UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number | 811-04760 |
DWS Advisor Funds
(Exact Name of Registrant as Specified in Charter)
One South Street
Baltimore, MD 21202
(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
(Name and Address of Agent for Service)
Date of fiscal year end: | 12/31 |
Date of reporting period: | 12/31/06 |
ITEM 1. REPORT TO STOCKHOLDERS
NY Tax Free Money Fund
(formerly NY Tax Free Money Fund Investment)
Tax Free Money Fund Investment
Annual Report to
Shareholders
December 31, 2006
Contents
3 Portfolio Managment Review 8 Information About Each Fund's Expenses 10 Portfolio Summary 11 Investment Portfolios 18 Financial Statements 22 Financial Highlights 23 Notes to Financial Statements 30 Report of Independent Registered Public Accounting Firm 31 Tax Information 32 Investment Management Agreement Approval 41 Trustees and Officers 45 Account Management Resources |
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 funds' objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the funds. Please read the prospectus carefully before you invest.
An investment in these funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. Please read each fund's prospectus for specific details regarding its 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 Investment Management Americas Inc., Deutsche Bank Trust Company Americas and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Tax Free Funds: A Team Approach to Investing
Deutsche Asset Management, Inc. (``DAMI'' or the ``Advisor''), which is part of Deutsche Asset Management, is the investment advisor for NY Tax Free Money Fund and Tax Free Money Fund Investment, each a series of DWS Advisor Funds (the ``Trust''). DAMI provides a full range of investment advisory services to institutional and retail clients. DAMI 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.
DAMI 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.
A group of investment professionals is responsible for the day-to-day management of each fund.
In the following interview, Lead Portfolio Manager Sonelius Kendrick-Smith discusses the market environment and the portfolio management team's approach to managing the funds during the most recent fiscal year.
Q: Will you discuss the market environment for the funds during the most recent fiscal year?
A: During 2006, US economic growth remained on track, despite geopolitical uncertainty, wide swings in energy prices and a slowdown in the residential real estate market. First quarter 2006 gross domestic product (GDP) was robust, but growth gradually slowed. In the second and third quarters of the year, GDP came in at 2.6% and 2.0%, respectively. The US Federal Reserve Board's (the Fed's) policy of raising short-term interest rates by one-quarter percentage point at each Fed meeting from June 2004 through June 2006 seemed — at least to some observers — to be bringing the economy in for a "perfect landing" (i.e., slower growth with no resurgence in inflation.)
Beginning at its August 2006 meeting through the end of the year, the Fed "paused" from further short-term rate hikes, believing that the rate increases already in place would prevent the economy from "overheating." At the close of the 12-month period ended December 31, 2006, the federal funds rate — the overnight rate charged by banks when they borrow money from each other, which guides other interest rates — stood at 5.25%. By late December, the Fed seemed at odds with market watchers: Chairman Bernanke and the Fed governors continually stated their concern about inflation — which remains above the Fed's target range — and said that they will consider further rate hikes if inflationary pressures increase. Investors seemed more concerned about the possibility of a sharp slowdown in the economy related to the slumping housing market. Lastly, though oil prices peaked at close to $80 per barrel in August 2006, by the end of the year they had retreated to the mid-$50 range and became a less critical factor for market watchers, at least in the short term.
At the end of December 2006, the one-year London Interbank Offered Rate (LIBOR), an industry standard for measuring one-year taxable money market rates, stood at 5.32%, compared with 4.83% 12 months earlier.1
1 The LIBOR, or the London Interbank Offered Rate, is the most widely used benchmark or reference rate for short-term interest rates. LIBOR is the rate of interest at which banks borrow funds from other banks, in large volume, in the international market.Q: How did the funds perform over their most recent fiscal year?
A: We were able to maintain a competitive tax-free yield for the funds. (All performance is historical and does not guarantee future results. Yields fluctuate and are not guaranteed.)
Performance is historical and does not guarantee future results. Current performance may be lower or higher than the performance data quoted.
