This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.

Investments in mutual funds involve risk. Some funds have more risk than others. This fund is subject to stock market risk. Stocks of micro capitalization companies (minimum market capitalization of $10 million) involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Please read the fund's prospectus for specific details regarding its investments and risk profile.

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

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit www.dws-scudder.com for the Fund's most recent month-end performance.

The maximum sales charge for Class A shares is 5.75%. For Class B shares, the maximum contingent deferred sales charge (CDSC) is 4% within the first year after purchase, declining to 0% after six years. Class C shares have no adjustment for front-end sales charges but redemptions within one year of purchase may be subject to a CDSC of 1%. Unadjusted returns do not reflect sales charges and would have been lower if they had. Institutional Class and Investment Class shares are not subject to sales charges.

To discourage short-term trading, the Fund imposes a 2% redemption fee on shareholders redeeming shares held less than 30 days, which has the effect of lowering total return.

Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share class.

Returns shown for Class A, B and C shares for the periods prior to their inception on June 28, 2002 are derived from the historical performance of Institutional Class shares of DWS Micro Cap Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of each specific class. Any difference in expenses will affect performance. On October 23, 2006, Investment Class was converted into Class S.

^* The Fund commenced operations on December 18, 1996. Index returns began on December 31, 1996.

^* Investment Class commenced operations on August 21, 1997. Index returns began on August 31, 1997.

^** On October 23, 2006, Investment Class was converted into Class S (see Note J, Subsequent Event, of Notes to Financial Statements).

^* On October 23, 2006, Investment Class was converted into Class S (see Note J, Subsequent Event, of Notes to Financial Statements).

Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Institutional Class shares; other share classes may vary.

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net investment of $9,425.

^* The Fund commenced operations on December 18, 1996. Index returns began on December 31, 1996.

⁺ Russell 2000 Growth Index is an unmanaged capitalization-weighted measure of 2,000 of the smallest capitalized US companies with a greater-than-average growth orientation and whose common stocks trade on the NYSE, AMEX and Nasdaq. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

^* The Fund commenced operations on December 18, 1996. Index returns began on December 31, 1996.

^* Investment Class commenced operations on August 21, 1997. Index returns began on August 31, 1997.

^** On October 23, 2006, Investment Class was converted into Class S (see Note J, Subsequent Event, of Notes to Financial Statements).

Class S shares are no longer available to new investors except under certain circumstances. (Please refer to the Fund's Statement of Additional Information.)

To discourage short-term trading, the Fund imposes a 2% redemption fee on shareholders redeeming shares held less than 30 days, which has the effect of lowering total return.

Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemptions of fund shares. Returns and rankings may differ by share class.

Returns shown for Class S shares for the periods prior to its inception on February 1, 2005 are derived from the historical performance of Institutional Class shares of DWS Micro Cap Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of Class S. Any difference in expenses will affect performance.

^* The Fund commenced operations on December 18, 1996. Index returns began on December 31, 1996.

Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Class S shares; other share classes may vary.

* The Fund commenced operations on December 18, 1996. Index returns began on December 31, 1996.

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section and which would result in higher total expenses. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had they not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (April 1, 2006 to September 30, 2006).

Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.

Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.

^* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.

^** On October 23, 2006, Investment Class was converted into Class S (see Note J, Subsequent Event, of Notes to Financial Statements).

Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for DWS Micro Cap Fund. DeAM, Inc. provides a full range of investment advisory services to institutional and retail clients. DeAM, Inc. is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.

Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.

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

Managing Director of Deutsche Asset Management and Lead Portfolio Manager of the fund.

Previously served as portfolio manager for 10 years at Credit Suisse Asset Management (or at its predecessor, Warburg Pincus Asset Management).

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

In the following interview, Lead Portfolio Manager Robert S. Janis discusses DWS Micro Cap Fund's market environment, performance and strategy during the fund's most recent fiscal year ended September 30, 2006.

Q: How did DWS Micro Cap Fund perform during the most recent 12-month period?

A: DWS Micro Cap Fund posted a -0.90% total return for its most recent fiscal year ended September 30, 2006, compared with the 5.88% return of its benchmark, the Russell 2000 Growth Index, and the 3.70% return of its peers, represented by the Lipper Small-Cap Growth Funds category.¹ (Fund return is for Class A shares; returns are unadjusted for sales charges. If sales charges had been included, returns would have been lower. Past performance is no guarantee of future results. Please see pages 4 through 9 for the performance of other share classes and for more complete performance information.)

¹ Source: Lipper Inc. The Lipper Small-Cap Growth Funds category includes portfolios that invest at least 75% of equity assets in companies with market capitalizations less than 300% of the dollar-weighted median market capitalization of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. These portfolios typically have above-average price-to-earnings ratios and price-to-book ratios compared with the S&P SmallCap 600 Index. It is not possible to invest directly into a Lipper category.

A: Over the 12-month period, the top individual security-level contributors to performance included Air Methods Corp., General Cable Corp. and MWI Veterinary Supply, Inc. Air Methods is a provider of air medical emergency transport services and systems throughout the United States. General Cable is a global developer and manufacturer in the wire and cable industry. Lastly, MWI Veterinary is a distributor of animal health products for veterinarians across the US. (As of September 30, 2006, the positions in General Cable and MWI Veterinary Supply were sold.)

Detractors from performance included Allion Healthcare, Inc., a national provider of specialty pharmacy and disease management services, focused on HIV/AIDs patients.

Q: What impact did sector positioning and stock selection have on the fund's results?

A: For the 12-month period, both the fund's sector allocation and overall stock selection represented a drag on performance. While our overweight to consumer staples contributed to performance, our overweights to energy and health care and our underweight to materials detracted from performance.²

² Overweight/underweight — An "overweight" means that a fund holds a higher weighting in a given sector compared with its benchmark index; an "underweight" means that a fund holds a lower weighting in a given sector.

Q: What were the major factors affecting stock market performance during the period?

A: In the fall of 2005, the United States endured three major hurricanes, and the start of a significant spike in energy prices. Following these events, investors grew more and more concerned that consumer spending would be negatively affected, and consumer-oriented stocks were hit hard, including those held by the fund. Therefore, the fund's large allocation in the consumer discretionary sector hurt its performance later 2005, but eventually rallied by the end of the fourth quarter of 2005. Since then, the US has experienced no major hurricanes, gas prices peaked and began to recede beginning in late August, and interest rates have stabilized. Consumer stocks, and the fund's holdings in this sector, have begun to benefit from these trends.

Over the past several months, the US economy has downshifted to a growth rate slightly below its long-term trends for periods of recovery. Some moderation in the pace of activity was to be expected, as three years of above-trend growth had absorbed excess capacity and contributed to pushing core inflation (i.e., increases in consumer prices not including food and energy costs) slightly above the US Federal Reserve Board's (the Fed) target range.

At its August and September 2006 meetings, the Fed decided to pause in raising short-term interest rates after 17 straight short-term rate hikes. It did so despite the fact that core inflation was running above the Fed's target range. Fed Chairman Bernanke and the Fed governors felt that the lagged effects of their credit tightening and the ongoing contraction in the housing market would slow economic activity and ease strains on key economic resources. In light of tamer energy prices, they felt that a "soft landing" (i.e., a retraction in economic growth, but without a recession and severe job losses) was possible and would bring inflation in line with their targets. Late in the 12-month period ended September 30, 2006, the US stock market rallied based on falling energy prices and declines in long-term interest rates. Stocks posted gains based on robust growth in the global economy and resulting strength in corporate earnings, and the Dow Jones Industrial Average approached the 12,000 mark.

Q: In light of the results for the most recent period, how do you view the economy and investment markets at present?

A: Looking ahead, market participants appear to be concerned with whether the current economic slowdown will be sufficient to reduce supply pressures on global resources and help contain and ultimately lower inflation without sending the economy into recession. Much depends on the outlook for the housing market, particularly on whether consumers' lessened ability to draw on home equity financing will markedly affect the overall level of consumer spending. We believe that the contraction in the housing market will be felt, but only modestly, because we do not expect housing prices to plunge. In addition, the economy should be helped by the fact that energy prices continue to ease, business finances have stayed strong and global economic activity remains firm. We expect the US economy to grow, though at a slower pace than in recent years. Of course, risks remain: First, a more severe correction in the housing market than we have already experienced could create a significant downturn in consumer spending as well as employment. On the flip side, the US economy may prove to be more resilient than expected, and require the Fed to hike short-term interest rates further. For the present, financial markets seem confident that the economy will be weak enough to prompt some Fed easing in 2007, but not so weak as to unduly hurt corporate earnings.

