asset or a cash payment in addition to owning
the reference assets. As a seller, the Fund receives a fixed rate of income
throughout the term of the contract, which typically is between six months and
five years, provided that there is no event of default. The Fund will segregate
assets in the form of cash and cash equivalents in an amount equal to the
aggregate market value of the credit default swaps of which it is the seller,
marked to market on a daily basis. If an event of default occurs, the seller
must pay the buyer the full notional value of the reference obligation through
either physical settlement or cash settlement. Credit default swap transactions
involve greater risks than if the Fund had invested in the reference obligation
directly.

Leverage and Borrowing Risk. Although the Fund's use of leverage creates
an opportunity for increased net income and capital appreciation for the Fund's
shares, it also results in additional risks and can magnify the effect of any
losses. The Fund will pay (and the holders of the Fund's shares will bear) any
costs and expenses relating to any leverage. If the income and gains earned on
securities purchased with leverage proceeds are greater than the cost of
leverage, the Fund's return will be greater than if leverage had not been used.
Conversely, if the income or gain from the securities purchased with such
proceeds does not cover the cost of leverage, the return to the Fund will be
less than if leverage had not been used. There is no assurance that a leveraging
strategy will be successful. Leverage involves risks and special considerations
for the Fund's shareholders including:

- the likelihood of greater volatility of NAV and market price of and
dividends on the Fund's shares than a comparable portfolio without
leverage;

- the risk that fluctuations in interest rates on borrowings and short-term
debt or in the dividend rates on any leverage that the Fund must pay will
reduce the return to the Fund's shareholders; and

- the effect of leverage in a declining market, which is likely to cause a
greater decline in the NAV of the Fund's shares than if the Fund were not
leveraged, which may result in a greater decline in the market price of
the Fund's shares.

It is also possible that the Fund will be required to sell assets at a time
when it would otherwise not do so, possibly at a loss, in order to redeem or
meet payment obligations on any leverage. Such a sale would reduce the Fund's
NAV and also make it difficult for the NAV to recover. The Fund in its best
judgment nevertheless may determine to continue to use leverage if it expects
that the benefits to the Fund's shareholders of maintaining the leveraged
position will outweigh the current reduced return. The Fund's use of leverage
may also impair the ability of the Fund to maintain its qualification for
federal income tax purposes as a regulated investment company.

Portfolio Turnover Risk. From year to year the Fund cannot accurately
predict its portfolio turnover rate, but it is anticipated that the annual
turnover rate of the Fund generally will not exceed 200% (excluding turnover of
securities having a maturity of one year or less). The portfolio turnover rate,
however, will not be a limiting factor when the Fund deems it desirable to
purchase or sell securities. A 200% annual turnover rate would occur, for
example, if all the securities in the portfolio were replaced two times in a
period of one year. A portfolio turnover rate of 200% would be higher than that
experienced by most investment companies with a similar investment objective. A
high turnover rate (over 100%) necessarily involves greater expenses to the
Fund. In prior years, the Fund's portfolio turnover rate has exceeded 100%. The
Fund will engage in portfolio trading if DIMA believes that a transaction will
help achieve the Fund's investment objective.

and distinct from the risk that the Fund's NAV may decrease. Since its initial
public offering, shares have traded at various times at both a discount and a
premium to NAV. See "Trading and Net Asset Value Information." The risk that the
shares may trade at a discount to NAV may be greater for investors expecting to
sell their shares in a relatively short period of time. Accordingly, the Shares
are designed primarily for long-term investors. Investors in the shares should
not view the Fund as a vehicle for short-term trading purposes.

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

The business and affairs of the Fund are managed by or under the direction
of the Board of Trustees of the Fund. Background information regarding the
Trustees and officers of the Fund is contained in the SAI under "Trustees and
Officers."

INVESTMENT ADVISER

Deutsche Investment Management Americas Inc., with headquarters at 345 Park
Avenue, New York, New York 10154, is the Fund's investment adviser pursuant to
an investment management agreement with the Fund (the "Investment Management
Agreement"). Pursuant to the Investment Management Agreement, and subject to
oversight by the Fund's Board, the Investment Adviser provides continuing
investment management of the assets of the Fund in accordance with the Fund's
investment objective, policies and restrictions. The Investment Adviser's
services include, but are not limited to, monitoring the Fund's performance and
compliance with its investment guidelines. DIMA provides a full range of
investment advisory services to retail and institutional clients, and as
of , 2007 had total assets of approximately $ billion under
management. DIMA is an indirect wholly-owned subsidiary of Deutsche Bank AG, an
international commercial and investment banking institution that is engaged in a
wide range of financial services, including investment management, mutual fund,
retail, private and commercial banking, investment banking and insurance. As
of , 2007, Deutsche Asset Management, the global asset management
division of Deutsche Bank AG, had more than $ billion in assets under
management. DIMA, along with DWS Scudder, is part of Deutsche Asset Management.
Funds managed by DeAM are referred to as "DWS funds."

PORTFOLIO MANAGEMENT

The following persons handle the day-to-day management of DWS Multi-Market
Income Trust:

GARY SULLIVAN, CFA.

Director of DIMA and Lead Portfolio Manager of the Fund.

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

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

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

WILLIAM CHEPOLIS, CFA.

Managing Director of DIMA and Portfolio Manager of the Fund.

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

- Portfolio Manager for Retail Mortgage Backed Securities: New York.

- Joined the Fund in 2005.

- BIS, University of Minnesota.

MATTHEW F. MACDONALD.

Director of DIMA and Portfolio Manager of the Fund.

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

- Portfolio Manager for Retail Mortgage Backed Securities: New York.

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

ADVISORY AGREEMENT

Pursuant to the Investment Management Agreement, DIMA is responsible for
managing the Fund's portfolio, subject at all times to the general oversight of
the Fund's Board of Trustees. The Fund has agreed to pay DIMA a management fee
payable on a monthly basis at the annual rate of 0.85% of the Fund's average
weekly net assets.

In addition to the fees of the Investment Adviser, the Fund pays all other
costs and expenses of its operations, including, but not limited to,
compensation of its trustees (other than those affiliated with the Investment
Adviser), custodial expenses, transfer agency and dividend disbursing expenses,
legal fees, expenses of independent auditors, expenses of repurchasing shares,
expenses of any leverage, expenses of preparing, printing and distributing
prospectuses, stockholder reports, notices, proxy statements and reports to
governmental agencies, and taxes, if any.

A discussion of the basis for the Board of Trustee's approval of the Fund's
Investment Management Agreement is available in the Fund's annual shareholder
report. The basis for subsequent continuations of this agreement will be
provided in annual or semi-annual reports to shareholders for the periods during
which such continuations occur.

Deutsche Bank AG or one of its affiliates may act as a broker for the Fund
and receive brokerage commissions or other transaction-related compensation from
the Fund in the purchase and sale of securities, options or futures contracts
when, in the judgment of DIMA, and in accordance with procedures approved by the
Fund's 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 Fund a rate consistent with
that charged to comparable unaffiliated customers in similar transactions.

MARKET TIMING-RELATED REGULATORY AND LITIGATION MATTERS

On December 21, 2006, Deutsche Asset Management ("DeAM") settled
proceedings with the SEC and the New York Attorney General on behalf of Deutsche
Asset Management, Inc. ("DAMI") and DIMA, the investment advisors to many of the
DWS Scudder funds, regarding allegations of improper trading at DeAM and at the
legacy Scudder and Kemper organizations prior to their acquisition by DeAM in
April 2002. These regulators alleged that although the prospectuses for certain
open-end funds ("funds") in the regulators' view indicated that the funds did
not permit market timing, DAMI and DIMA breached their fiduciary duty to those
funds in that their efforts to limit trading activity in the funds were not
effective at certain times. The regulators also alleged that DAMI and DIMA
breached their fiduciary duty to certain funds by entering into certain market
timing arrangements with investors. These trading arrangements originated in
businesses that existed prior to the currently constituted DeAM organization,
which came together as a result of various mergers of the legacy Scudder, Kemper
and Deutsche fund groups, and all of the arrangements were terminated prior to
the start of the regulatory investigations that began in the summer of 2003. No
current DeAM employee approved these trading arrangements. Under the terms of
the settlements, DAMI and DIMA neither admit nor deny any wrongdoing.

The terms of the SEC settlement, which identified improper trading in the
legacy Deutsche and Kemper mutual funds only, provide for payment of
disgorgement in the amount of $17.2 million. The terms of the settlement with
the New York Attorney General provide for payment of disgorgement in the amount
of $102.3 million, which is inclusive of the amount payable under the SEC
settlement, plus a civil penalty in the amount of $20 million. The total amount
payable by DeAM, approximately $122.3 million, would be distributed in
accordance with a distribution plan to be developed by a distribution
consultant. The funds' investment advisers do not believe

these amounts will have a material adverse financial impact on them or
materially affect their ability to perform under their investment management
agreements with the DWS funds. The above-described amounts are not material to
Deutsche Bank, and have already been reserved.

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

In addition, DeAM is subject to certain further undertakings relating to
the governance of the mutual funds, including that: at least 75% of the members
of the Boards of Trustees/Directors overseeing the DWS Funds continue to be
independent of DeAM; the Chairmen of the DWS funds' Boards of Trustees/Directors
continue to be independent of DeAM; DeAM maintain existing management fee
reductions for certain funds for a period of five years and not increase
management fees for certain funds during this period; the funds retain a senior
officer (or independent consultants) responsible for assisting in the review of
fee arrangements and monitoring compliance by the funds and the investment
advisors with securities laws, fiduciary duties, codes of ethics and other
compliance policies, the expense of which shall be borne by DeAM; and periodic
account statements, fund prospectuses and the mutual funds' web site contain
additional disclosure and/or tools that assist investors in understanding the
fees and costs associated with an investment in the funds and the impact of fees
and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State
regarding market timing matters. The terms of the Illinois settlement provide
for investor education contributions totaling approximately $4 million and a
payment in the amount of $2 million to the Securities Audit and Enforcement
Fund.

The matters alleged in the regulatory settlements described above also
serve as the general basis of a number of private class action lawsuits
involving the DWS funds. These lawsuits name as defendants various persons,
including certain DWS funds, the Fund's investment advisors and their
affiliates, and certain individuals, including in some cases fund
Trustees/Directors, officers, and other parties. Each DWS fund's investment
advisor has agreed to indemnify the applicable DWS funds in connection with
these lawsuits, or other lawsuits or regulatory actions that may be filed making
similar allegations.

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

NET ASSET VALUE

NAV per share is determined daily as of the close of regular session
trading on the NYSE (usually 4:00 p.m., Eastern time) ("Value Time"). NAV is
calculated by dividing the value of all of the securities and other assets of
the Fund, less its liabilities (including accrued expenses and indebtedness), by
the total number of shares outstanding.

An equity security is valued at its most recent sale price on the
security's primary exchange or OTC market as of the Value Time. Lacking any
sales, the security is valued at the calculated mean between the most recent bid
quotation and the most recent asked quotation (the "Calculated Mean") on such
exchange or OTC market as of the Value Time. If it is not possible to determine
the Calculated Mean, the security is valued at the most recent bid quotation on
such exchange or OTC market as of the Value Time. In the case of certain foreign
exchanges or OTC markets, the closing price reported by the exchange or OTC
market (which may sometimes be referred to as the "official close" or the
"official closing price" or other similar term) will be considered the most
recent sale price.

Debt securities are valued as follows. Money market instruments purchased
with an original or remaining maturity of 60 days or less, maturing at par, are
valued at amortized cost. Other money market instruments are valued based on
information obtained from an independent pricing service or, if such information
is not readily

available, by using matrix pricing techniques (formula driven calculations based
primarily on current market yields). Privately placed debt securities, other
than Rule 144A debt securities, initially are valued at cost and thereafter
based on all relevant factors including type of security, size of holding and
restrictions on disposition. Other debt securities not addressed above are
valued at prices supplied by an independent pricing service, if available, and
otherwise at the most recent bid quotation or evaluated price, as applicable,
obtained from one or more broker-dealers. If it is not possible to value a
particular debt security pursuant to the above methods, the security is valued
on the basis of factors including (but not limited to) maturity, coupon,
creditworthiness, currency denomination, and the movement of the market in which
the security is normally traded.

An exchange-traded option contract on securities, currencies and other
financial instruments is valued at its most recent sale price on the relevant
exchange. Lacking any sales, the option contract is valued at the Calculated
Mean. If it is not possible to determine the Calculated Mean, the option
contract is valued at the most recent bid quotation in the case of a purchased
option contract or the most recent asked quotation in the case of a written
option contract, in each case as of the Value Time. An option contract on
securities, currencies and other financial instruments traded in the OTC market
is valued on the Value Date at the evaluated price provided by the broker-dealer
with which it was traded. Futures contracts (and options thereon) are valued at
the most recent settlement price, if available, on the exchange on which they
are traded most extensively. With the exception of stock index futures contracts
which trade on the Chicago Mercantile Exchange, closing settlement times are
prior to the close of trading on the NYSE. For stock index futures contracts
which trade on the Chicago Mercantile Exchange, closing settlement prices are
normally available at approximately 4:20 Eastern time. If no settlement price is
available, the last traded price on such exchange will be used.

If market quotations for a portfolio asset are not readily available or the
value of a portfolio asset as determined in accordance with Board approved
procedures does not represent the fair market value of the portfolio asset, the
value of the portfolio asset is taken to be an amount which, in the opinion of
the Fund's Pricing Committee (or, in some cases, the Board's Valuation
Committee), represents fair market value. The value of other portfolio holdings
owned by the Fund is determined in a manner which is intended to fairly reflect
the fair market value of the asset on the valuation date, based on valuation
procedures adopted by the Fund's Board and overseen primarily by the Fund's
Pricing Committee.

DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN

The Fund makes monthly distributions to shareholders in a manner that
results in the Fund being relieved of any federal income taxes on the amount so
distributed. Net short term capital gains, if any, may be distributed monthly
and net long term capital gains, if any, will be distributed at least annually.
See "Federal Income Taxation."

Holders of shares will receive dividends in cash. However, shareholders
whose shares are registered in their names may elect to have all distributions
of dividends and capital gains automatically reinvested by United Missouri Bank
N.A., as agent for shareholders ("UMB" or "Plan Agent"), in additional shares of
the Fund pursuant to the Plan. Shareholders whose shares are held in the name of
a broker or nominee will receive all such distributions in cash and should
contact the broker or nominee to determine how they may participate in the Plan.

The Fund's transfer agent and dividend disbursing agent, DWS-SISC, will
establish a dividend investment account (the "Account") for each shareholder
participating in the Plan. DWS-SISC will credit to the Account of each
participant funds it receives from the following sources: (a) cash dividends and
capital gains distributions paid on shares of the Fund registered in the
participant's name on the books of the Fund; and (b) cash dividends and capital
gains distributions paid on shares registered in the name of the DWS-SISC but
credited to the participant's Account; and (c) voluntary cash contribution as
described below.

If the Trustees of the Fund declare a dividend or capital gain
distribution, the nonparticipants in the Plan will receive such dividend or
distribution in cash and participants in the Plan will receive the equivalent in
shares determined as follows:

(a) If on the record date for the dividend or distribution, shares are
trading at a premium over NAV per share, the Fund will issue on the payment
date, shares valued at NAV per share on the record date.

(b) If on the record date for a dividend or capital gain distribution,
shares are trading at a discount from NAV per share, funds credited to a
participant's account will be used to purchase shares. UMB will attempt
commencing five (5) days prior to the payment date and ending on the
payment date, to acquire shares in the open market. If and to the extent
that UMB is unable to acquire sufficient shares to satisfy the dividend
and/or capital gain distribution, the Fund will issue to UMB shares at NAV
in an aggregate amount of the remaining dividend and capital gain
distribution. For the federal income tax treatment of dividends and
distributions to participants in the Plan, see "Federal Income Taxation."

The cost of shares and fractional shares acquired for each participant's
Account in connection with a purchase shall be determined by the average cost
per share, including brokerage commissions as described below, of the shares
acquired by UMB in connection with that purchase. Shareholders will receive a
confirmation showing the average cost and number of shares acquired as soon as
practicable after DWS-SISC has received or UMB has purchased shares. DWS-SISC
may commingle the cash in a participant's account with similar funds of other
participants of the Fund for whom UMB acts as agent under the Plan.

A participant may from time to time make voluntary cash contributions to
his Account by sending to DWS-SISC a check or money order, payable to DWS-SISC,
in a minimum amount of $100 with appropriate accompanying instructions. (No more
than $500 may be contributed per month.) DWS-SISC will inform UMB of the total
funds available for the purchase of shares and DWS-SISC will use the funds to
purchase additional shares for the participant's Account the earlier of: (a)
when it next purchases Shares as a result of a dividend or capital gain
distribution or (b) on or shortly after the first day of each month and in no
event more than 30 days after such date except when temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of
federal securities laws. Cash contributions received more than fifteen calendar
days or less than five calendar days prior to a payment date will be returned
uninvested. Interest will not be paid on any uninvested cash contributions.
Participants making voluntary cash investments will be charged a $.75 service
fee for each such investment and will be responsible for their pro rata share of
brokerage commissions. All cash contributions will be invested in shares
purchased in the open market.

Participants in the Plan may withdraw from the Plan upon written notice to
DWS-SISC. When a participant withdraws from the Plan, or upon termination of the
Plan as provided below, a participant will receive a certificate for the full
shares in a respective account, plus a check for any fractional shares based on
market price. If a participant so desires, DWS-SISC will notify UMB to sell all
the Shareholder's shares in the Plan and send the proceeds to the participant,
less brokerage commissions and a $2.50 service fee. If the proceeds of the
withdrawal are $100,000 or less and the proceeds are to be payable to the
shareholder of record and mailed to the address of record, a signature guarantee
normally will not be required for notices by individual account owners
(including joint account owners), otherwise a signature guarantee will be
required. In addition, if the certificate is to be issued or sent to anyone
other than the registered owner(s) at the address of record, a signature
guarantee will be required on the notice. A notice of withdrawal will be
effective for the next dividend or capital gain distribution following receipt
of the notice by DWS-SISC provided the notice is received by DWS-SISC at least
ten (10) calendar days prior to the record date for the dividend or capital gain
distribution.

The Fund will increase the price at which shares may be issued under the
Plan to 95% of the fair market value of the shares on the record date if the NAV
per share of the shares on the record date is less than 95% of the fair market
value of the shares on the record date.

DWS-SISC maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account. Shares in the account
of each Plan participant will be held by UMB in non-certificated form in the
name of the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan. Each participant nevertheless has the right to
receive certificates for whole shares owned by such person.

The Fund will distribute proxy material to nominee and record shareholders
in accordance with SEC rules and regulations.

There is no charge to participants for reinvesting dividends or
distributions, except for certain brokerage commissions, as described below.
DWS-SISC and UMB's fees for handling the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage charges with
respect to shares issued directly by

the Fund as a result of dividends or distributions payable either in stock or in
cash. However, each participant will pay a pro rata share of brokerage
commissions incurred with respect to UMB's open market purchases in connection
with the reinvestment of dividends or capital gain distributions as well as from
cash contributions.

The automatic reinvestment of dividends and distributions will not relieve
participants of any tax which may be payable on such dividends or distributions.

Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan,
including with respect to any dividend or distribution paid subsequent to
written notice of the change sent to the participants in the Plan at least 90
prior to the effective date of the change. All correspondence concerning the
Plan should be directed to DWS-SISC at P.O. Box 219066, Kansas City, Missouri
64121-9066.

FEDERAL INCOME TAXATION

Except as otherwise indicated below, the following discussion is based upon
provisions of the Code, the applicable Treasury regulations thereunder, judicial
authority and current administrative rulings and practice. Future legislative,
judicial or administrative changes or interpretations, which may or may not be
retroactive, could affect the tax consequences to the Fund or to the holders of
shares.

The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In general, if the Fund so qualifies and
distributes to its shareholders at least 90% of its investment company taxable
income (including net short term capital gains, but excluding the deduction for
dividends paid) and at least 90% of its tax-exempt interest income (less
expenses allocable thereto) in each year in a manner that qualifies for the
deduction for dividends paid, it will not be required to pay federal income
taxes on any taxable income that it distributes. In addition, the Fund will not
be subject to federal income tax on any net capital gain (i.e., any excess of
its net long term capital gain over its net short term capital loss for the
taxable year) that is distributed to its shareholders. The Fund may be subject
to a 4% excise tax on a portion of its income or gains to the extent that it
fails to timely distribute at least the sum of 98% of its ordinary income for
the calendar year and 98% of its capital gain net income for the one year period
generally ending on October 31. As a Massachusetts business trust the Fund will
not be subject to any excise or income taxes in Massachusetts.

All dividends and distributions will generally be taxable regardless of
whether a Shareholder takes them in cash or they are reinvested pursuant to the
Plan in additional shares of the Fund. Distributions of the Fund's investment
company taxable income (including net short term capital gain, but excluding the
deduction for dividends paid) will generally be taxable as ordinary income to
the extent of the Fund's current and accumulated earnings and profits. However,
a portion of such distributions derived from certain corporate dividends, if
any, may qualify for either the dividends received deduction available to
corporate shareholders under Section 243 of the Code or the reduced rates of
U.S. federal income taxation for "qualified dividend income" available to
noncorporate shareholders under Section 1(h)(11) of the Code for taxable years
beginning on or prior to December 31, 2010, provided in each case certain
holding period and other requirements are met. Distributions of net capital
gain, if any, are generally taxable as long-term capital gain for U.S. federal
income tax purposes without regard to the length of time a shareholder has held
shares of the Fund. A distribution of an amount in excess of the Fund's current
and accumulated earnings and profits, if any, will be treated by a shareholder
as a tax-free return of capital, which is applied against and reduces the
shareholder's basis in his, her or its shares. To the extent that the amount of
any such distribution exceeds the shareholder's basis in his, her, or its
shares, the excess will be treated by the shareholder as gain from the sale or
exchange of the shares. The U.S. federal income tax status of all dividends and
distributions will be designated by the Fund and reported to the shareholders
annually.