7-Day Current Yield — NY Tax Free Money Fund | |
December 31, 2006 | 3.10%* |
December 31, 2005 | 2.62%* |
7-Day Current Yield — Tax Free Money Fund Investment | |
December 31, 2006 | 3.13%** |
December 31, 2005 | 2.64%** |
Yields are historical, will fluctuate and do not guarantee future performance. The 7-day current yield refers to the income paid by the portfolio over a 7-day period expressed as an annual percentage rate of the fund's shares outstanding. Please call the Service Center at (800) 730-1313 for the product's most recent month-end performance.
Q: What has been the strategy for the funds?
A: Over the period, the supply of new tax-exempt money market securities declined by more than 10% nationwide, as a healthy US economy enabled municipalities and states to borrow less.
In searching for possible investments, we continued to focus on the highest-quality securities while seeking competitive yields across the municipal investment spectrum. As the best-known names were becoming expensive in a tighter supply environment, for Tax Free Money Fund Investment we sought to maintain as high a yield as possible by focusing on less well-known issuers that were nevertheless strong credits. For the NY Tax Free Money Fund, we focused on smaller issuers that were nevertheless liquid and top-tier in quality. We also maintained a cautious stance by targeting an average maturity similar to the funds' peers. Lastly, in purchasing three- to six-month commercial paper for the portfolios during the first half of 2006 when the Fed was increasing rates, we "laddered" maturities within the portfolio (i.e., maturities were equally staggered so that there was a steady stream of maturing securities to reinvest when rates moved higher).
Another strategy to balance higher yield with top quality instruments was to maintain a strong position in floating-rate securities as we took advantage of an increase in floating-rate interest coupons. The interest rate of floating-rate securities adjusts periodically based on indices such as the Bond Market Association Index of Variable Rate Demand Notes.2 Because the interest rates of these instruments adjust as market conditions change, they provide flexibility in an uncertain interest rate environment. Within the funds' floating-rate positions, we are maintaining a core allocation in municipal trust receipts (MTRs).3 MTRs, which are financing vehicles for longer-term bonds, offer slightly higher yields than conventional variable rate instruments.
2 The Bond Market Association Index of Variable Rate Demand Notes is a weekly high-grade market index consisting of seven-day, tax-exempt, variable-rate demand notes produced by Municipal Market Data Group. Actual issues are selected from Municipal Market Data's database of more than 10,000 active issues. It is not possible to invest directly into an index.3 Municipal trust receipts (MTRs) are typically structured by a bank, broker-dealer or other financial institution by depositing municipal securities into a trust or partnership coupled with a conditional right to sell, or put, the holder's interest in the underlying securities at par plus accrued interest to a financial institution. These trusts are structured so that the purchaser of the MTR is considered to be investing in the underlying municipal securities. The structure is intended to allow the tax-exempt status of interest generated by the underlying asset to pass through to the purchaser.
Q: What detracted from performance during the period?
A: Several one-year notes purchased in 2005 and due to mature in 2006 underperformed because of the rising rate environment that we experienced over the first half of 2006. In addition, it was difficult to purchase maturities further out than the date of the next Fed meeting, when rates might once again be raised. We preferred to be cautious, which in the end cost the funds some yield but was a prudent approach in preserving principal.
Q: Will you describe your investment philosophy?
A: We continue our insistence on the highest credit quality within the funds. We also plan to maintain our conservative investment strategies and standards. We continue to apply a careful approach to investing on behalf of the funds and to seek competitive tax-free yield for our shareholders.
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 manager's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
Information About Each Fund's Expenses
As an investor, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include 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 each 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, each 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 period and held for the entire six-month period (July 1, 2006 to December 31, 2006).
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. If these transaction costs had been included, your costs would have been higher.