The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results.

For more complete details about the Fund's investment portfolio, see page 19. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end will be posted to www.dws-scudder.com on or after the last day of the following month. In addition, the Fund's top ten holdings and other information about the Fund is posted on www.dws-scudder.com as of the calendar quarter-end on or after the 15th day following quarter-end. Please see the Account Management Resources section for contact information.

Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.

⁺ The cost for federal income tax purposes was $108,814,564. At September 30, 2006, net unrealized appreciation for all securities based on tax cost was $3,587,687. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $11,923,803 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $8,336,116.

(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at September 30, 2006 amounted to $21,126,554 which is 23.8% of net assets.

(b) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.

(d) Cash Management QP Trust, an affiliated fund, is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

^(a) Redemption price per share for shares held less than 30 days is equal to net asset value less a 2% redemption fee.

^(b) On October 23, 2006, Investment Class was converted into Class S (see Note J, Subsequent Event).

^* Non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Scudder Funds (see Note G).

DWS Micro Cap Fund (formerly Scudder Micro Cap Fund) (the "Fund") is a diversified series of DWS Advisor Funds (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment management company organized as a Delaware business trust. On July 10, 2006, DWS Micro Cap Fund became a series of DWS Advisor Funds, an open-end investment management company. Prior to July 10, 2006, DWS Micro Cap Fund was a series of DWS Investments Trust, an open-end investment management company.

The Fund currently has multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Class C shares do not convert into another class. Institutional Class shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes. Class S shares are not subject to initial or contingent deferred sales charges. Class S shares are no longer available to new investors except under certain circumstances. (Please refer to the Fund's Statement of Additional Information.) On October 23, 2006, Investment Class was converted into Class S. (Please see Note J.)

Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution service fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.

The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.

Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Cash Management QP Trust are valued at their net asset value each business day.

Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.

Securities Lending. The Fund may lend securities to financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of liquid, unencumbered assets having a value at least equal to the value of the securities loaned. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to the lending agent. Either the Fund or the borrower may terminate the loan. The Fund is subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.

In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for the Fund a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether the Fund is taxable in certain jurisdictions), and requires certain expanded tax disclosures. The Interpretation is effective for fiscal years beginning after December 15, 2006. Management has begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund's financial statements.

Distribution of Income and Gains. Net investment income of the Fund, if any, is declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.

The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.

At September 30, 2006, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:

In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:

* For tax purposes, short-term capital gains distributions are considered ordinary income distributions.

Redemption Fees. The Fund imposes a redemption fee of 2% of the total redemption amount on all Fund shares redeemed or exchanged within 30 days of buying them, either by purchase or exchange. This fee is assessed and retained by the Fund for the benefit of the remaining shareholders. The redemption fee is accounted for as an addition to paid-in capital.

Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Realized gains and losses from investment transactions are recorded on an identified cost basis.

During the year ended September 30, 2006, purchases and sales of investment securities (excluding short-term investments) aggregated $99,136,191 and $108,110,112, respectively.

DWS Scudder is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG. Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, is the Advisor and Administrator for the Fund.

Investment Advisory Agreement. Under the Investment Advisory Agreement, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. Prior to July 1, 2006, the investment advisory fee payable under the Investment Advisory Agreement was equal to an annual rate of 1.50% of the Fund's average daily net assets, computed and accrued daily and payable monthly.

Effective July 1, 2006, under the Amended and Restated Investment Management Agreement with the Advisor, the Fund pays a monthly investment management fee based on the Fund's average daily net assets accrued daily and payable monthly, at the following annual rates:

For the period from October 1, 2005 through June 30, 2006, the Advisor and Administrator had contractually agreed to waive their fees or reimburse expenses of the Fund (excluding certain expenses such as extraordinary expenses, proxy/shareholder meeting costs, taxes, brokerage, interest and organizational and offering expenses) to the extent necessary to maintain the annual expenses of the classes of the Fund as follows:

Effective July 1, 2006 through September 30, 2006, the Advisor and Administrator have contractually agreed to waive their fees or reimburse expenses of the Fund (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest and organizational and offering expenses) to the extent necessary to maintain the annual expenses of the classes of the Fund as follows:

Accordingly, for the year ended September 30, 2006, the Advisor waived a portion of its fee pursuant to an Expense Limitation Agreement aggregating $342,282 and the amount imposed aggregated $1,122,509 which was equivalent to an annual effective rate of 1.11% of the Fund's average daily net assets.

Administrator Service Fee. Prior to July 1, 2006, for its services as Administrator, DeAM, Inc. received a fee (the "Administrator Service Fee") of 0.22% of the average daily net assets for Class A, Class B, Class C, Investment Class and Institutional Class and 0.47% for Class S shares, computed and accrued daily and payable monthly.

For the period from October 1, 2005 through June 30, 2006, the Administrator Service Fee was as follows:

Administration Fee. Effective July 1, 2006, the Administration Agreement with DeAM, Inc. was terminated and the Fund entered into an Administrative Services Agreement with the Deutsche Investment Management Americas Inc. ("DeIM"), an indirect, wholly owned subsidiary of Deutsche Bank AG, pursuant to which DeIM provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays DeIM a fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the period from July 1, 2006 through September 30, 2006, the Advisor received an Administration Fee of $23,088, of which $7,332 is unpaid.

Service Provider Fees. DWS Scudder Investments Service Company ("DWS-SISC"), an affiliate of the Advisor, serves as the transfer agent, shareholder service agent and dividend-paying agent for Class A, B, C, Investment and Institutional Class shares of the Fund. DWS Scudder Service Corporation ("DWS-SSC"), an affiliate of the Advisor, serves as the transfer agent, shareholder service agent and dividend-paying agent for Class S shares of the Fund. Pursuant to a sub-transfer agency agreement among DWS-SISC and DWS-SSC and DST Systems, Inc. ("DST"), DWS-SISC and DWS-SSC have delegated certain transfer agent and dividend-paying agent functions to DST. DWS-SISC and DWS-SSC compensate DST out of the shareholders servicing fee they receive from the Fund. Prior to July 1, 2006, this fee was included in the Administration Agreement with DeAM, Inc. For the period from July 1, 2006 through September 30, 2006, the amounts charged to the Fund by DWS-SISC and DWS-SSC were as follows:

Distribution Service Agreement. Under the Distribution Agreement, in accordance with Rule 12b-1 under the 1940 Act, DWS Scudder Distributors, Inc. ("DWS-SDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.25% of the average daily net assets of the Class A shares and 0.75% of average daily net assets of the Class B and C shares. Pursuant to the agreement, DWS-SDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the year ended September 30, 2006, the Distribution Fee was as follows:

In addition, DWS-SDI provides information and administrative services ("Shareholder Servicing Fee") to Class B, C and Investment Class shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DWS-SDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the year ended September 30, 2006, the Shareholder Servicing Fee was as follows:

Underwriting Agreement and Contingent Deferred Sales Charge. DWS-SDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the year ended September 30, 2006 aggregated $5,690.

In addition, DWS-SDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the year ended September 30, 2006, the CDSC for the Fund's Class B and C shares was $10,864 and $711, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares.

Typesetting and Filing Service Fees. Under an agreement with DeIM, DeIM is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended September 30, 2006, the amount charged to the Fund by DeIM included in reports to shareholders aggregated $30,000, of which $5,880 is unpaid.

Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregated annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each fund in the Fund Complex for which he or she serves. In addition, the Chairman of the Board and the Chairman of each committee of the Board receives additional compensation for their services. Payment of such fees and expenses is allocated among all such funds described above in direct proportion to their relative net assets.

Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay its Advisor a management fee for the affiliated funds' investments in the QP Trust.

For the year ended September 30, 2006, the Advisor agreed to reimburse the Fund $4,470, which represented a portion of the expected fee savings for the Advisor through June 30, 2006, related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider.

In addition, the Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the custodian expenses. During the year ended September 30, 2006, the custodian fee was reduced by $57 for custody credits earned.

The Fund and several other affiliated funds (the "Participants") share in a $750 million revolving credit facility administered by JPMorgan Chase Bank N.A. for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.

