N-CSRS 1 sr043010af_cfi.htm DWS CORE FIXED INCOME FUND

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

FORM N-CSRS

 

Investment Company Act file number

811-04760

 

DWS Advisor Funds

(Exact Name of Registrant as Specified in Charter)

 

345 Park Avenue

New York, NY 10154-0004

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, including Area Code: (212) 454-7190

 

Paul Schubert

345 Park Avenue

New York, NY 10154-0004

(Name and Address of Agent for Service)

 

Date of fiscal year end:

10/31

 

Date of reporting period:

4/30/2010

 

ITEM 1.

REPORT TO STOCKHOLDERS

 

 

 

APRIL 30, 2010

Semiannual Report
to Shareholders

 

 

DWS Core Fixed Income Fund

cfi_cover10

Contents

4 Performance Summary

7 Information About Your Fund's Expenses

9 Portfolio Summary

11 Investment Portfolio

17 Financial Statements

21 Financial Highlights

27 Notes to Financial Statements

37 Summary of Management Fee Evaluation by Independent Fee Consultant

42 Account Management Resources

44 Privacy Statement

This report must be preceded or accompanied by a prospectus. To obtain a summary prospectus, if available, or 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 summary prospectus and prospectus contain this and other important information about the fund. Please read the prospectus carefully before you invest.

Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. In the current market environment, mortgage backed securities are experiencing increased volatility. See the prospectus for details.

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

Performance Summary April 30, 2010

Average Annual Total Returns as of 4/30/10

Unadjusted for Sales Charge

6-Month‡

1-Year

3-Year

5-Year

10-Year

Class A

2.97%

10.73%

-0.76%

0.96%

4.19%

Class B

2.48%

9.89%

-1.51%

0.20%

3.40%

Class C

2.59%

10.00%

-1.51%

0.22%

3.41%

Adjusted for the Maximum Sales Charge

 

 

 

 

 

Class A (max 4.50% load)

-1.66%

5.75%

-2.27%

0.04%

3.71%

Class B (max 4.00% CDSC)

-1.52%

6.89%

-2.10%

0.03%

3.40%

Class C (max 1.00% CDSC)

1.59%

10.00%

-1.51%

0.22%

3.41%

No Sales Charges

 

 

 

 

 

Class R

2.73%

10.41%

-1.01%

0.72%

3.94%

Class S

2.94%

10.93%

-0.53%

1.14%

4.31%

Institutional Class

2.99%

11.00%

-0.55%

1.19%

4.44%

Barclays Capital US Aggregate Bond Index+

2.54%

8.30%

6.32%

5.38%

6.43%

Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.

‡ Total returns shown for periods less than one year are not annualized.

Performance in the Average Annual Total Returns table above and the Growth of an Assumed $10,000 Investment line graph that follows is historical and does not guarantee future results. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit www.dws-investments.com for the Fund's most recent month-end performance. Performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had.

The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated March 1, 2010 are 1.05%, 1.84%, 1.74%, 1.35%, 0.76% and 0.68% for Class A, Class B, Class C, Class R, Class S and Institutional Class shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.

Index returns, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Returns shown for Class A, B and C shares for the periods prior to their inception on June 28, 2002, Class R shares on October 1, 2003 and Class S shares on February 1, 2005 are derived from the historical performance of Institutional Class shares of DWS Core Fixed Income Fund during such periods and have been adjusted to reflect the higher total annual operating expenses of each specific class. Any difference in expenses will affect performance.

Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge)

[] DWS Core Fixed Income Fund — Class A

[] Barclays Capital US Aggregate Bond Index+

cfi_g10k50

Yearly periods ended April 30

The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 4.50%. This results in a net initial investment of $9,550.

The growth of $10,000 is cumulative.

Performance of other share classes will vary based on the sales charges and the fee structure of those classes.

+ Barclays Capital US Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with average maturities of one year or more.

Net Asset Value and Distribution Information

 

Class A

Class B

Class C

Class R

Class S

Institutional Class

Net Asset Value:

4/30/10

$ 9.16

$ 9.15

$ 9.16

$ 9.20

$ 9.15

$ 9.15

10/31/09

$ 9.04

$ 9.04

$ 9.04

$ 9.09

$ 9.04

$ 9.04

Distribution Information:

Six Months as of 4/30/10:

Income Dividends

$ .15

$ .11

$ .11

$ .14

$. .15

$ .16

April Income Dividend

$ .0222

$ .0166

$ .0166

$ .0205

$ .0234

$ .0242

SEC 30-day Yield as of 4/30/10++

2.59%

1.98%

1.97%

2.47%

2.87%

2.97%

Current Annualized Distribution Rate as of 4/30/10++

2.95%

2.21%

2.20%

2.71%

3.11%

3.22%

++ The SEC yield is net investment income per share earned over the month ended April 30, 2010, shown as an annualized percentage of the maximum offering price per share on the last day of the period. The SEC yield is computed in accordance with a standardized method prescribed by the Securities and Exchange Commission. The SEC yields would have been 2.03%, 1.82%, 1.80%, 2.41% and 2.74% for Class A, B, C, R and S shares, respectively, had certain expenses not been reduced. Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value on April 30, 2010. Distribution rate simply measures the level of dividends and is not a complete measure of performance. The current annualized distribution rates would have been 2.39%, 2.05%, 2.03%, 2.65% and 2.98% for Class A, B, C, R and S shares, respectively, had certain expenses not been reduced. Yields and distribution rates are historical, not guaranteed and will fluctuate.

Lipper Rankings — Intermediate Investment Grade Debt Funds Category as of 4/30/10

Period

Rank

 

Number of Fund Classes Tracked

Percentile Ranking (%)

Class A

1-Year

423

of

554

77

3-Year

437

of

465

94

5-Year

370

of

398

93

Class B

1-Year

459

of

554

83

3-Year

442

of

465

95

5-Year

380

of

398

96

Class C

1-Year

451

of

554

82

3-Year

441

of

465

95

5-Year

379

of

398

95

Class R

1-Year

435

of

554

79

3-Year

438

of

465

94

5-Year

375

of

398

94

Class S

1-Year

414

of

554

75

3-Year

434

of

465

94

5-Year

369

of

398

93

Institutional Class

1-Year

411

of

554

75

3-Year

435

of

465

94

5-Year

368

of

398

93

10-Year

211

of

230

92

Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable.

Information About Your Fund's Expenses

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. 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 it 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 (November 1, 2009 to April 30, 2010).

The tables illustrate your Fund's expenses in two ways:

• 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. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.

Expenses and Value of a $1,000 Investment for the six months ended April 30, 2010

Actual Fund Return

Class A

Class B

Class C

Class R

Class S

Institutional Class

Beginning Account Value 11/1/09

$ 1,000.00

$ 1,000.00

$ 1,000.00

$ 1,000.00

$ 1,000.00

$ 1,000.00

Ending Account Value 4/30/10

$ 1,029.70

$ 1,024.80

$ 1,025.90

$ 1,027.30

$ 1,029.40

$ 1,029.90

Expenses Paid per $1,000*

$ 4.33

$ 8.08

$ 8.09

$ 5.58

$ 3.57

$ 3.07

Hypothetical 5% Fund Return

Class A

Class B

Class C

Class R

Class S

Institutional Class

Beginning Account Value 11/1/09

$ 1,000.00

$ 1,000.00

$ 1,000.00

$ 1,000.00

$ 1,000.00

$ 1,000.00

Ending Account Value 4/30/10

$ 1,020.53

$ 1,016.81

$ 1,016.81

$ 1,019.29

$ 1,021.27

$ 1,021.77

Expenses Paid per $1,000*

$ 4.31

$ 8.05

$ 8.05

$ 5.56

$ 3.56

$ 3.06

* 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.