Any dividend declared by the Fund in October, November or December with a
record date in such a month and paid during the following January will be
treated for U.S. federal income tax purposes as paid by the Fund and received by
shareholders on December 31 of the calendar year in which it is declared.

If a shareholder's distributions are automatically reinvested pursuant to
the Plan and the Plan Agent invests the distribution in shares acquired on
behalf of the Shareholder in open-market purchases, for U.S. federal income tax
purposes, the shareholder will be treated as having received a taxable
distribution in the amount of the cash dividend

that the Shareholder would have received if the shareholder had elected to
receive cash. If a shareholder's distributions are automatically reinvested
pursuant to the Plan and the Plan Agent invests the distribution in newly issued
shares of the Fund, the Shareholder will be treated as receiving a taxable
distribution equal to the fair market value of the shares the shareholder
receives.

The Fund may be subject to withholding and other taxes imposed by foreign
countries, including taxes on interest, dividends and capital gains with respect
to its investments in those countries, which would, if imposed, reduce the yield
on or return from those investments. Tax treaties between certain countries and
the U.S. may reduce or eliminate these taxes in some cases. The Fund does not
expect to satisfy the requirements for passing through to its shareholders their
pro rata share of qualified foreign taxes paid by the Fund, with the result that
shareholders will not be required to include such taxes in their gross income
and will not be entitled to a tax deduction or credit for such taxes on their
own federal income tax returns.

Sales and other dispositions of the Fund's shares generally are taxable
events for Shareholders that are subject to U.S. federal income tax.
Shareholders should consult their own tax advisors with reference to their
individual circumstances to determine whether any particular transaction in the
Fund's shares is properly treated as a sale or exchange for federal income tax
purposes, as the following discussion assumes, and the tax treatment of any
gains or losses recognized in such transactions. Gain or loss will generally be
equal to the difference between the amount of cash and the fair market value of
other property received and the Shareholder's adjusted tax basis in the shares
sold or exchanged. Such gain or loss will generally be characterized as capital
gain or loss and will be long-term if the shareholder's holding period for the
shares is more than one year and short-term if it is one year or less. However,
any loss realized by a shareholder upon the sale or other disposition of shares
with a tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gain with respect to such shares. For the purposes of calculating the
six-month period, the holding period is suspended for any periods during which
the shareholder's risk of loss is diminished as a result of holding one or more
other positions in substantially similar or related property or through certain
options or short sales. A shareholder's ability to deduct capital losses may be
limited. In addition, losses on sales or other dispositions of shares may be
disallowed under the "wash sale" rules in the event that substantially identical
stocks or securities are acquired (including shares acquired pursuant to
reinvestment of dividends) within a period of 61 days beginning 30 days before
and ending 30 days after a sale or other disposition of shares. In such a case,
the disallowed portion of any loss generally would be included in the U.S.
federal tax basis of the shares acquired.

The Fund is required in certain circumstances to backup withhold at a
current rate of 28% on reportable payments including dividends, capital gain
distributions, and proceeds of sales or other dispositions of the Fund's shares
paid to certain holders of the Fund's shares who do not furnish the Fund with
their correct social security number or other taxpayer identification number and
certain other certifications, or who are otherwise subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
from payments made to a Shareholder may be refunded or credited against such
shareholder's U.S. federal income tax liability, if any, provided that the
required information is timely furnished to the Internal Revenue Service.

THE FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE PROVISIONS OF THE
CODE AND THE TREASURY REGULATIONS THEREUNDER CURRENTLY IN EFFECT AS THEY
DIRECTLY GOVERN THE TAXATION OF THE FUND AND ITS SHAREHOLDERS. THESE PROVISIONS
ARE SUBJECT TO CHANGE BY LEGISLATIVE OR ADMINISTRATIVE ACTION, AND ANY SUCH
CHANGE MAY BE RETROACTIVE. A MORE COMPLETE DISCUSSION OF THE FEDERAL INCOME TAX
RULES APPLICABLE TO THE FUND CAN BE FOUND IN THE SAI, WHICH IS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX
ADVISORS REGARDING SPECIFIC QUESTIONS AS TO U.S. FEDERAL, FOREIGN, STATE, AND
LOCAL INCOME OR OTHER TAXES BEFORE MAKING AN INVESTMENT IN THE FUND.

REPURCHASE OF SHARES

Shares of closed-end management investment companies frequently trade at a
discount from their NAV but in some cases trade at a premium. In recognition of
the possibility that the Fund's shares might similarly trade at a discount, the
Fund may from time to time take action to attempt to reduce or eliminate a
market value discount from NAV by repurchasing its shares in the open market or
by tendering for its own shares at NAV. The Board of Trustees, in consultation
with DIMA, will review on a quarterly basis the possibility of open market
repurchases or tender

offers of Fund shares. There are no assurances that the Board of Trustees will,
in fact, decide to undertake either of these actions or, if undertaken, that
such actions will result in the Fund's shares trading at a price that is equal
to or approximates their NAV. In addition, the Board of Trustees will not
necessarily announce when it has given consideration to these matters.

Subject to the Fund's investment policies and restrictions with respect to
borrowings, the Fund may incur debt to finance repurchases or tenders. See
"Investment Objective, Strategies and Policies" above and "Investment
Restrictions" in the SAI. Interest on any such borrowings will reduce the Fund's
net investment income.

There can be no assurance that repurchases or tenders will result in the
Fund's shares trading at a price that approximates or is equal to its NAV per
share. The Fund anticipates that the market price of its shares will from time
to time vary from NAV. The market price of the Fund's shares will, among other
things, be determined by the relative demand for and supply of such shares in
the market, the Fund's investment performance, the Fund's dividends and yield
and investor perception of the Fund's overall attractiveness as an investment as
compared with other investment alternatives. Nevertheless, the fact that the
Fund's shares may be the subject of tender offers at NAV from time to time may
reduce the spread between market price and net asset value that might otherwise
exist. In the opinion of DIMA, sellers may be less inclined to accept a
significant discount if they have a reasonable expectation of being able to
recover NAV in conjunction with a possible tender offer.

Although the Board of Trustees believes that share repurchases and tenders
generally should have a favorable effect upon the market price of the Fund's
shares, it should be recognized that the acquisition of shares by the Fund will
decrease the total assets of the Fund and, therefore, have the effect of
increasing the Fund's expense ratio. In addition, any purchase by the Fund of
its shares at a time when borrowings are outstanding will increase the leverage
applicable to the outstanding shares then remaining. See "U.S. Federal Income
Tax Matters" in the SAI for a discussion of the federal income tax consequences
of tenders and other repurchases. Because of the nature of the Fund's investment
objective and policies and the Fund's portfolio, DIMA does not anticipate that
repurchases and tenders should have a materially adverse effect on the Fund's
investment performance and does not anticipate any material difficulty in
disposing of portfolio securities in order to consummate stock repurchases and
tenders.

Even if a tender offer has been made, it is the Trustees' announced policy,
which may be changed by the Trustees, that the Fund cannot accept tenders or
effect repurchases, if (1) such transactions, if consummated, would (a) result
in the delisting of the Fund's shares from the NYSE (the Exchange having advised
the Fund that it would consider delisting if the aggregate market value of the
Fund's outstanding shares is less than $5,000,000, the number of publicly held
shares falls below 600,000 or the number of round-lot holders falls below
1,200), or (b) impair the Fund's status as a regulated investment company under
the Code (which would make the Fund a taxable entity, causing the Fund's income
to be taxed at the corporate level in addition to the taxation of shareholders
who receive dividends from the Fund); (2) the amount of securities tendered
would require liquidation of such a substantial portion of the Fund's
securities, such that the Fund would not be able to liquidate portfolio
securities in an orderly manner in light of the existing market conditions and
such liquidation would have an adverse effect on the NAV of the Fund to the
detriment of nontendering stockholders; or (3) there is, in the Board of
Trustees' judgment, any material (a) legal action or proceeding instituted or
threatened challenging such transactions or otherwise materially adversely
affecting the Fund, (b) suspension of or limitation on prices for trading
securities generally on the NYSE, (c) declaration of a banking moratorium by
federal or state authorities or any suspension of payment by banks in the United
States or New York State in which the Fund invests, (d) limitation affecting the
Fund or the issuers of its portfolio securities imposed by federal or state
authorities on the extension of credit by lending institutions, (e) commencement
of war, armed hostilities or other international or national calamity directly
or indirectly involving the United States, or (f) other event or condition which
would have a material adverse effect on the Fund or its shareholders if shares
were repurchased. The Trustees may modify these conditions in light of
experience.

Any tender offer made by the Fund will be at a price equal to the NAV of
the shares on a date subsequent to the Fund's receipt of all tenders. During the
pendency of any tender offer by the Fund, the Fund will calculate daily the NAV
of the shares and will establish procedures that will be specified in the tender
offer documents, to enable shareholders to ascertain readily such NAV. Each
offer will be made and shareholders notified in accordance with the requirements
of the Securities Exchange Act of 1934 and the 1940 Act, either by publication
or mailing or both. Each offering document will contain such information as is
prescribed by such laws and the rules and regulations

promulgated thereunder. When a tender offer is authorized to be made by the
Fund's Trustees, a shareholder wishing to accept the offer will be required to
tender all (but not less than all) of the shares owned by such shareholder (or
attributed to the shareholder for federal income tax purposes under Section 318
of the Code). The Fund will not specify a record date for the tender offer that
will not permit a shareholder of record on the effective date of the tender
offer to tender such shareholder's shares. The Fund will purchase all shares
tendered in accordance with the terms of the offer unless it determines to
accept none of them (based upon one of the conditions set forth above). Each
person tendering shares will pay to the Fund a reasonable service charge
currently anticipated to be $25.00, subject to change, to help defray certain
costs, including the processing of tender forms, effecting payment, postage and
handling. Any such service charge will be paid directly by the tendering
shareholder and will not be deducted from the proceeds of the purchase. The
Fund's transfer agent will receive the fee as an offset to these costs. The Fund
expects the cost to the Fund of effecting a tender offer will exceed the
aggregate of all service charges received from those who tender their shares.
Costs associated with the tender will be charged against capital.

Tendered shares that have been accepted and purchased by the Fund will be
held in treasury and may be retired by the Trustees. Treasury shares will be
recorded and reported as an offset to shareholders' equity and accordingly will
reduce the Fund's total assets. If treasury shares are retired, shares issued
and outstanding and capital in excess of par value will be reduced.

If the Fund must liquidate portfolio securities in order to purchase Fund
shares tendered, the Fund may realize gains and losses. If the portfolio
securities sold consist of market discount bonds or securities subject to Code
Section 988, the Fund's distributable net investment income could be positively
or adversely affected. See "U.S. Federal Income Tax Matters" and "Investment and
Restrictions" in the SAI. The portfolio turnover rate of the Fund may or may not
be affected by the Fund's repurchases of shares pursuant to a tender offer.

DESCRIPTION OF SHARES

GENERAL

The Agreement and Declaration of Trust permits the Trustees to issue an
unlimited number of common shares of beneficial interest, $.01 par value. The
shares outstanding are, and those offered hereby when issued will be, fully paid
and nonassessable by the Fund. The Fund's shares have no preemptive, conversion,
exchange or redemption rights. Each share has one vote, with fractional shares
voting proportionately. Shares are freely transferable, and holders thereof are
entitled to dividends as declared by the Trustees, and, if the Fund were
liquidated, would receive the net assets of the Fund. Under the rules of the
NYSE applicable to listed companies, the Fund is required to hold an annual
meeting of shareholders. If the Fund is converted to an open-end investment
company or if for any other reason the Fund's shares are no longer listed on the
NYSE (or any other national securities exchange the rules of which require
annual meetings of shareholders), the Fund does not intend to hold annual
meetings of shareholders.

Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Fund
or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to meet its
obligations. The likelihood of such circumstances is remote.

The Fund has no present intention of offering additional shares, other than
under the Plan. See "Dividends and Distributions; Dividend Reinvestment Plan."
Other offerings of Fund shares, if made, will require approval of the Trustees.
Any additional offering will be subject to the requirements of the 1940 Act that
shares may not be sold at a price below the then current NAV, exclusive of
underwriting discounts and commissions, except in connection with an offering to
existing shareholders or with the consent of the holders of a majority of the
Fund's outstanding shares. In addition, the Fund expects that it would commence
a continuous offering of its shares in the event it converted to an open-end
investment company. See "Conversion to Open-End Fund" below.

The Agreement and Declaration of Trust further provides that obligations of
the Fund are not binding upon Trustees individually but only upon the property
of the Fund and that the Trustees will not be liable for errors of judgment or
mistakes of fact or law, but nothing in the Agreement and Declaration of Trust
protects a Trustee against any liability 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 such Trustee's
office.

CONVERSION TO OPEN-END FUND

The Trustees may at any time propose conversion of the Fund to an open-end
management investment company depending upon their judgment as to the
advisability of such action in light of circumstances then prevailing. Such a
conversion would require the approval of a majority of the outstanding shares of
the Fund. Shareholders of an open-end investment company may require the company
to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their NAV, less such redemption charge,
if any, as might be in effect at the time of redemption. If the Fund is
converted to an open-end management investment company, it could be required to
liquidate portfolio securities to meet requests for redemption, and its shares
would no longer be listed on the NYSE. In addition, the Fund also would have to
change certain of its investment policies.

CLOSED-END FUND STRUCTURE

Closed-end funds differ from open-end investment companies (commonly
referred to as mutual funds) in that closed-end funds generally list their
shares for trading on a securities exchange and do not redeem their shares at
the option of the shareholder. By comparison, mutual funds issue securities
redeemable at NAV at the option of the shareholder and typically engage in a
continuous offering of their shares. Mutual funds are subject to continuous
asset in-flows and out-flows that can complicate portfolio management, whereas
closed-end funds generally can stay more fully invested in securities consistent
with the closed-end fund's investment objective and policies. In addition, in
comparison to open-end funds, closed-end funds have greater flexibility in their
ability to make certain types of investments, including investments in illiquid
securities.

However, shares of closed-end investment companies listed for trading on a
securities exchange frequently trade at a discount from NAV, although in some
cases they may trade at a premium. The market price may be affected by trading
volume of the shares, general market and economic conditions and other factors
beyond the control of the closed-end fund. The foregoing factors may result in
the market price of the shares being greater than, less than or equal to NAV.
The Board of Trustees has reviewed the structure of the Fund in light of its
investment objective and policies and has determined that the closed-end
structure is in the best interests of the shareholders. As described below,
however, the Board of Trustees will review periodically the trading range and
activity of the Fund's shares with respect to its NAV and the Board may take
certain actions to seek to reduce or eliminate any such discount. Such actions
may include open market repurchases or tender offers for the shares at net asset
value or the possible conversion of the Fund to an open-end investment company.
There can be no assurance that the Board will decide to undertake any of these
actions or that, if undertaken, such actions would result in the shares trading
at a price equal to or close to net asset value per share.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

State Street Bank and Trust Company serves as the custodian of the Fund's
assets pursuant to a custody agreement. Under the custody agreement, the
Custodian holds the Fund's assets in compliance with the 1940 Act. For its
services, the Custodian will receive a monthly fee based upon, among other
things, the average value of the total assets of the Fund, plus certain charges
for securities transactions.

State Street Bank and Trust Company is also the named transfer agent.
However, pursuant to a sub-transfer agency agreement between State Street Bank
and Trust Company and DWS-SISC, an affiliate of DIMA, DWS-SISC is the transfer
agent, dividend-paying agent and shareholder service agent for the Fund.
Pursuant to a sub-transfer agency agreement between DWS-SISC and DST Systems,
Inc. ("DST"), DWS-SISC has delegated

certain transfer agent and dividend-disbursing agent functions to DST. DWS-SISC
compensates DST out of the shareholder servicing fee it receives from the Fund.

State Street Bank and Trust Company is located at 225 Franklin Street,
Boston, Massachusetts 02109. DIMA is located at 345 Park Avenue, New York, New
York 10154. DWS-SISC is located at 210 W. 10th Street, Kansas City, Missouri
64105-1614.

LEGAL MATTERS

Vedder, Price, Kaufman & Kammholz, P.C., Chicago, Illinois ("Vedder Price")
serves as counsel to the Fund in connection with this offering. Certain matters
relating to Massachusetts law have been passed on by Bingham McCutchen LLP.

REPORTS TO SHAREHOLDERS

The Fund sends unaudited semi-annual and audited annual reports to
shareholders, including a list of the portfolio investments held by the Fund.

ADDITIONAL INFORMATION

The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act and in accordance therewith
files reports and other information with the SEC. Reports, proxy statements and
other information filed by the Fund with the SEC pursuant to the informational
requirements of such Acts can be inspected and copied at the public reference
facilities maintained by the SEC, 100 F. Street, N.E., Washington, D.C. 20549.
The SEC maintains a web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Fund, that file electronically with the SEC.

The Fund's shares are listed on the NYSE, and reports, proxy statements and
other information concerning the Fund and filed with the SEC by the Fund can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.

This prospectus constitutes part of a Registration Statement filed by the
Fund with the SEC under the Securities Act of 1933, as amended, and the 1940
Act. This prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the Fund
and the shares offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC. Each such statement is
qualified in its entirety by such reference. The complete Registration Statement
may be obtained from the SEC upon payment of the fee prescribed by its rules and
regulations or free of charge through the Securities and Exchange Commission's
web site (http://www.sec.gov).

TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

PAGE
----

GENERAL INFORMATION..................................................... 1
INVESTMENT RESTRICTIONS................................................. 1
INVESTMENT POLICIES AND TECHNIQUES...................................... 2
MANAGEMENT OF THE FUND.................................................. 29
Investment Adviser.................................................... 29
Investment Management Agreement....................................... 30
Compensation of Portfolio Manager..................................... 31
Fund Ownership of Portfolio Managers.................................. 32
Conflicts of Interest................................................. 32
Codes of Ethics....................................................... 34
Regulatory Matters.................................................... 35
FUND SERVICE PROVIDERS.................................................. 35
Independent Registered Public Accounting Firm......................... 35
Legal Counsel......................................................... 35
Custodian, Transfer Agent and Dividend-Paying Agent................... 36
PORTFOLIO TRANSACTIONS.................................................. 36
PORTFOLIO TURNOVER...................................................... 38
DIVIDENDS............................................................... 38
U.S. FEDERAL INCOME TAX MATTERS......................................... 39
TRUSTEES AND OFFICERS................................................... 46
Securities Beneficially Owned......................................... 53
PROXY VOTING GUIDELINES................................................. 54
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM....................................................... 55
ADDITIONAL INFORMATION.................................................. 55
APPENDIX................................................................ A-1

APPENDIX
DESCRIPTION OF BOND RATINGS

STANDARD & POOR'S CORPORATION BOND RATINGS

AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

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

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

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

CI. The rating CI is reserved for income bonds on which no interest is
being paid.

D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC. BOND RATINGS

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

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

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

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

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

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

A-1

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

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

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

FITCH INVESTORS SERVICE, INC. BOND RATINGS

AAA. Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.

AA. Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA.

A. Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.

BBB. Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment.

BB. Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt services requirements.

B. Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.

CCC. Bonds rated CCC have certain identifiable characteristics which, if
not remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.

CC. Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.

C. Bonds rated C are in imminent default in payment of interest or
principal.

DDD, DD and D. Bonds rated DDD, DD and D are in default on interest and/or
principal payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these bonds,
and D represents the lowest potential for recovery.

A-2

--------------------------------------------------------------------------------
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT MAKING AN OFFER
TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS. THE FUND'S BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAY HAVE CHANGED SINCE THAT DATE. THE FUND WILL AMEND THIS PROSPECTUS IF THERE
ARE ANY MATERIAL CHANGES TO THE INFORMATION PROVIDED SUBSEQUENT TO THE DATE OF
THE PROSPECTUS AND PRIOR TO THE COMPLETION OF THIS OFFERING.

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

TABLE OF CONTENTS

Cautionary Notice Regarding Forward-Looking Statements..........................
Prospectus Summary.............................................................. 1
The Offer....................................................................... 1
The Fund........................................................................ 4
Special Considerations and Risk Factors......................................... 5
Fee Table....................................................................... 14
Financial Highlights............................................................ 15
Information Regarding Senior Securities......................................... 16
Trading and Net Asset Value Information......................................... 16
The Offer....................................................................... 16
Use of Proceeds................................................................. 24
The Fund........................................................................ 24
Investment Objective, Strategies and Policies................................... 24
Use of Leverage................................................................. 28
Special Considerations and Risk Factors......................................... 29
Management of the Fund.......................................................... 36
Net Asset Value................................................................. 38
Dividends and Distributions; Dividend Reinvestment Plan......................... 39
Federal Income Taxation......................................................... 40
Repurchase of Shares............................................................ 42
Description of Shares........................................................... 44
Closed-End Fund Structure....................................................... 45
Custodian, Transfer Agent and Dividend Disbursing Agent......................... 45
Legal Matters................................................................... 46
Reports to Shareholders......................................................... 46
Additional Information.......................................................... 46
Table of Contents of Statement of Additional Information........................ 46
Appendix Description of Bond Ratings ........................................... A-1

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SHARES
Beneficial Interest

DWS

MULTI-MARKET

INCOME

TRUST

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

PROSPECTUS

[DATE]

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The information in this Statement of Additional Information is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell securities and is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.