*On October 23, 2006, Investment Class was converted into Class S (see Note J, Subsequent Event).

** For the period February 1, 2005 (commencement of operations of Class S shares) to September 30, 2005.

Market Timing Related Regulatory and Litigation Matters. Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including DWS Scudder. The DWS funds' advisors have been cooperating in connection with these inquiries and are in discussions with the regulators concerning proposed settlements. Publicity about mutual fund practices arising from these industry-wide inquiries serves as the general basis of a number of private lawsuits against the DWS funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain DWS funds, the funds' investment advisors and their affiliates, and certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each DWS fund's investment advisor has agreed to indemnify the applicable DWS funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding market timing, revenue sharing, fund valuation or other subjects arising from or related to the pending inquiries. It is not possible to determine with certainty what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors.

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

With respect to regulatory matters, Deutsche Asset Management ("DeAM") has advised the funds as follows:

DeAM expects to reach final agreements with regulators in 2006 regarding allegations of improper trading in the DWS funds. DeAM expects that it will reach settlement agreements with the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Illinois Secretary of State providing payment of disgorgement, penalties, and investor education contributions totaling approximately $134 million. Approximately $127 million of this amount would be distributed to shareholders of the affected DWS funds in accordance with a distribution plan to be developed by an independent distribution consultant. DeAM does not believe that any of the DWS funds will be named as respondents or defendants in any proceedings. The funds' investment advisors do not believe these amounts will have a material adverse financial impact on them or materially affect their ability to perform under their investment management agreements with the DWS funds. The above-described amounts are not material to Deutsche Bank, and have already been reserved.

Based on the settlement discussions thus far, DeAM believes that it will be able to reach a settlement with the regulators on a basis that is generally consistent with settlements reached by other advisors, taking into account the particular facts and circumstances of market timing at DeAM and at the legacy Scudder and Kemper organizations prior to their acquisition by DeAM in April 2002. Among the terms of the expected settled orders, DeAM would be subject to certain undertakings regarding the conduct of its business in the future, including maintaining existing management fee reductions for certain funds for a period of five years. DeAM expects that these settlements would resolve regulatory allegations that it violated certain provisions of federal and state securities laws (i) by entering into trading arrangements that permitted certain investors to engage in market timing in certain DWS funds and (ii) by failing more generally to make adequate measures to prevent market timing in the DWS funds, primarily during the 1999-2001 period. With respect to the trading arrangements, DeAM expects that the settlement documents will include allegations related to one legacy DeAM arrangement, as well as three legacy Scudder and six legacy Kemper arrangements. All of these trading arrangements originated in businesses that existed prior to the current 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 the trading arrangements.

There is no certainty that the final settlement documents will contain the foregoing terms and conditions. The independent Trustees/ Directors of the DWS funds have carefully monitored these regulatory investigations with the assistance of independent legal counsel and independent economic consultants.

Other Regulatory Matters. On September 28, 2006, the Securities and Exchange Commission ("SEC") and the National Association of Securities Dealers ("NASD") announced final agreements in which Deutsche Investment Management Americas Inc. ("DeIM"), Deutsche Asset Management, Inc. ("DeAM, Inc.") 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 DeIM 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 DeIM, DeAM, Inc. and SDI neither admitted nor denied any of the regulators' findings, DeIM, DeAM, Inc. and SDI agreed to pay disgorgement, prejudgment interest and civil penalties in the total amount of $19.3 million. The portion of the settlements to be distributed to the funds is approximately $17.8 million and is payable 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. Accordingly, in September 2006 the Fund recorded a receivable from the Advisor for its settlement portion of $298,095 which is equivalent to $0.062 per share.

As part of the settlements, DeIM, DeAM, Inc. 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.

SDI has also offered to settle with the NASD regarding SDI's provision of non-cash compensation to associated persons of NASD member firms and related policies. In the offer, SDI consents to the imposition of a censure by the NASD and a fine of $425,000. The NASD has not yet accepted SDI's offer.

During the year ended September 30, 2006, the Advisor fully reimbursed the Fund $24 for an expense incurred on a loan. The amount of the expense was less than 0.01% of the Fund's average net assets thus having no impact on the Fund's total return.

During the year ended September 30, 2006 the Fund realized a gain of $18,520 on the disposal of an investment not meeting the Fund's investment restrictions.

On June 28, 2006, the Fund's Board approved the conversion of Investment Class shares into the Fund's Class S shares. The conversion of these shares was completed on October 23, 2006, and Investment Class shares are no longer offered by the Fund.

To the Trustees of DWS Advisor Funds and Shareholders of DWS Micro Cap Fund:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of DWS Micro Cap Fund (formerly Scudder Micro Cap Fund) (the "Fund") at September 30, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

The Fund paid distributions of $3.58 per share from net long-term capital gains during its year ended September 30, 2006, of which 100% represents 15% rate gains.

Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $9,738,000 as capital gain dividends for its year ended September 30, 2006, of which 100% represents 15% rate gains.

For corporate shareholders, 100% of the income dividends paid during the Fund's fiscal year ended September 30, 2006, qualified for the dividends received deduction.

For federal income tax purposes, the Fund designates $249,000, or the maximum allowable under tax law, as qualified dividend income.

Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call 1-800-621-1048.

Additional information announced by Deutsche Asset Management regarding the terms of the expected settlements referred to in the Market Timing Related Regulatory and Litigation Matters and Other Regulatory Matters in the Notes to Financial Statements 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.

A Special Meeting of Shareholders (the "Meeting") of DWS Micro Cap Fund (the "Fund") was held on June 1, 2006, at the offices of Deutsche Asset Management, 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted upon by the shareholders (the resulting votes are presented below).

I. Election of Board Members. ("Number of Votes" represents all Funds that are a series of DWS Advisor Funds.)

II-A. Approval of an Amended and Restated Investment Management Agreement with the Fund's Current Investment Advisor.

II-B. Approval of an Amended and Restated Investment Management Agreement with Deutsche Investment Management Americas Inc.

* Broker non-votes are proxies received by the Fund from brokers or nominees when the broker or nominee neither has received instructions from the beneficial owner or other persons entitled to vote nor has discretionary power to vote on a particular matter.

The Meeting was reconvened on June 9, 2006, at which time the following matter was voted upon by the shareholders (the resulting votes are presented below):

The Meeting was reconvened again on June 27, 2006, at which time the following matter was voted upon by the shareholders (the resulting votes are presented below):

The Fund's Trustees approved the continuation of the Fund's current investment advisory agreement with DeAM in September 2006. The Fund's current investment advisory agreement was also approved by the Fund's shareholders at a special meeting held in May 2006 as part of an overall plan to standardize and add flexibility to the management agreements for the DWS funds.

In terms of the process that the Trustees followed prior to approving the agreement, shareholders should know that:

At present time, all but one of your Fund's Trustees are independent of DeAM and its affiliates.

The Trustees meet frequently to discuss fund matters. Each year, the Trustees dedicate part or all of several meetings to contract review matters. In connection with reviewing the Fund's investment advisory agreement, the Trustees also review the terms of the Fund's Rule 12b-1 plan, distribution agreement, administration agreement, transfer agency agreement and other material service agreements.

In connection with the Board's 2006 contract review, the Board formed a special committee to facilitate careful review of the funds' contractual arrangements. After reviewing the Fund's arrangements, that committee recommended that the Board vote to approve the continuation of the Fund's investment advisory agreement.

The Trustees regularly meet privately with their independent counsel to discuss contract review and other matters. In addition, the Trustees were also advised by two consultants in the course of their 2006 review of the Fund's contractual arrangements.

DeAM and its predecessors have managed the Fund since inception, and the Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interest of shareholders. As you may know, DeAM is part of Deutsche Bank, a major global banking institution that is engaged in a wide range of financial services. The Trustees believe that there are significant advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Shareholders may focus primarily on fund performance and fees, but the Fund's Trustees consider these and many other factors, including the quality and integrity of DeAM's personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.