Annualized Expense Ratios

Class A

Class B

Class C

Class R

Class S

Institutional Class

DWS Core Fixed Income Fund

.86%

1.61%

1.61%

1.11%

.71%

.61%

For more information, please refer to the Fund's prospectus.

Portfolio Summary

Asset Allocation (As a % of Net Assets)

4/30/10

10/31/09

 

 

 

Government & Agency Obligations

30%

16%

Mortgage-Backed Securities Pass-Throughs

26%

37%

Corporate Bonds

19%

26%

Cash Equivalents and Other Assets and Liabilities, net

10%

6%

Municipal Bonds and Notes

6%

5%

Commercial Mortgage-Backed Securities

6%

7%

Collateralized Mortgage Obligations

2%

2%

Asset-Backed

1%

1%

 

100%

100%

Sector Diversification (As a % of Corporate Bonds)

4/30/10

10/31/09

 

 

 

Financials

42%

46%

Consumer Staples

14%

9%

Energy

12%

11%

Health Care

10%

7%

Consumer Discretionary

7%

10%

Utilities

5%

5%

Industrials

4%

4%

Materials

4%

4%

Telecommunication Services

2%

4%

 

100%

100%

Quality

4/30/10

10/31/09

 

 

 

US Government and Agencies

54%

49%

AAA*

16%

18%

AA

3%

2%

A

7%

11%

BBB

17%

17%

BB

—

1%

Not Rated

3%

2%

 

100%

100%

Asset allocation, sector diversification and quality are subject to change.

* Includes cash equivalents.

The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Fund's credit quality does not remove market risk.

Effective Maturity

4/30/10

10/31/09

 

 

 

Under 1 year

12%

7%

1-4.99 years

44%

38%

5-9.99 years

32%

47%

10-14.99 years

2%

2%

15 years or greater

10%

6%

 

100%

100%

Effective maturity is the weighted average of the bonds held by the Fund taking into consideration any maturity shortening features.

Weighted average effective maturity: 6.2 years and 6.5 years, respectively.

Effective maturity is subject to change.

For more complete details about the Fund's investment portfolio, see page 10. A quarterly Fact Sheet is available upon request. 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. A complete list of the Fund's portfolio holdings is also posted on www.dws-investments.com from time to time. Please see the Fund's current prospectus for more information.

Investment Portfolio as of April 30, 2010 (Unaudited)

 

Principal Amount ($)

Value ($)

 

 

Corporate Bonds 19.1%

Consumer Discretionary 1.4%

CBS Corp., 7.875%, 7/30/2030

 

2,500,000

2,837,570

DirecTV Holdings LLC, 144A, 6.35%, 3/15/2040

 

1,892,000

1,954,347

NBC Universal, Inc., 144A, 5.15%, 4/30/2020

 

650,000

657,586

Time Warner Cable, Inc., 8.75%, 2/14/2019

 

750,000

939,751

Viacom, Inc., 6.25%, 4/30/2016

 

811,000

909,986

 

7,299,240

Consumer Staples 2.6%

Anheuser-Busch InBev Worldwide, Inc., 144A, 7.75%, 1/15/2019

 

3,100,000

3,731,272

CVS Caremark Corp.:

 

6.125%, 9/15/2039

 

1,750,000

1,794,574

 

6.25%, 6/1/2027

 

2,663,000

2,851,564

Kraft Foods, Inc., 5.375%, 2/10/2020

 

5,400,000

5,600,956

 

13,978,366

Energy 2.2%

Anadarko Petroleum Corp., 6.45%, 9/15/2036

 

2,490,000

2,586,617

DCP Midstream LLC, 144A, 9.75%, 3/15/2019

 

2,330,000

3,033,958

Enterprise Products Operating LLC:

 

4.6%, 8/1/2012

 

700,000

739,043

 

Series M, 5.65%, 4/1/2013

 

830,000

897,893

 

Series B, 7.5%, 2/1/2011

 

1,525,000

1,592,884

Kinder Morgan Energy Partners LP, 6.5%, 9/1/2039

 

2,050,000

2,172,766

Williams Partners LP, 144A, 6.3%, 4/15/2040

 

940,000

973,742

 

11,996,903

Financials 8.0%

American Express Co., 7.0%, 3/19/2018

 

3,400,000

3,887,591

Bank of America Corp.:

 

5.75%, 12/1/2017 (a)

 

4,310,000

4,403,208

 

6.5%, 8/1/2016

 

525,000

566,296

 

7.625%, 6/1/2019

 

150,000

171,228

Barclays Bank PLC:

 

Series 1, 5.0%, 9/22/2016

 

1,210,000

1,253,664

 

5.2%, 7/10/2014 (a)

 

1,165,000

1,249,520

Citigroup, Inc., 8.5%, 5/22/2019 (a)

 

3,000,000

3,541,584

Credit Suisse AG, 5.4%, 1/14/2020

 

720,000

733,013

General Electric Capital Corp., 5.625%, 5/1/2018

 

4,000,000

4,238,400

Hartford Financial Services Group, Inc., 5.95%, 10/15/2036

 

2,400,000

2,214,386

KeyBank NA, 5.7%, 11/1/2017

 

1,900,000

1,917,476

Lincoln National Corp., 8.75%, 7/1/2019

 

1,475,000

1,839,962

Merrill Lynch & Co., Inc., Series C, 5.45%, 7/15/2014

 

445,000

470,186

Metropolitan Life Global Funding I, 144A, 5.125%, 4/10/2013

 

1,670,000

1,796,788

Morgan Stanley, Series F, 6.0%, 4/28/2015

 

2,110,000

2,254,733

PNC Funding Corp., 5.25%, 11/15/2015

 

2,750,000

2,923,839

Principal Financial Group, Inc., 7.875%, 5/15/2014

 

2,150,000

2,445,034

Prudential Financial, Inc.:

 

Series B, 5.1%, 9/20/2014

 

1,120,000

1,198,468

 

6.2%, 1/15/2015

 

820,000

911,552

 

7.375%, 6/15/2019

 

460,000

541,811

Simon Property Group LP, (REIT), 6.75%, 5/15/2014

 

945,000

1,056,047

Telecom Italia Capital SA, 5.25%, 11/15/2013

 

2,871,000

3,022,801

 

42,637,587

Health Care 2.0%

Express Scripts, Inc.:

 

6.25%, 6/15/2014

 

1,480,000

1,659,808

 

7.25%, 6/15/2019

 

2,155,000

2,547,801

Medco Health Solutions, Inc., 7.125%, 3/15/2018

 

3,400,000

3,949,569

Quest Diagnostics, Inc., 6.95%, 7/1/2037

 

2,130,000

2,433,853

 

10,591,031

Industrials 0.8%

CSX Corp.:

 

6.15%, 5/1/2037

 

1,750,000

1,828,115

 

6.25%, 3/15/2018

 

2,200,000

2,453,050

 

4,281,165

Materials 0.7%

Dow Chemical Co., 8.55%, 5/15/2019 (a)

 

3,000,000

3,665,751

Telecommunication Services 0.4%

American Tower Corp., 7.0%, 10/15/2017

 

1,724,000

1,926,570

Utilities 1.0%

FirstEnergy Solutions Corp., 6.8%, 8/15/2039

 