Subject To Completion, Dated _____ 2007

DWS MULTI-MARKET INCOME TRUST

STATEMENT OF ADDITIONAL INFORMATION

DWS Multi-Market Income Trust (the "Fund") is a diversified, closed-end
management investment company. The Fund seeks to achieve a high current income
consistent with prudent total return asset management. There is no assurance the
Fund will meet its objective.

This statement of additional information ("SAI") is not a prospectus, but
should be read in conjunction with the prospectus for the Fund dated
_____________, 2007. Investors should obtain and read the prospectus prior to
purchasing common shares. A copy of the prospectus may be obtained without
charge, by writing the Fund or calling the Altman Group, Inc. toll-free at
[800-780-7438]. The Prospectus is also available on the website of the
Securities and Exchange Commission ("SEC") (http://www.sec.gov).

Portions of the Fund's Annual and Semi-Annual Reports to Shareholders are
incorporated by reference into the SAI. You may obtain an additional copy of the
Annul Report or Semi-Annual Reports to Shareholders without charge by calling
(___) _______________.

The prospectus and this SAI omit certain of the information contained in
the registration statement filed with the SEC. The registration statement may be
obtained from the SEC upon payment of the fee prescribed, or inspected at the
SEC's office or via its website (http://www.sec.gov) at no charge. Capitalized
terms used but not defined herein have the meanings ascribed to them in the
prospectus.

TABLE OF CONTENTS

PAGE
----

GENERAL INFORMATION...................................................... 1

INVESTMENT RESTRICTIONS.................................................. 1

INVESTMENT POLICIES AND TECHNIQUES....................................... 2

MANAGEMENT OF THE FUND................................................... 29

Investment Adviser.................................................... 29
Investment Management Agreement....................................... 30
Compensation of Portfolio Managers..................................... 31
Fund Ownership of Portfolio Managers.................................. 32
Conflicts of Interest................................................. 32
Codes of Ethics....................................................... 34
Regulatory Matters.................................................... 35

FUND SERVICE PROVIDERS................................................... 35

Independent Registered Public Accounting Firm......................... 35
Legal Counsel......................................................... 35
Custodian, Transfer Agent and Dividend-Paying Agent................... 36

PORTFOLIO TRANSACTIONS................................................... 36

PORTFOLIO TURNOVER....................................................... 38

DIVIDENDS................................................................ 38

U.S. FEDERAL INCOME TAX MATTERS.......................................... 39

TRUSTEES AND OFFICERS.................................................... 46

Securities Beneficially Owned......................................... 53

PROXY VOTING GUIDELINES.................................................. 54

FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM....................................................... 55

ADDITIONAL INFORMATION................................................... 55

APPENDIX................................................................. A-1

GENERAL INFORMATION

The DWS Multi-Market Income Trust (the "Fund") was organized on August 3,
1988 as a Massachusetts business trust. Initially, the Fund's name was the
Kemper Trust #8, which was later changed to the Kemper Multi-Market Income Trust
on January 9, 1989 and later to the Scudder Multi-Market Income Trust on January
1, 2001. On February 6, 2006, the Fund was changed to its current name, the DWS
Multi-Market Income Trust.

INVESTMENT RESTRICTIONS

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

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

The Fund has elected to be classified as a diversified closed-end
investment management company. A diversified fund may not, with respect to 75%
of total assets, invest more than 5% of its total assets in the securities of a
single issuer or invest in more than 10% of the outstanding voting securities of
such issuer.

As a matter of fundamental policy, the Fund will not:

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

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

(3) concentrate its investments in a particular industry, as that term is
used in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time;

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

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

(6) purchase physical commodities or contracts relating to physical
commodities; and

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

As a matter of non-fundamental policy, the Fund currently may not:

(1) purchase securities on margin or make short sales, except (i) short
sales against the box, (ii) in connection with arbitrage transactions, (iii) for
margin deposits in connection with future contracts, options or other permitted
investments, (iv) that transactions in futures contracts and options shall not
be

deemed to constitute selling securities short, and (v) that the Fund may obtain
such short-term credits as may be necessary for the clearance of securities
transactions;

(2) 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;

(3) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial margin with
respect to such futures contracts entered into on behalf of the Fund and the
premiums paid for such options on futures contracts does not exceed 5% of the
fair market value of the Fund's total assets; provided that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in computing the 5% limit;

(4) purchase warrants if as a result, such securities, taken at the lower
of cost or market value, would represent more than 5% of the value of the Fund's
total assets (for this purpose, warrants acquired in units or attached to
securities will be deemed to have no value); and

(5) lend portfolio securities in an amount greater than one third of its
total assets.

INVESTMENT POLICIES AND TECHNIQUES

Descriptions in this SAI of a particular investment practice or technique
in which the Fund may engage are meant to describe the spectrum of investments
that Deutsche Investment Management Americas Inc. ("DIMA" or the "Investment
Adviser"), in its discretion might, but is not required to, use in managing the
Fund's portfolio assets. Furthermore, it is possible that certain types of
financial instruments or investment techniques described herein may not be
available, permissible, economically feasible or effective for their intended
purposes in all markets. Certain practices, techniques or instruments may not be
principal activities of the Fund, but, to the extent employed, could from time
to time have a material impact on the Fund's performance.

ADVANCE REFUNDED BONDS. The 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. The Fund may also
purchase municipal securities that have been refunded prior to purchase by the
Fund.

ASSET-BACKED SECURITIES. Asset-backed securities may include pools of
mortgages ("Mortgage-Backed Securities"), loans, receivables or other assets.
Payment of principal and interest may be largely dependent upon the cash flows
generated by the assets backing the securities. For purposes of determining the
percentage of 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. Primarily, these securities may
not have the benefit of any security interest in the related assets. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. There is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities. Asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different parties. To lessen
the effect of failures by obligors

on underlying assets to make payments, the securities may contain elements of
credit support which fall into two categories: (i) liquidity protection, and
(ii) protection against losses resulting from ultimate default by an obligor on
the underlying assets.

Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
results from payment of the insurance obligations on at least a portion of the
assets in the pool. This protection may be provided through guarantees, policies
or letters of credit obtained by the issuer or sponsor from third parties,
through various means of structuring the transaction or through a combination of
such approaches. The Fund will not pay any additional or separate fees for
credit support. The degree of credit support provided for each issue is
generally based on historical information respecting the level of credit risk
associated with the underlying assets. Delinquency or loss in excess of that
anticipated or failure of the credit support could adversely affect the return
on an investment in such a security. The availability of asset-backed securities
may be affected by legislative or regulatory developments. It is possible that
such developments may require the Fund to dispose of any then existing holdings
of such securities.

BANK LOANS. The Fund may also invest in bank loans, which are typically
senior debt obligations of borrowers (issuers) and as such, are considered to
hold a senior position in the capital structure of the borrower. These may
include loans which hold the most senior position, that hold an equal ranking
with other senior debt, or loans that are, in the judgment of the Investment
Adviser, 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 Investment Adviser believes has a
market value at the time of acquisition that equals or exceeds the principal
amount of the loan.

These loans are often issued in connection with recapitalizations,
acquisitions, leveraged buy-outs and refinancings. It is important to note that
Moody's and S&P may rate bank loans higher than high yield bonds of the same
issuer to reflect their more senior position. The Fund may invest in both fixed-
and floating-rate loans. In addition, bank loans can trade either as an
"assignment" or "participation".

When the Fund buys an assignment, it is essentially becoming a party to the
bank agreement. The vast majority of all trades are assignments and would
therefore generally represent the preponderance of bank loans held by the Fund.
In certain cases, the Fund may buy bank loans on a participation basis, if for
example, the Fund did not want to become party to the bank agreement. However,
in all cases, the Fund will not purchase bank loans where Deutsche Bank, or an
affiliate, serves as an agent bank.

Participations and assignments involve credit risk, interest rate risk,
liquidity risk, and the risk of being a lender. If the Fund purchases a
participation, it may only be able to enforce its rights through the lender, and
may assume the credit risk of both the lender and the borrower.

Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks. For example, if a
loan is foreclosed, the purchaser could become part owner of any collateral, and
would bear the costs and liabilities associated with owning and disposing of the
collateral. In addition, it is at least conceivable that under emerging legal
theories of lender liability, a purchaser could be held liable as a co-lender.

In the case of loans administered by a bank or other financial institution
that acts as agent for all holders, if assets held by the agent for the benefit
of a purchaser are determined to be subject to the claims

of the agent's general creditors, the purchaser might incur certain costs and
delays in realizing payment on the loan or loan participation and could suffer a
loss of principal or interest.

In the case of loan participations where a bank or other lending
institution serves as financial intermediary between the Fund and the borrower,
if the participation does not shift to the Fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the Fund, in some
circumstances, to treat both the lending bank or other lending institution and
the borrower as issuers for purposes of the Fund's investment policies. Treating
a financial intermediary as an issuer of indebtedness may restrict the Fund's
ability to invest in indebtedness related to a single financial intermediary, or
a group of intermediaries engaged in the same industry, even if the underlying
borrowers represent many different companies and industries.

CERTIFICATES OF DEPOSIT. The Fund may invest in bank certificates of
deposit at any time, but expects to use them primarily during temporary
defensive periods. Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The issuer agrees to pay the
amount deposited plus interest to the bearer of the receipt on the date
specified on the certificate. The certificate usually can be traded in the
secondary market prior to maturity.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are hybrids between
mortgage-backed bonds and mortgage pass-through securities. Similar to a bond,
interest and prepaid principal are paid, in most cases, semiannually. CMOs may
be collateralized by whole mortgage loans but are more typically collateralized
by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
Fannie Mae, and their income streams.

CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments. The prices of certain CMOs,
depending on their structure and the rate of prepayments, can be volatile. Some
CMOs may also not be as liquid as other securities.

In a typical CMO transaction, a corporation issues multiple series (e.g.,
A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to
purchase mortgages or mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a third party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B, and C bonds all bear current
interest.

Interest on the Series Z Bond is accrued and added to principal and a like
amount is paid as principal on the Series A, B, or C Bond currently being paid
off. When the Series A, B, and C Bonds are paid in full, interest and principal
on the Series Z Bond begins to be paid currently. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.

The principal risk of CMOs results from the rate of prepayments on
underlying mortgages serving as collateral and from the structure of the deal.
An increase or decrease in prepayment rates will affect the yield, average life
and price of CMOs.

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities, that
is, bonds, notes, debentures, preferred stocks and other securities that are
convertible 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 the Fund may invest are either 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. Convertible debt
securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends 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 generally are 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"(TM)).

CORPORATE OBLIGATIONS. Investment in corporate debt obligations involves
credit and interest rate risk. The value of fixed-income investments will
fluctuate with changes in interest rates and bond market conditions, tending to
rise as interest rates decline and to decline as interest rates rise. 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. Longer term
bonds are, however, generally more volatile than bonds with shorter maturities.

DEPOSITARY RECEIPTS. The 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 the stock of
unsponsored Depositary Receipts are not

obligated to disclose material information 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. For purposes
of the Fund's investment policies, the Fund's investments in ADRs, GDRs and
other types of Depositary Receipts will be deemed to be investments in the
underlying securities. 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, the 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.

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. The Fund may invest in all types of direct debt investments, but
among these investments the Fund currently intends to invest primarily in direct
loans and trade claims.

When the Fund participates in a direct loan it will be lending money
directly to an issuer. Direct loans generally do not have an underwriter or
agent bank, but instead, are negotiated between a company's management team and
a lender or group of lenders. Direct loans typically offer better security and
structural terms than other types of high yield securities. Direct debt
obligations are often the most senior obligations in an issuer's capital
structure or are well-collateralized so that overall risk is lessened. Trade
claims are unsecured rights of payment arising from obligations other than
borrowed funds. Trade claims include vendor claims and other receivables that
are adequately documented and available for purchase from high-yield
broker-dealers. Trade claims typically may sell at a discount. In addition to
the risks otherwise associated with low-quality obligations, trade claims have
other risks, including the possibility that the amount of the claim may be
disputed by the obligor. Trade claims normally would be considered illiquid and
pricing can be volatile. Direct debt instruments involve a risk of loss in case
of default or insolvency of the borrower. The 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 the 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.
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 the 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 the Fund's ability to dispose of them when necessary to meet the 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 the
Fund to assign a value of these instruments for purposes of valuing the Fund's
portfolio

and calculating its net asset value. In order to lessen liquidity risk, the Fund
anticipates investing primarily in direct debt instruments that are quoted and
traded in the high yield market and will not invest in these instruments if it
would cause more than 15% of the Fund's net assets to be illiquid. Trade claims
may also present a tax risk to the Fund. The Fund will not invest in trade
claims if it affects the Fund's qualification as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended.

DOLLAR ROLL TRANSACTIONS. Dollar roll transactions consist of the sale by
the Fund to a bank or broker/dealer (the "counterparty") of GNMA certificates or
other 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. The 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 the Fund agrees to buy a security on a future date.

The Fund will segregate cash, US government securities or other liquid
assets in an amount sufficient to meet its purchase obligations under the
transactions.

A dollar roll involves costs to the Fund. For example, while the Fund
receives a fee as consideration for agreeing to repurchase the security, the
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 the Fund, thereby effectively charging the Fund interest on
its borrowing. Further, although the 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 Fund's
borrowing.

The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Fund is able to purchase them.
Similarly, the 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 the Fund, the security that the Fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Fund's use of the cash
that it receives from a dollar roll will provide a return that exceeds borrowing
costs.

EQUITY SECURITIES. Consistent with the Fund's investment objective,
policies and restrictions, the Fund may purchase and hold equity securities,
including equity securities received in an exchange or workout of distressed
lower-rated debt securities. A distressed security is a security that is in
default or in risk of being in default.

EURODOLLAR INSTRUMENTS. The Fund may make investments in Eurodollar
instruments, provided that the value of the aggregate initial margin with
respect to such instruments and the premiums paid for such investments does not
exceed 5% of the Fund's total assets. Eurodollar instruments are US
dollar-denominated futures contracts or options thereon that are linked to the
London Interbank Offered Rate ("LIBOR"), although foreign currency-denominated
instruments are available from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds and sellers to obtain
a fixed rate for borrowings. The Fund might use Eurodollar futures contracts and
options thereon

to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.

EURODOLLAR OBLIGATIONS. The Fund may invest in 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.

EMERGING MARKETS. The Fund may invest foreign fixed income securities in
countries considered by the Investment Adviser to have developing or "emerging"
markets. A developing or emerging market country can be considered to be a
country that is in the initial stages of its industrialization cycle. Currently,
emerging markets generally include every country in the world other than the
United States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore and
most Western European countries. Investing in emerging markets is to be
considered speculative and involves the risks described under Foreign Fixed
Income Securities, Foreign Currencies and Foreign Investments.

FIXED INCOME SECURITIES. The Fund may invest in fixed income securities.
Fixed income securities include government, corporate or municipal bonds, which
pay a fixed rate of interest until the bonds mature, and preferred stock paying
a fixed dividend.

FOREIGN FIXED INCOME SECURITIES. Because most foreign fixed income
securities are not rated, the Fund will invest in foreign fixed income
securities based on the Investment Adviser's analysis without relying on
published ratings. Since such investments will be based upon the Investment
Adviser's analysis rather than upon published ratings, achievement of the Fund's
goals may depend more upon the abilities of the Investment Adviser than would
otherwise be the case.

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

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

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

FOREIGN CURRENCIES. The Fund may invest in foreign currencies. Because
investments in foreign securities usually will involve currencies of foreign
countries, and because the 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 the Fund as measured in
US dollars may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the 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 the 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 the Fund values its assets daily in terms of US dollars, it does
not intend to convert its holdings of foreign currencies into US dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not

charge a fee for conversion, they do 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 the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
options or forward or futures contracts to purchase or sell foreign currencies.

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

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

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

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

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

private property rights and have at times nationalized and expropriated the
assets of private companies. Investments in emerging markets may be considered
speculative.

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

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

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

ILLIQUID SECURITIES AND RESTRICTED SECURITIES. The Fund may purchase
securities that are subject to legal or contractual restrictions on resale
("restricted securities"). Generally speaking, restricted securities may be sold
(i) only to qualified institutional buyers; (ii) in a privately negotiated
transaction to a limited number of purchasers; (iii) in limited quantities after
they have been held for a specified period of time and other conditions are met
pursuant to an exemption from registration; or (iv) in a public offering for
which a registration statement is in effect under the Securities Act of 1933, as
amended (the "1933 Act"). Issuers of restricted securities may not be subject to
the disclosure and other investor protection requirements that would be
applicable if their securities were publicly traded.

Restricted securities are often illiquid, but they may also be liquid. For
example, restricted securities that are eligible for resale under Rule 144A are
often deemed to be liquid. The Fund may also purchase securities that are not
subject to legal or contractual restrictions on resale, but that are deemed
illiquid. Such securities may be illiquid, for example, because there is a
limited trading market for them.

The Fund may be unable to sell a restricted or illiquid security. In
addition, it may be more difficult to determine a market value for restricted or
illiquid securities. Moreover, if adverse market conditions were to develop
during the period between the Fund's decision to sell a restricted or illiquid

security and the point at which the Fund is permitted or able to sell such
security, the Fund might obtain a price less favorable than the price that
prevailed when it decided to sell. This investment practice, therefore, could
have the effect of increasing the level of illiquidity of the Fund.

INVESTMENT-GRADE DEBT SECURITIES. The 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 similar ratings of another nationally recognized statistical rating
organization ("NRSRO") or, if unrated, judged to be of equivalent quality as
determined by the Adviser. Moody's considers bonds it rates Baa to have
speculative elements as well as investment-grade characteristics. To the extent
that the Fund invests in higher-grade securities, the Fund will not be able to
avail itself of opportunities for higher income which may be available at lower
grades.

LOWER RATED FIXED INCOME SECURITIES. The Fund may purchase debt securities
that are rated below investment-grade (commonly referred to as "high yield
bonds" or "junk bonds"), and preferred stock that is, rated below in investment
grade. Securities rated below Baa by Moody's or below BBB by S&P or similarly
rated by another NRSRO and unrated securities judged to be of equivalent quality
as determined by the Investment Adviser are considered below investment grade.
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. See the Appendix to this SAI for a more complete
description of the ratings assigned by ratings organizations and their
respective characteristics.

Issuers of such high yield 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 the 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.

The Fund may have difficulty disposing of certain high-yield securities
because it may have a thin trading market. Because not all dealers maintain
markets in all high yield securities, the 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 the Fund's ability to dispose of particular issues and may also make
it more difficult for the Fund to obtain accurate market quotations for purposes
of valuing 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.

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. For these reasons, it is
generally the policy of the Investment Adviser not to rely exclusively on
ratings issued by established credit rating agencies, but to supplement such
ratings with its own independent and on-going review of credit quality. The
achievement of the Fund's investment objective by investment in such securities
may be more dependent on the Investment Adviser's credit analysis than is the
case for higher quality bonds. Should the rating of a portfolio security be
downgraded, the Investment Adviser will determine whether it is in the best
interests of the Fund to retain or dispose of such security.

Prices for high yield 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.

A portion of the high-yield securities acquired by the Fund may be
purchased upon issuance, which may involve special risks because of the
securities so acquired are new issues. In such instances that the Fund may be a
substantial purchaser of the issue and therefore have the opportunity to
participate in structuring the terms of the offering. Although this may enable
the Fund to seek to protect itself against certain of such risks, the
considerations discussed herein would nevertheless remain applicable.

The Fund may hold distressed securities, which are securities that are in
default or risk of being in default. In connection with an exchange or workout
of such securities, the Fund may accept various instruments if the Investment
Adviser determines it is in the best interest of the Fund and consistent with
the Fund's investment objective and policies. Such instruments may include, but
are not limited to, warrants, rights, participation interests in asset sales and
contingent-interest obligations.

INTERFUND BORROWING AND LENDING PROGRAM. The Fund has received exemptive
relief from the SEC, which permits the Fund to participate in an interfund
lending program among certain investment companies advised by the Investment
Adviser. 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
may extend overnight, but could have a maximum duration of seven days. Loans may
be called on one day's notice. The 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 Boards of the participating funds.

INVERSE FLOATERS. The Fund may invest in inverse floaters. Inverse floaters
are debt instruments with a floating rate of interest that bears an inverse
relationship to changes in short-term market interest rates. Investments in
inverse floaters may include "leveraged" inverse floaters involving a floating
rate that may change based on a multiple (greater than one) of a reference rate
(e.g., floating rate = fixed rate x multiplier reference rate).

INVESTMENT COMPANY SECURITIES. The Fund may acquire securities of other
investment companies to the extent consistent with its investment objective and
subject to the limitations of the Investment Company Act of 1940, as amended
(the "1940 Act"). The Fund will indirectly bear its proportionate share of any
management fees and other expenses paid by such other investment companies.

For example, the Fund may invest in a variety of investment companies which
seek to track the composition and performance of specific indexes or a specific
portion of an index. These index-based investments hold substantially all of
their assets in securities representing their specific index. Accordingly, the
main risk of investing in index-based investments is the same as investing in a
portfolio of equity securities comprising the index. The market prices of
index-based investments will fluctuate in accordance with both changes in the
market value of their underlying portfolio securities and due to supply and
demand for the instruments on the exchanges on which they are traded (which may
result in their trading at a discount or premium to their net asset values).
Index-based investments may not replicate exactly the performance of their
specified index because of transaction costs and because of the temporary
unavailability of certain component securities of the index.

Examples of index-based investments include:

SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary Receipts,"
are based on the S&P 500 Composite Stock Price Index. They are issued by the
SPDR Trust, a unit investment trust that holds shares of substantially all the
companies in the S&P 500 in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.

MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They
are issued by the MidCap SPDR Trust, a unit investment trust that holds a
portfolio of securities consisting of substantially all of the common stocks in
the S&P MidCap 400 Index in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.