In determining to approve the continuation of the Fund's current investment advisory agreement, the Board considered all factors that it believes relevant to the interests of Fund shareholders, including:

The investment management fee schedule for the Fund, including (i) comparative information provided by Lipper regarding investment management fee rates paid to other investment advisors by similar funds and (ii) fee rates paid to DeAM by similar funds and institutional accounts advised by DeAM (if any). With respect to management fees paid to other investment advisors by similar funds, the Trustees noted that the fee rates paid by the Fund were higher than the median (4th quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2005). The Board gave a lesser weight to fees paid by similar institutional accounts advised by DeAM, in light of the material differences in the scope of services provided to mutual funds as compared to those provided to institutional accounts. Taking into account the foregoing, the Board concluded that the fee schedule in effect for the Fund represents reasonable compensation in light of the nature, extent and quality of the investment services being provided to the Fund.

The extent to which economies of scale would be realized as the Fund grows. In this regard, the Board noted that the Fund's investment management fee schedule includes breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between Fund shareholders and DeAM of such economies of scale as may exist in the management of the Fund at current asset levels.

The total operating expenses of the Fund. In this regard, the Board noted that the total (net) operating expenses of the Fund (Class A shares) are expected to be higher than the median (3rd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2005, and in each case analyzing Class A expenses less any applicable distribution and/or services plan expenses). The Board considered the expenses of this class to be representative for purposes of evaluating other classes of shares. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitation agreed to by DeAM helped to ensure that the Fund's total (net) operating expenses would be competitive relative to the applicable Lipper universe.

The investment performance of the Fund and DeAM, both absolute and relative to various benchmarks and industry peer groups. The Board noted that for the one-, three- and five-year periods ended June 30, 2006, the Fund's performance (Institutional Class shares) was in the 3rd quartile, 2nd quartile and 2nd quartile, respectively, of the applicable Lipper universe. The Board also observed that the Fund has outperformed its benchmark in the five-year period ended June 30, 2006 and has underperformed its benchmark in the one- and three-year periods ended June 30, 2006. The Board recognized that DeAM has made significant changes in its investment personnel and processes in recent years in an effort to improve long-term performance.

The nature, extent and quality of the advisory services provided by DeAM. The Board considered extensive information regarding DeAM, including DeAM's personnel (including particularly those personnel with responsibilities for providing services to the Fund), resources, policies and investment processes. The Board also considered the terms of the current investment advisory agreement, including the scope of services provided under the agreement. In this regard, the Board concluded that the quality and range of services provided by DeAM have benefited and should continue to benefit the Fund and its shareholders.

The costs of the services to, and profits realized by, DeAM and its affiliates from their relationships with the Fund. The Board reviewed information concerning the costs incurred and profits realized by DeAM during 2005 from providing investment management services to the Fund (and, separately, to the entire DWS Scudder fund complex), and reviewed with DeAM the cost allocation methodology used to determine DeAM's profitability. In analyzing DeAM's costs and profits, the Board also reviewed the fees paid to and services provided by DeAM and its affiliates with respect to administrative services, transfer agent services, shareholder servicing and distribution (including fees paid pursuant to 12b-1 plans), as well as information regarding other possible benefits derived by DeAM and its affiliates as a result of DeAM's relationship with the Fund. As part of this review, the Board considered information provided by an independent accounting firm engaged to review DeAM's cost allocation methodology and calculations. The Board concluded that the Fund's investment management fee schedule represented reasonable compensation in light of the costs incurred by DeAM and its affiliates in providing services to the Fund. The Board also reviewed information regarding the profitability of certain similar investment management firms. The Board noted that while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), Deutsche Asset Management's overall profitability with respect to the DWS Scudder fund complex (after taking into account distribution and other services provided to the funds by DeAM and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.

The practices of DeAM regarding the selection and compensation of brokers and dealers executing portfolio transactions for the Fund. The Board considered that a portion of the Fund's brokerage may be allocated to affiliates of DeAM, subject to compliance with applicable SEC rules. The Board also reviewed and approved, subject to ongoing review by the Board, a plan whereby a limited portion of the Fund's brokerage may in the future be allocated to brokers who acquire (and provide to DeAM and its affiliates) research services from third parties that are generally useful to DeAM and its affiliates in managing client portfolios. The Board indicated that it would continue to monitor the allocation of the Fund's brokerage to ensure that the principle of "best price and execution" remains paramount in the portfolio trading process.

DeAM's commitment to and record of compliance, including its written compliance policies and procedures. In this regard, the Board considered DeAM's commitment to indemnify the Fund against any costs and liabilities related to lawsuits or regulatory actions making allegations regarding market timing, revenue sharing, fund valuation or other subjects arising from or relating to pending regulatory inquiries. The Board also considered the significant attention and resources dedicated by DeAM to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of DeAM's chief compliance officer, who reports to the Board; (ii) the large number of compliance personnel who report to DeAM's chief compliance officer; and (iii) the substantial commitment of resources by Deutsche Asset Management to compliance matters.

Deutsche Bank's commitment to its US mutual fund business. The Board considered recent and ongoing efforts by Deutsche Bank to restructure its US mutual fund business to improve efficiency and competitiveness and to reduce compliance and operational risk. The Board considered assurances received from Deutsche Bank that it would commit the resources necessary to maintain high quality services to the Fund and its shareholders while various organizational initiatives are being implemented. The Board also considered Deutsche Bank's strategic plans for its US mutual fund business, the potential benefits to Fund shareholders and Deutsche Bank's management of the DWS fund group, one of Europe's most successful fund groups.

Based on all of the foregoing, the Board determined to continue the Fund's current investment advisory agreement, and concluded that the continuation of such agreement was in the best interests of the Fund's shareholders.

In reaching this conclusion the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, many of which were in executive session with only the Independent Trustees and their counsel present. It is possible that individual Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the current agreement.

The following table presents certain information regarding the Board Members and Officers of the Trust as of September 30, 2006. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each Independent Board Member is c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period. The Board Members may also serve in similar capacities with other funds in the fund complex.

¹ A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.

² The mailing address of Axel Schwarzer is c/o Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. Mr. Schwarzer is an interested Board Member by virtue of his positions with Deutsche Asset Management.

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

The fund's Statement of Additional Information ("SAI") includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: 1-800-621-1048.

ITEM 2.

CODE OF ETHICS.

As of the end of the period, September 30, 2006, DWS Micro Cap Fund has a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.

There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.

A copy of the code of ethics is filed as an exhibit to this Form N-CSR.

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

The Funds’ audit committee is comprised solely of trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Funds’ Board of Trustees has determined that there are several “audit committee financial experts” serving on the Funds’ audit committee. The Board has determined that Keith R Fox, the chair of the Funds’ audit committee, qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on its review of Mr. Fox’s pertinent experience and education. The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

DWS MICRO CAP FUND

FORM N-CSR DISCLOSURE RE: AUDIT FEES

The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.

The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee).

Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund

Fiscal Year Ended September 30,	Audit Fees Billed to Fund	Audit-Related Fees Billed to Fund	Tax Fees Billed to Fund	All Other Fees Billed to Fund
2006	$52,500	$128	$0	$0
2005	$43,400	$225	$0	$0

The above “Audit- Related Fees” were billed for agreed upon procedures performed.

Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers

The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas, Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.

Fiscal Year September 30,	Audit-Related Fees Billedto Adviser and Affiliated Fund Service Providers	Tax Fees Billed to Adviser and Affiliated Fund Service Providers	All Other Fees Billed to Adviser and Affiliated Fund Service Providers
2006	$155,500	$73,180	$0
2005	$309,400	$136,355	$0

The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures and additional related procedures and the above “Tax Fees” were billed in connection with tax advice and agreed-upon procedures.

Non-Audit Services

The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.

Fiscal Year
Ended
September 30,

Total
Non-Audit Fees Billed to Fund

(A)

Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund)

(B)

Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements)

(C)

Total of (A), (B)

and (C)

2006

$73,180

$15,000

$88,180

2005

$136,355

$89,635

$225,990

All other engagement fees were billed for services in connection with training seminars and risk management initiatives for DeIM and other related entities that provide support for the operations of the fund.

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS

Not Applicable

ITEM 6.

SCHEDULE OF INVESTMENTS

Not Applicable

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not Applicable

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS

Not Applicable.

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Committee on Independent Trustees/Directors selects and nominates Independent Trustees/Directors. Fund shareholders may submit nominees that will be considered by the committee when a Board vacancy occurs. Submissions should be mailed to: c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33910.

ITEM 11.

CONTROLS AND PROCEDURES.

(a)	The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

(b)

There have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last half-year (the registrant’s second fiscal half-year in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.

ITEM 12.

EXHIBITS.

(a)(1)

Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.

(a)(2)

Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.