NY Tax Free Money Fund
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2006 | |
Actual Fund Return |
|
Beginning Account Value 7/1/06 | $ 1,000.00 |
Ending Account Value 12/31/06 | $ 1,014.40 |
Expenses Paid per $1,000* | $ 3.81 |
Hypothetical 5% Fund Return |
|
Beginning Account Value 7/1/06 | $ 1,000.00 |
Ending Account Value 12/31/06 | $ 1,021.42 |
Expenses Paid per $1,000* | $ 3.82 |
Annualized Expense Ratio |
|
NY Tax Free Money Fund | .75% |
For more information, please refer to the Fund's prospectus.
Tax Free Money Fund Investment
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2006 | |
Actual Fund Return |
|
Beginning Account Value 7/1/06 | $ 1,000.00 |
Ending Account Value 12/31/06 | $ 1,014.40 |
Expenses Paid per $1,000* | $ 3.81 |
Hypothetical 5% Fund Return |
|
Beginning Account Value 7/1/06 | $ 1,000.00 |
Ending Account Value 12/31/06 | $ 1,021.42 |
Expenses Paid per $1,000* | $ 3.82 |
Annualized Expense Ratio |
|
Tax Free Money Fund Investment | .75% |
For more information, please refer to the Fund's prospectus.
NY Tax Free Money Fund
Asset Allocation | 12/31/06 | 12/31/05 |
|
|
|
Municipal Investments Municipal Variable Rate Demand Notes | 72% | 87% |
Municipal Bonds and Notes | 28% | 13% |
| 100% | 100% |
Weighted Average Maturity |
|
|
|
|
|
NY Tax Free Money Fund | 28 days | 26 days |
iMoneyNet State Specific Retail Money Funds Average* | 27 days | 27 days |
Tax Free Money Fund Investment
Asset Allocation | 12/31/06 | 12/31/05 |
|
|
|
Municipal Investments Municipal Variable Rate Demand Notes | 83% | 83% |
Municipal Bonds and Notes | 17% | 17% |
| 100% | 100% |
Weighted Average Maturity |
|
|
|
|
|
Tax Free Money Fund Investment | 29 days | 34 days |
iMoneyNet National Retail Tax Free Money Funds Average** | 31 days | 31 days |
Asset allocation and weighted average maturity are subject to change.
For more complete details about the Funds' holdings, see pages 11 and 14. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Funds 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 Funds' top ten holdings and other information about the Funds 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 more contact information.
Following the Funds' 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.
Investment Portfolios as of December 31, 2006
NY Tax Free Money Fund
| Principal Amount ($) | Value ($) |
|
| |
Municipal Investments 98.6% | ||
New York 94.2% | ||
Erie County, NY, Industrial Development Agency, Civic Facility Revenue, Suburban Adult Services, 3.99%*, 6/1/2022, KeyBank NA (a) | 1,235,000 | 1,235,000 |
Mineola, NY, Union Free School District, Tax Anticipation Notes, 4.5%, 6/29/2007 | 5,000,000 | 5,014,139 |
New York, Convention Center Development Corp. Revenue, Series 1247Z, 144A, 3.95%*, 11/15/2013 (b) | 1,000,000 | 1,000,000 |
New York, Metropolitan Transportation Authority Revenue: |
|
|
Series 848-D, 144A, 3.93%*, 11/15/2021 (b) | 1,789,500 | 1,789,500 |
Series 1040, 144A, 3.95%*, 11/15/2020 (b) | 500,000 | 500,000 |
3.96%*, 11/15/2030 (b) | 2,480,000 | 2,480,000 |
New York, State Environmental Facilities Corp., Pollution Control Revenue, Series PA-1261, 144A, 3.95%*, 12/15/2009 (b) | 500,000 | 500,000 |
New York, State General Obligation, Series B, 3.6%*, 3/15/2030, Dexia Credit Local France (a) | 2,000,000 | 2,000,000 |