Select Sector SPDRs(R): Select Sector SPDRs are based on a particular
sector or group of industries that are represented by a specified Select Sector
Index within the Standard & Poor's Composite Stock Price Index. They are issued
by The Select Sector SPDR Trust, an open-end management investment company with
nine portfolios that each seeks to closely track the price performance and
dividend yield of a particular Select Sector Index.

DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM).
They are issued by the DIAMONDS Trust, a unit investment trust that holds a
portfolio of all the component common stocks of the Dow Jones Industrial Average
and seeks to closely track the price performance and dividend yield of the Dow.

Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq-100 Index.
They are issued by the Nasdaq-100 Trust, a unit investment trust that holds a
portfolio consisting of substantially all of the securities, in substantially
the same weighting, as the component stocks of the Nasdaq-100 Index and seeks to
closely track the price performance and dividend yield of the Index.

WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are based
on 17 country-specific Morgan Stanley Capital International Indexes. They are
issued by the WEBs Index Fund, Inc., an open-end management investment company
that seeks to generally correspond to the price and yield performance of a
specific Morgan Stanley Capital International Index.

The Fund may also invest in business development companies, which are also
investment companies. Business development companies generally are specialty
finance companies that provide debt

and/or equity capital to companies at various stages of development from
emerging growth companies to expansion-stage companies to established companies.
Companies that business development companies finance are typically privately
held by may include publicly-held companies that lack access to public capital
or are sensitive to equity ownership dilution. Business development companies
are closed-end investment companies that have elected to be treated as a
business development company under the 1940 Act.

LENDING OF PORTFOLIO SECURITIES. The Fund may lend its investment
securities in an amount up to 33 1/3 of its total assets to approved
institutional borrowers who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Fund attempts to increase its net investment income through the
receipt of interest on the loan. Any gain or loss in the market price of the
securities loaned that might occur during the term of the loan would belong to
the Fund. The Fund may lend its investment securities so long as the terms,
structure and the aggregate amount of such loans are not inconsistent with the
1940 Act or the rules and regulations or interpretations of the SEC thereunder,
which currently require that (a) the borrower pledge and maintain with the Fund
collateral consisting of liquid, unencumbered assets having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis), (c) the loan be made subject
to termination by the Fund at any time, and (d) the Fund receives reasonable
interest on the loan (which may include the Fund investing any cash collateral
in interest bearing short-term investments), and distributions on the loaned
securities and any increase in their market value. There may be risks of delay
in recovery of the securities or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be made
only to borrowers selected by the Fund's delegate after a commercially
reasonable review of relevant facts and circumstances, including the
creditworthiness of the borrower.

At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Trustees. In addition, voting rights may pass with
the loaned securities, but if a material event occurs affecting an investment on
loan, the loan must be called and the securities voted. Pursuant to an exemptive
order granted by the SEC, cash collateral received by the Fund may be invested
in a money market fund managed by the Investment Adviser (or one of its
affiliates).

INVESTMENT OF UNINVESTED CASH BALANCES. The Fund may have cash balances
that have not been invested in portfolio securities ("Uninvested Cash").
Uninvested Cash may result from a variety of sources, including dividends or
interest received from portfolio securities, unsettled securities transactions,
reserves held for investment strategy purposes, scheduled maturity of
investments, liquidation of investment securities to meet anticipated
redemptions and dividend payments, and new cash received from investors.
Uninvested Cash may be invested directly in money market instruments or other
short-term debt obligations. Pursuant to an Exemptive Order issued by the SEC,
the Fund may use Uninvested Cash to purchase shares of affiliated funds
including money market funds, short-term bond funds and Cash Management QP
Trust, or one or more future entities for which the Investment Adviser acts as
trustee or investment adviser that operate as cash management investment
vehicles and that are excluded from the definition of investment company
pursuant to Section 3(c)(1) or 3(c)(7) of the 1940 Act (collectively, the
"Central Funds") in excess of the limitations of Section 12(d)(1) of the 1940
Act. Investment by the Fund in shares of the Central Funds will be in accordance
with the Fund's investment policies and restrictions as set forth in its
registration statement.

Certain of the Central Funds comply with Rule 2a-7 under the 1940 Act. The
other Central Funds are or will be short-term bond funds that invest in
fixed-income securities and maintain a dollar weighted average maturity of three
years or less. Each of the Central Funds will be managed specifically to
maintain a highly liquid portfolio, and access to them will enhance the Fund's
ability to manage Uninvested Cash.

The Fund will invest Uninvested Cash in Central Funds only to the extent
that the Fund's aggregate investment in the Central Funds does not exceed 25% of
its total assets. Purchase and sales of shares of Central Funds are made at net
asset value.

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. Only
banks which, in the opinion of the Investment Adviser, are of investment quality
comparable to other permitted investments of a fund may be used for letter of
credit backed investments.

LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in fixed- and
floating-rate loans ("Loans") arranged through private negotiations between an
issuer of emerging market debt instruments and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in most
instances to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans ("Assignments") from third parties.

As a result, the 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, the 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. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is determined by the
Investment Adviser to be creditworthy.

When the Fund purchases Assignments from Lenders, it will acquire direct
rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and may be more limited than, those
held by the assigning Lender.

The Fund may have difficulty disposing of Assignments and Participations.
Because no liquid market for these obligations typically exists, the 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 the Fund's ability to dispose of particular Assignments or
Participations when necessary to meet the 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 the Fund to assign a value to
those securities for purposes of valuing the Fund's portfolio and calculating
its net asset value.

PAY-IN-KIND BONDS. The Fund may invest in Pay-in-kind, or "PIK" bonds. PIK
bonds are bonds which pay interest through the issuance of additional debt or
equity securities. Similar to zero coupon obligations, PIK bonds carry
additional risk as holders of these types of securities realize no cash until
the cash payment date unless a portion of such securities is sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment. The
market price of PIK bonds is affected by interest rate changes to a greater
extent, and therefore tends to be more volatile, than that of securities which
pay interest in cash. Additionally, current federal income tax law requires the
holder of certain PIK bonds to accrue income with respect to these securities
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for federal income and excise
taxes, the Fund may be required to distribute income accrued with respect to
these securities and may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.

PREFERRED STOCK. The Fund may invest in preferred stocks. Preferred stocks
pay fixed or floating dividends to investors, and have a "preference" over
common stock in the payment of dividends and the liquidation of a company's
assets. This means that a company must pay dividends on preferred stock before
paying any dividends on its common stock. Preferred stockholders usually have no
right to vote for corporate directors or on other matters.

SECURITIES BACKED BY GUARANTEES. The Fund may invest in securities backed
by guarantees from banks, insurance companies and other financial institutions.

Consequently, changes in the credit quality of these institutions could
have an adverse impact on securities they have guaranteed or backed, which could
cause losses to the Fund and affect its share price.

SHORT SALES AGAINST THE BOX. The Fund may make short sales of common stocks
if, at all times when a short position is open, the 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 the 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. The Fund will segregate the common stock or
convertible or exchangeable preferred stock or debt securities in a special
account with the custodian. The federal income tax treatment of short sales of
appreciated investments may limit the extent to which the Fund may enter into
short sales against the box.

REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. In a
repurchase agreement, the Fund acquires ownership of a security and
simultaneously commits to resell that security to the seller, typically a bank
or broker/dealer.

A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and, as described in more detail below, the value of such securities is
kept at least equal to the repurchase price on a daily basis. The repurchase
price may be higher than the purchase price, the difference being income to the
Fund, or the purchase and repurchase prices may be the same, with interest at a
stated rate due to the Fund together with the repurchase price upon repurchase.
In either case, the income to the 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
the Fund subject to a repurchase agreement as being owned by the Fund or as
being collateral for a loan by the 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, the 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 the
Fund has not perfected a security interest in the Obligation, the 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, the 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 the Fund, the
Adviser 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 the Fund may incur a loss if the proceeds to the 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), the 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. The Fund may enter into "reverse repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the securities, agrees to repurchase such securities at an agreed time and
price. The Fund segregates assets in an amount at least equal to its obligation
under outstanding reverse repurchase agreements. The Fund will enter into
reverse repurchase agreements only when the Adviser believes that the interest
income to be earned from the investment of the proceeds of the transaction will
be greater than the interest expense of the transaction. Such transactions may
increase fluctuations in the market value of fund assets and its yield.

STAND-BY COMMITMENTS. A stand-by commitment is a right acquired by the
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 the Fund's option, at a specified price.
Stand-by commitments are also known as "puts." The exercise by the 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 the Fund will have the following features:
(1) they will be in writing and will be physically held by the Fund's custodian;
(2) the Fund's right to exercise them will be unconditional and unqualified; (3)
they will be entered into only with sellers which in the Investment Adviser'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) the Fund's acquisition
cost (excluding any accrued interest which the Fund paid on their acquisition),
less any amortized market premium or plus any amortized original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date.

The Fund expects that stand-by commitments generally will be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the 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 Investment Adviser
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 the 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 Internal Revenue Service (the "IRS") has issued a favorable revenue
ruling to the effect that, under specified circumstances, a registered
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. The 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.

STRATEGIC TRANSACTIONS AND DERIVATIVES. The Fund may, but is not required
to, utilize various other investment strategies as described below for a variety
of purposes, such as enhancing return or hedging various market risks, managing
the effective maturity or duration of the fixed-income securities in the Fund's
portfolio or enhancing potential gain. These strategies may be executed through
the use of derivative contracts. No more than 5% of the Fund's assets will be
committed to Strategic Transactions entered into for non-hedging purposes.

In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter 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, currency forward contracts, currency futures
contracts, currency swaps or options on currencies, or currency futures and
various other currency transactions (collectively, all the above are called
"Strategic Transactions"). In addition, Strategic Transactions may also include
new techniques, instruments or strategies that are permitted as regulatory
changes occur. Strategic Transactions may be used without limit (subject to
certain limits imposed by the 1940 Act) to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
Fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a substitute for
purchasing or selling particular securities. Some Strategic Transactions may
also be used to enhance potential gain. Any or all of these investment
techniques may be used at any time and in any combination, and there is no
particular strategy that dictates the use of one technique rather than another,
as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Investment Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions will not be used
to alter fundamental investment purposes and characteristics of the Fund, and
the Fund will segregate assets (or as provided by applicable regulations, enter
into certain offsetting positions) to cover its obligations under options,
futures and swaps to limit leveraging of the Fund.

Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Investment Adviser's view as to
certain market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell. The
use of currency transactions can result in the Fund incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.

GENERAL CHARACTERISTICS OF OPTIONS. Put options and call options typically
have similar structural characteristics and operational mechanics regardless of
the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options
discussed in greater detail below. In addition, many Strategic Transactions
involving options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."

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, the 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 the Fund the right to sell such instrument at the option exercise
price. The Fund will not sell put options if, as a result, more than 50% of the
Fund's total assets would be required to be segregated to cover its potential
obligations under such put options other than those with respect to futures and
options thereon. 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. The Fund's purchase of a call
option on a security, financial future, index, currency or other instrument
might be intended to protect the 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. An American style put or call
option may be exercised at any time during the option period while a European
style put or call option may be exercised only upon expiration or during a fixed
period prior thereto. The Fund is authorized to purchase and sell exchange
listed options and over-the-counter options ("OTC options"). Exchange listed
options are issued by a regulated intermediary such as the Options Clearing
Corporation ("OCC"), which guarantees the performance of the obligations of the
parties to such options. The discussion below uses the OCC as an example, but is
also applicable to other financial intermediaries.

With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled 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.

The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("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. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.

Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Investment Adviser must assess the
creditworthiness of each such Counterparty or any guarantor or credit
enhancement of the Counterparty's credit to determine the likelihood that the
terms of the OTC option will be satisfied. The Fund will engage in OTC option
transactions only with US government securities dealers recognized by the
Federal Reserve Bank of New York as "primary dealers" or broker/dealers,
domestic or foreign banks or other financial institutions which have received
(or the guarantors of the obligation of which have received) a short-term credit
rating of A-1 from S&P or P-1 from Moody's or an equivalent rating from any
nationally recognized statistical rating organization ("NRSRO") or, in the case
of OTC currency transactions, are determined to be of equivalent credit quality
by the Investment Adviser. The staff of the SEC currently takes the position
that OTC options purchased by the Fund, and portfolio securities

"covering" the amount of the Fund's obligation pursuant to an OTC option sold by
it (the cost of the sell-back plus the in-the-money amount, if any) are
illiquid.

If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.

The Fund may purchase and sell call options on securities including US
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments that are traded on US and foreign
securities exchanges and in the over-the-counter markets, and on securities
indices, currencies and futures contracts. All calls sold by the Fund must be
"covered" (i.e., the Fund must own the securities or futures contract subject to
the call) or must meet the asset segregation requirements described below as
long as the call is outstanding. Even though the Fund will receive the option
premium to help protect it against loss, a call sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument and
may require the Fund to hold a security or instrument which it might otherwise
have sold.

The Fund may purchase and sell put options on securities including US
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above
securities in its portfolio), and on securities indices, currencies and futures
contracts other than futures on individual corporate debt and individual equity
securities. The Fund will not sell put options if, as a result, more than 50% of
the Fund's total assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to
futures and options thereon. In selling put options, there is a risk that the
Fund may be required to buy the underlying security at a disadvantageous price
above the market price.

GENERAL CHARACTERISTICS OF FUTURES. The Fund may enter into futures
contracts or purchase or sell put and call options on such futures to hedge
against anticipated interest rate, currency or equity market changes, and for
duration management and risk management purposes and return enhancement
purposes. Futures are generally bought and sold on the commodities exchanges
where they are listed with payment of initial and variation margin as described
below. The sale of a futures contract creates a firm obligation by the Fund, as
seller, to deliver to the buyer the specific type of financial instrument called
for in the contract at a specific future time for a specified price (or, with
respect to index futures and Eurodollar instruments, the net cash amount).
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.

The Fund has claimed exclusion from the definition of the term "commodity
pool operator" adopted by the CFTC and the National Futures Association, which
regulate trading in the futures markets. Therefore, the Fund is not subject to
commodity pool operator registration and regulation under the Commodity Exchange
Act. Futures and options on futures may be entered into for bona fide hedging,
risk management (including duration management) or other portfolio and return
enhancement management purposes to the extent consistent with the exclusion from
commodity pool operator registration. Typically, maintaining a futures contract
or selling an option thereon requires the Fund to deposit with a financial
intermediary as security for its obligations an amount of cash or other
specified assets (initial margin) which initially is typically 1% to 10% of the
face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further

obligation on the part of the Fund. If the 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. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction but there can be no assurance that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur.

OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES. The Fund also
may purchase and sell call and put options on securities indices and other
financial indices and in so doing can achieve many of the same objectives it
would achieve through the sale or purchase of options on individual securities
or other instruments. Options on securities indices and other financial indices
are similar to options on a security or other instrument except that, rather
than settling by physical delivery of the underlying instrument, they settle by
cash settlement, i.e., an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the excess of the closing price of the index over the exercise price
of the option, which also may be multiplied by a formula value. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.

CURRENCY TRANSACTIONS. The Fund may engage in currency transactions with
Counterparties primarily in order to hedge, or manage the risk of the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. 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. 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. The Fund may enter into currency
transactions with Counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from another NRSRO or
(except for OTC currency options) are determined to be of equivalent credit
quality by the Investment Adviser.

The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps generally
will be limited to hedging involving either specific transactions or portfolio
positions except as described below. Transaction hedging is entering into a
currency transaction with respect to specific assets or liabilities of the Fund,
which will generally arise in connection with the purchase or sale of its
portfolio securities or the receipt of income therefrom. Position hedging is
entering into a currency transaction with respect to portfolio security
positions denominated or generally quoted in that currency.

The Fund generally will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.

The 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 the Fund has or in which the Fund expects
to have portfolio exposure.

To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio 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 the Fund's portfolio securities are or are
expected to be denominated, in exchange for US dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Investment Adviser
considers that the Austrian schilling is correlated to the German deutschemark
(the "D-mark"), the Fund holds securities denominated in schillings and the
Investment Adviser believes that the value of schillings will decline against
the US dollar, the Investment Adviser may enter into a commitment or option to
sell D-marks and buy dollars. Currency hedging involves some of the same risks
and considerations as other transactions with similar instruments. Currency
transactions can result in losses to the 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 the Fund is engaging in proxy hedging. If the Fund enters into a currency
hedging transaction, the Fund will comply with the asset segregation
requirements described below.

RISKS OF CURRENCY TRANSACTIONS. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the 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. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.

RISKS OF STRATEGIC TRANSACTIONS OUTSIDE THE US. When conducted outside the
US, Strategic Transactions may not be regulated as rigorously as in the US, may
not involve a clearing mechanism and related guarantees, and are subject to the
risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the US of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the US, (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the US, and (v) lower trading volume and liquidity.

COMBINED TRANSACTIONS. The 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
Strategic Transaction, as part of a single or combined strategy when, in the
opinion of the Investment Adviser, it is

in the best interests of the 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 Investment
Adviser'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.

SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into
which the Fund may enter are interest rate, currency, index and other swaps and
the purchase or sale of related caps, floors and collars. The Fund expects to
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.

The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as the Fund will segregate
assets (or enter into offsetting positions) to cover its obligations under
swaps, the Adviser and the Fund believe such obligations do not constitute
senior securities under the 1940 Act and, accordingly, will not treat them as
being subject to its borrowing restrictions. The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from another NRSRO or is determined to be of equivalent credit quality by
the Adviser. If there is a default by the Counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

The Fund may invest up to 15% of its total assets in credit default swaps
(measured by the notional amount of the credit default swap). A credit default
swap is a contract between a buyer and a seller of protection against a
pre-defined credit event. The buyer of protection pays the seller a fixed
regular fee provided that no event of default on an underlying reference
obligation has occurred. If an event of default occurs, the seller must pay the
buyer the full notional value, or "par value," of the reference obligation in
exchange for the reference obligation. Credit default swaps are used as a means
of "buying" credit protection, i.e., attempting to mitigate the risk of default
or credit quality deterioration in some portion of the Fund's holdings, or
"selling" credit protection, i.e., attempting to gain exposure to an underlying
issuer's credit quality characteristics without directly investing in that
issuer. Where the Fund

is a seller of credit protection, it effectively adds leverage to its portfolio
because, in addition, to its total net assets, the Fund would be subject to
investment exposure on the notional amount of the swap. The Fund will only sell
credit protection with respect to securities in which it would be authorized to
invest directly. No more than 5% of the Fund's assets may be invested in credit
default swaps for purposes of buying credit protection if the Fund does not own
the underlying security or securities at the time of investment.

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions,
in addition to other requirements, require that the Fund segregates cash or
liquid assets with its custodian to the extent that obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any obligation by
the Fund to pay or deliver securities or assets must be covered at all times by
the securities, instruments or currency required to be delivered, or, subject to
any regulatory restrictions, an amount of cash or liquid assets at least equal
to the current amount of the obligation must be segregated with the custodian.
The segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by the Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by the Fund on an index will require the Fund to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.

Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid assets denominated in that currency equal to the Fund's obligations or to
segregate liquid assets equal to the amount of the Fund's obligation.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash

settlement. As a result, when the Fund sells these instruments it will only
segregate an amount of cash or liquid assets equal to its accrued net
obligations, as there is no requirement for payment or delivery of amounts in
excess of the net amount. These amounts will equal 100% of the exercise price in
the case of a non cash-settled put, the same as an OCC guaranteed listed option
sold by the Fund, or the in-the-money amount plus any sell-back formula amount
in the case of a cash-settled put or call. In addition, when the Fund sells a
call option on an index at a time when the in-the-money amount exceeds the
exercise price, the Fund will segregate, until the option expires or is closed
out, cash or cash equivalents equal in value to such excess. OCC issued and
exchange listed options sold by the Fund other than those above generally settle
with physical delivery, or with an election of either physical delivery or cash
settlement and the Fund will segregate an amount of cash or liquid assets equal
to the full value of the option. OTC options settling with physical delivery, or
with an election of either physical delivery or cash settlement will be treated
the same as other options settling with physical delivery.

In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating cash or liquid assets sufficient to meet its obligation to purchase
or provide securities or currencies, or to pay the amount owed at the expiration
of an index-based futures contract. Such liquid assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.

With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid securities having a
value equal to the accrued excess. Caps, floors and collars require segregation
of assets with a value equal to the Fund's net obligation, if any.

Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated cash or
liquid assets, equals its net outstanding obligation in related options and
Strategic Transactions. For example, the Fund could purchase a put option if the
strike price of that option is the same or higher than the strike price of a put
option sold by the Fund. Moreover, instead of segregating assets if the Fund
held a futures or forward contract, it could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price
of the contract held. Other Strategic Transactions may also be offset in
combinations. If the offsetting transaction terminates at the time of or after
the primary transaction no segregation is required, but if it terminates prior
to such time, cash or liquid assets equal to any remaining obligation would need
to be segregated.

US GOVERNMENT SECURITIES. There are two broad categories of US
government-related debt instruments: (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.

Interest rates on US government obligations 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 the Fund's
portfolio does not guarantee the net asset value of the shares of the Fund.
There are market risks inherent in all investments in securities and the value
of an investment in the 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 the Fund's investments 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 the Fund and may even result in losses to
the 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 the Fund's average portfolio maturity. As a
result, the Fund's portfolio may experience greater volatility during periods of
rising interest rates than under normal market conditions.

WHEN-ISSUED SECURITIES. The Fund may from time to time purchase equity and
debt securities on a "when-issued," "delayed delivery" or "forward delivery"
basis. The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
for the securities takes place at a later date. During the period between
purchase and settlement, no payment is made by the Fund to the issuer and no
interest accrues to the Fund. When the Fund purchases such securities, it
immediately assumes the risks of ownership, including the risk of price
fluctuation. Failure to deliver a security purchased on this basis may result in
a loss or missed opportunity to make an alternative investment.