(b)	Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.

Form N-CSR Item F

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:

DWS Micro Cap Fund, a series of DWS Advisor Funds

By:	/s/Michael G. Clark

Michael G. Clark

President

Date:

November 30, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Registrant:

DWS Micro Cap Fund, a series of DWS Advisor Funds

By:	/s/Michael G. Clark

Michael G. Clark

President

Date:

November 30, 2006

By:	/s/Paul Schubert

Paul Schubert

Chief Financial Officer and Treasurer

Date:

November 30, 2006

Average Annual Total Returns (Unadjusted for Sales Charge) as of 9/30/06
DWS Micro Cap Fund	1-Year	3-Year	5-Year	Life of Fund^*
Class A	-.90%	9.49%	7.53%	12.07%
Class B	-1.60%	8.68%	6.74%	11.24%
Class C	-1.66%	8.66%	6.73%	11.23%
Institutional Class	-.63%	9.76%	7.78%	12.35%
Russell 2000^® Growth Index⁺	5.88%	11.81%	10.15%	4.11%

Average Annual Total Returns as of 9/30/06
DWS Micro Cap Fund	1-Year	3-Year	5-Year	Life of Class^*
Investment Class^**	-.95%	9.48%	7.52%	10.68%
Russell 2000 Growth Index⁺	5.88%	11.81%	10.15%	2.93%

Net Asset Value and Distribution Information
	Class A	Class B	Class C	Investment Class^*	Institutional Class
Net Asset Value: 9/30/06	$ 18.87	$ 18.16	$ 18.15	$ 18.85	$ 19.36
9/30/05	$ 22.45	$ 21.88	$ 21.88	$ 22.44	$ 22.90
Distribution Information: Twelve Months: Capital Gains as of 9/30/06	$ 3.60	$ 3.60	$ 3.60	$ 3.60	$ 3.60

Institutional Class Lipper Rankings — Small-Cap Growth Funds Category as of 9/30/06
Period	Rank		Number of Funds Tracked	Percentile Ranking (%)
1-Year	450	of	558	81
3-Year	279	of	463	61
5-Year	224	of	370	61

Comparative Results (Adjusted for Maximum Sales Charge) as of 9/30/06
DWS Micro Cap Fund		1-Year	3-Year	5-Year	Life of Fund^*
Class A	Growth of $10,000	$9,340	$12,372	$13,550	$28,754
Class A	Average annual total return	-6.60%	7.35%	6.26%	11.40%
Class B	Growth of $10,000	$9,591	$12,641	$13,754	$28,351
Class B	Average annual total return	-4.09%	8.13%	6.58%	11.24%
Class C	Growth of $10,000	$9,834	$12,831	$13,847	$28,336
Class C	Average annual total return	-1.66%	8.66%	6.73%	11.23%
Russell 2000 Growth Index⁺	Growth of $10,000	$10,588	$13,980	$16,214	$14,805
Russell 2000 Growth Index⁺	Average annual total return	5.88%	11.81%	10.15%	4.11%

Comparative Results as of 9/30/06
DWS Micro Cap Fund		1-Year	3-Year	5-Year	Life of Class^*
Institutional Class	Growth of $1,000,000	$993,700	$1,322,100	$1,454,300	$3,123,400
Institutional Class	Average annual total return	-.63%	9.76%	7.78%	12.35%
Russell 2000 Growth Index⁺	Growth of $1,000,000	$1,058,800	$1,398,000	$1,621,400	$1,480,500
Russell 2000 Growth Index⁺	Average annual total return	5.88%	11.81%	10.15%	4.11%

Net Asset Value and Distribution Information
	Class S
Net Asset Value: 9/30/06	$ 18.89
9/30/05	$ 22.46
Distribution Information: Twelve Months: Capital Gains as of 9/30/06	$ 3.60

Class S Lipper Rankings — Small-Cap Growth Funds Category as of 9/30/06
Period	Rank		Number of Funds Tracked	Percentile Ranking (%)
1-Year	458	of	558	82

Expenses and Value of a $1,000 Investment for the six months ended September 30, 2006
Actual Fund Return	Class A	Class B	Class C	Investment Class^**	Class S	Institutional Class
Beginning Account Value 4/1/06	$ 1,000.00	$ 1,000.00	$ 1,000.00	$ 1,000.00	$ 1,000.00	$ 1,000.00
Ending Account Value 9/30/06	$ 832.00	$ 829.20	$ 828.80	$ 831.90	$ 832.50	$ 833.40
Expenses Paid per $1,000*	$ 7.95	$ 11.37	$ 11.42	$ 7.99	$ 7.40	$ 6.80
Hypothetical 5% Fund Return	Class A	Class B	Class C	Investment Class^**	Class S	Institutional Class
Beginning Account Value 4/1/06	$ 1,000.00	$ 1,000.00	$ 1,000.00	$ 1,000.00	$ 1,000.00	$ 1,000.00
Ending Account Value 9/30/06	$ 1,016.39	$ 1,012.63	$ 1,012.58	$ 1,016.03	$ 1,017.00	$ 1,017.65
Expenses Paid per $1,000*	$ 8.74	$ 12.51	$ 12.56	$ 8.80	$ 8.14	$ 7.49

Annualized Expense Ratios	Class A	Class B	Class C	Investment Class^**	Class S	Institutional Class
DWS Micro Cap Fund	1.73%	2.48%	2.49%	1.74%	1.61%	1.48%

Asset Allocation (Excludes Securities Lending Collateral)	9/30/06	9/30/05

Common Stocks	97%	96%
Cash Equivalents	3%	4%
	100%	100%

Sector Diversification (As a % of Common Stocks)	9/30/06	9/30/05

Health Care	26%	20%
Consumer Discretionary	25%	21%
Information Technology	18%	26%
Industrials	11%	9%
Energy	9%	7%
Consumer Staples	6%	7%
Financials	5%	7%
Materials	—	3%
	100%	100%

Ten Largest Equity Holdings at September 30, 2006 (33.3% of Net Assets)
1. Air Methods Corp. Provider of aeromedical emergency transport services	3.9%
2. Red Robin Gourmet Burgers, Inc. Owner that operates a chain of specialty restaurants	3.8%
3. Buffalo Wild Wings, Inc. Owns and operates Buffalo Wild Wings Bar and Restaurant	3.8%
4. Wild Oats Markets, Inc. Operates a natural foods supermarket chain	3.7%
5. Carrizo Oil & Gas, Inc. Producer of gas and crude oil	3.4%
6. Amedisys, Inc. Provider of alternate-site health care services	3.2%
7. Essex Corp. Delivers optical & signal processors for radar & communication products	3.1%
8. NovAtel, Inc. Designs & markets a broad range of products that determine precise geographic locations	2.9%
9. McCormick & Schmick's Seafood Restaurants, Inc. Operator of a chain of seafood restaurants	2.8%
10. Arena Resources, Inc. Explores and develops oil and gas	2.7%

	Shares	Value ($)