2,316,000

2,321,833

Sempra Energy, 6.5%, 6/1/2016

 

2,600,000

2,956,106

 

5,277,939

Total Corporate Bonds (Cost $91,327,466)

101,654,552

 

Mortgage-Backed Securities Pass-Throughs 26.3%

Federal Home Loan Mortgage Corp.:

 

4.5%, 9/1/2020

 

11,411,039

11,950,924

 

5.0%, with various maturities from 2/1/2021 until 4/1/2035

 

7,703,011

8,151,336

 

5.5%, with various maturities from 10/1/2023 until 1/1/2034

 

4,127,573

4,393,032

 

6.0%, 3/1/2038

 

2,247,436

2,406,601

 

6.5%, 2/1/2038

 

827,247

900,212

Federal National Mortgage Association:

 

3.629%*, 3/1/2036

 

10,697,843

11,286,224

 

4.5%, with various maturities from 8/1/2033 until 10/1/2033

 

6,430,886

6,584,119

 

4.839%*, 8/1/2037

 

5,264,047

5,540,568

 

5.0%, with various maturities from 8/1/2033 until 9/1/2035

 

25,913,865

27,069,171

 

5.5%, with various maturities from 2/1/2025 until 5/1/2035 (b)

 

28,387,527

30,020,362

 

6.0%, with various maturities from 10/1/2022 until 12/1/2035 (b)

 

20,635,600

22,115,245

 

6.5%, with various maturities from 5/1/2023 until 4/1/2037 (b)

 

8,959,846

9,756,221

Total Mortgage-Backed Securities Pass-Throughs (Cost $134,544,572)

140,174,015

 

Asset-Backed 1.5%

Automobile Receivables 0.8%

Household Automotive Trust, "A4", Series 2006-1, 5.52%, 3/18/2013

 

4,306,987

4,374,820

Credit Card Receivables 0.6%

Citibank Omni Master Trust, "A8", Series 2009-A8, 144A, 2.354%*, 5/16/2016

 

3,000,000

3,033,340

Manufactured Housing Receivables 0.1%

Green Tree Financial Corp., "A4", Series 1996-2, 7.2%, 4/15/2026

 

242,702

244,595

Total Asset-Backed (Cost $7,592,319)

7,652,755

 

Commercial Mortgage-Backed Securities 5.6%

Banc of America Commercial Mortgage, Inc.:

 

"A4", Series 2007-2, 5.867%*, 4/10/2049

 

4,900,000

4,794,529

 

"A4", Series 2007-4, 5.935%*, 2/10/2051

 

6,989,022

7,160,283

Bear Stearns Commercial Mortgage Securities, "A4", Series 2007-PW18, 5.7%, 6/11/2050

 

6,923,000

6,884,523

Credit Suisse Mortgage Capital Certificates, "A3", Series 2006-C3, 6.019%*, 6/15/2038

 

4,000,000

4,128,273

LB-UBS Commercial Mortgage Trust:

 

"A3", Series 2006-C7, 5.347%, 11/15/2038

 

2,500,000

2,509,878

 

"A4", Series 2007-C6, 5.858%*, 7/15/2040

 

4,500,000

4,503,529

Total Commercial Mortgage-Backed Securities (Cost $26,693,468)

29,981,015

 

Collateralized Mortgage Obligations 2.3%

Chase Mortgage Finance Corp., "A1", Series 2003-S2, 5.0%, 3/25/2018

 

4,518

4,587

FDIC Structured Sale Guaranteed Notes, "1A", Series 2010-S1, 144A, 0.823%*, 2/25/2048

 

5,919,154

5,935,990

Federal Home Loan Mortgage Corp.:

 

"NE", Series 2802, 5.0%, 2/15/2033

 

90,000

95,701

 

"TE", Series 2827, 5.0%, 4/15/2033

 

65,000

69,016

 

"PE", Series 2864, 5.0%, 6/15/2033

 

40,000

42,367

 

"KE", Series 2934, 5.0%, 11/15/2033

 

53,000

56,242

Federal National Mortgage Association:

 

"EC", Series 2005-15, 5.0%, 10/25/2033

 

80,000

84,728

 

"PE", Series 2005-14, 5.0%, 12/25/2033

 

90,000

95,311

 

"J", Series 1998-36, 6.0%, 7/18/2028

 

2,367,892

2,481,387

 

"PH", Series 1999-19, 6.0%, 5/25/2029

 

3,115,669

3,374,961

Total Collateralized Mortgage Obligations (Cost $11,630,747)

12,240,290

 

Government & Agency Obligations 29.8%

US Treasury Obligations

US Treasury Bill, 0.185%**, 9/16/2010 (c)

 

396,000

395,713

US Treasury Bonds:

 

4.75%, 2/15/2037 (a)

 

17,000,000

17,738,446

 

5.375%, 2/15/2031 (a)

 

10,000,000

11,353,120

US Treasury Notes:

 

1.375%, 2/15/2012 (a)

 

37,500,000

37,841,325

 

1.75%, 1/31/2014 (a)

 

80,000,000

79,581,280

 

3.625%, 2/15/2020 (a)

 

12,000,000

11,964,372

Total Government & Agency Obligations (Cost $157,391,143)

158,874,256

 

Municipal Bonds and Notes 6.0%

Illinois, State General Obligation, 4.421%, 1/1/2015 (d)

1,000,000

1,017,720

Los Angeles, CA, Community Redevelopment Agency, Community Redevelopment Financing Authority Revenue, Series L, 6.02%, 9/1/2021 (e)

6,480,000

6,133,190

Nashville & Davidson County, TN, Metropolitan Government, Convention Center Authority Revenue, Build America Bonds, Series A2, 7.431%, 7/1/2043

750,000

820,493

Pomona, CA, Pension Obligation, Series AR, 5.732%, 7/1/2025 (e)

2,245,000

2,012,193

Pueblo of Santa Ana, NM, Certificates of Participation, "A", 5.875%, 4/1/2024

7,020,000

6,132,040

Rancho Cordova, CA, Certificates of Partnership, City Hall Acquisition, Series B, 5.65%, 2/1/2024 (e)

4,340,000

3,977,914

Riverside, CA, Public Financing Authority, Tax Allocation Revenue, University Corridor, Series D, 5.89%, 8/1/2032 (e)

925,000

727,466

West Virginia, State General Obligation, Jobs Inventory Trust Board:

 

 

Series A, Zero Coupon, 1/22/2012

1,300,000

1,175,941

 

Series A, 144A, Zero Coupon, 6/12/2013

1,500,000

1,239,765

 

Series C, 144A, Zero Coupon, 7/31/2013

3,500,000

2,865,520

Wilkes Barre, PA, General Obligation, Series C, 5.48%, 11/15/2024 (e)

6,315,000

5,803,801

Total Municipal Bonds and Notes (Cost $33,680,072)

31,906,043

 

 

Shares

Value ($)

 

 

Securities Lending Collateral 31.3%

Daily Assets Fund Institutional, 0.25% (f) (g)
(Cost $166,878,464)

 

166,878,464

166,878,464

 

Cash Equivalents 14.8%

Central Cash Management Fund, 0.21% (f)
(Cost $78,825,393)

 

78,825,393

78,825,393

 

 

% of Net Assets

Value ($)

 

 

Total Investment Portfolio (Cost $708,563,644)+

136.7

728,186,783

Other Assets and Liabilities, Net (a)

(36.7)

(195,424,356)

Net Assets

100.0

532,762,427

* These securities are shown at their current rate as of April 30, 2010. Floating rate securities' yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate.
** Annualized yield at time of purchase; not a coupon rate.
+ The cost for federal income tax purposes was $709,454,267. At April 30, 2010, net unrealized appreciation for all securities based on tax cost was $18,732,516. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $21,627,940 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,895,424.
(a) All or a portion of these securities were on loan, amounting to $160,661,704. In addition, included in other assets and liabilities, net are pending sales, amounting to $2,295,443, that are also on loan (see Notes to Financial Statements). The value of all securities loaned at April 30, 2010 amounted to $162,957,147, which is 30.6% of net assets.
(b) Delayed delivery security included.
(c) At April 30, 2010, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.
(d) Taxable issue.
(e) Bond is insured by one of these companies:

Insurance Coverage

As a % of Total Investment Portfolio

Ambac Financial Group, Inc.