To the extent that assets of the Fund are held in cash pending the
settlement of a purchase of securities, the Fund would earn no income. While
such securities may be sold prior to the settlement date, the Fund intends to
purchase them with the purpose of actually acquiring them unless a sale appears
desirable for investment reasons. At the time the Fund makes the commitment to
purchase a security on this basis, it will record the transaction and reflect
the value of the security in determining its net asset value. The market value
of the securities may be more or less than the purchase price. The Fund will
segregate cash or liquid assets in an amount equal in value to commitments for
such securities.

ZERO COUPON SECURITIES. The Fund may invest in zero coupon securities,
which pay no cash income and are sold at substantial discounts from their value
at maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest (cash). Zero
coupon securities which are convertible into common stock offer the opportunity
for capital appreciation as increases (or decreases) in market value of such
securities closely follow the movements in the market value of the underlying
common stock. Zero coupon convertible securities

generally are expected to be less volatile than the underlying common stocks as
they usually are issued with maturities of 15 years or less and are issued with
options and/or redemption features exercisable by the holder of the obligation
entitling the holder to redeem the obligation and receive a defined cash
payment.

Zero coupon securities include municipal securities, securities issued
directly by the US Treasury, and US Treasury bonds or notes and their unmatured
interest coupons and receipts for their underlying principal ("coupons") which
have been separated by their holder, typically a custodian bank or investment
brokerage firm, from the underlying principal (the "corpus") of the US Treasury
security. A number of securities firms and banks have stripped the interest
coupons and receipts and then resold them in custodial receipt programs with a
number of different names, including Treasury Income Growth Receipts
("TIGRS(TM)") and Certificate of Accrual on Treasuries ("CATS(TM)"). The
underlying US Treasury bonds and notes themselves are held in book-entry form at
the Federal Reserve Bank or, in the case of bearer securities (i.e.,
unregistered securities which are owned ostensibly by the bearer or holder
thereof), in trust on behalf of the owners thereof. Counsel to the underwriters
of these certificates or other evidences of ownership of the US Treasury
securities have stated that, for federal income tax and securities purposes, in
their opinion purchasers of such certificates, such as the Fund, most likely
will be deemed the beneficial holder of the underlying US Government securities.
The Fund intends to adhere to the current SEC staff position that privately
stripped obligations should not be considered US government securities for the
purpose of determining if the Fund is "diversified" under the 1940 Act.

The US Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve program, as
established by the Treasury Department, is known as "STRIPS" or "Separate
Trading of Registered Interest and Principal of Securities." Under the STRIPS
program, the Fund will be able to have its beneficial ownership of zero coupon
securities recorded directly in the book-entry record-keeping system in lieu of
having to hold certificates or other evidences of ownership of the underlying US
Treasury securities.

When US Treasury obligations have been stripped of their unmatured interest
coupons by the holder, the principal or corpus is 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. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold bundled in such form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells.

MANAGEMENT OF THE FUND

INVESTMENT ADVISER

Deutsche Investment Management Americas Inc., which is part of Deutsche
Asset Management ("DeAM"), is the investment adviser for the Fund. DIMA has
served as the investment adviser to the Fund since April 5, 2002. Under the
supervision of the Board of Trustees of the Fund, with headquarters at 345 Park
Avenue, New York, New York, DIMA manages the Fund's daily investment and
business affairs subject to the policies established by the Fund's Board of
Trustees. DIMA and its predecessors have more than 80 years of experience
managing mutual funds. DIMA provides a full range of investment advisory
services to institutional and retail clients.

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

The Trustees of the Fund have overall responsibility for the management of
the Fund under Massachusetts law.

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

INVESTMENT MANAGEMENT AGREEMENT

The Fund entered into the current Investment Management Agreement with DIMA
on April 5, 2002. Under the Investment Management Agreement, the Investment
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies and restrictions. The Investment Adviser determines the
securities, instruments and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Investment Adviser provides certain administrative services in
accordance with the Investment Management Agreement. The Fund pays a monthly
investment management fee of 1/12 of the annual rate of 0.85% of the Fund's
average weekly net assets. In addition to the monthly management fee, the Fund
pays all other costs and expenses of its operations, including compensation of
its Independent Trustees, custodian, transfer agency and dividend disbursing
expenses, legal fees, expenses of independent auditors, expenses of repurchasing
shares, expenses of any leverage, listing expenses, expenses of preparing,
printing and distributing shareholder reports, notices, proxy statements and
reports to governmental agencies, and taxes, if any. Because the Fund uses
leverage in the form of borrowings from unaffiliated financial institutions, the
fees paid to the Investment Adviser for investment management services are
higher than if the Fund did not use leverage because the fees paid will are
calculated based on the Fund's average weekly net assets, which would include
the assets attributable to leverage. Because the fees paid to the Investment
Adviser are determined on the basis of the Fund's average weekly net assets, the
Investment Adviser's interest in determining whether to leverage the Fund may
differ from the interests of the Fund.

The Investment Management Agreement provides that the Investment Adviser
shall not be liable for any act or omission in the course of, connected with or
arising out of any services to be rendered under the Investment Advisory
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by the Investment Adviser of its obligations
and duties under the Investment Advisory Agreement.

The Investment Management Agreement remains in effect from year to year if
approved annually (1) by the Fund's Board of Trustees or by the holders of a
majority of the Fund's outstanding voting securities and (2) by a majority of
the independent directors who are not parties to such contract or agreement. The
Investment Management Agreement will terminate upon assignment by any party and
is terminable, without penalty, on 60 days' written notice by the Fund's Board
of Trustees or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund or upon 90 days' written notice by the
Investment Adviser.

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

In reviewing the terms of the Investment Management Agreement and in
discussions with the Investment Adviser concerning the Investment Management
Agreement, the Trustees of the Fund who are not "interested persons" of the
Investment Adviser are represented by independent counsel at the Fund's expense.
The Board of Trustees last voted to approve the Investment Management Agreement
on September 22, 2006. During the fiscal years ended November 30, 2006, November
30, 2005 and November 30, 2004, the Fund paid DIMA a management fee of
$1,715,858, $1,684,471 and $1,569,325, respectively.

Prior to September 30, 2005, Deutsche Asset Management Investment Services
Limited ("DeAMIS"), and affiliate of the Investment Adviser, served as
sub-advisor to the Fund with respect to a portion of the Fund's portfolio that
was allocated to it by the Investment Adviser for management. The Investment
Adviser compensated DeAMIS out of the management fee it received from the Fund.
On July 7, 2005, Deutsche Bank AG sold DeAMIS and other assets to Aberdeen Asset
Management PLC. The Board of Trustees allowed the subadvisory agreement with
DeAMIS, due for renewal on September 30, 2005, to expire and only the advisory
agreement with DIMA was approved for continuation. Aberdeen Asset Management PLC
plays no role in managing the Fund.

Officers and employees of the Investment Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Investment Adviser'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.

The term DWS Scudder is the designation given to the services provided by
the Investment Adviser and its affiliates to the DWS Family of Funds.

COMPENSATION OF PORTFOLIO MANAGERS

The Fund has been advised that the Investment Adviser seeks to offer its
investment professionals competitive short-term and long-term compensation.
Portfolio managers and research professionals are paid (i) fixed base salaries,
which are linked to job function, responsibilities and financial services
industry peer comparison and (ii) variable compensation, which is linked to
investment performance, individual contributions to the team and DWS Scudder's
and Deutsche Bank's financial results. Variable compensation may include a cash
bonus incentive and participation in a variety of long-term equity programs
(usually in the form of Deutsche Bank equity).

Bonus and long-term incentives comprise a greater proportion of total
compensation as an investment professional's seniority and compensation levels
increase. Top performing investment professionals earn a total compensation
package that is highly competitive, including a bonus that is a multiple of
their base salary. The amount of equity awarded under the long-term equity
programs is generally based on the individual's total compensation package and
may comprise from 0%-40% of the total compensation award. As incentive
compensation increases, the percentage of compensation awarded in Deutsche Bank
equity also increases. Certain senior investment professionals may be subject to
a mandatory diverting of a portion of their equity compensation into proprietary
mutual funds that they manage.

To evaluate its investment professionals, the Investment Adviser uses a
Performance Management Process. Objectives evaluated by the process are related
to investment performance and generally take into account peer group and
benchmark related data. The ultimate goal of this process is to link the
performance of investment professionals with client investment objectives and to
deliver

investment performance that meets or exceeds clients' risk and return
objectives. When determining total compensation, the Investment Adviser
considers a number of quantitative and qualitative factors such as:

- DWS Scudder performance and the performance of Deutsche Asset
Management, quantitative measures which include 1, 3 and 5 year
pre-tax returns versus benchmark (such as the benchmark used in the
prospectus) and appropriate peer group, taking into consideration risk
targets. Additionally, the portfolio manager's retail/institutional
asset mix is weighted, as appropriate for evaluation purposes.

- Qualitative measures include adherence to the investment process and
individual contributions to the process, among other things. In
addition, the Investment Adviser assesses compliance, risk management
and teamwork skills.

- Other factors, including contributions made to the investment team as
well as adherence to compliance, risk management, and "living the
values" of the Investment Adviser, are part of a discretionary
component which gives management the ability to reward these behaviors
on a subjective basis through bonus incentives.

In addition, the Investment Adviser analyzes competitive compensation
levels through the use of extensive market data surveys. Portfolio manager
compensation is reviewed and may be modified each year as appropriate to reflect
changes in the market, as well as to adjust the factors used to determine
overall compensation to promote good sustained investment performance.

FUND OWNERSHIP OF PORTFOLIO MANAGERS

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

FUND OWNERSHIP OF PORTFOLIO MANAGERS

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

DOLLAR RANGE OF DOLLAR RANGE OF ALL DWS
NAME OF PORTFOLIO MANAGER FUND SHARES OWNED FUND SHARES OWNED
------------------------- ----------------- -----------------------

Gary Sullivan $0 $10,001 - $50,000
William Chepolis $0 $100,001 - $500,000
Matthew F. MacDonald $0 $0

CONFLICTS OF INTEREST

In addition to managing the assets of the Fund, the Fund's portfolio
managers may have responsibility for managing other client accounts of the
Investment Adviser or its affiliates. The tables below show, for the portfolio
manager, the number and asset size of (1) SEC registered investment companies
(or series thereof) other than the Fund, (2) pooled investment vehicles that are
not registered investment companies and (3) other accounts (e.g., accounts
managed for individuals or organizations) managed by each portfolio manager. The
tables also show the number of performance based fee accounts, as well as the
total assets of the accounts for which the advisory fee is based on the
performance of the account. This information is provided as of the Fund's most
recent fiscal year end.

OTHER SEC REGISTERED INVESTMENT COMPANIES MANAGED:

NUMBER OF
NUMBER OF TOTAL ASSETS OF INVESTMENT
REGISTERED REGISTERED COMPANY ACCOUNTS TOTAL ASSETS
NAME OF PORTFOLIO INVESTMENT INVESTMENT WITH PERFORMANCE- PERFORMANCE-BASED
MANAGER COMPANIES COMPANIES BASED FEE FEE ACCOUNTS
----------------- ---------- --------------- ----------------- -----------------

Gary Sullivan 11 $7,404,897,828 0 $0
William Chepolis 17 $9,791,081,238 0 $0
Matthew F. MacDonald 17 $9,791,081,238 0 $0

OTHER POOLED INVESTMENT VEHICLES MANAGED:

NUMBER OF
POOLED
INVESTMENT
NUMBER OF TOTAL ASSETS VEHICLE
POOLED OF POOLED ACCOUNTS WITH TOTAL ASSETS OF
NAME OF PORTFOLIO INVESTMENT INVESTMENT PERFORMANCE-BASED PERFORMANCE-BASED
MANAGER VEHICLES VEHICLES FEE FEE ACCOUNTS
----------------- ---------- ------------ ----------------- -----------------

Gary Sullivan 0 $0 0 $0
William Chepolis 0 $0 0 $0
Matthew F. MacDonald 0 $0 0 $0

OTHER ACCOUNTS MANAGED:

NUMBER OF OTHER
ACCOUNTS WITH TOTAL ASSETS OF
NAME OF PORTFOLIO NUMBER OF TOTAL ASSETS OF PERFORMANCE- PERFORMANCE-
MANAGER OTHER ACCOUNTS OTHER ACCOUNTS BASED FEE BASED FEE ACCOUNTS
----------------- -------------- --------------- ----------------- ------------------

Gary Sullivan 0 $0 0 $0
William Chepolis 0 $0 0 $0
Matthew F. MacDonald 0 $0 0 $0

In addition to the accounts above, an investment professional may manage
accounts in a personal capacity that may include holdings that are similar to,
or the same as, those of the Fund. The Investment Adviser has in place a Code of
Ethics that is designed to address conflicts of interest and that, among other
things, imposes restrictions on the ability of portfolio managers and other
"access persons" to invest in securities that may be recommended or traded in
the Fund and other client accounts.

Real, potential or apparent conflicts of interest may arise when a
portfolio manager has day-to-day portfolio management responsibilities with
respect to more than one fund or account, including the following:

- Certain investments may be appropriate for the Fund and also for other
clients advised by the Investment Adviser, including other client
accounts managed by the Fund's portfolio management team. Investment
decisions for the Fund and other clients are made with a view to
achieving their respective investment objectives and after
consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. A
particular security may be bought or sold for only one client or in
different amounts and at different times for more than one but less
than all clients. Likewise, because clients of the Investment Adviser
may have differing investment strategies, a particular security may be
bought for one or more clients when one or more other clients are
selling the security. The investment results achieved for the Fund may
differ from the results achieved for other clients of the Investment
Adviser. 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 Investment Adviser to be most equitable to each client,
generally utilizing a pro rata allocation methodology. In some cases,
the allocation procedure could potentially have an adverse

effect or positive effect on the price or amount of the securities
purchased or sold by the Fund. Purchase and sale orders for the Fund
may be combined with those of other clients of the Investment Adviser
in the interest of achieving the most favorable net results to the
Fund and the other clients.

- 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 Investment
Adviser attempts to minimize these conflicts by aligning its portfolio
management teams by investment strategy and by employing similar
investment models across multiple client accounts.

- In some cases, an apparent conflict may arise where the Investment
Adviser has an incentive, such as a performance-based fee, in managing
one account and not with respect to other accounts it manages. The
Investment Adviser will not determine allocations based on whether it
receives a performance-based fee from the client. Additionally, the
Investment Adviser has in place supervisory oversight processes to
periodically monitor performance deviations for accounts with like
strategies.

- The Investment Adviser and its affiliates and the investment team of
the Fund may manage other mutual funds and separate accounts on a
long-short basis. The simultaneous management of long and short
portfolios creates potential conflicts of interest including the risk
that short sale activity could adversely affect the market value of
the long positions(and vice versa), the risk arising from sequential
orders in long and short positions, and the risks associated with
receiving opposing orders at the same time. The Investment Adviser has
adopted procedures that it believes are reasonably designed to
mitigate these potential conflicts of interest. Included in these
procedures are specific guidelines developed to ensure fair and
equitable treatment for all clients whose accounts are managed by the
Fund's portfolio manager. The Investment Adviser 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 Investment Adviser is owned by Deutsche Bank AG, a multi-national
financial services company. Therefore, the Investment Adviser is affiliated with
a variety of entities that provide, and/or engage in commercial banking,
insurance, brokerage, investment banking, financial advisory, broker-dealer
activities (including sales and trading), hedge funds, real estate and private
equity investing, in addition to the provision of investment management services
to institutional and individual investors. Since Deutsche Bank AG, its
affiliates, directors, officers and employees (the "Firm") are engaged in
businesses and have interests other than managing asset management accounts,
such other activities involve real, potential or apparent conflicts of interest.
These interests and activities include potential advisory, transactional and
financial activities and other interests in securities and companies that may be
directly or indirectly purchased or sold by the Firm for its clients' advisory
accounts. These are considerations of which advisory clients should be aware and
which may cause conflicts that could be to the disadvantage of the Investment
Adviser's advisory clients. The Investment Adviser has instituted business and
compliance policies, procedures and disclosures that are designed to identify,
monitor and mitigate conflicts of interest and, as appropriate, to report them
to the Fund's Board.

CODES OF ETHICS

The Fund and DIMA have each adopted Codes of Ethics under Rule 17j-1 under
the 1940 Act. Trustees, officers of the Fund, employees of the Investment
Adviser and employees of the DIMA are permitted to make personal securities
transactions, including transactions in securities that may be purchased or held
by the Fund, subject to requirements and restrictions set forth in the
applicable Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of the Fund. Among
other things, the Codes of Ethics prohibit certain types of transactions absent
prior approval, impose time periods during which personal transactions may not
be made in certain securities, and require 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 Codes of Ethics may be granted in particular circumstances
after review by appropriate personnel.

The Codes of Ethics may be reviewed and copied at the Public Reference Room
of the SEC in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at (202) 551-8090. The Code of
Ethics is also available on the SEC's website at http://www.sec.gov. Copies of
the Code of Ethics may be obtained, after paying a duplicating fee, by
electronic request to publicinfo@sec.gov., or by writing the SEC's Public
Reference Sector, Washington, D.C. 20549.

REGULATORY MATTERS

On September 28, 2006, the SEC and the National Association of Securities
Dealers ("NASD") announced final agreements in which DIMA, Deutsche Asset
Management, Inc. ("DAMI") and Scudder Distributors, Inc. ("SDI") (now known as
DWS Scudder Distributors, Inc.) settled administrative proceedings regarding
disclosure of brokerage allocation practices in connection with sales of the
Scudder Funds' (now known as the DWS Scudder Funds) shares during 2001-2003. The
agreements with the SEC and NASD are reflected in orders which state, among
other things, that DIMA and DeAM, Inc. failed to disclose potential conflicts of
interest to the fund Boards and to shareholders relating to SDI's use of certain
funds' brokerage commissions to reduce revenue sharing costs to broker-dealer
firms with whom it had arrangements to market and distribute Scudder Fund
shares. These directed brokerage practices were discontinued in October 2003.

Under the terms of the settlements, in which DIMA, DAMI and SDI neither
admitted nor denied any of the regulators' findings, DIMA, DAMI and SDI agreed
to pay disgorgement, prejudgment interest and civil penalties in the total
amount of $19.3 million. The portion of the settlements distributed to the funds
was approximately $17.8 million and was paid to the funds as prescribed by the
settlement orders based upon the amount of brokerage commissions from each fund
used to satisfy revenue sharing agreements with broker-dealers who sold fund
shares. Based on the prescribed settlement order, the Fund was not entitled to a
portion of the settlement.

As part of the settlements, DIMA, DAMI and SDI also agreed to implement
certain measures and undertakings relating to revenue sharing payments including
making additional disclosures in the fund Prospectuses or Statements of
Additional Information, adopting or modifying relevant policies and procedures
and providing regular reporting to the fund Boards.

Additional information announced by DeAM regarding the terms of the
expected settlements will be made available at www.dws
scudder.com/regulatory_settlements, which will also disclose the terms of any
final settlement agreements once they are announced.

For discussion of other regulatory matters, see the Fund's prospectus.

FUND SERVICE PROVIDERS

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

[__________] has been appointed as the independent registered public
accounting firm for the Fund. [__________] audits the financial statements of
the Fund and provides other audit, tax and related services. The financial
statements of the Fund as of __________, 2006 appearing in this SAI have been
audited by ________________, as set forth in their report thereon appearing
elsewhere herein, and is included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

LEGAL COUNSEL

Vedder, Price, Kaufman and Kammholz, P.C., 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund and its Independent
Trustees.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT

PORTFOLIO TRANSACTIONS

The Investment Adviser is generally responsible for placing the orders for
the purchase and sale of portfolio securities, including the allocation of
brokerage.

The policy of the Investment Adviser in placing orders for the purchase and
sale of securities for the Fund is to seek best execution, taking into account
such factors, among others, as price; commission (where applicable); the
brokerdealer'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 brokerdealer's ability to maintain
confidentiality; the financial condition of the broker-dealer; and whether the
brokerdealer has the infrastructure and operational capabilities to execute and
settle the trade. The Investment Adviser 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 Fund to
reported commissions paid by others. The Investment Adviser routinely reviews
commission rates, execution and settlement services performed and makes internal
and external comparisons.

Commission rates on transactions in equity securities on U.S. securities
exchanges are subject to negotiation. Commission rates on transactions in equity
securities on foreign securities exchanges are generally fixed. Purchases and
sales of fixed-income securities and certain over-the-counter securities are
effected on a net basis, without the payment of brokerage commissions.
Transactions in fixed income and certain over-the-counter securities are
generally placed by the Investment Adviser with the principal market makers for
these securities unless the Investment Adviser 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 Fund
to their customers. However, the Investment Adviser does not consider sales of
shares of the Fund as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund and, accordingly, has implemented policies
and procedures reasonably

designed to prevent its traders from considering sales of shares of the Fund as
a factor in the selection of broker-dealers to execute portfolio transactions
for the Fund.

The Investment Adviser is permitted by Section 28(e) of the Securities
Exchange Act of 1934, as amended ("1934 Act"), when placing portfolio
transactions for the Fund, to cause the Fund to pay brokerage commissions in
excess of that which another broker-dealer might charge for executing the same
transaction in order to obtain research and brokerage services if the Investment
Adviser determines that such commissions are reasonable in relation to the
overall services provided. The Investment Adviser 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 Investment
Adviser. Consistent with the Investment Adviser's policy regarding best
execution, where more than one broker is believed to be capable of providing
best execution for a particular trade, the Investment Adviser 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 the Fund and to the Investment
Adviser, it is the opinion of the Investment Adviser that such information only
supplements its own research effort since the information must still be
analyzed, weighed and reviewed by the Investment Adviser's staff. Research and
brokerage services received from a broker-dealer may be useful to the Investment
Adviser in providing services to clients other than the Fund making the trade,
and not all such information is used by the Investment Adviser in connection
with such Fund. Conversely, such information provided to the Investment Adviser
by broker-dealers through which other clients of the Investment Adviser effect
securities transactions may be useful to the Investment Adviser in providing
services to the 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 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 associated hardware, and meetings arranged with corporate and
industry representatives.