Common Stocks 98.8%
Consumer Discretionary 24.1%
Hotels Restaurants & Leisure 12.5%
Buffalo Wild Wings, Inc.*	87,200	3,335,400
McCormick & Schmick's Seafood Restaurants, Inc.*	112,300	2,525,627
Red Robin Gourmet Burgers, Inc.* (a)	72,600	3,347,586
Ruth's Chris Steak House, Inc.*	102,300	1,925,286
		11,133,899
Internet & Catalog Retail 4.6%
dELiAs, Inc.	245,000	1,886,500
Stamps.com, Inc.* (a)	116,500	2,220,490
		4,106,990
Leisure Equipment & Products 2.4%
MarineMax, Inc.* (a)	82,800	2,107,260
Specialty Retail 3.7%
Hot Topic, Inc.*	112,500	1,253,250
Zumiez, Inc.* (a)	74,600	2,014,200
		3,267,450
Textiles, Apparel & Luxury Goods 0.9%
Volcom, Inc.* (a)	37,700	849,758
Consumer Staples 6.1%
Food & Staples Retailing 3.7%
Wild Oats Markets, Inc.* (a)	202,300	3,271,191
Food Products 2.4%
Green Mountain Coffee Roasters, Inc.*	58,100	2,138,080
Energy 8.8%
Energy Equipment & Services 2.7%
Superior Well Services, Inc.* (a)	87,900	1,740,420
Union Drilling, Inc.*	59,000	649,000
		2,389,420
Oil, Gas & Consumable Fuels 6.1%
Arena Resources, Inc.* (a)	76,000	2,441,120
Carrizo Oil & Gas, Inc.*	116,100	2,994,219
		5,435,339
Financials 4.5%
Capital Markets
Sanders Morris Harris Group, Inc.	150,000	1,876,500
Thomas Weisel Partners Group, Inc.* (a)	133,500	2,142,675
		4,019,175
Health Care 25.9%
Health Care Equipment & Supplies 7.6%
AngioDynamics, Inc.*	77,500	1,605,025
Micrus Endovascular Corp.*	142,800	1,852,116
SonoSite, Inc.* (a)	59,400	1,686,960
Spectranetics Corp.*	136,540	1,597,518
		6,741,619
Health Care Providers & Services 18.3%
Air Methods Corp.*	148,300	3,499,880
Allion Healthcare, Inc.* (a)	412,900	1,725,922
Amedisys, Inc.* (a)	71,700	2,844,339
Centene Corp.*	135,800	2,232,552
HMS Holdings Corp.*	136,200	1,718,844
Nighthawk Radiology Holdings, Inc.* (a)	93,600	1,790,568
Providence Service Corp.*	88,200	2,433,438
		16,245,543
Industrials 11.3%
Aerospace & Defense 3.1%
Essex Corp.*	158,000	2,749,200
Commercial Services & Supplies 2.4%
Fuel-Tech NV*	146,100	2,175,429
Machinery 4.5%
Badger Meter, Inc. (a)	93,200	2,347,708
RBC Bearings, Inc.*	67,700	1,634,955
		3,982,663
Road & Rail 1.3%
Celadon Group, Inc.*	68,050	1,132,352
Information Technology 18.1%
Communications Equipment 2.5%
EMS Technologies, Inc.*	119,800	2,249,844
Computers & Peripherals 2.7%
Neoware, Inc.* (a)	175,900	2,390,481
Electronic Equipment & Instruments 2.9%
NovAtel, Inc.*	55,900	2,566,928
Internet Software & Services 4.3%
Bankrate, Inc.* (a)	61,100	1,622,816
Perficient, Inc.*	140,800	2,207,744
		3,830,560
Software 5.7%
Sonic Solutions*	118,600	1,807,464
Synchronoss Technologies, Inc.*	154,927	1,468,708
Witness Systems, Inc.*	102,300	1,793,319
		5,069,491
Total Common Stocks (Cost $84,264,985)		87,852,672

Securities Lending Collateral 25.0%
Daily Assets Fund Institutional, 5.31% (b) (c) (Cost $22,208,865)	22,208,865	22,208,865

Cash Equivalents 2.6%
Cash Management QP Trust, 5.34% (d) (Cost $2,340,714)	2,340,714	2,340,714

	% of Net Assets	Value ($)

Total Investment Portfolio (Cost $108,814,564)⁺	126.4	112,402,251
Other Assets and Liabilities, Net	(26.4)	(23,470,976)
Net Assets	100.0	88,931,275

Statement of Assets and Liabilities as of September 30, 2006 (continued)
Net Asset Value
Class A Net Asset Value and redemption price^(a) per share ($28,858,503 ÷ 1,529,620 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)	$ 18.87
Maximum offering price per share (100 ÷ 94.25 of $18.87)	$ 20.02
Class B Net Asset Value, offering and redemption price^(a) (subject to contingent deferred sales charge) per share ($4,035,835 ÷ 222,267 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)	$ 18.16
Class C Net Asset Value, offering and redemption price^(a) (subject to contingent deferred sales charge) per share ($8,003,051 ÷ 440,936 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)	$ 18.15
Investment Class^(b) Net Asset Value, offering and redemption price^(a)per share ($17,205,164 ÷ 912,958 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)	$ 18.85
Class S Net Asset Value, offering and redemption price^(a)per share ($1,221,389 ÷ 64,670 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)	$ 18.89
Institutional Class Net Asset Value, offering and redemption price^(a)per share ($29,607,333 ÷ 1,529,324 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)	$ 19.36

	Years Ended September 30,
	2006	2005
Distributions from ordinary income*	$ 87,994	$ 1,301,015
Distributions from long-term capital gains	$ 15,750,970	$ 8,534,445

Statement of Assets and Liabilities as of September 30, 2006
Assets
Investments: Investments in securities, at value (cost $84,264,985) — including $21,126,554 of securities loaned	$ 87,852,672
Investment in Daily Assets Fund Institutional (cost $22,208,865)^*	22,208,865
Investment in Cash Management QP Trust (cost $2,340,714)	2,340,714
Total investments in securities, at value (cost $108,814,564)	112,402,251
Receivable for investments sold	689,085
Interest receivable	13,591
Receivable for Fund shares sold	99,352
Due from Advisor	304,240
Other assets	45,247
Total assets	113,553,766
Liabilities
Payable for investments purchased	1,983,000
Payable for Fund shares redeemed	185,360
Payable upon return of securities loaned	22,208,865
Accrued investment advisory fee	28,038
Other accrued expenses and payables	217,228
Total liabilities	24,622,491
Net assets, at value	$ 88,931,275
Net Assets
Net assets consist of: Net unrealized appreciation (depreciation) on investments	3,587,687
Accumulated net realized gain (loss)	12,265,212
Paid-in capital	73,078,376
Net assets, at value	$ 88,931,275

Statement of Operations for the year ended September 30, 2006
Investment Income
Income: Dividends	$ 225,983
Interest — Cash Management QP Trust	113,892
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates	28,263
Other Income^*	298,095
Total Income	666,233
Expenses: Investment advisory fee	1,464,791
Administrator service fee	180,337
Administration fee	23,088
Services to shareholders	38,880
Distribution and shareholder servicing fees	250,401
Custodian fees	8,298
Auditing	52,710
Legal	70,782
Trustees' fees and expenses	8,135
Reports to shareholders and shareholder meeting	109,909
Registration fees	73,656
Other	12,574
Total expenses before expense reductions	2,293,561
Expense reductions	(507,163)
Total expenses after expense reductions	1,786,398
Net investment income (loss)	(1,120,165)
Realized and Unrealized Gain (Loss) on Investment Transactions
Net realized gain (loss) from investments	13,511,069
Net realized gain on investment not meeting investment guidelines of the Fund	18,520
Net unrealized appreciation (depreciation) during the period on investments	(13,285,039)
Net gain (loss) on investment transactions	244,550
Net increase (decrease) in net assets resulting from operations	$ (875,615)

Statement of Changes in Net Assets
	Years Ended September 30,
Increase (Decrease) in Net Assets	2006	2005
Operations: Net investment income (loss)	$ (1,120,165)	$ (1,545,291)
Net realized gain (loss) on investment transactions	13,529,589	19,345,275
Net unrealized appreciation (depreciation) during the period on investment transactions	(13,285,039)	(1,117,162)
Net increase (decrease) in net assets resulting from operations	(875,615)	16,682,822
Distributions to shareholders from: Net realized gains: Class A	(4,106,621)	(2,559,528)
Class B	(795,830)	(559,376)
Class C	(1,461,877)	(1,029,594)
Investment Class	(2,908,852)	(1,800,363)
Class S	(101,502)	—
Institutional Class	(6,464,282)	(3,886,599)
Fund share transactions: Proceeds from shares sold	39,012,148	32,543,583
Reinvestment of distributions	15,023,250	9,053,891
Cost of shares redeemed	(49,016,402)	(52,876,480)
Redemption fees	4,801	723
Net increase (decrease) in net assets from Fund share transactions	5,023,797	(11,278,283)
Increase (decrease) in net assets	(11,690,782)	(4,430,921)
Net assets at beginning of period	100,622,057	105,052,978
Net assets at end of period (including accumulated net investment loss of $0 and $1,012, respectively)	$ 88,931,275	$ 100,622,057