New York, State Housing Finance Agency Revenue, 100 Maien Lane Housing, Series A, 3.89%*, 11/1/2037, Bank of New York (a) | 1,000,000 | 1,000,000 |
New York, State Power Authority, 3.48%, 1/5/2007 | 3,000,000 | 3,000,000 |
New York, State Power Authority Revenue & General Purpose, 3.6%*, 3/1/2016 | 3,500,000 | 3,500,000 |
New York, State Thruway Authority, Personal Income Tax Revenue, Series PT-3027, 144A, 3.95%*, 3/15/2025 (b) | 2,470,000 | 2,470,000 |
New York, Tobacco Settlement Financing Corp., Series R-6500, 144A, 3.96%*, 6/1/2021 (b) | 2,620,000 | 2,620,000 |
New York City, NY, Industrial Development Agency, Civic Facility Revenue, Abraham Joshua Heschel Project, 3.94%*, 4/1/2032, Allied Irish Bank PLC (a) | 1,505,000 | 1,505,000 |
New York City, NY, Industrial Development Agency, Civic Facility Revenue, Allen Stevenson School, 3.93%*, 12/1/2034, Allied Irish Bank PLC (a) | 1,105,000 | 1,105,000 |
New York City, NY, Industrial Development Agency, Civic Facility Revenue, Jewish Board of Family Services, 3.93%*, 7/1/2025, Allied Irish Bank PLC (a) | 2,250,000 | 2,250,000 |
New York City, NY, Municipal Water Finance Authority, 3.6%, 1/4/2007 | 2,000,000 | 2,000,000 |
New York City, NY, Transitional Finance Authority Building Aid Revenue, 144A, 3.96%*, 7/15/2036 (b) | 2,000,000 | 2,000,000 |
New York City, NY, Transitional Finance Authority Revenue, Series A-40, 144A, 3.94%*, 11/1/2026 (b) | 955,000 | 955,000 |
New York City, NY, Transitional Finance Authority Revenue, Future Tax Secured, Series A-1, 3.95%*, 11/15/2022 | 45,000 | 45,000 |
New York, NY, General Obligation: |
|
|
Series 1318, 144A, 3.95%*, 6/1/2013 (b) | 995,000 | 995,000 |
Series B-3, 3.93%*, 1/1/2032 | 500,000 | 500,000 |
Series B-13, 144A, 3.94%*, 11/15/2021 (b) | 2,065,000 | 2,065,000 |
Onondaga County, NY, Industrial Development Agency, Civic Facility Revenue, YMCA of Greater Syracuse, Series A, 3.99%*, 11/1/2025, HSBC Bank PLC (a) | 3,585,000 | 3,585,000 |
Orange County, NY, Industrial Development Agency, Civic Facility Revenue, St. Lukes Cornwall Hospital Project, 3.94%*, 7/1/2032, KeyBank NA (a) | 1,000,000 | 1,000,000 |
Port Authority of New York & New Jersey, State General Obligation, 3.53%, 2/8/2007 | 2,500,000 | 2,500,000 |
Schenectady County, NY, Industrial Development Agency, Civic Facility Revenue, Sunnyview Hospital, Series B, 3.94%*, 8/1/2033, KeyBank NA (a) | 2,205,000 | 2,205,000 |
Suffolk County, NY, Industrial Development Agency, Civic Facility Revenue, St. Anthonys High School Civic, 3.94%*, 12/1/2036, Sovereign Bank FSB (a) | 1,400,000 | 1,400,000 |
Yates County, NY, Industrial Development Agency, Civic Facility Revenue, Series B, 3.94%*, 9/1/2015, KeyBank NA (a) | 250,000 | 250,000 |
| 51,468,639 | |
Puerto Rico 4.4% | ||
ABN AMRO, Munitops Certificates Trust, Series 2000-17, 144A, 3.92%*, 10/1/2008 | 1,400,000 | 1,400,020 |
Commonwealth of Puerto Rico, Highway & Transportation Authority Revenue, Certificates Macon Trust, Series R, 144A, 3.92%*, 7/1/2035 (b) | 1,000,000 | 1,000,000 |
| 2,400,020 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $53,868,659)+ | 98.6 | 53,868,659 |
Other Assets and Liabilities, Net | 1.4 | 750,386 |
Net Assets | 100.0 | 54,619,045 |
+ The cost for federal income tax purposes was $53,868,659.