1.4

National Public Finance Guarantee Corp.

1.3

Many insurers who have traditionally guaranteed payment of municipal issues have been downgraded by the major rating agencies.

(f) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(g) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

REIT: Real Estate Investment Trust

Included in the portfolio are investments in mortgage- or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal Home Loan Mortgage Corp. and Federal National Mortgage Association issues have similar coupon rates and have been aggregated for presentation purposes in the investment portfolio.

At April 30, 2010, open futures contracts purchased were as follows:

Futures

Currency

Expiration Date

Contracts

Notional

Value ($)

Unrealized Depreciation ($)

10-Year US Treasury Note

USD

6/21/2010

300

35,371,875

(174,038)

Currency Abbreviation

USD United States Dollar

For information on the Fund's policy and additional disclosures regarding futures contracts, please refer to the Derivatives section of Note A in the accompanying Notes to Financial Statements.

Fair Value Measurements

Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of April 30, 2010 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.

Assets

Level 1

Level 2

Level 3

Total

 

Fixed Income (h)

 

 

 

 

Corporate Bonds

$ —

$ 101,654,552

$ —

$ 101,654,552

Mortgage-Backed Securities Pass-Throughs

—

140,174,015

—

140,174,015

Asset-Backed

—

7,652,755

—

7,652,755

Commercial Mortgage-Backed Securities

—

29,981,015

—

29,981,015

Collateralized Mortgage Obligations

—

12,240,290

—

12,240,290

Government & Agency Obligations

—

158,478,543

—

158,478,543

Municipal Bonds and Notes

—

31,906,043

—

31,906,043

Short-Term Investments (h)

245,703,857

395,713

—

246,099,570

Total

$ 245,703,857

$ 482,482,926

$ —

$728,186,783

Liabilities

 

 

 

 

Derivatives (i)

$ (174,038)

$ —

$ —

$ (174,038)

Total

$ (174,038)

$ —

$ —

$ (174,038)

(h) See Investment Portfolio for additional detailed categorizations.
(i) Derivatives include unrealized appreciation (depreciation) on open futures contracts.

The accompanying notes are an integral part of the financial statements.

Financial Statements

Statement of Assets and Liabilities as of April 30, 2010 (Unaudited)

Assets

Investments:

Investments in securities, at value (cost $462,859,787) — including $160,661,704 of securities loaned

$ 482,482,926

Investment in Daily Assets Fund Institutional (cost $166,878,464)*

166,878,464

Investment in Central Cash Management Fund (cost $78,825,393)

78,825,393

Total investments, at value (cost $708,563,644)

728,186,783

Receivable for investments sold

36,734,270

Receivable for delayed delivery securities sold

91,318,265

Receivable for Fund shares sold

253,445

Interest receivable

3,602,549

Foreign taxes recoverable

4,045

Other assets

61,275

Total assets

860,160,632

Liabilities

Cash overdraft

4,243,270

Payable for investments purchased

32,481,000

Payable for delayed delivery securities purchased

119,659,788

Payable for Fund shares redeemed

2,944,735

Payable upon return of securities loaned

166,878,464

Payable for daily variation margin on open futures contracts

140,625

Distributions payable

167,228

Accrued management fee

179,037

Other accrued expenses and payables

704,058

Total liabilities

327,398,205

Net assets, at value

$ 532,762,427

* Represents collateral on securities loaned.

The accompanying notes are an integral part of the financial statements.

Statement of Assets and Liabilities as of April 30, 2010 (Unaudited) (continued)

Net Assets Consist of:

Accumulated distributions in excess of net investment income

(336,308)

Net unrealized appreciation (depreciation) on:

Investments

19,623,139

Futures

(174,038)

Accumulated net realized gain (loss)

(304,601,724)

Paid-in capital

818,251,358

Net assets, at value

$ 532,762,427

Net Asset Value

Class A

Net Asset Value and redemption price per share ($255,532,043 ÷ 27,906,657 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 9.16

Maximum offering price per share (100 ÷ 95.50 of $9.16)

$ 9.59

Class B

Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($8,948,518 ÷ 978,041 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 9.15

Class C

Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($26,458,842 ÷ 2,890,011 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 9.16

Class R

Net Asset Value, offering and redemption price per share ($3,120,400 ÷ 339,199 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 9.20

Class S

Net Asset Value, offering and redemption price per share ($54,099,857 ÷ 5,912,018 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 9.15

Institutional Class

Net Asset Value, offering and redemption price per share ($184,602,767 ÷ 20,165,771 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 9.15

The accompanying notes are an integral part of the financial statements.

Statement of Operations for the six months ended April 30, 2010 (Unaudited)

Investment Income

Income:
Interest

$ 12,001,271

Income distributions — Central Cash Management Fund

86,385

Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates

11,400

Total Income

12,099,056

Expenses:
Management fee

1,176,106

Administration fee

294,027

Services to shareholders

777,188

Distribution and service fees

546,972

Custodian fee

17,640

Professional fees

47,453

Trustees' fees and expenses

13,333

Reports to shareholders

135,808

Registration fees

41,696

Other

31,854

Total expenses before expense reductions

3,082,077

Expense reductions

(699,200)

Total expenses after expense reductions

2,382,877

Net investment income

9,716,179

Realized and Unrealized Gain (Loss)

Net realized gain (loss) from:
Investments

18,883,293

Futures

(2,129,076)

 

16,754,217

Change in net unrealized appreciation (depreciation) on:
Investments

(9,797,635)

Futures

(5,310)

 

(9,802,945)

Net gain (loss)

6,951,272

Net increase (decrease) in net assets resulting from operations

$ 16,667,451

The accompanying notes are an integral part of the financial statements.

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets

Six Months Ended April 30, 2010 (Unaudited)

Year Ended October 31, 2009

Operations:
Net investment income

$ 9,716,179

$ 58,621,652

Net realized gain (loss)

16,754,217

(304,109,002)

Change in net unrealized appreciation (depreciation)

(9,802,945)

290,990,902

Net increase (decrease) in net assets resulting from operations

16,667,451

45,503,552

Distributions to shareholders from:
Net investment income:

Class A

(4,678,544)

(20,504,435)

Class B

(127,749)

(642,236)

Class C

(366,628)

(1,577,820)

Class R

(47,829)

(146,709)

Class S

(862,966)

(3,449,579)

Institutional Class

(3,647,193)

(32,325,189)

Total distributions

(9,730,909)

(58,645,968)

Fund share transactions:
Proceeds from shares sold

42,409,315

306,250,462

Reinvestment of distributions

8,721,747

55,035,286

Cost of shares redeemed

(178,981,868)

(1,157,988,518)

Redemption fees

—

19,275

Net increase (decrease) in net assets from Fund share transactions

(127,850,806)

(796,683,495)

Increase (decrease) in net assets

(120,914,264)

(809,825,911)

Net assets at beginning of period

653,676,691

1,463,502,602

Net assets at end of period (including accumulated distributions in excess of net investment income of $336,308 and $321,578, respectively)

$ 532,762,427

$ 653,676,691

The accompanying notes are an integral part of the financial statements.