The Investment Adviser 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 hardware used by the Investment Adviser to facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third
parties if the Investment Adviser determines that such product or service
constitutes brokerage and research as defined in Section 28(e) and
interpretations thereunder. Currently, it is the Investment Adviser's policy
that Sub-Investment Advisers may not execute portfolio transactions on behalf of
the Fund to obtain third party research and brokerage services. The Investment
Adviser may, in the future, change this policy.

DIMA will monitor regulatory developments and market practice in the use of
client commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment decisions for the 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 the Fund with those to be sold or
purchased for other accounts in executing transactions. Purchases or sales are
then averaged as to price and commission and allocated as to amount in a manner
deemed equitable to each account. While in some cases this practice could have a
detrimental effect on the price paid or received by, or on the size of the
position obtained or disposed of for, the Fund, in other cases it is believed
that the ability to engage in volume transactions will be beneficial to the
Fund.

DIMA and its affiliates and the 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.

DIMA has adopted procedures that it believes are reasonably designed to
mitigate these potential conflicts of interest. Incorporated in the procedures
are specific guidelines developed to ensure fair and equitable treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory reviews, as well as compliance oversight to ensure
that potential conflicts of interest relating to this type of activity are
properly addressed.

Deutsche Bank AG or one of its affiliates (or in the case of a Sub-Advisor,
the Sub-Advisor or one of its affiliates) may act as a broker for the Fund and
receive brokerage commissions or other transaction-related compensation from the
Fund 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 Fund' Boards, the affiliated broker will be able to obtain a price and
execution at least as favorable as those obtained from other qualified brokers
and if, in the transaction, the affiliated broker charges the Fund a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions.

For the fiscal years ended November 30, 2006, November 30, 2005, and
November 30, 2004, the Fund paid no aggregate brokerage commissions.

The Fund is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in Rule 10b-1 of the 1940 Act) that the Fund
has acquired during the most recent fiscal year. As of November 30, 2006 the
Fund held securities of its regular brokers or dealers as follows: E-Trade
Financial Corp. $654,000 and Doral Financial Corp. $741,000.

PORTFOLIO TURNOVER

The Fund's portfolio turnover rate may vary from year to year. The
portfolio turnover rate is calculated by dividing the lesser of the Fund's
annual sales or purchases of portfolio securities (exclusive of purchases or
sales or securities whose maturities at the time of acquisition were one year or
less) by the monthly average value of the long-term securities in the portfolio
during the year. For the fiscal years ended November 30, 2006, November 30, 2005
and November 30, 2004, the Fund's portfolio turnover rates were 79%, 143% and
187%, respectively.

DIVIDENDS

The Fund intends to distribute all or a portion of its net investment
income quarterly to holders of its common shares. Dividends and distributions
are be payable in common shares, with the option to receive cash in lieu of the
shares. The Fund may at times, in its discretion, pay out less than the entire

amount of its net investment income earned in any particular period and may at
times pay out such accumulated undistributed income in addition to net
investment income earned in other periods in order to permit the Fund to
maintain a more stable level of distributions. As a result, the dividend paid by
the Fund to holders of common stock for any particular period may be more or
less than the amount of net investment income earned by the Fund during such
period. The Fund is not required to maintain a stable level of distributions to
shareholders. For federal income tax purposes, the Fund is required to
distribute substantially all of its net investment income each year to both
reduce its federal income tax liability and to avoid a potential excise tax. The
Fund intends to distribute all realized net capital gains, if any, at least
annually.

Under the 1940 Act, the Fund is not permitted to incur indebtedness unless
immediately after such incurrence the Fund has an asset coverage of at least
300% of the aggregate outstanding principal balance of indebtedness.
Additionally, under the 1940 Act, the Fund may not declare any dividend or other
distribution upon any class of its capital shares, or purchase any such capital
shares, unless the aggregate indebtedness of the Fund has, at the time of the
declaration of any such dividend or distribution or at the time of any such
purchase, an asset coverage of at least 300% after deducting the amount of such
dividend, distribution, or purchase price, as the case may be.

While any preferred shares are outstanding, the Fund may not declare any
cash dividend or other distribution on its common shares, unless at the time of
such declaration, (i) all accumulated preferred dividends have been paid and
(ii) the net asset value of the Fund's portfolio (determined after deducting the
amount of such dividend or other distribution) is at least 200% of the
liquidation value of the outstanding preferred shares (expected to be equal to
the original purchase price per share plus any accumulated and unpaid dividends
thereon).

In addition to the limitations imposed by the 1940 Act described above,
certain lenders may impose additional restrictions on the payment of dividends
or distributions on the common shares in the event of a default on the Fund's
borrowings. If the Fund's ability to make distributions on its common stock is
limited, such limitation could, under certain circumstances, impair the ability
of the Fund to maintain its qualification for taxation as a regulated investment
company, which would have adverse tax consequences for shareholders.

U.S. FEDERAL INCOME TAX MATTERS

The following is a summary discussion of certain U.S. federal income tax
consequences that may be relevant to a shareholder that acquires, holds and/or
disposes of common shares of the Fund. This discussion only addresses U.S.
federal income tax consequences to U.S. shareholders who hold their shares as
capital assets and does not address all of the U.S. federal income tax
consequences that may be relevant to particular shareholders in light of their
individual circumstances. This discussion also does not address the tax
consequences to shareholders who are subject to special rules, including,
without limitation, banks and financial institutions, insurance companies,
dealers in securities or foreign currencies, foreign holders, persons who hold
their shares as or in a hedge against currency risk, a constructive sale, or
conversion transaction, holders who are subject to the alternative minimum tax,
or tax-exempt or tax-deferred plans, accounts, or entities. In addition, the
discussion does not address any state, local, or foreign tax consequences. The
discussion reflects applicable income tax laws of the United States as of the
date hereof, which tax laws may be changed or subject to new interpretations by
the courts or the Internal Revenue Service ("IRS") retroactively or
prospectively and could affect the continued validity of this summary. No
attempt is made to present a detailed explanation of all U.S. federal income tax
concerns affecting the Fund and its shareholders, and the discussion set forth
herein does not constitute tax advice. INVESTORS ARE URGED TO CONSULT THEIR OWN
TAX ADVISERS BEFORE MAKING AN INVESTMENT IN THE FUND TO DETERMINE THE SPECIFIC
TAX CONSEQUENCES TO THEM OF INVESTING IN THE FUND,

INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES AS
WELL AS THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS.

The Fund has elected to be treated and has qualified for each of its
taxable years, as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") so that it will not pay
U.S. federal income tax on income and capital gains timely distributed (or
treated as being distributed as described below) to shareholders. In order to
qualify as a regulated investment company under Subchapter M of the Code, the
Fund must, among other things, derive at least 90% of its gross income for each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies, other income (including gains from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies and net income derived from interests in qualified
publicly traded partnerships (collectively, the "90% income test"). In addition
to the 90% income test, the Fund must also diversify its holdings (commonly
referred to as the "asset test") so that, at the end of each quarter of its
taxable year (i) at least 50% of the value of the Fund's total assets is
represented by cash and cash items, U.S. government securities, securities of
other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater in value than 5% of the value of the Fund's total assets and
to not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. government securities or
securities of other regulated investment companies), of two or more issuers
controlled by the Fund and engaged in the same, similar or related trades or
businesses, or of one or more qualified publicly traded partnerships.

If the Fund qualifies as a regulated investment company and distributes to
its shareholders at least 90% of the sum of (i) its "investment company taxable
income" as that term is defined in the Code (which includes, among other things,
dividends, taxable interest, the excess of any net short-term capital gains over
net long-term capital losses and certain net foreign exchange gains as reduced
by certain deductible expenses) without regard to the deduction for dividends
paid and (ii) the excess of its gross tax-exempt interest, if any, over certain
disallowed deductions, the Fund will be relieved of U.S. federal income tax on
any income of the Fund, including long-term capital gains, distributed to
shareholders. However, if the Fund retains any investment company taxable income
or "net capital gain" (i.e., the excess of net long-term capital gains over net
short-term capital losses), it will be subject to U.S. federal income tax at
regular corporate federal income tax rates (currently a maximum rate of 35%) on
the amount retained. The Fund intends to distribute at least annually, all or
substantially all of its investment company taxable income, net tax-exempt
interest, and net capital gain. Under the Code, the Fund also will be subject to
a nondeductible 4% federal excise tax generally on a portion of its
undistributed ordinary income for any calendar year and capital gains for the
one year period ending October 31 in such calendar year if it fails to meet
certain minimum distribution requirements with respect to such calendar year.
The Fund intends to make distributions in a timely manner and accordingly does
not expect to be subject to this excise tax.

If for any taxable year the Fund does not qualify as a regulated investment
company for U.S. federal income tax purposes, it would be treated as a U.S.
corporation subject to U.S. federal income tax and distributions to its
shareholders would not be deductible by the Fund in computing its taxable
income. In such event, the Fund's distributions, to the extent derived from the
Fund's current or accumulated earnings and profits, would generally constitute
ordinary dividends, which generally would be eligible for the dividends received
deduction available to corporate shareholders under Section 243 of the Code, as
discussed below, and non-corporate shareholders of the Fund generally would be
able to treat such distributions as "qualified dividend income" under Section
1(h)(11) of the Code for taxable years beginning on or prior to December 31,
2010, as discussed below, provided in each case that certain holding period and
other requirements are satisfied.

Unless a shareholder elects otherwise, all distributions will be
automatically reinvested in additional common shares of the Fund pursuant to the
Automatic Dividend Reinvestment Plan (the "Plan"). For U.S. federal income tax
purposes, all dividends are generally taxable regardless of whether a
shareholder takes them in cash or they are reinvested pursuant to the Plan in
additional shares of the Fund. If a shareholder's distributions are
automatically reinvested pursuant to the Plan and the Plan Agent invests the
distribution in shares acquired on behalf of the shareholder in open-market
purchases, for U.S. federal income tax purposes, the shareholder will be treated
as having received a taxable distribution in the amount of the cash dividend
that the shareholder would have received if the shareholder had elected to
receive cash. If a shareholder's distributions are automatically reinvested
pursuant to the Plan and the Plan Agent invests the distribution in newly issued
shares of the Fund, the shareholder will be treated as receiving a taxable
distribution equal to the fair market value of the stock the shareholder
receives.

Distributions of investment company taxable income are generally taxable as
ordinary income to the extent of the Fund's current and accumulated earnings and
profits. Under Section 1(h)(11) of the Code, for taxable years beginning on or
before December 31, 2010, qualified dividend income, if any, received by
non-corporate shareholders is taxed at rates equivalent to long-term capital
gain tax rates, which currently reach a maximum of 15%. "Qualified dividend
income" generally includes dividends from certain domestic corporations and
dividends from "qualified foreign corporations," although dividends paid by
REITs will not generally qualify as qualified dividend income. For these
purposes, a "qualified foreign corporation" is a foreign corporation (i) that is
incorporated in a possession of the United States or is eligible for benefits
under a qualifying income tax treaty with the United States, or (ii) whose stock
with respect to which such dividend is paid is readily tradable on an
established securities market in the United States. A qualified foreign
corporation does not include a foreign corporation that for the taxable year of
the corporation in which the dividend was paid, or the preceding taxable year,
is a "passive foreign investment company," as defined in the Code. The Fund
generally can pass the tax treatment of qualified dividend income it receives
through to Fund shareholders to the extent of the aggregate dividends received
by the Fund. For the Fund to receive qualified dividend income, the Fund must
meet certain holding period requirements for the stock on which the otherwise
qualified dividend is paid. In addition, the Fund cannot be obligated to make
payments (pursuant to a short sale or otherwise) with respect to substantially
similar or related property. If the Fund lends portfolio securities, amounts
received by the Fund that is the equivalent of the dividends paid by the issuer
on the securities loaned will not be eligible for qualified dividend income
treatment. The same provisions, including the holding period requirements, apply
to each shareholder's investment in the Fund in order for the shareholder to be
eligible to treat distributions as qualified dividend income. For taxable years
beginning after December 31, 2010, qualified dividend income will no longer be
taxed at the rates applicable to long-term capital gains, but rather will be
taxed at ordinary income tax rates, which currently reach a maximum rate of 35%
for individuals, unless Congress enacts legislation providing otherwise.
Distributions by the Fund of net capital gain, if any, are taxable at long-term
capital gain rates for U.S. federal income tax purposes without regard to the
length of time the shareholder has held shares of the Fund. For corporate
shareholders, capital gains are taxed at the same federal income tax rate as
ordinary income. A distribution of an amount in excess of the Fund's current and
accumulated earnings and profits, if any, will be treated by a shareholder as a
tax-free return of capital, which is applied against and reduces the
shareholder's basis in his, her or its shares. To the extent that the amount of
any such distribution exceeds the shareholder's basis in his, her or its shares,
the excess will be treated by the shareholder as gain from the sale or exchange
of such shares. The U.S. federal income tax status of all distributions will be
designated by the Fund and reported to the shareholders annually.

Certain distributions by the Fund, if any, may qualify for the dividends
received deduction available to corporate shareholders under Section 243 of the
Code, subject to certain holding period and other requirements, but generally
only to the extent the Fund earned dividend income from stock investments in
U.S. domestic corporations.

The Fund intends to distribute all net realized capital gain, if any, at
least annually. If, however, the Fund were to retain any net capital gain, the
Fund may designate the retained amount as undistributed capital gains in a
notice to shareholders who, if subject to U.S. federal income tax on long-term
capital gains, (i) will be required to include in income, as long-term capital
gain, their proportionate share of such undistributed amount, and (ii) will be
entitled to credit their proportionate share of the federal income tax paid by
the Fund on the undistributed amount against their U.S. federal income tax
liabilities, if any, and to claim refunds to the extent the credit exceeds such
liabilities. In such case, the basis of shares owned by a shareholder of the
Fund will be increased for federal income tax purposes by the difference between
the amount of undistributed net capital gain included in the shareholder's gross
income and the federal income tax deemed paid by the shareholders.

If the Fund invests in certain positions such as pay-in-kind securities,
zero coupon securities, deferred interest securities or, in general, any other
securities with original issue discount (or with market discount if the Fund
elects to include market discount in income currently), the Fund must accrue
income on such investments for each taxable year, which generally will be prior
to the receipt of the corresponding cash payments. However, the Fund must
distribute, at least annually, all or substantially all of its net investment
income, including such accrued income, to shareholders to avoid U.S. federal
income and excise taxes. Therefore, the Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
may have to leverage itself by borrowing the cash, to satisfy distribution
requirements.

The Fund may acquire discount market bonds. A market discount bond is a
security acquired in the secondary market at a price below its redemption value
(or its adjusted issue price if it is also an original discount bond). If the
Fund invests in a market discount bond, it will required to treat any gain
recognized or the disposition of such market discount bond as ordinary income
(instead of capital gain) to the extent of the accrued market discount unless
the Fund elects to include the market discount in income as it accures.

Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
certain options and futures contracts relating to foreign currency, foreign
currency forward contracts, foreign currencies, or payables or receivables
denominated in a foreign currency are subject to Section 988 of the Code, which
generally causes such gain and loss to be treated as ordinary income or loss and
may affect the amount, timing and character of distributions to shareholders.

The Fund may invest in debt obligations that are in the lowest rating
categories or are unrated, including debt obligations of issuers not currently
paying interest or who are in default. Investments in debt obligations that are
at risk of or in default present special tax issues for the Fund. Tax rules are
not entirely clear about issues such as when the Fund may cease to accrue
interest, original issue discount or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities and how payments
received on obligations in default should be allocated between principal and
income. These and other related issues will be addressed by the 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 U.S. federal income or excise taxes.

If the Fund utilizes leverage through borrowing, asset coverage limitations
imposed by the 1940 Act as well as additional restrictions that may be imposed
by certain lenders on the payment of dividends

or distributions could potentially limit or eliminate the Fund's ability to make
distributions on its common shares until the asset coverage is restored. These
limitations could prevent the Fund from distributing at least 90% of its
investment company taxable income as is required under the Code and therefore
might jeopardize the Fund's qualification as a regulated investment company
and/or might subject the Fund to a nondeductible 4% federal excise tax. Upon any
failure to meet the asset coverage requirements imposed by the 1940 Act, the
Fund may, in its sole discretion and to the extent permitted under the 1940 Act,
purchase or redeem shares of preferred stock or notes in order to maintain or
restore the requisite asset coverage and avoid the adverse consequences to the
Fund and its shareholders of failing to meet the distribution requirements.
There can be no assurance, however, that any such action would achieve these
objectives. The Fund will endeavor to avoid restrictions on its ability to
distribute dividends.

The Fund may engage in various transactions utilizing options, futures
contracts, forward contracts, hedge instruments, straddles, and other similar
transactions. Such transactions may be subject to special provisions of the Code
that, among other things, affect the character of any income realized by the
Fund from such investments, accelerate recognition of income to the Fund, defer
Fund losses, and affect the determination of whether capital gain or loss is
characterized as long-term or short-term capital gain or loss. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions may also require the Fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat them as if they
were closed out), which may cause the Fund to recognize income without receiving
cash with which to make distributions in amounts necessary to satisfy the
distribution requirements for avoiding U.S. federal income and excise taxes. In
addition, certain Fund investments may produce income that will not qualify for
the 90% income test. The Fund will monitor its investments and transactions,
will make the appropriate tax elections, and will make the appropriate entries
in its books and records when it acquires an option, futures contract, forward
contract, hedge instrument or other similar investment in order to mitigate the
effect of these rules, prevent disqualification of the Fund as a regulated
investment company and minimize the imposition of U.S. federal income and excise
taxes, if possible.

If the Fund receives a so-called "excess distribution" with respect to
stock in a passive foreign investment company ("PFIC"), the Fund itself may be
subject to tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the Fund to shareholders. A foreign
corporation is classified as a PFIC for a taxable year if at least 50% of its
assets constitute investment-type assets or 75% or more of its gross income is
investment-type income. In general, under the PFIC rules, an excess distribution
is treated as having been realized ratably over the period during which the Fund
held the PFIC stock. The Fund itself will be subject to U.S. federal income tax
(including interest) on the portion, if any, of an excess distribution that is
so allocated to prior taxable years. Certain distributions from a PFIC as well
as gain from the sale of PFIC stock are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might have been
classified as capital gain.

The Fund may be eligible to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently is available in some circumstances,
the Fund generally would be required to include its share of the PFIC's income
and net capital gain annually, regardless of whether distributions are received
from the PFIC in a given year. If this election were made, the special rules
discussed above relating to the taxation of excess distributions would not
apply. In addition, another election may be available that would involve marking
to market the Fund's PFIC shares at the end of each taxable year (and on certain
other dates prescribed in the Code), with the result that unrealized gains are
treated as though they were realized. If this election were made, tax at the
Fund level under the PFIC rules would generally be eliminated, but the Fund
could, in limited circumstances, incur nondeductible interest charges. The
Fund's intention to qualify annually as a regulated investment company may limit
its options with respect to PFIC shares.

Because the application of the PFIC rules may affect, among other things,
the character of gains and the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, and may subject the Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders and that will be taxed to shareholders as ordinary
income or long-term capital gain may be increased or decreased as compared to a
fund that did not invest in PFIC shares.

The Fund may invest in REITs that hold residual interests in real estate
mortgage investment conduits ("REMICs"). Under Treasury regulations that have
not yet been issued, but may apply retroactively, a portion of the Fund's income
from a REIT that is attributable to the REIT's residual interest in a REMIC
(referred to in the Code as an "excess inclusion") will be subject to federal
income tax in all events. These regulations may provide that excess inclusion
income of a regulated investment company, such as the Fund, 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 residual interest directly. In general, excess inclusion
income allocated to shareholders (i) cannot be offset by net operating losses
(subject to a limited exception for certain thrift institutions), (ii) will
constitute unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or
other tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and which otherwise might not be required to file a federal tax return, to file
a tax return and pay tax on such income, and (iii) in the case of a foreign
shareholder, will not qualify for any reduction in U.S. federal withholding tax.
In addition, if at any time during any taxable year a "disqualified
organization" (as defined in the Code) is a record holder of a share in a
regulated investment company, then the regulated investment company will be
subject to a tax equal to that portion of its excess inclusion income for the
taxable year that is allocable to the disqualified organization, multiplied by
the highest federal income tax rate imposed on corporations. The Fund does not
intend to invest in REITs in which a substantial portion of the assets will
consist of residual interests in REMICs.

The Fund may be subject to withholding and other taxes imposed by foreign
countries, including taxes on interest, dividends and capital gains with respect
to its investments in those countries, which would, if imposed, reduce the yield
on or return from those investments. Tax treaties between certain countries and
the U.S. may reduce or eliminate such taxes in some cases. If more than 50% of
the value of the total assets of the Fund at the close of the taxable year
consists of securities in foreign corporations, the Fund may make an election
under Section 853 of the Code to enable the shareholders to claim a credit or
deduction (subject to limitations) on their federal income tax returns for their
pro rata portion of qualified taxes paid by the Fund to foreign countries (which
taxes relate primarily to investment income). Shareholders will treat such
amounts as part of their distribution from the Fund. The foreign tax credit
available to shareholders is subject to certain limitations and restrictions
imposed by the Code.