Class A Years Ended September 30,	2006	2005	2004	2003	2002^a
Selected Per Share Data
Net asset value, beginning of period	$ 22.45	$ 20.99	$ 18.69	$ 14.07	$ 18.24
Income (loss) from investment operations: Net investment income (loss)^b	(.22)^f	(.32)	(.31)	(.18)	.03
Net realized and unrealized gain (loss) on investment transactions	.24^c	3.93	2.61	4.80	(4.20)
Total from investment operations	.02	3.61	2.30	4.62	(4.17)
Less distributions from: Net realized gain on investment transactions	(3.60)	(2.15)	—	—	—
Redemption fees	.00^***	.00^***	—	—	—
Net asset value, end of period	$ 18.87	$ 22.45	$ 20.99	$ 18.69	$ 14.07
Total Return (%)^d,e	(.90)^f,g	17.88	12.37	32.84	(22.86)^**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)	29	26	22	11	.6
Ratio of expenses before expense reductions (%)	2.29	2.24	2.15	2.16	2.22^*
Ratio of expenses after expense reductions (%)	1.75	1.74	1.74	1.74	1.74^*
Ratio of net investment income (loss) (%)	(1.09)^f	(1.52)	(1.47)	(1.09)	.70^*
Portfolio turnover rate (%)	100	108	99	74	66
^a For the period June 28, 2002 (commencement of operations of Class A shares) to September 30, 2002. ^b Based on average shares outstanding during the period. ^c Because of the timing of subscriptions and redemptions in relation to fluctuating markets at value the amount shown may not agree with the change in aggregate gains and losses. ^d Total return would have been lower had certain expenses not been reduced. ^e Total return does not reflect the effect of any sales charges. ^f Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Scudder Funds (see Note G). The non-recurring income resulted in an increase in net investment income of $0.061 per share and an increase in the ratio of net investment income of 0.29%. Excluding this non-recurring income, total return would have been 0.33% lower. ^g The Fund realized a gain of $18,520 on the disposal of an investment not adhering to the Fund's investment restrictions. Excluding this gain, total return would have been 0.02% lower. ^* Annualized ^** Not annualized ^*** Amount is less than $.005.

Class B Years Ended September 30,	2006	2005	2004	2003	2002^a
Selected Per Share Data
Net asset value, beginning of period	$ 21.88	$ 20.64	$ 18.52	$ 14.04	$ 18.24
Income (loss) from investment operations: Net investment income (loss)^b	(.36)^f	(.47)	(.46)	(.30)	(.00)^***
Net realized and unrealized gain (loss) on investment transactions	.24^c	3.86	2.58	4.78	(4.20)
Total from investment operations	(.12)	3.39	2.12	4.48	(4.20)
Less distributions from: Net realized gain on investment transactions	(3.60)	(2.15)	—	—	—
Redemption fees	.00^***	.00^***	—	—	—
Net asset value, end of period	$ 18.16	$ 21.88	$ 20.64	$ 18.52	$ 14.04
Total Return (%)^d,e	(1.60)^f,g	16.95	11.56	31.91	(23.03)^**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)	4	5	5	3	3
Ratio of expenses before expense reductions (%)	3.05	2.98	2.90	2.91	2.97^*
Ratio of expenses after expense reductions (%)	2.50	2.49	2.49	2.49	2.49^*
Ratio of net investment income (loss) (%)	(1.84)^f	(2.27)	(2.22)	(1.84)	(.05)^*
Portfolio turnover rate (%)	100	108	99	74	66
^a For the period June 28, 2002 (commencement of operations of Class B shares) to September 30, 2002. ^b Based on average shares outstanding during the period. ^c Because of the timing of subscriptions and redemptions in relation to fluctuating markets at value the amount shown may not agree with the change in aggregate gains and losses. ^d Total return would have been lower had certain expenses not been reduced. ^e Total return does not reflect the effect of any sales charges. ^f Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Scudder Funds (see Note G). The non-recurring income resulted in an increase in net investment income of $0.061 per share and an increase in the ratio of net investment income of 0.29%. Excluding this non-recurring income, total return would have been 0.34% lower. ^g The Fund realized a gain of $18,520 on the disposal of an investment not adhering to the Fund's investment restrictions. Excluding this gain, total return would have been 0.02% lower. ^* Annualized ^** Not annualized ^*** Amount is less than $.005.

Class C Years Ended September 30,	2006	2005	2004	2003	2002^a
Selected Per Share Data
Net asset value, beginning of period	$ 21.88	$ 20.64	$ 18.51	$ 14.04	$ 18.24
Income (loss) from investment operations: Net investment income (loss)^b	(.36)^f	(.47)	(.46)	(.31)	(.00)^***
Net realized and unrealized gain (loss) on investment transactions	.23^c	3.86	2.59	4.78	(4.20)
Total from investment operations	(.13)	3.39	2.13	4.47	(4.20)
Less distributions from: Net realized gain on investment transactions	(3.60)	(2.15)	—	—	—
Redemption fees	.00^***	.00^***	—	—	—
Net asset value, end of period	$ 18.15	$ 21.88	$ 20.64	$ 18.51	$ 14.04
Total Return (%)^d,e	(1.66)^f,g	16.95	11.56	31.84	(23.03)^**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)	8	9	14	5	3
Ratio of expenses before expense reductions (%)	3.02	2.98	2.90	2.91	2.97^*
Ratio of expenses after expense reductions (%)	2.50	2.49	2.49	2.49	2.49^*
Ratio of net investment income (loss) (%)	(1.84)^f	(2.27)	(2.22)	(1.84)	(.05)^*
Portfolio turnover rate (%)	100	108	99	74	66
^a For the period June 28, 2002 (commencement of operations of Class C shares) to September 30, 2002. ^b Based on average shares outstanding during the period. ^c Because of the timing of subscriptions and redemptions in relation to fluctuating markets at value the amount shown may not agree with the change in aggregate gains and losses. ^d Total return would have been lower had certain expenses not been reduced. ^e Total return does not reflect the effect of any sales charges. ^f Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Scudder Funds (see Note G). The non-recurring income resulted in an increase in net investment income of $0.061 per share and an increase in the ratio of net investment income of 0.29%. Excluding this non-recurring income, total return would have been 0.34% lower. ^g The Fund realized a gain of $18,520 on the disposal of an investment not adhering to the Fund's investment restrictions. Excluding this gain, total return would have been 0.02% lower. ^* Annualized ^** Not annualized ^*** Amount is less than $.005.

Investment Class⁺ Years Ended September 30,	2006	2005	2004	2003	2002
Selected Per Share Data
Net asset value, beginning of period	$ 22.44	$ 20.97	$ 18.67	$ 14.06	$ 17.05
Income (loss) from investment operations: Net investment income (loss)^a	(.23)^d	(.32)	(.31)	(.17)	(.18)
Net realized and unrealized gain (loss) on investment transactions	.24^b	3.94	2.61	4.78	(2.81)
Total from investment operations	.01	3.62	2.30	4.61	(2.99)
Less distributions from: Net realized gain on investment transactions	(3.60)	(2.15)	—	—	—
Redemption fees	.00^*	.00^*	—	—	—
Net asset value, end of period	$ 18.85	$ 22.44	$ 20.97	$ 18.67	$ 14.06
Total Return (%)^c	(.95)^d,e	17.89	12.37	32.79	(17.54)
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)	17	18	19	18	12
Ratio of expenses before expense reductions (%)	2.19	2.20	2.15	2.16	2.21
Ratio of expenses after expense reductions (%)	1.76	1.74	1.74	1.74	1.74
Ratio of net investment income (loss) (%)	(1.10)^d	(1.52)	(1.47)	(1.09)	(1.02)
Portfolio turnover rate (%)	100	108	99	74	66
⁺ On October 23, 2006, Investment Class was converted into Class S (see Note J, Subsequent Event). ^a Based on average shares outstanding during the period. ^b Because of the timing of subscriptions and redemptions in relation to fluctuating markets at value the amount shown may not agree with the change in aggregate gains and losses. ^c Total return would have been lower had certain expenses not been reduced. ^d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Scudder Funds (see Note G). The non-recurring income resulted in an increase in net investment income of $0.061 per share and an increase in the ratio of net investment income of 0.29%. Excluding this non-recurring income, total return would have been 0.34% lower. ^e The Fund realized a gain of $18,520 on the disposal of an investment not adhering to the Fund's investment restrictions. Excluding this gain, total return would have been 0.02% lower. ^* Amount is less than $.005.