Financial Highlights

Class A

Years Ended October 31,

2010a

2009

2008

2007

2006

2005

Selected Per Share Data

Net asset value, beginning of period

$ 9.04

$ 9.01

$ 10.66

$ 10.72

$ 10.73

$ 11.08

Income (loss) from investment operations:

Net investment incomeb

.15

.42

.51

.49

.47

.44

Net realized and unrealized gain (loss)

.12

.02c

(1.65)

(.06)

.02

(.30)

Total from investment operations

.27

.44

(1.14)

.43

.49

.14

Less distributions from:

Net investment income

(.15)

(.41)

(.51)

(.49)

(.48)

(.44)

Net realized gains

—

—

—

—

(.02)

(.05)

Total distributions

(.15)

(.41)

(.51)

(.49)

(.50)

(.49)

Redemption fees

—

.00***

.00***

.00***

.00***

.00***

Net asset value, end of period

$ 9.16

$ 9.04

$ 9.01

$ 10.66

$ 10.72

$ 10.73

Total Return (%)d,e

2.97**

5.18

(11.17)

4.14

4.72

1.28

Ratios to Average Net Assets and Supplemental Data

Net assets, end of period ($ millions)

256

313

562

788

611

431

Ratio of expenses before expense reductions (%)

1.15*

1.05

.97

.99

.95

.81

Ratio of expenses after expense reductions (%)

.86*

.78

.80

.80

.82

.80

Ratio of net investment income (%)

3.26*

4.84

4.93

4.64

4.50

4.04

Portfolio turnover rate (%)

83**

258

223

194

173

177f

a For the six months ended April 30, 2010 (Unaudited).
b Based on average shares outstanding during the period.
c The amount of net realized and unrealized gain shown for a share outstanding for the period ended October 31, 2009 does not correspond with the aggregate net loss on investments for the period due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
d Total return does not reflect the effect of any sales charges.
e Total return would have been lower had certain expenses not been reduced.
f Excludes portfolio securities delivered as a result of processing redemption in-kind transactions.
* Annualized
** Not annualized
*** Amount is less than $.005.

Class B

Years Ended October 31,

2010a

2009

2008

2007

2006

2005

Selected Per Share Data

Net asset value, beginning of period

$ 9.04

$ 9.00

$ 10.65

$ 10.71

$ 10.72

$ 11.07

Income (loss) from investment operations:

Net investment incomeb

.11

.36

.43

.41

.39

.36

Net realized and unrealized gain (loss)

.11

.02c

(1.65)

(.06)

.02

(.30)

Total from investment operations

.22

.38

(1.22)

.35

.41

.06

Less distributions from:

Net investment income

(.11)

(.34)

(.43)

(.41)

(.40)

(.36)

Net realized gains

—

—

—

—

(.02)

(.05)

Total distributions

(.11)

(.34)

(.43)

(.41)

(.42)

(.41)

Redemption fees

—

.00***

.00***

.00***

.00***

.00***

Net asset value, end of period

$ 9.15

$ 9.04

$ 9.00

$ 10.65

$ 10.71

$ 10.72

Total Return (%)d,e

2.48**

4.37

(11.75)

3.36

3.94

.51

Ratios to Average Net Assets and Supplemental Data

Net assets, end of period ($ millions)

9

12

23

31

35

41

Ratio of expenses before expense reductions (%)

1.86*

1.84

1.72

1.75

1.67

1.56

Ratio of expenses after expense reductions (%)

1.61*

1.55

1.55

1.55

1.57

1.55

Ratio of net investment income (%)

2.51*

4.07

4.18

3.89

3.75

3.29

Portfolio turnover rate (%)

83**

258

223

194

173

177f

a For the six months ended April 30, 2010 (Unaudited).
b Based on average shares outstanding during the period.
c The amount of net realized and unrealized gain shown for a share outstanding for the period ended October 31, 2009 does not correspond with the aggregate net loss on investments for the period due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
d Total return does not reflect the effect of any sales charges.
e Total return would have been lower had certain expenses not been reduced.
f Excludes portfolio securities delivered as a result of processing redemption in-kind transactions.
* Annualized
** Not annualized
*** Amount is less than $.005.

Class C

Years Ended October 31,

2010a

2009

2008

2007

2006

2005

Selected Per Share Data

Net asset value, beginning of period

$ 9.04

$ 9.01

$ 10.66

$ 10.72

$ 10.73

$ 11.08

Income (loss) from investment operations:

Net investment incomeb

.11

.36

.43

.41

.39

.36

Net realized and unrealized gain (loss)

.12

.01c

(1.65)

(.06)

.02

(.30)

Total from investment operations

.23

.37

(1.22)

.35

.41

.06

Less distributions from:

Net investment income

(.11)

(.34)

(.43)

(.41)

(.40)

(.36)

Net realized gains

—

—

—

—

(.02)

(.05)

Total distributions

(.11)

(.34)

(.43)

(.41)

(.42)

(.41)

Redemption fees

—

.00***

.00***

.00***

.00***

.00***

Net asset value, end of period

$ 9.16

$ 9.04

$ 9.01

$ 10.66

$ 10.72

$ 10.73

Total Return (%)d,e

2.59**

4.36

(11.84)

3.37

3.94

.52

Ratios to Average Net Assets and Supplemental Data

Net assets, end of period ($ millions)

26

33

48

69

55

55

Ratio of expenses before expense reductions (%)

1.78*

1.74

1.66

1.68

1.63

1.56

Ratio of expenses after expense reductions (%)

1.61*

1.55

1.55

1.55

1.57

1.55

Ratio of net investment income (%)

2.51*

4.07

4.18

3.89

3.75

3.29

Portfolio turnover rate (%)

83**

258

223

194

173

177f

a For the six months ended April 30, 2010 (Unaudited).
b Based on average shares outstanding during the period.
c The amount of net realized and unrealized gain shown for a share outstanding for the period ended October 31, 2009 does not correspond with the aggregate net loss on investments for the period due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
d Total return does not reflect the effect of any sales charges.
e Total return would have been lower had certain expenses not been reduced.
f Excludes portfolio securities delivered as a result of processing redemption in-kind transactions.
* Annualized
** Not annualized
*** Amount is less than $.005.