(a) Security incorporates a letter of credit from a major bank.
(b) Bond is insured by one of these companies.
Insurance Coverage | As a % of Total Investment Portfolio |
Ambac Financial Group | 8.1 |
Financial Guaranty Insurance Company | 7.6 |
Financial Security Assurance, Inc. | 8.7 |
MBIA Corp. | 8.0 |
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Tax Free Money Fund Investment
| Principal Amount ($) | Value ($) |
|
| |
Municipal Investments 99.3% | ||
Alabama 1.2% | ||
Jefferson County, AL, Sewer Revenue, Capital Improvement Warrants, Series A, 3.95%*, 2/1/2042 (a) | 1,350,000 | 1,350,000 |
Arizona 3.3% | ||
Arizona, Salt River Project Agricultural Improvement & Power District: |
|
|
3.5%, 2/6/2007 | 1,000,000 | 1,000,000 |
3.54%, 2/6/2007 | 2,600,000 | 2,600,000 |
| 3,600,000 | |
California 0.9% | ||
ABN AMRO, Munitops Certificates Trust, Series 2005-43, 144A, 3.94%*, 8/1/2013 (a) | 1,040,000 | 1,040,000 |
Colorado 5.0% | ||
Colorado, Health Facilities Authority Revenue, Catholic Health Initiatives, Series B-1, 3.93%*, 3/1/2023 | 2,800,000 | 2,800,000 |
Colorado, Postsecondary Educational Facilities Authority Revenue, Mullen High School Project, 4.01%*, 8/1/2017, Wells Fargo Bank NA (b) | 2,690,000 | 2,690,000 |
| 5,490,000 | |
District of Columbia 2.2% | ||
District of Columbia, General Obligation, Series B-33, 144A, 3.95%*, 6/1/2025 (a) | 2,470,000 | 2,470,000 |
Florida 1.3% | ||
Jacksonville, FL, Electric Systems Authority Revenue, Series B, 4.0%*, 10/1/2030 | 400,000 | 400,000 |
Jacksonville, FL, Health Facilities Authority, Hospital Revenue, Series A, 3.99%*, 8/15/2033, Bank of America NA (b) | 1,000,000 | 1,000,000 |
| 1,400,000 | |
Illinois 5.4% | ||
Chicago, IL, General Obligation, Series Z-10, 144A, 3.97%*, 6/29/2029 (a) | 2,935,000 | 2,935,000 |
Chicago, IL, Solar Eclipse Funding Trust, Series 2006-0003, 144A, 3.94%*, 1/1/2026 (a) | 500,000 | 500,000 |
Illinois, Finance Authority Revenue, Northwestern Memorial Hospital, Series B-2, 4.0%*, 8/15/2038 | 1,000,000 | 1,000,000 |
Illinois, Finance Authority Student Housing Revenue, Dekalb LLC Project, Series A, 3.98%*, 7/1/2038, Sovereign Bank (b) | 1,500,000 | 1,500,000 |
| 5,935,000 | |
Indiana 4.8% | ||
ABN AMRO, Munitops Certificates Trust, Series 2003-32, 144A, 3.94%*, 1/15/2012 (a) | 1,000,000 | 1,000,000 |
Indiana, State Development Finance Authority Revenue, Educational Facilities, Indiana Museum of Art, 3.95%*, 2/1/2039, Bank One NA (b) | 1,400,000 | 1,400,000 |
Indiana, State Educational Facilities Authority Revenue, St. Mary Woods Project, 3.97%*, 4/1/2024, Bank One NA (b) | 2,900,000 | 2,900,000 |
| 5,300,000 | |
Iowa 1.9% | ||
Iowa, Finance Authority Hospital Facility Revenue, Iowa Health Systems, Series B, 3.88%*, 7/1/2015 (a) | 2,100,000 | 2,100,000 |