If the Fund does not make the election permitted under Section 853 of the
Code, any foreign taxes paid or accrued will represent an expense to the Fund
that will reduce its investment company taxable income. In such a case,
shareholders will not be able to claim either a credit or a deduction for their
pro rata portion of such taxes paid by the Fund, nor will shareholders be
required to treat as part of the amounts distributed to them their pro rata
portion of such taxes paid.

At the time of an investor's purchase of the Fund's shares, a portion of
the purchase price may be attributable to realized or unrealized appreciation in
the Fund's portfolio or undistributed taxable income of the Fund. Consequently,
subsequent distributions by the Fund with respect to these shares from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such shares and the distributions economically
represent a return of a portion of the investment. Investors should consider the
tax implication of purchasing shares (including securities distributed by the
Fund) just prior to a distribution.

Sales and other dispositions of the Fund's shares generally are taxable
events for shareholders that are subject to federal income tax. Shareholders
should consult their own tax advisors regarding their individual circumstances
to determine whether any particular transaction in the Fund's shares is properly
treated as a sale or exchange for federal income tax purposes (as the following
discussion assumes) and the tax treatment of any gains or losses recognized in
such transactions. Generally, gain or loss will be equal to the difference
between the amount of cash and the fair market value of other property received
and the shareholder's adjusted tax basis in the shares sold or exchanged. In
general, any gain or loss realized upon a taxable disposition of shares will be
treated as long-term capital gain or loss if the shares have been held for more
than one year. Otherwise, the gain or loss on the taxable disposition of the
Fund's shares will be treated as short-term capital gain or loss. However, any
loss realized by a shareholder upon the sale or other disposition of shares with
a tax holding period of six months or less will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gain with respect to such shares. For purposes of calculating this
six-month period, the holding period is suspended for any periods during which
the shareholder's risk of loss is diminished as a result of holding one or more
other positions in substantially similar or related property or through certain
options or short trades. Long-term capital gain rates of noncorporate
shareholders have been reduced--in general, to 15% with lower rates applying to
taxpayers in the 10% and 15% rate brackets--for taxable years beginning on or
before December 31, 2010. For taxable years beginning after December 31, 2010,
the maximum noncorporate tax rate on long term capital gains will increase to
20%, unless Congress enacts legislation providing otherwise. A shareholder's
ability to deduct capital losses may be subject to limitations. In addition,
losses on sales or other dispositions of shares may be disallowed under the
"wash sale" rules in the event a shareholder acquires substantially identical
stock or securities (including Fund shares pursuant to reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after a sale or other disposition of shares. In such a case, the disallowed
portion of any loss generally would be included in the U.S. federal income tax
basis of the shares acquired.

From time to time the Fund may repurchase its shares. Shareholders who
tender all shares held, and those considered to be held (under attribution rules
contained in the Code), by them will be treated as having sold their shares and
generally will realize a capital gain or loss. If a shareholder tenders fewer
than all of its shares (including those considered held through attribution),
such shareholder may be treated as having received a taxable dividend upon the
tender of its shares. In such a case, there is a remote risk that non-tendering
shareholders will be treated as having received taxable distributions from the
Fund. To the extent that the Fund recognizes net gains on the liquidation of
portfolio securities to meet such tenders of shares, the Fund will be required
to make additional distributions to its shareholders.

The IRS has taken the position that if a regulated investment company has
two classes of shares, it must designate distributions made to each class in any
year as consisting of no more than such class's proportionate share of
particular types of income (e.g., ordinary income and net capital gains).
Consequently, if both common shares and preferred shares are outstanding, the
Fund intends to designate distributions made to each class of particular types
of income in accordance with each class' proportionate shares of such income.
Thus, the Fund will designate to the extent applicable, dividends qualifying for
the corporate dividends received deduction (if any), income not qualifying for
the dividends received deduction, qualified dividend income, ordinary income and
net capital gain in a manner that allocates such income between the holders of
common shares and preferred shares in proportion to the total dividends made to
each class during or for the taxable year, or otherwise as required by
applicable law. However, for purposes of determining whether distributions are
out of the Fund's current or accumulated earnings and profits, the Fund's
earnings and profits will be allocated first to the Fund's preferred shares, if
any, and then to the Fund's common shares. In such a case, since the Fund's
current and accumulated earnings and profits will first be used to pay dividends
on the preferred shares, distributions in excess of such earnings and profits,
if any, will be made disproportionately to holders of common shares.

Federal law requires that the Fund withhold, as "backup withholding," 28%
of reportable payments, including dividends, capital gain distributions and the
proceeds of sales or other dispositions of the Fund's shares paid to
shareholders who have not complied with IRS regulations. In order to avoid this
withholding requirement, shareholders must certify on their Account
Applications, or on a separate IRS Form W-9, that the Social Security Number or
other Taxpayer Identification Number they provide is their correct number and
that they are not currently subject to backup withholding, or that they are
exempt from backup withholding. The Fund may nevertheless be required to
withhold if it receives notice from the IRS or a broker that the number provided
is incorrect or backup withholding is applicable as a result of previous
underreporting of interest or dividend income. Backup withholding is not an
additional tax. Any amount withheld may be allowed as a refund or a credit
against the shareholder's U.S. federal income tax liability if the appropriate
information (such as the timely filing of the appropriate federal income tax
return) is provided to the IRS.

Under Treasury regulations, if a shareholder recognizes a loss with respect
to shares of $2 million or more in a single taxable year (or $4 million or more
in any combination of taxable years) for an individual shareholder, S
corporation or trust or $10 million or more in a single taxable year (or $20
million or more in any combination of years) for a shareholder who is a C
corporation, such shareholder will generally be required to file with the IRS a
disclosure statement on Form 8886. Direct shareholders of portfolio securities
are generally excepted from this reporting requirement, but under current
guidance, shareholders of a regulated investment company are not excepted.
Future guidance may extend the current exception from this reporting requirement
to shareholders of most or all regulated investment companies. The fact that a
loss is reportable under these regulations does not affect the legal
determination of whether the taxpayer's treatment of the loss is proper.
Shareholders should consult their tax advisors to determine the applicability of
these regulations in light of their individual circumstances.

The description of certain U.S. federal income tax provisions above relates
only to U.S. federal income tax consequences for shareholders who are U.S.
persons (i.e., U.S. citizens or residents or U.S. corporations, partnerships,
trusts or estates). Non-U.S. shareholders should consult their tax advisers
concerning the tax consequences of ownership of shares of the Fund, including
the possibility that distributions may be subject to a 30% U.S. withholding tax
(or a reduced rate of withholding provided by an applicable treaty if the
investor provides proper certification of such status).

SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS ON THESE MATTERS AND ON
ANY SPECIFIC QUESTION OF U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
APPLICABLE TAX LAWS BEFORE MAKING AN INVESTMENT IN THE FUND.

TRUSTEES AND OFFICERS

The following table presents certain information regarding the Trustees and
Officers of the Fund as of _____________, 2007. Each individual's year of birth
is set forth in parentheses after his or her name. Unless otherwise noted, (i)
each individual has engaged in the principal occupation(s) noted in the table
for at least the most recent five years, although not necessarily in the same
capacity, and (ii) unless otherwise noted, the address of each individual is c/o
Deutsche Asset Management, 222 South Riverside Plaza, Chicago, Illinois 60606.
Trustees term of office extends until the next shareholder's meeting called for
the purpose of electing such Trustees and until the election and qualification
of a successor, or until such Trustees sooner dies, retires, resigns or is
removed as provided in the governing documents of the Trust.

INDEPENDENT TRUSTEES

NUMBER OF
NAME, YEAR OF BIRTH, FUNDS IN
POSITION(S) HELD WITH DWS FUND
THE FUND AND LENGTH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND COMPLEX
OF TIME SERVED(1) OTHER DIRECTORSHIPS HELD OVERSEEN
------------------------ ---------------------------------------------------- ---------

Paul K. Freeman (1950) President, Cook Street Holdings (consulting); 63
Chairman since 2007, Consultant, World Bank/Inter-American Development
and Board Member, Bank; formerly, Project Leader, International
2002-present Institute for Applied Systems Analysis (1998-2001);
Chief Executive Officer, The Eric Group, Inc.
(environmental insurance) (1986-1998)

John W. Ballantine Retired; formerly, Executive Vice President and 63
(1946) Chief Risk Management Officer, First Chicago NBD
Board Member, Corporation/The First National Bank of Chicago
1999-present (1996-1998); Executive Vice President and Head of
International Banking (1995-1996). Directorships:
Healthways Inc. (provider of disease and care
management services); Portland General Electric
(utility company). Former Directorships: First Oak
Brook Bancshares, Inc. and Oak Brook Bank

Donald L. Dunaway (1937) Retired; formerly, Executive Vice President, A. O. 63
Board Member, Smith Corporation (diversified manufacturer)
1980-present (1963-1994)

James R. Edgar (1946) Distinguished Fellow, University of Illinois, 63
Board Member, Institute of Government and Public Affairs
1999-present (1999-present); formerly, Governor, State of
Illinois (1991-1999). Directorships: Kemper
Insurance Companies; John B. Sanfilippo & Son, Inc.
(processor/packager/marketer of nuts, snacks and
candy products); Horizon Group Properties, Inc.;
Youbet.com (online wagering platform);
Alberto-Culver Company (manufactures, distributes
and markets health and beauty care products)

Robert B. Hoffman (1936) Retired; formerly, Chairman, Harnischfeger 63
Board Member, Industries, Inc. (machinery for the mining and paper
1981-present industries) (1999-2000); prior thereto, Vice
Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and
nutritional/food products) (1994-1999).
Directorship: RCP Advisors, LLC (a private equity
investment advisory firm)

William McClayton (1944) Managing Director of Finance and Administration, 63
Board Member, Diamond Management & Technology Consultants, Inc.
2004-present (global management consulting firm) (2001-present);
formerly, Partner, Arthur Andersen LLP (accounting)
(1986-2001). Formerly: Trustee, Ravinia Festival;
Board of Managers, YMCA of Metropolitan Chicago

Shirley D. Peterson Retired; formerly, President, Hood College 63
(1941) (1995-2000); prior thereto, Partner, Steptoe &
Board Member, Johnson (law firm); Commissioner, Internal Revenue
1995-present Service; Assistant Attorney General (Tax), US
Department of Justice. Directorships: Federal Mogul
Corp. (supplier of automotive components and
subsystems); AK Steel (steel production); Goodyear
Tire & Rubber Co. (April 2004-present); Champion
Enterprises, Inc. (manufactured home building);
Wolverine World Wide, Inc. (designer, manufacturer
and marketer of footwear) (April 2005-present);
Trustee, Bryn Mawr College. Former Directorship:
Bethlehem Steel Corp.

Robert H. Wadsworth President, Robert H. Wadsworth & Associates, Inc. 66
(1940) (consulting firm) (1983 to present). Formerly,
Board Member, Trustee of New York Board DWS Funds; President and
2004-present Trustee, Trust for Investment Managers (registered
investment company) (1999-2002). President,
Investment Company Administration, L.L.C.
(1992*-2001); President, Treasurer and Director,
First Fund Distributors, Inc.
(June 1990-January 2002); Vice President,
Professionally Managed Portfolios
(May 1991-January 2002) and Advisors Series Trust
(October 1996-January 2002) (registered investment
companies)

* Inception date of the corporation which was the predecessor to the L.L.C.

INTERESTED TRUSTEE(2)

Axel Schwarzer (1958) Managing Director, Deutsche Asset Management; Head [__]
Board Member, of Deutsche Asset Management Americas; CEO of DWS
2006-present Scudder; formerly, board member of DWS Investments,
Germany (1999-2005); formerly, Head of Sales and
Product Management for the Retail and Private
Banking Division of Deutsche Bank in Germany
(1997-1999); formerly, various strategic and
operational positions for Deutsche Bank Germany
Retail and Private Banking Division in the field of
investment funds, tax driven instruments and asset
management for corporations (1989-1996)

OFFICERS(3)

NAME, DATE OF BIRTH,
POSITION(S) HELD WITH
THE TRUST AND LENGTH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND
OF TIME SERVED(1) OTHER DIRECTORSHIPS HELD
------------------------- ------------------------------------------------------------------

Michael G. Clark(5) Managing Director(4), Deutsche Asset Management (2006-present);
(1965) President of DWS family of funds; formerly, Director of Fund Board
President, 2006-present Relations (2004-2006) and Director of Product Development
(2000-2004), Merrill Lynch Investment Managers; Senior Vice
President Operations, Merrill Lynch Asset Management (1999-2000)

Philip J. Collora (1945) Director(4), Deutsche Asset Management
Vice President and
Assistant Secretary,
1986-present

Paul H. Schubert(5) Managing Director(4), Deutsche Asset Management (since July 2004);
(1963) formerly, Executive Director, Head of Mutual Fund Services and
Chief Financial Treasurer for UBS Family of Funds (1998-2004); Vice President and
Officer, 2004-present Director of Mutual Fund Finance at UBS Global Asset Management
Treasurer, 2005-present (1994-1998)

John Millette(6) (1962) Director(4), Deutsche Asset Management
Secretary, 2001-present

Patricia DeFilippis(5) Vice President, Deutsche Asset Management (since June 2005);
(1963) formerly, Counsel, New York Life Investment Management LLC
Assistant Secretary, (2003-2005); legal associate, Lord, Abbett & Co. LLC (1998-2003)
2005-present

Elisa D. Metzger(5) Director(4), Deutsche Asset Management (since September 2005);
(1962) formerly, Counsel, Morrison and Foerster LLP (1999-2005)
Assistant Secretary,
2005-present

Caroline Pearson(6) Managing Director(4), Deutsche Asset Management
(1962)
Assistant Secretary,
1998-present

Kathleen Sullivan Director(4), Deutsche Asset Management
D'Eramo(6) (1957)
Assistant Treasurer,
2003-present

Jason Vazquez(5) (1972) Vice President, Deutsche Asset Management (since 2006); formerly,
Anti-Money Laundering AML Operations Manager for Bear Stearns (2004-2006), Supervising
Compliance Officer, Compliance Principal and Operations Manager for AXA Financial
2007-present (1999-2004)

Robert Kloby(5) (1962) Managing Director(4), Deutsche Asset Management (2004-present);
Chief Compliance formerly, Chief Compliance Officer/Chief Risk Officer, Robeco USA
Officer, 2006-present (2000-2004); Vice President, The Prudential Insurance Company of
America (1988-2000); E.F. Hutton and Company (1984-1988)

----------
(1) Length of time served represents the date that each Board Member was first
elected to the common Board which oversees a number of investment
companies, including the Fund, managed by the Investment Adviser. For the
officers

of the Fund, length of time served represents the date that each officer
was first elected to serve as an officer of any fund overseen by the
aforementioned common Board.

(2) As a result of his position with the Investment Adviser, Mr. Schwarzer is
considered an "interested person" of the Fund within the meaning of the
1940 Act.

(3) As a result of their respective positions held with the Investment Adviser,
these individuals are considered "interested persons" of the Investment
Adviser within the meaning of the 1940 Act. Interested persons receive no
compensation from the Fund.

(4) Executive title, not a board directorship.

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

(6) Address: Two International Place, Boston, Massachusetts 02110.

TRUSTEES' RESPONSIBILITIES. The officers of the Trust manage its day-to-day
operations under the direction of the Board. The primary responsibility of the
Board is to represent the interests of the shareholders of the Fund and to
provide oversight of the management of the Fund. All of the Trustees are not
"interested persons" of the Investment Adviser.

The Board has adopted its own Governance Procedures and Guidelines and has
established a number of committees, as described below. For each of the
following Committees, the Board has adopted a written charter setting forth the
Committees' responsibilities.

BOARD COMMITTEES. The Board oversees a number of investment companies
managed by the Investment Adviser. Information shown below represents meetings
held on behalf of all such funds. The common Board has the following committees:

Audit Committee: The Audit Committee, which consists entirely of
Independent Trustees, makes recommendations regarding the selection of
independent registered public accounting firm for the Fund, confers with the
independent registered public accounting firm regarding the Fund's financial
statements, the results of audits and related matters, and performs such other
tasks as the full Board deems necessary or appropriate. The Audit Committee
receives annual representations from the independent registered public
accounting firm as to its independence. The members of the Audit Committee are
William McClayton (Chair), Donald L. Dunaway and Robert B. Hoffman. The Audit
Committee held seven (7) meetings during calendar year 2006.

Nominating and Governance Committee: The Nominating and Governance
Committee, which consists entirely of Independent Trustees, seeks and reviews
candidates for consideration as nominees for membership on the Board and
oversees the administration of the Fund's Governance Procedures and Guidelines.
The members of the Nominating and Governance Committee are Shirley D. Peterson
(Chair), James R. Edgar and William McClayton. Shareholders wishing to submit
the name of a candidate for consideration as a Board member by the Committee
should submit their recommendation(s) and resume to the Secretary of the Trust.
The Nominating and Governance Committee held four (4) meetings during calendar
year 2006.

Contract Review Committee: The Contract Review Committee, which consists
entirely of Independent Trustees, oversees the annual contract review process.
The members of the Contract Review Committee are Paul K. Freeman (Chair), John
W. Ballantine, Donald L. Dunaway, William McClayton and Robert H. Wadsworth. The
Contract Review Committee held two (2) meetings during calendar year 2006.

Valuation Committee: The Valuation Committee reviews Valuation Procedures
adopted by the Board, determines fair value of the Fund's securities as needed
in accordance with the Valuation Procedures and performs such other tasks as the
full Board deems necessary. The members of the Valuation Committee are John W.
Ballantine (Chair), Robert H. Wadsworth, Donald L. Dunaway (alternate) and
William McClayton (alternate). The Valuation Committee held one (1) meeting
during calendar year 2006.

Equity Oversight Committee: The Equity Oversight Committee oversees
investment activities of the DWS equity funds, such as investment performance
and risk, expenses and services provided under the investment management
agreement. The members of the Equity Oversight Committee are John W. Ballantine
(Chair), James R. Edgar and Robert B. Hoffman. The Equity Oversight Committee
held five (5) meetings during calendar year 2006.

Operations Committee: The Operations Committee oversees the operations of
the Fund[s], such as reviewing each DWS fixed-income fund's administrative fees
and expenses, distribution arrangements, portfolio transaction policies, custody
and transfer agency arrangements and shareholder services. Currently, the
members of the Operations Committee are Robert H. Wadsworth (Chair), John W.
Ballantine and James R. Edgar. The Operations Committee held six (6) meetings
during calendar year 2006.

Fixed-Income Oversight Committee: The Fixed-Income Oversight Committee
oversees investment activities of the Funds, such as investment performance and
risk, expenses and services provided under the investment management agreement.
The members of the Fixed-Income Oversight Committee are Donald L. Dunaway
(Chair), Shirley D. Peterson and Robert H. Wadsworth. The Fixed-Income Oversight
Committee held five (5) meetings during calendar year 2006.

REMUNERATION. For the calendar year ended 2006, each Independent Board
Member received a monthly retainer, paid on a quarterly basis, and an attendance
fee, plus expenses, for each Board meeting and Committee meeting attended. Each
Independent Board Member receives an annual base retainer, paid quarterly, and,
as applicable, an additional annual fixed fee(s) for serving as committee
member, committee chairman and/or as the Independent Board chairman. The
Trustees serve as board members of various other funds advised by the Investment
Adviser. The Investment Adviser supervises the Fund's investments, pays the
compensation and expenses of its personnel who serve as Trustees and officers on
behalf of the Fund and receives a management fee for its services.

The Board established a deferred compensation plan for the Independent
Trustees ("Deferred Compensation Plan"). Under the Deferred Compensation Plan,
the Independent Trustees may defer receipt of all, or a portion, of the
compensation they earn for their services to the Fund, in lieu of receiving
current payments of such compensation. Any deferred amount is treated as though
an equivalent dollar amount has been invested in shares of one or more funds
advised by the Investment Adviser ("Shadow Shares"). Governor Edgar currently
has elected to defer at least a portion of his fees. In addition, previously,
Mr. Dunaway elected to defer fees that were payable, which are now included
under the Deferred Compensation Plan. The equivalent Shadow Shares are reflected
below in the table describing the Board Member's share ownership.

Members of the Board who are officers, directors, employees or stockholders
of the Investment Adviser or its affiliates receive no direct compensation from
the Fund, although they are compensated as employees of the Investment Adviser,
or its affiliates, and as a result may be deemed to participate in fees paid by
the Fund. The Independent Trustees are not entitled to benefits under any fund
pension or retirement plan. The following table shows compensation received by
each Board Member from the Fund and aggregate compensation from the DWS fund
complex during the calendar year 2006.

TOTAL
PENSION OR COMPENSATION
COMPENSATION COMPENSATION RETIREMENT PAID TO BOARD
FROM DWS FROM DWS BENEFITS MEMBER FROM
STRATEGIC MULTI-MARKET ACCRUED AS PART DWS FUND
NAME OF TRUSTEES INCOME TRUST INCOME TRUST OF FUND EXPENSES COMPLEX(2)(3)(4)
---------------- ------------ ------------ ---------------- ----------------

John W. Ballantine.......... $1,720 $2,800 $0 $222,670
Donald L. Dunaway........... $1,600 $2,640 $0 $210,170
James R. Edgar(1)........... $1,360 $2,240 $0 $180,170
Paul K. Freeman............. $1,680 $2,720 $0 $217,670
Robert B. Hoffman........... $1,600 $2,600 $0 $207,670
William McClayton........... $1,470 $2,410 $0 $193,560
Shirley D. Peterson(5)...... $1,880 $3,040 $0 $242,670
Robert H. Wadsworth......... $1,480 $2,440 $0 $228,250

----------
(1) Includes deferred fees. Pursuant to a Deferred Compensation Plan, as
discussed above, deferred amounts are treated as though an equivalent
dollar amount has been invested in Shadow Shares (as defined above) of
funds managed by the Investment Adviser in which compensation may be
deferred by Governor Edgar. Total deferred fees (including interest thereon
and the return from the assumed investment in the funds managed by the
Investment Adviser) payable from the [Trust/Corporation] to Governor Edgar
are [$____].