Class S Years Ended September 30,	2006	2005^a
Selected Per Share Data
Net asset value, beginning of period	$ 22.46	$ 20.99
Income (loss) from investment operations: Net investment income (loss)^b	(.20)^e	(.21)
Net realized and unrealized gain (loss) on investment transactions	.23^c	1.68
Total from investment operations	.03	1.47
Less distributions from: Net realized gain on investment transactions	(3.60)	—
Redemption fees	.00^***	.00^***
Net asset value, end of period	$ 18.89	$ 22.46
Total Return (%)^d	(.85)^e,f	7.00^**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)	1	5
Ratio of expenses before expense reductions (%)	2.21	2.23^*
Ratio of expenses after expense reductions (%)	1.68	1.74^*
Ratio of net investment income (loss) (%)	(1.02)^e	(1.46)^*
Portfolio turnover rate (%)	100	108
^a For the period February 1, 2005 (commencement of operations of Class S shares) to September 30, 2005. ^b Based on average shares outstanding during the period. ^c Because of the timing of subscriptions and redemptions in relation to fluctuating markets at value the amount shown may not agree with the change in aggregate gains and losses. ^d Total return would have been lower had certain expenses not been reduced. ^e Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Scudder Funds (see Note G). The non-recurring income resulted in an increase in net investment income of $0.061 per share and an increase in the ratio of net investment income of 0.29%. Excluding this non-recurring income, total return would have been 0.33% lower. ^f The Fund realized a gain of $18,520 on the disposal of an investment not adhering to the Fund's investment restrictions. Excluding this gain, total return would have been 0.02% lower. ^* Annualized ^** Not annualized ^*** Amount is less than $.005.

Institutional Class Years Ended September 30,	2006	2005	2004	2003	2002
Selected Per Share Data
Net asset value, beginning of period	$ 22.90	$ 21.32	$ 18.93	$ 14.22	$ 17.21
Income (loss) from investment operations: Net investment income (loss)^a	(.18)^d	(.28)	(.26)	(.14)	(.14)
Net realized and unrealized gain (loss) on investment transactions	.24^b	4.01	2.65	4.85	(2.85)
Total from investment operations	.06	3.73	2.39	4.71	(2.99)
Less distributions from: Net realized gain on investment transactions	(3.60)	(2.15)	—	—	—
Redemption fees	.00^*	.00^*	—	—	—
Net asset value, end of period	$ 19.36	$ 22.90	$ 21.32	$ 18.93	$ 14.22
Total Return (%)^c	(.63)^d,e	18.14	12.63	33.12	(17.37)
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)	30	41	44	79	52
Ratio of expenses before expense reductions (%)	2.00	1.99	1.90	1.91	1.96
Ratio of expenses after expense reductions (%)	1.50	1.49	1.49	1.49	1.49
Ratio of net investment income (loss) (%)	(.84)^d	(1.27)	(1.22)	(.84)	(.77)
Portfolio turnover rate (%)	100	108	99	74	66
^a Based on average shares outstanding during the period. ^b Because of the timing of subscriptions and redemptions in relation to fluctuating markets at value the amount shown may not agree with the change in aggregate gains and losses. ^c Total return would have been lower had certain expenses not been reduced. ^d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Scudder Funds (see Note G). The non-recurring income resulted in an increase in net investment income of $0.061 per share and an increase in the ratio of net investment income of 0.29%. Excluding this non-recurring income, total return would have been 0.34% lower. ^e The Fund realized a gain of $18,520 on the disposal of an investment not adhering to the Fund's investment restrictions. Excluding this gain, total return would have been 0.02% lower. ^* Amount is less than $.005.

Undistributed ordinary income*	$ 3,506,846
Undistributed net long-term capital gains	$ 8,758,366
Net unrealized appreciation (depreciation) on investments	$ 3,587,687

Annual Report to Shareholders

Annual Report
to Shareholders

First $250 million of the Fund's average daily net assets	1.25%
Next $250 million of such net assets	1.10%
Next $500 million of such net assets	.95%
Over $1.0 billion of such net assets	.80%

Class A	1.74%
Class B	2.49%
Class C	2.49%
Investment Class	1.74%
Class S	1.74%
Institutional Class	1.49%

Class A	1.65%
Class B	2.40%
Class C	2.40%
Investment Class	1.65%
Class S	1.40%
Institutional Class	1.40%

Administrator Service Fee	Total Aggregated	Waived
Class A	$ 47,462	$ 37,604
Class B	8,351	6,738
Class C	15,601	12,602
Investment Class	34,624	18,230
Class S	3,581	1,383
Institutional Class	70,718	54,154
	$ 180,337	$ 130,711

Services to Shareholders	Total Aggregated	Waived	Unpaid at September 30, 2006
Class A	$ 18,172	$ 17,122	$ 1,050
Class B	3,690	3,145	545
Class C	3,796	3,121	675
Investment Class	2,958	—	2,958
Class S	612	529	83
Institutional Class	6,930	5,726	1,204
	$ 36,158	$ 29,643	$ 6,515

Distribution Fee	Total Aggregated	Unpaid at September 30, 2006
Class A	$ 70,655	$ 6,324
Class B	36,312	2,684
Class C	68,743	5,325
	$ 175,710	$ 14,333

Shareholder Servicing Fee	Total Aggregated	Unpaid at September 30, 2006	Annual Effective Rate
Class B	$ 11,843	$ 1,774	.24%
Class C	22,408	3,796	.24%
Investment Class	40,440	28,447	.20%
	$ 74,691	$ 34,017

	Year Ended September 30, 2006		Year Ended September 30, 2005
	Shares	Dollars	Shares	Dollars
Shares sold
Class A	757,398	$ 15,545,626	714,599	$ 15,273,484
Class B	41,062	846,542	57,849	1,217,053
Class C	105,725	2,132,185	145,553	3,045,625
Investment Class*	410,129	8,825,827	210,570	4,546,252
Class S	60,587	1,281,289	28,044**	604,016**
Institutional Class	489,828	10,380,679	363,137	7,857,153
		$ 39,012,148		$ 32,543,583
Shares issued to shareholders in reinvestment of distributions
Class A	184,048	$ 3,701,205	99,862	$ 2,099,157
Class B	35,416	689,197	25,390	523,030
Class C	67,456	1,312,703	41,863	862,385
Investment Class*	143,496	2,882,828	84,185	1,768,725
Class S	4,890	98,386	—	—
Institutional Class	307,865	6,338,931	177,681	3,800,594
		$ 15,023,250		$ 9,053,891
Shares redeemed
Class A	(588,049)	$ (12,104,125)	(703,113)	$ (14,946,344)
Class B	(86,554)	(1,758,230)	(116,098)	(2,421,030)
Class C	(153,140)	(3,052,710)	(444,982)	(9,576,355)
Investment Class*	(443,471)	(8,929,235)	(387,415)	(8,251,873)
Class S	(24,615)	(478,943)	(4,236)**	(94,421)**
Institutional Class	(1,074,921)	(22,693,159)	(819,084)	(17,586,457)
		$ (49,016,402)		$ (52,876,480)
Redemption fees		$ 4,801		$ 723
Net increase (decrease)
Class A	353,397	$ 7,143,563	111,348	$ 2,426,323
Class B	(10,076)	(222,220)	(32,859)	(680,946)
Class C	20,041	392,375	(257,566)	(5,668,286)
Investment Class*	110,154	2,779,850	(92,660)	(1,936,500)
Class S	40,862	900,754	23,808**	509,595**
Institutional Class	(277,228)	(5,970,525)	(278,266)	(5,928,469)
		$ 5,023,797		$ (11,278,283)

	Number of Votes:
	For	Withheld
Henry P. Becton, Jr.	439,217,704.469	3,753,093.585
Dawn-Marie Driscoll	439,224,192.946	3,743,605.108
Keith R. Fox	439,230,602.032	3,737,196.022
Kenneth C. Froewiss	439,255,986.088	3,711,811.966
Martin J. Gruber	439,184,395.908	3,783,402.146
Richard J. Herring	439,254,370.904	3,713,427.150
Graham E. Jones	439,202,833.057	3,764,964.997
Rebecca W. Rimel	439,229,633.088	3,738,164.966
Philip Saunders, Jr.	439,157,742.341	3,810,055.713
William N. Searcy, Jr.	439,269,874.890	3,697,923.164
Jean Gleason Stromberg	439,256,234.415	3,711,563.639
Carl W. Vogt	439,195,306.566	3,772,491.488
Axel Schwarzer	439,210,622.946	3,757,175.108

Number of Votes:
For	Against	Abstain	Broker Non-Votes*
2,570,119.478	106,122.028	124,438.007	663,092.000