Class R

Years Ended October 31,

2010a

2009

2008

2007

2006

2005

Selected Per Share Data

Net asset value, beginning of period

$ 9.09

$ 9.05

$ 10.71

$ 10.77

$ 10.77

$ 11.12

Income (loss) from investment operations:

Net investment incomeb

.14

.40

.48

.47

.45

.41

Net realized and unrealized gain (loss)

.11

.03c

(1.65)

(.06)

.02

(.30)

Total from investment operations

.25

.43

(1.17)

.41

.47

.11

Less distributions from:

Net investment income

(.14)

(.39)

(.49)

(.47)

(.45)

(.41)

Net realized gains

—

—

—

—

(.02)

(.05)

Total distributions

(.14)

(.39)

(.49)

(.47)

(.47)

(.46)

Redemption fees

—

.00***

.00***

.00***

.00***

.00***

Net asset value, end of period

$ 9.20

$ 9.09

$ 9.05

$ 10.71

$ 10.77

$ 10.77

Total Return (%)

2.73d**

5.02d

(11.41)d

3.88d

4.56d

1.04

Ratios to Average Net Assets and Supplemental Data

Net assets, end of period ($ millions)

3

3

3

5

10

7

Ratio of expenses before expense reductions (%)

1.23*

1.35

1.18

1.16

1.12

1.05

Ratio of expenses after expense reductions (%)

1.11*

1.06

1.05

1.05

1.08

1.05

Ratio of net investment income (%)

3.00*

4.57

4.68

4.39

4.24

3.79

Portfolio turnover rate (%)

83**

258

223

194

173

177e

a For the six months ended April 30, 2010 (Unaudited).
b Based on average shares outstanding during the period.
c The amount of net realized and unrealized gain shown for a share outstanding for the period ended October 31, 2009 does not correspond with the aggregate net loss on investments for the period due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
d Total return would have been lower had certain expenses not been reduced.
e Excludes portfolio securities delivered as a result of processing redemption in-kind transactions.
* Annualized
** Not annualized
*** Amount is less than $.005.

Class S

Years Ended October 31,

2010a

2009

2008

2007

2006

2005b

Selected Per Share Data

Net asset value, beginning of period

$ 9.04

$ 9.00

$ 10.65

$ 10.71

$ 10.73

$ 11.02

Income (loss) from investment operations:

Net investment incomec

.15

.44

.53

.52

.49

.34

Net realized and unrealized gain (loss)

.11

.03d

(1.65)

(.06)

.00***

(.29)

Total from investment operations

.26

.47

(1.12)

.46

.49

.05

Less distributions from:

Net investment income

(.15)

(.43)

(.53)

(.52)

(.49)

(.34)

Net realized gains

—

—

—

—

(.02)

—

Total distributions

(.15)

(.43)

(.53)

(.52)

(.51)

(.34)

Redemption fees

—

.00***

.00***

.00***

.00***

.00***

Net asset value, end of period

$ 9.15

$ 9.04

$ 9.00

$ 10.65

$ 10.71

$ 10.73

Total Return (%)e

2.94**

5.42

(10.86)

4.40

4.73

.41**

Ratios to Average Net Assets and Supplemental Data

Net assets, end of period ($ millions)

54

54

86

133

113

1

Ratio of expenses before expense reductions (%)

.89*

.76

.80

.77

.93

.81*

Ratio of expenses after expense reductions (%)

.71*

.56

.55

.55

.67

.74*

Ratio of net investment income (%)

3.41*

5.06

5.18

4.89

4.65

4.12*

Portfolio turnover rate (%)

83**

258

223

194

173

177f

a For the six months ended April 30, 2010 (Unaudited).
b For the period from February 1, 2005 (commencement of operations of Class S shares) to October 31, 2005.
c Based on average shares outstanding during the period.
d The amount of net realized and unrealized gain shown for a share outstanding for the period ended October 31, 2009 does not correspond with the aggregate net loss on investments for the period due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
e Total return would have been lower had certain expenses not been reduced.
f Excludes portfolio securities delivered as a result of processing redemption in-kind transactions.
* Annualized
** Not annualized
*** Amount is less than $.005.

Institutional Class

Years Ended October 31,

2010a

2009

2008

2007

2006

2005

Selected Per Share Data

Net asset value, beginning of period

$ 9.04

$ 9.01

$ 10.66

$ 10.72

$ 10.73

$ 11.08

Income (loss) from investment operations:

Net investment incomeb

.16

.44

.54

.52

.50

.47

Net realized and unrealized gain (loss)

.11

.02c

(1.66)

(.06)

.01

(.30)

Total from investment operations

.27

.46

(1.12)

.46

.51

.17

Less distributions from:

Net investment income

(.16)

(.43)

(.53)

(.52)

(.50)

(.47)

Net realized gains

—

—

—

—

(.02)

(.05)

Total distributions

(.16)

(.43)

(.53)

(.52)

(.52)

(.52)

Redemption fees

—

.00***

.00***

.00***

.00***

.00***

Net asset value, end of period

$ 9.15

$ 9.04

$ 9.01

$ 10.66

$ 10.72

$ 10.73

Total Return (%)d

2.99**

5.42

(10.94)

4.40

4.98

1.52

Ratios to Average Net Assets and Supplemental Data

Net assets, end of period ($ millions)

185

239

740

624

599

571

Ratio of expenses before expense reductions (%)

.80*

.68

.58

.59

.61

.56

Ratio of expenses after expense reductions (%)

.61*

.55

.55

.55

.58

.55

Ratio of net investment income (%)

3.51*

5.07

5.18

4.89

4.74

4.29

Portfolio turnover rate (%)

83**

258

223

194

173

177e

a For the six months ended April 30, 2010 (Unaudited).
b Based on average shares outstanding during the period.
c The amount of net realized and unrealized gain shown for a share outstanding for the period ended October 31, 2009 does not correspond with the aggregate net loss on investments for the period due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
d Total return would have been lower had certain expenses not been reduced.
e Excludes portfolio securities delivered as a result of processing redemption in-kind transactions.
* Annualized
** Not annualized
*** Amount is less than $.005.

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

DWS Core Fixed Income 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 management investment company organized as a Massachusetts business trust.

The Fund offers 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 of the Fund are closed to new purchases, except exchanges or the reinvestment of dividends or other distributions. Class B shares were offered to investors without an initial sales charge and 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 automatically convert into another class. Class R shares are only available to participants in certain retirement plans and are offered to investors without an initial sales charge or contingent deferred sales charge. 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 and are generally not available to new investors except under certain circumstances.

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 and 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. Debt securities are valued by independent pricing services approved by the Trustees of the Fund. If the pricing services are unable to provide valuations, the securities are valued at the most recent bid quotation or evaluated price, as applicable, obtained from one or more broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes.

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 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. In accordance with the Fund's valuation procedures, factors used in determining value may include, but are not limited to, the type of the security, the size of the holding, the initial cost of the security, the existence of any contractual restrictions on the security's disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies, quotations or evaluated prices from broker-dealers and/or pricing services, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company's or issuer's financial statements, an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

Securities Lending. The Fund may lend securities to certain financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of 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 either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. 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 a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

When-Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time the Fund enters into this type of transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Certain risks may arise upon entering into when-issued or delayed delivery securities from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.

Derivatives. Authoritative accounting guidance requires that disclosures about the Fund's derivative and hedging activities and derivatives accounted for as hedging instruments must be disclosed separately from derivatives that do not qualify for hedge accounting. Because investment companies account for their derivatives at fair value and record any changes in fair value in current period earnings, the Fund's derivatives are not accounted for as hedging instruments. As such, even though the Fund may use derivatives in an attempt to achieve an economic hedge, the Fund's derivatives are not considered to be hedging instruments. The disclosure below is presented in accordance with authoritative accounting guidance.

Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund enters into interest rate futures to gain exposure to different parts of the yield curve while managing overall duration.

Futures contracts are valued at the most recent settlement price. Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary cash or securities ("initial margin") in an amount equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. Gains or losses are realized when the contract expires or is closed. Since all futures contracts are exchange traded, counterparty risk is minimized as the exchange's clearinghouse acts as the counterparty, and guarantees the futures against default.

Certain risks may arise upon entering into futures contracts, including the risk that an illiquid market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the underlying hedged security, index or currency. Risk of loss may exceed amounts recognized in the Statement of Assets and Liabilities.