(2) For each Board Member, except Mr. Wadsworth, total compensation includes
compensation for service on the boards of 21 trusts/corporations comprised
of 69 funds/portfolios. Mr. Wadsworth's total compensation was for service
on the boards of 24 trusts/corporations comprised of 72 funds/portfolios.
Each Board Member, except Mr. Wadsworth, currently serves on the boards of
22 trusts/corporations comprised of 63 funds/portfolios. Mr. Wadsworth
currently serves on the boards of 25 DeAM trusts/corporations comprised of
66 funds/portfolios.

(3) Aggregate compensation reflects amounts paid to the Trustees for numerous
special meetings of ad hoc committees of the Chicago Board in connection
with reviewing the Funds' rebranding initiatives to change to the DWS
Family of Funds and with respect to legal and regulatory matters. Such
amounts totaled $5,170 for each of Messrs. Ballantine, Dunaway, Edgar,
Freeman, Hoffman, McClayton and Ms. Peterson. These meeting fees were borne
by the Investment Adviser.

(4) For calendar year 2007, John W. Ballantine, Donald L. Dunaway, James R.
Edgar, Paul K. Freeman, Robert B. Hoffman, William McClayton, Shirley D.
Peterson, Robert H. Wadsworth are expected to receive aggregate
compensation from the DWS Fund complex in the amounts of $215,000,
$202,500, $190,000, $240,000, $185,000, $205,000, 187,500 and $205,000,
respectively. The differences in compensation amounts from calendar year
2006 are due to the changes in Board and committee chairpersons and
committee assignments that became effective January 1, 2007.

(5) Includes $50,000 in annual retainer fees received by Ms. Peterson as
Chairperson of the Board, for which she served through December 31, 2006.

Mr. Freeman, prior to his service as Independent Board Member, served as a
board member of certain funds in the Deutsche Bank complex ("DB Funds"). In
connection with his resignation and the resignation of certain other board
members of the DB Funds on July 30, 2002 (the "Effective Date"), which was part
of a restructuring of the boards overseeing the DB Funds, Deutsche Asset
Management, Inc. ("DAMI") agreed to recommend, and, if necessary obtain,
directors and officers ("D&O") liability insurance coverage for the prior board
members, including Mr. Freeman, that is at least as equivalent in scope and
amount to the D&O coverage provided to the prior board members for the six-year
period following the Effective Date. In the event that D&O insurance coverage is
not available in the commercial marketplace on commercially reasonable terms
from a conventional third party insurer, DeAM reserved the right to provide
substantially equivalent protection in the form of an indemnity or financial
guarantee from an affiliate of DeAM. The D&O policy in effect prior to the
Effective Date provided aggregate coverage of $25,000,000, subject to a $250,000
per claim deductible.

BOARD MEMBER FUND OWNERSHIP. Under the Trust's Governance Procedures and
Guidelines, the Independent Trustees have established the expectation that
within three years of becoming a Board Member, an Independent Board Member will
have invested an amount in those funds he or she oversees (which shall include
amounts held under a deferred fee agreement that are valued based on "shadow

shares" in such funds) in the aggregate in excess of $150,000. Each interested
Board Member is also encouraged to own an amount of shares (based upon their own
individual judgment) of those funds that he or she oversees that is suitable for
his or her own appropriate investment needs. The following tables set forth each
Board Member's share ownership of the Fund and all funds in the DWS fund complex
overseen by each Board Member as of December 31, 2006.

AGGREGATE DOLLAR
RANGE OF SECURITIES
DOLLAR RANGE OF DOLLAR RANGE OF OWNED IN ALL FUNDS
SECURITIES OWNED IN SECURITIES OWNED IN IN THE DWS FUND
DWS STRATEGIC INCOME DWS MULTI-MARKET COMPLEX OVERSEEN BY
NAME OF TRUSTEE TRUST INCOME TRUST BOARD MEMBER
--------------- -------------------- ------------------- -------------------

John W. Ballantine.......... None None Over $100,000
Donald L. Dunaway*.......... None None Over $100,000
James R. Edgar*............. None None Over $100,000
Paul K. Freeman............. None None Over $100,000
Robert B. Hoffman........... None None Over $100,000
William McClayton........... None None $10,001-$50,000
Shirley D. Peterson......... None None Over $100,000
Axel Schwarzer.............. None None None
Robert H. Wadsworth......... $10,001-$50,000 $10,001-$50,000 Over $100,000

----------
* The dollar range of shares shown includes shadow shares of certain DWS
Family of Funds in which Mr. Dunaway and Governor Edgar are deemed to be
invested pursuant to the Trust's Deferred Compensation Plan as more fully
described above under "Remuneration."

OWNERSHIP IN SECURITIES OF THE INVESTMENT ADVISER AND RELATED COMPANIES

As reported to the Fund, the information in the following table reflects
ownership by the Independent Trustees and their immediate family members of
certain securities as of December 31, 2006. An immediate family member can be a
spouse, children residing in the same household including step and adoptive
children and any dependents. The securities represent ownership in the
Investment Adviser or principal underwriter of the Fund and any persons (other
than a registered investment company) directly or indirectly controlling,
controlled by, or under common control with the Investment Adviser or principal
underwriter of the Fund (including Deutsche Bank AG).

VALUE OF PERCENT OF
OWNER AND SECURITIES CLASS ON
RELATIONSHIP ON AN AN
TO BOARD TITLE OF AGGREGATE AGGREGATE
INDEPENDENT BOARD MEMBER MEMBER COMPANY CLASS BASIS BASIS
------------------------ ------------ ------- -------- ---------- ----------

John W. Ballantine.......... None
Donald L. Dunaway........... None
James R. Edgar.............. None
Paul K. Freeman............. None
Robert B. Hoffman........... None
William McClayton........... None
Shirley D. Peterson......... None
Robert H. Wadsworth......... None

SECURITIES BENEFICIALLY OWNED

As of ______, 2007, all Trustees and Officers of the Fund as a group owned
beneficially (as that term is defined is section 13(d) of the Securities
Exchange Act of 1934) less than 1% of the outstanding securities of the Fund.

[To the best of the Fund's knowledge, as of ________, 2007, no person owned
of record or beneficially 5% or more of any class of the Fund's outstanding
shares, ________.]

PROXY VOTING GUIDELINES

The Fund has delegated proxy voting responsibilities to the Investment
Adviser, subject to the Board's general oversight. The Fund has delegated proxy
voting to the Investment Adviser with the direction that proxies should be voted
consistent with the Fund's best economic interests. The Investment Adviser has
adopted its own Proxy Voting Policies and Procedures ("Policies"), and Proxy
Voting Guidelines ("Guidelines") for this purpose. The Policies address, among
other things, conflicts of interest that may arise between the interests of the
Fund and the interests of the Investment Adviser and its affiliates, including
the Fund's principal underwriter. The Guidelines set forth the Investment
Adviser's general position on various proposals, such as:

- SHAREHOLDER RIGHTS -- The Investment Adviser generally votes against
proposals that restrict shareholder rights.

- CORPORATE GOVERNANCE -- The Investment Adviser generally votes for
confidential and cumulative voting and against supermajority voting
requirements for charter and bylaw amendments. The Investment Adviser
generally votes for proposals to restrict a chief executive officer
from serving on more than three outside boards of directors. The
Investment Adviser generally votes against proposals that require a
company to appoint a Chairman who is an independent director.

- ANTI-TAKEOVER MATTERS -- The Investment Adviser generally votes for
proposals that require shareholder ratification of poison pills or
that request boards to redeem poison pills, and votes against the
adoption of poison pills if they are submitted for shareholder
ratification. The Investment Adviser generally votes for fair price
proposals.

- COMPENSATION MATTERS -- The Investment Adviser generally votes for
executive cash compensation proposals, unless they are unreasonably
excessive. The Investment Adviser generally votes against stock option
plans that do not meet the Investment Adviser's criteria.

- ROUTINE MATTERS -- The Investment Adviser generally votes for the
ratification of auditors, procedural matters related to the annual
meeting and changes in company name, and against bundled proposals and
adjournment.

The general provisions described above do not apply to investment
companies. The Investment Adviser generally votes proxies solicited by
investment companies in accordance with the recommendations of an independent
third party, except for proxies solicited by or with respect to investment
companies for which the Investment Adviser or an affiliate serves as investment
adviser or principal underwriter ("affiliated investment companies"). The
Investment Adviser votes affiliated investment company proxies in the same
proportion as the vote of the investment company's other shareholders (sometimes
called "mirror" or "echo" voting). Master fund proxies solicited from feeder
funds are voted in accordance with applicable requirements of the 1940 Act.

Although the Guidelines set forth the Investment Adviser's general voting
positions on various proposals, the Investment Adviser may, consistent with the
Fund's best interests, determine under some circumstances to vote contrary to
those positions.

The Guidelines on a particular issue may or may not reflect the view of
individual members of each Board or of a majority of each Board. In addition,
the Guidelines may reflect a voting position that differs from the actual
practices of the public companies within the Deutsche Bank AG organization or of
the investment companies for which the Investment Adviser or an affiliate serves
as investment adviser or sponsor.

The Investment Adviser may consider the views of a portfolio company's
management in deciding how to vote a proxy or in establishing general voting
positions for the Guidelines, but management's views are not determinative.

As mentioned above, the Policies describe the way in which the Investment
Adviser resolves conflicts of interest. To resolve conflicts, the Investment
Adviser, under normal circumstances, votes proxies in accordance with its
Guidelines. If the Investment Adviser departs from the Guidelines with respect
to a particular proxy or if the Guidelines do not specifically address a certain
proxy proposal, a proxy voting committee established by the Investment Adviser
will vote the proxy. Before voting any such proxy, however, the Investment
Adviser's conflicts review committee will conduct an investigation to determine
whether any potential conflicts of interest exist in connection with the
particular proxy proposal. If the conflicts review committee determines that the
Investment Adviser has a material conflict of interest, or certain individuals
on the proxy voting committee should be recused from participating in a
particular proxy vote, it will inform the proxy voting committee. If notified
that the Investment Adviser has a material conflict, or fewer than three voting
members are eligible to participate in the proxy vote, typically the Investment
Adviser will engage an independent third party to vote the proxy or follow the
proxy voting recommendations of an independent third party.

Under certain circumstances, the Investment Adviser may not be able to vote
proxies or the Investment Adviser may find that the expected economic costs from
voting outweigh the benefits associated with voting. For example, the Investment
Adviser may not vote proxies on certain foreign securities due to local
restrictions or customs. The Investment Adviser generally does not vote proxies
on securities subject to share blocking restrictions.

When available, you may obtain information about how the Fund voted proxies
related to its portfolio securities during the 12-month period ended June 30th
of each year by visiting the Securities and Exchange Commission's Web site at
www.sec.gov or by visiting our Web site at www.dws-scudder.com (type "proxy
voting" in the search field).

FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

The Fund's audited financial statements and independent registered public
accounting firm's report thereon, appearing in the Fund's Annual Report to
Shareholders for the period ending November 30, 2006 and the Fund's unaudited
financial statements appearing in the Fund's Semi-Annual Report to Shareholders
for the period ending May 31, 2006 are incorporated by reference in this SAI.
The Fund's Annual and Semi-Annual Reports to Shareholders are available upon
request and free of charge by calling the Fund at 800-647-1568.

ADDITIONAL INFORMATION

A Registration Statement on Form N-2, including amendments thereto,
relating to the Common Shares of the Fund offered hereby, has been filed by the
Fund with the SEC, Washington, D.C. The Fund's Prospectus and this SAI do not
contain all of the information set forth in the Registration

Statement, including any exhibits and schedules thereto. For further information
with respect to the Fund and the Common Shares offered hereby, reference is made
to the Fund's Registration Statement. Statements contained in the Fund's
Prospectus and this SAI as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Copies of the Registration Statement may be inspected without
charge at the SEC's principal office in Washington, D.C., and copies of all or
any part thereof may be obtained from the SEC upon the payment of certain fees
prescribed by the SEC.

APPENDIX

STANDARD & POOR'S CORPORATION BOND RATINGS

AAA. Debt rated AAA had the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

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

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

CI. The rating CI is reserved for income bonds on which no interest is
being paid.

D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC. BOND RATINGS

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

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

BAA. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over

A-1

any great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.

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

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

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

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

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

FITCH LONG-TERM DEBT RATINGS

AAA. Highest credit quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA. Very high credit quality. "AA" ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.

A. High credit quality. "A" ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB. Good credit quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

BB. Speculative. "BB" ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic change
over time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.

B. Highly speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC, CC, C. High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.

A-2

DDD, DD, D. Default. The ratings of obligations in this category are based
on their prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest. "DD" indicates
potential recoveries in the range of 50%-90%, and "D" the lowest recovery
potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

COMMERCIAL PAPER RATINGS

Commercial paper rated by Standard & Poor's Ratings Services ("S&P") has
the following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is rated A-1 or A-2.

The ratings Prime-1 and Prime-2 are the two highest commercial paper
ratings assigned by Moody's Investors Service, Inc. ("Moody's"). Among the
factors considered by it in assigning ratings are the following: (1) evaluation
of the management of the issuer; (2) economic evaluation of the issuer's
industry or industries and an appraisal of speculative-type risks which may be
inherent in certain areas; (3) evaluation of the issuer's products in relation
to competition and customer acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or 2.

A-3

PART C

OTHER INFORMATION

ITEM 25. FINANCIAL STATEMENTS AND EXHIBITS.

(1) Financial Statements

Part A - Financial Highlights

Part B - The Fund's financial statements are included in the Fund's 2006
annual report and are incorporated by reference into the Statement of Additional
Information. The statements in the 2006 annual report include: Schedule of
Investments as of November 30, 2006; the Statement of Assets and Liabilities as
of November 30, 2006; Statement of Operations for the fiscal year ended November
30, 2006; Statements of Changes in Net Assets for the fiscal years ended
November 30, 2006 and November 30, 2005; Notes to Financial Statements; and
Financial Highlights for a share of common shares outstanding during each of the
fiscal years ended November 30, 2006, 2005, 2004, 2003 and 2002.

(2) Exhibits

(a)(1) Declaration of Trust, dated August 3, 1988.(2)
(a)(2) Amended and Restated Agreement and Declaration of Trust, dated January 9,
1989.(1)
(a)(3) Certificate of Amendment of Declaration of Trust, dated November 29,
2000.(1)
(a)(4) Certificate of Amendment of Declaration of Trust, dated November 16,
2005.(1)
(b)(1) By-Laws of the Fund, dated January 11, 1989.(1)
(b)(2) Amendment to By-Laws, dated January 9, 2004.(1)
(b)(3) Amendment to By-Laws, dated November 29, 2004.(1)
(b)(4) Amendment to By-Laws, dated February 23, 2006.(1)
(b)(5) Amendment to By-Laws, dated March 3, 2006.
(c) Not applicable.
(d)(1) Form of Subscription Certificate.(2)
(d)(2) Form of Notice of Guaranteed Delivery.(2)
(d)(3) Form of Exercise Form.(2)
(d)(5) Form of Subscription Agent Agreement.(2)
(d)(6) Form of Information Agent Agreement.(2)
(e) Amended and Restated Dividend Reinvestment and Cash Purchase Plan, dated
April 1, 2002.(1)
(f) Not applicable.
(g)(1) Investment Management Agreement, dated April 5, 2002.(1)
(g)(2) First Amendment to Investment Management Agreement, dated March 19,
2003.(1)
(h) Not applicable.
(i) Not applicable.
(j) Custody Agreement between the Fund and State Street Bank & Trust
Company.(2)
(k) Transfer Agency and Service Agreement between the Fund and State
Street Bank & Trust Company.(2)
(l) Opinion and Consent of Bingham McCutchen LLP.(2)
(m) Not Applicable.
(n) Consent of _____________________ dated _____ __, ____.
(o) Not applicable.
(p) Not applicable.
(q) Not applicable.
(r)(1) Code of Ethics of the Fund adopted pursuant to Rule 17j of the
Investment Company Act.(2)
(r)(2) Code of Ethics of Deutsche Investment Management Americas Inc. adopted
pursuant to Rule 17j of the Investment Company Act of 1940.(2)
(s) Power of Attorney.(1)

----------
(1) Filed herewith.

C-1

(2) To be filed by amendment.

ITEM 26. MARKETING ARRANGEMENTS.

Not applicable.

ITEM 27. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses to be incurred in
connection with this Rights Offering described in this Registration Statement:

Registration fee................................. $__________
New York Stock Exchange listing fee.............. __________
Printing (other than stock certificates)......... __________
Legal fees and expenses.......................... __________
Accounting fees and expenses..................... __________
Subscription Agent fees and expenses............. __________
Information Agent fees and expenses.............. __________
Miscellaneous expenses........................... __________
-----------
Total......................................... $__________
===========

ITEM 28. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL.

None.

ITEM 29. NUMBER OF HOLDERS OF SECURITIES.

As of ____________, ______, the Fund had approximately ___ holders of
record of its common share, par value $0.01 per shares.

ITEM 30. INDEMNIFICATION.

Under Article VIII of our Amended and Restated Agreement and Declaration of
Trust, 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 Amended
and Restated Declaration of Trust does not protect any person against any
liability to the Registrant or its shareholders 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 his office.

We maintain insurance on behalf of any person who is or was a trustee of
officer of the Fund, against certain liability asserted against him or her and
incurred by him or her or arising out of his or her position. In no event,
however, will we pay that portion of the premium, if any, for insurance to
indemnify any such person or any act for which we ourselves are not permitted to
indemnify.

Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to the directors and officers, we have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
such Act and is therefore unenforceable. If a claim for indemnification against
such liabilities under the Securities Act of 1933 (other than for expenses
incurred in a successful defense) is asserted against us by the trustees or
officers in connection with this rights offering, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by us

C-2

is against public policy as expressed in such Act and will be governed by the
final adjudication of such issue.

The Fund's Investment Management Agreement, filed as exhibit (g)(1), limits
the liability of our investment adviser.

ITEM 31. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

We are fulfilling the requirement of this Item 31 to provide a list of the
trustees and directors of our investment adviser, together with information as
to any other business, profession, vocation or employment of a substantial
nature engaged in by those entities or those of its officers and directors
during the past two years, by incorporating herein by reference the information
contained in the current Form ADV filed on January 17, 2007, respectively, with
the Securities and Exchange Commission by Deutsche Investment Management
Americas Inc. (Commission File No. 801-104518) pursuant to the Investment
Advisers Act of 1940, as amended.

ITEM 32. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31 (a) of the Investment Company Act and the rules thereunder will be
maintained at the offices of State Street Bank & Trust Company, 200 Clarendon
Street, Boston Massachusetts 02116, and at our offices, 345 Park Avenue, New
York, New York 10154.

ITEM 33. MANAGEMENT SERVICES.

Not Applicable.

ITEM 34. UNDERTAKINGS.

(a) Registrant undertakes to suspend offering of the shares covered under
this registration statement until it amends its prospectus contained herein if
(1) subsequent to the effective date of this Registration Statement, its net
asset value per share declines more than ten percent from its net asset value as
of the effective date of this Registration Statement, or (2) its net asset value
increases to an amount greater than its net proceeds as stated in the prospectus
contained herein.

(b) Registrant undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
posteffective amendment thereof) in the registration statement; and (iii)
to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

C-3

(4) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant under Rule 497(h)
under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.

(c) Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of receipt
of a written or oral request, the Statement of Additional Information.

C-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, the State of New York, on
the 21st day of February, 2007.

DWS MULTI-MARKET INCOME TRUST

By: /s/ Michael G. Clark
------------------------------------
Michael G. Clark
President

As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities indicated on the
21st day of February, 2007.

/s/ Michael G. Clark President
-------------------------------------
Michael G. Clark

/s/ Paul H. Schubert Chief Financial Officer and Treasurer
-------------------------------------
Paul H. Schubert

/s/ Paul K. Freeman Trustee
-------------------------------------
Paul K. Freeman*

Trustee
-------------------------------------
John W. Ballantine

/s/ Donald L. Dunaway Trustee
-------------------------------------
Donald L. Dunaway*

/s/ James R. Edgar Trustee
-------------------------------------
James R. Edgar*

Trustee
-------------------------------------
Robert B. Hoffman

Trustee
-------------------------------------
William McClayton

/s/ Shirley D. Peterson Trustee
-------------------------------------
Shirley D. Peterson*

Trustee
-------------------------------------
Axel Schwarzer

/s/ Robert H. Wadsworth Trustee
-------------------------------------
Robert H. Wadsworth*

*By: /s/ John Millette
--------------------------------
John Millette**

** Attorney-in-fact pursuant to the power of attorney filed herewith.

EXHIBIT INDEX

(a)(2) Amended and Restated Agreement and Declaration of Trust, dated
January 9, 1989.
(a)(3) Certificate of Amendment of Declaration of Trust, dated November 29,
2000.
(a)(4) Certificate of Amendment of Declaration of Trust, dated November 16,
2005.
(b)(1) By-Laws of the Fund, dated January 11, 1989.
(b)(2) Amendment to By-Laws, dated January 9, 2004.
(b)(3) Amendment to By-Laws, dated November 29, 2004.
(b)(4) Amendment to By-Laws, dated February 23, 2006.
(b)(5) Amendment to By-Laws, dated March 3, 2006.
(e) Amended and Restated Dividend Reinvestment and Cash Purchase Plan,
dated April 1, 2002.
(g)(1) Investment Management Agreement, dated April 5, 2002.
(g)(2) First Amendment to Investment Management Agreement, dated March 19,
2003.
(s) Power of Attorney