Kentucky 3.7% | ||
Lexington-Fayette Urban County, KY, Industrial Development Revenue, YMCA Central Kentucky, Inc. Project, 3.97%*, 7/1/2019, Bank One Kentucky NA (b) | 1,605,000 | 1,605,000 |
Somerset, KY, Blakley Family YMCA, Inc. Project, 3.97%*, 4/1/2015, Fifth Third Bank (b) | 2,470,000 | 2,470,000 |
| 4,075,000 | |
Massachusetts 5.5% | ||
Massachusetts, State Development Finance Agency Revenue, Governor Dummer Academy, 3.94%*, 8/1/2036, Citizens Bank of MA (b) | 3,800,000 | 3,800,000 |
Massachusetts, State Development Finance Agency Revenue, YMCA of Greater Worcester, 3.96%*, 9/1/2041, TD BankNorth NA (b) | 2,250,000 | 2,250,000 |
| 6,050,000 | |
New Jersey 8.3% | ||
New Jersey, State Tax & Revenue Anticipation Notes, 4.5%, 6/22/2007 | 2,500,000 | 2,511,070 |
New Jersey, State Transportation Trust Fund Authority, Series PT-2494, 144A, 3.93%*, 12/15/2023 (a) | 4,200,000 | 4,200,000 |
New Jersey, Toms River School District, 3.7%, 11/21/2007 | 2,500,000 | 2,501,206 |
| 9,212,276 | |
New York 6.8% | ||
Erie County, NY, Industrial Development Agency, Civic Facility Revenue, Suburban Adult Services, 3.99%*, 6/1/2022, KeyBank NA (b) | 980,000 | 980,000 |
Mineola, NY, Union Free School District, Tax Anticipation Notes, 4.5%, 6/29/2007 | 2,000,000 | 2,005,655 |
New York City, NY, Industrial Development Agency, Civic Facility Revenue, Allen Stevenson School, 3.93%*, 12/1/2034, Allied Irish Bank PLC (b) | 2,000,000 | 2,000,000 |
New York City, NY, Municipal Water Finance Authority, 3.6%, 1/4/2007 | 2,500,000 | 2,500,000 |
| 7,485,655 | |
North Carolina 1.4% | ||
North Carolina, Capital Facilities Finance Agency Revenue, Series 1338, 144A, 3.95%*, 10/1/2041 | 1,595,000 | 1,595,000 |
Ohio 6.4% | ||
Ohio, State Higher Educational Facility Community Revenue, Pooled Program, Series A, 3.98%*, 9/1/2020, Fifth Third Bank (b) | 2,090,000 | 2,090,000 |
Ohio, State Higher Educational Facility Revenue, Cleveland Institution Music Project, 3.93%*, 5/1/2030, National City Bank (b) | 5,000,000 | 5,000,000 |
| 7,090,000 | |
Oregon 1.8% | ||
Portland, OR, Sewer System Revenue, Series PT-2435, 144A, 3.95%*, 10/1/2023 (a) | 1,990,000 | 1,990,000 |
Pennsylvania 4.1% | ||
Berks County, PA, Industrial Development Authority Revenue, Richard J. Caron Foundation Project, 3.97%*, 9/1/2025, Wachovia Bank NA (b) | 2,545,000 | 2,545,000 |
Philadelphia, PA, School District, Tax & Revenue Anticipation Notes, Series A, 4.5%, 6/29/2007, Bank of America NA (b) | 2,000,000 | 2,006,800 |
| 4,551,800 | |
Tennessee 6.3% | ||
Montgomery County, TN, Public Building Authority, Pooled Financing Revenue, Tennessee County Loan Pool, 4.0%*, 7/1/2034, Bank of America NA (b) | 2,200,000 | 2,200,000 |