A summary of the open futures contracts as of April 30, 2010 is included in a table following the Fund's Investment Portfolio. For the six months ended April 30, 2010, the Fund invested in futures contracts with a total notional value generally indicative of a range from approximately $35,372,000 to $97,877,000.

The following table summarizes the value of the Fund's derivative instruments held as of April 30, 2010 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:

Liability Derivative

Futures Contracts

Interest Rate Contracts (a)

$ (174,038)

The above derivative is located in the following Statement of Assets and Liabilities account:

(a) Net unrealized appreciation (depreciation) on futures. Liability of Payable for daily variation margin on open futures contracts reflects unsettled variation margin.

Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the six months ended April 30, 2010 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:

Realized Gain (Loss)

Futures Contracts

Interest Rate Contracts (a)

$ (2,129,076)

The above derivative is located in the following Statement of Operations account:

(a) Net realized gain (loss) from futures

Change in Net Unrealized Appreciation (Depreciation)

Futures Contracts

Interest Rate Contracts (a)

$ (5,310)

The above derivative is located in the following Statement of Operations account:

(a) Change in net unrealized appreciation (depreciation) on futures

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.

At October 31, 2009, the Fund had a net tax basis capital loss carryforward of approximately $320,634,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until October 31, 2014 ($11,016,000), October 31, 2016 ($3,331,000) and October 31, 2017 ($306,287,000), the respective expiration dates, whichever occurs first.

The Fund has reviewed the tax positions for the open tax years as of October 31, 2009 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.

Distribution of Income and Gains. Net investment income of the Fund is declared as a daily dividend and distributed to shareholders monthly. 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 primarily 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.

The tax character of current year distributions will be determined at the end of the current fiscal year.

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. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes with the exception of securities in default of principal.

B. Purchases and Sales of Securities

During the six months ended April 30, 2010, purchases and sales of investment securities (excluding short-term investments and US Treasury obligations) aggregated $280,942,474 and $476,860,374, respectively. Purchases and sales of US Treasury obligations aggregated $189,518,004 and $132,945,621, respectively.

C. Related Parties

Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank, AG, 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.

Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:

First $1.5 billion of the Fund's average daily net assets

.400%

Next $1.75 billion of such net assets

.385%

Next $1.75 billion of such net assets

.370%

Over $5 billion of such net assets

.355%

Effective October 1, 2009, the Advisor has voluntarily agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:

Class A

.86%

Class B

1.61%

Class C

1.61%

Class R

1.11%

Class S

.71%

Institutional Class

.61%

These voluntary waivers or reimbursements may be terminated at any time at the option of the Advisor.

In addition, for the period from November 1, 2009 through September 30, 2010, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of Class S shares to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) at 0.81%.

Accordingly, for the six months ended April 30, 2010, the Advisor waived a portion of its management fee pursuant to the Investment Management Agreement aggregating $29,170 and the amount imposed aggregated $1,146,936, which was equivalent to an annualized effective rate of 0.39% of the Fund's average daily net assets.

In addition, for the six months ended April 30, 2010, the Advisor reimbursed the Fund $12,240 and $115,767 of sub-recordkeeping expenses for Class S and Institutional Class shares, respectively.

Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the six months ended April 30, 2010, the Administration Fee was $294,027, of which $44,358 is unpaid.

Service Provider Fees. DWS Investments Service Company ("DISC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended April 30, 2010, the amounts charged to the Fund by DISC were as follows:

Services to Shareholders

Total Aggregated

Waived

Class A

$ 247,777

$ 247,777

Class B

9,140

9,140

Class C

18,230

18,230

Class R

600

600

Class S

29,747

29,747

Institutional Class

69,549

69,549

 

$ 375,043

$ 375,043

Distribution and Service Fees. Under the Fund's Class B, Class C and Class R 12b-1 Plans, DWS Investments Distributors, Inc., ("DIDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of each of Class B and C shares and 0.25% of average daily net assets of Class R shares. In accordance with the Fund's Underwriting and Distribution Services Agreement, DIDI enters into related selling group agreements with various firms at various rates for sales of Class B, C and R shares. For the six months ended April 30, 2010, the Distribution Fee was as follows:

Distribution Fee

Total Aggregated

Unpaid at April 30, 2010

Class B

$ 38,033

$ 6,207

Class C

109,701

16,812

Class R

3,975

701

 

$ 151,709

$ 23,720

In addition, DIDI provides information and administrative services for a fee ("Service Fee") to the shareholders of Class A, Class B, Class C and Class R at an annual rate of up to 0.25% of average daily net assets for each such class. DIDI 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 six months ended April 30, 2010, the Service Fee was as follows:

Service Fee

Total Aggregated

Waived

Unpaid at April 30, 2010

Annualized Effective Rate

Class A

$ 344,160

$ 156,990

$ 37,155

.13%

Class B

11,910

3,148

5,157

.17%

Class C

35,226

5,621

14,043

.20%

Class R

3,967

1,221

1,687

.17%

 

$ 395,263

$ 166,980

$ 58,042

 

Underwriting Agreement and Contingent Deferred Sales Charge. DIDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the six months ended April 30, 2010, aggregated $598.

In addition, DIDI 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 six months ended April 30, 2010, the CDSC for Class B and C shares aggregated $7,428 and $1,313, respectively. A deferred sales charge of up to 0.85% is assessed on certain redemptions of Class A shares. For the six months ended April 30, 2010, DIDI received $31 for Class A shares.

Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the six months ended April 30, 2010, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $14,919, of which $9,895 is unpaid.

Trustees' Fees and Expenses. The Fund paid each Trustee not affiliated with the Advisor retainer fees plus specified amounts for various committee services and for the Board Chairperson.

Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in Central Cash Management Fund and other affiliated money market funds managed by the Advisor. The Fund indirectly bears its proportionate share of the expenses of the underlying money market funds. Central Cash Management Fund does not pay the Advisor an investment management fee. Central Cash Management Fund seeks a high level of current income consistent with liquidity and the preservation of capital.

D. Line of Credit

The Fund and other affiliated funds (the "Participants") share in a $450 million revolving credit facility provided by a syndication of banks. The Fund may borrow 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 on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.

E. Share Transactions

The following table summarizes share and dollar activity in the Fund:

 

Six Months Ended April 30, 2010

Year Ended October 31, 2009

 

Shares

Dollars

Shares

Dollars

Shares sold

Class A

2,293,033

$ 20,768,584

7,655,443

$ 66,827,696

Class B

54,376

493,041

128,404

1,112,409

Class C

101,872

923,707

608,613

5,289,101

Class R

27,978

254,824

108,193

949,756

Class S

1,047,587

9,512,655

1,852,239

16,100,633

Institutional Class

1,154,462

10,456,504

24,615,346

215,970,867

 

 

$ 42,409,315

 

$ 306,250,462

Shares issued to shareholders in reinvestment of distributions

Class A

483,696

$ 4,372,839

2,172,520

$ 18,878,870

Class B

11,739

106,063

55,935

485,374

Class C

28,334

256,146

122,118

1,061,171

Class R

5,209

47,336

16,681

145,884

Class S

77,951

704,535

335,136

2,910,699

Institutional Class

357,855

3,234,828

3,628,975

31,553,288

 

 

$ 8,721,747

 

$ 55,035,286

Shares redeemed

Class A

(9,429,245)

$ (85,484,462)

(37,658,512)

$ (328,812,396)

Class B

(385,168)

(3,486,643)

(1,416,451)

(12,321,741)

Class C

(900,884)

(8,162,829)