Nashville & Davidson County, TN, Metropolitan Government Industrial Development Board Revenue, Nashville Symphony Hall Project, 3.9%*, 12/1/2031, Bank of America NA (b) | 2,725,000 | 2,725,000 |
Tennessee, Municipal Securities Trust Certificates, Tennessee Energy, Series 2006-275, 144A, 3.94%*, 4/2/2020 | 1,000,000 | 1,000,000 |
Tennessee, Tennergy Corp., Gas Revenue, Stars Certificates, Series 2006-001, 144A, 3.96%*, 5/1/2016 | 1,000,000 | 1,000,000 |
| 6,925,000 | |
Texas 21.4% | ||
Corpus Christi, TX, Utility System Revenue, Series PT-1816, 144A, 3.96%*, 7/15/2010 (a) | 2,285,000 | 2,285,000 |
Cypress-FairBanks, TX, Independent School District, Series PT-2512, 144A, 3.95%*, 2/15/2022 | 5,140,000 | 5,140,000 |
Lufkin, TX, Health Facilities Development Corp., Health Systems Revenue, Memphis Health Systems East Texas, 3.99%*, 2/15/2035, Wachovia Bank NA (b) | 700,000 | 700,000 |
Texas, Hidalgo Willacy Housing Finance Corp., Multi-Family Housing Revenue, Series F18J, 144A, 4.08%*, 1/1/2039 | 5,185,000 | 5,185,000 |
Texas, State Tax & Revenue Anticipation Notes, 4.5%, 8/31/2007 | 2,000,000 | 2,012,160 |
Texas, State Turnpike Authority, Central Texas Turnpike System Revenue, Series 1407, 144A, 3.95%*, 8/15/2042 (a) | 3,000,000 | 3,000,000 |
Texas, University of Texas Systems Revenue Financing, 3.58%, 1/4/2007 | 1,300,000 | 1,300,000 |
Texas, Water Development Board Revenue, Series PT-2187, 144A, 3.95%*, 7/15/2021 | 3,980,000 | 3,980,000 |
| 23,602,160 | |
Virginia 0.4% | ||
Virginia, College Building Authority, Educational Facilities Revenue, 21st Century College, Series B, 4.0%*, 2/1/2026 | 400,000 | 400,000 |
Washington 6.6% | ||
Port Tacoma, WA, General Obligation, Series R-4036, 144A, 3.95%*, 12/1/2025 (a) | 5,000 | 5,000 |
Spokane, WA, Public Facilities District Hotel, Motel & Sales Use Tax, Series R-2041, 144A, 3.95%*, 12/1/2023 (a) | 3,120,000 | 3,120,000 |
Washington, State Housing Finance Commission, Nonprofit Revenue, YMCA Tacoma-Pierce County Project, 3.95%*, 12/1/2032, US Bank NA (b) | 4,170,000 | 4,170,000 |
| 7,295,000 | |
Puerto Rico 0.6% | ||
Commonwealth of Puerto Rico, General Obligation, Series 813-D, 144A, 3.9%*, 7/1/2020 (a) | 640,000 | 640,000 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $109,596,891)+ | 99.3 | 109,596,891 |
Other Assets and Liabilities, Net | 0.7 | 766,351 |
Net Assets | 100.0 | 110,363,242 |
+ The cost for federal income tax purposes was $109,596,891.
(a) Bond is insured by one of these companies.
Insurance Coverage | As a % of Total Investment Portfolio |
Ambac Financial Group | 10.7 |
Financial Guaranty Insurance Company | 4.8 |
Financial Security Assurance, Inc. | 5.2 |
MBIA Corp. | 3.4 |
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.
The accompanying notes are an integral part of the financial statements.