(2,430,517)

(21,149,993)

Class R

(78,424)

(714,156)

(112,824)

(983,304)

Class S

(1,204,787)

(10,921,143)

(5,785,453)

(50,538,573)

Institutional Class

(7,742,107)

(70,212,635)

(84,044,798)

(744,182,511)

 

 

$ (178,981,868)

 

$ (1,157,988,518)

Redemption fees

 

$ —

 

$ 19,275

Net increase (decrease)

Class A

(6,652,516)

$ (60,343,039)

(27,830,549)

$ (243,090,933)

Class B

(319,053)

(2,887,539)

(1,232,112)

(10,723,958)

Class C

(770,678)

(6,982,976)

(1,699,786)

(14,798,220)

Class R

(45,237)

(411,996)

12,050

112,368

Class S

(79,249)

(703,953)

(3,598,078)

(31,525,199)

Institutional Class

(6,229,790)

(56,521,303)

(55,800,477)

(496,657,553)

 

 

$ (127,850,806)

 

$ (796,683,495)

F. Review for Subsequent Events

Management has evaluated the events and transactions subsequent to period end through the date the financial statements were available to be issued, and has determined that there were no material events that would require disclosure in the Fund's financial statements.

Summary of Management Fee Evaluation by Independent Fee Consultant

October 9, 2009, As Revised November 20, 2009

Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Funds (formerly the DWS Scudder Funds). My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2009, including my qualifications, the evaluation process for each of the DWS Funds, consideration of certain complex-level factors, and my conclusions. I served in substantially the same capacity in 2007 and 2008.

Qualifications

For more than 35 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.

Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past ten years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.

I hold a Master of Business Administration degree, with highest honors, from Harvard University and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds and serve in various leadership and financial oversight capacities with non-profit organizations.

Evaluation of Fees for each DWS Fund

My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 124 publicly offered Fund portfolios in the DWS Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).

In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper, Strategic Insight, and Morningstar databases and drew on my industry knowledge and experience.

To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.

In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.

Fees and Expenses Compared with Other Funds

The competitive fee and expense evaluation for each fund focused on two primary comparisons:

The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.

The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.

These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.

DeAM's Fees for Similar Services to Others

DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Fund. These similar products included the other DWS Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.

Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.

Costs and Profit Margins

DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.

Economies of Scale

Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Fund compares with this industry observation, I reviewed:

The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.

Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.

How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.

Quality of Service — Performance

The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.

In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.

I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.

Complex-Level Considerations

While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:

I reviewed DeAM's profitability analysis for all DWS Funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.

I considered whether DeAM and affiliates receive any significant ancillary or "fall-out" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.

I considered how aggregated DWS Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.

I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.

Findings

Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Funds are reasonable.

cfi_sigmack0
Thomas H. Mack

Account Management Resources

For shareholders of Class A, B, C, S and Institutional Class

For More Information

The automated telephone system allows you to access personalized account information and obtain information on other DWS funds using either your voice or your telephone keypad. Certain account types within Classes A, B, C and S also have the ability to purchase, exchange or redeem shares using this system.
For more information, contact your financial advisor. You may also access our automated telephone system or speak with a DWS Investments representative by calling the appropriate number below:

For shareholders of Classes A, B, C and Institutional Class:

(800) 621-1048

For shareholders of Class S:

(800) 728-3337

Web Site

www.dws-investments.com

View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more.

Written Correspondence

DWS Investments

PO Box 219151
Kansas City, MO 64121-9151

Proxy Voting

The fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048.

Principal Underwriter

If you have questions, comments or complaints, contact:

DWS Investments Distributors, Inc.

222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148

 

Class A

Class B

Class C

Class S

Institutional Class

Nasdaq Symbol

SFXAX
 SFXBX
 SFXCX
 SFXSX
 MFINX

CUSIP Number

23339E 889
 23339E 871
 23339E 863
 23339E 541
 23339E 848

Fund Number

493
 693
 793
 2394
 593

For shareholders of Class R

Automated Information Line

DWS Investments Flex Plan Access (800) 532-8411

24-hour access to your retirement plan account.

Web Site

www.dws-investments.com

Click "Retirement Plans" to reallocate assets, process transactions and review your funds through our secure online account access.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more.

For More Information

(800) 543-5776

To speak with a service representative.

Written Correspondence

DWS Investments Service Company

222 South Riverside Plaza
Chicago, IL 60606-5806

Proxy Voting

A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048.

Principal Underwriter

If you have questions, comments or complaints, contact:

DWS Investments Distributors, Inc.

222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148

 

Class R

Nasdaq Symbol

SFXRX

CUSIP Number

23339E 855

Fund Number

1504

Privacy Statement

Dear Valued Client:

Your confidence is important to us. So we want to make sure you know our policies regarding the handling of our clients' private information. The following information is issued by DWS Investments Distributors, Inc., Deutsche Investment Management Americas Inc., DeAM Investor Services, Inc., DWS Trust Company and the DWS Funds.

We consider privacy fundamental to our client relationships and adhere to the policies and practices described below to protect current and former clients' information. We never sell customer lists or individual client information. Internal policies are in place to protect confidentiality, while allowing client needs to be served. Only individuals who need to do so in carrying out their job responsibilities may access client information. We maintain physical, electronic and procedural safeguards that comply with federal and state standards to protect confidentiality. These safeguards extend to all forms of interaction with us, including the Internet.

In the normal course of business, clients give us nonpublic personal information on applications and other forms, on our Web sites, and through transactions with us or our affiliates. Examples of the nonpublic personal information collected are name, address, Social Security number, and transaction and balance information. To be able to serve our clients, certain of this client information is shared with affiliated and nonaffiliated third-party service providers such as transfer agents, custodians and broker-dealers to assist us in processing transactions and servicing your account.

In addition, we may disclose the information we collect to companies that perform marketing services on our behalf or to other financial institutions with which we have joint marketing agreements. These organizations may only use client information for the purpose designated by the companies listed above. Additional requirements beyond federal law may be imposed by certain states. To the extent that these state laws apply, we will comply with them before we share information about you.

We may also disclose nonpublic personal information about you to other parties as required or permitted by law. For example, we are required to or may provide information to government entities or regulatory bodies in response to requests for information or subpoenas, to private litigants in certain circumstances, to law enforcement authorities, or any time we believe it necessary to protect the firm.

At any time, if you have questions about our policy, please write to us at:

DWS Investments
Attention: Correspondence — Chicago
P.O. Box 219415
Kansas City, MO 64121-9415 September 2009

Notes

Notes

cfi_backcover0

 

 

ITEM 2.

CODE OF ETHICS

 

 

 

Not applicable.

 

 

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT

 

 

 

Not applicable.

 

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

 

 

Not applicable.

 

 

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

 

 

 

There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board. The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Paul K. Freeman, Independent Chairman, DWS Funds, P.O. Box 101833, Denver, CO 80250-1833.

 

 

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 second fiscal quarter of the period covered by this 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)   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-CSRS 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 Core Fixed Income Fund, a series of DWS Advisor Funds

 

 

 

 

By:

/s/Michael G. Clark

Michael G. Clark

President

 

 

Date:

June 29, 2010

 

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 Core Fixed Income Fund, a series of DWS Advisor Funds

 

 

 

 

By:

/s/Michael G. Clark

Michael G. Clark

President

 

 

Date:

June 29, 2010

 

 

 

 

By:

/s/Paul Schubert

Paul Schubert

Chief Financial Officer and Treasurer

 

 

Date:

June 29, 2010