Statements of Assets and Liabilities as of December 31, 2006 | ||
Assets | NY Tax Free Money Fund | Tax Free Money Fund Investment |
Investments in securities, valued at amortized cost | $ 53,868,659 | $ 109,596,891 |
Cash | 7,252 | 187,502 |
Receivable for investments sold | 2,396,813 | — |
Interest receivable | 396,928 | 874,163 |
Due from advisor | 61,514 | 57,746 |
Other assets | 18,612 | 19,103 |
Total assets | 56,749,778 | 110,735,405 |
Liabilities | ||
Payable for investments purchased | 1,913,028 | — |
Dividends payable | 102,270 | 216,302 |
Accrued management fee | 4,776 | 24,615 |
Other accrued expenses and payables | 110,659 | 131,246 |
Total liabilities | 2,130,733 | 372,163 |
Net assets, at value | $ 54,619,045 | $ 110,363,242 |
Net Assets | ||
Net assets consist of: Undistributed net investment income | — | — |
Accumulated net realized gain (loss) | — | (1,339) |
Paid-in capital | 54,619,045 | 110,364,581 |
Net assets, at value | $ 54,619,045 | $ 110,363,242 |
Net Asset Value | ||
Net assets applicable to shares outstanding | $ 54,619,045 | $ 110,363,242 |
Shares outstanding ($.001 par value per share, unlimited number of shares authorized) | 54,612,628 | 110,361,083 |
Net Asset Value, offering and redemption price per share (net assets divided by shares outstanding) | $ 1.00 | $ 1.00 |
The accompanying notes are an integral part of the financial statements.
Statements of Operations for the year ended December 31, 2006 | ||
Investment Income | NY Tax Free Money Fund | Tax Free Money Fund Investment |
Income: Interest | $ 2,816,656 | $ 4,421,612 |
Expenses: Management fee | 123,614 | 197,077 |
Administrative service fee | 208,530 | 516,083 |
Administration fee | 47,654 | 45,371 |
Services to shareholders | 120,911 | 57,795 |
Custodian fees | 4,310 | 4,374 |
Distribution service fees | 119,136 | 102,084 |
Auditing | 39,886 | 40,530 |
Legal | 62,285 | 75,322 |
Trustees' fees and expenses | 15,205 | 26,640 |
Reports to shareholders and shareholder meeting | 44,040 | 58,243 |
Registration fees | 18,120 | 19,280 |
Other | 7,546 | 15,727 |
Total expenses before expense reductions | 811,237 | 1,158,526 |
Expense reductions | (195,403) | (172,616) |
Total expenses after expense reductions | 615,834 | 985,910 |
Net investment income | 2,200,822 | 3,435,702 |
Net realized gain (loss) on investment transactions | 3,626 | 818 |
Net increase (decrease) in net assets resulting from operations | $ 2,204,448 | $ 3,436,520 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets — NY Tax Free Money Fund | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2006 | 2005 |
Operations: Net investment income | $ 2,200,822 | $ 1,680,696 |
Net realized gain (loss) on investment transactions | 3,626 | 289 |
Net increase (decrease) in net assets resulting from operations | 2,204,448 | 1,680,985 |
Distributions to shareholders from: Net investment income | (2,200,822) | (1,680,695) |
Fund share transactions: Proceeds from shares sold | 224,192,113 | 255,899,620 |
Reinvestment of distributions | 552,803 | 445,761 |
Cost of shares redeemed | (260,266,744) | (276,418,725) |
Net increase (decrease) in net assets from Fund share transactions | (35,521,828) | (20,073,344) |
Increase (decrease) in net assets | (35,518,202) | (20,073,054) |
Net assets at beginning of period | 90,137,247 | 110,210,301 |
Net assets at end of period (including undistributed net investment income of $0 and $25,578, respectively) | $ 54,619,045 | $ 90,137,247 |
Other Information | ||
Shares outstanding at beginning of period | 90,134,456 | 110,207,798 |
Shares sold | 224,192,113 | 255,899,620 |
Shares issued to shareholders in reinvestment of distributions | 552,803 | 445,761 |
Shares redeemed | (260,266,744) | (276,418,723) |
Net increase (decrease) in Fund shares | (35,521,828) | (20,073,342) |
Shares outstanding at end of period | 54,612,628 | 90,134,456 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets — Tax Free Money Fund Investment | ||
| Years Ended December 31, | |
Increase (Decrease) in Net Assets | 2006 | 2005 |
Operations: Net investment income | $ 3,435,702 | $ 3,024,804 |
Net realized gain (loss) on investment transactions | 818 | (2,157) |
Net increase (decrease) in net assets resulting from operations | 3,436,520 | 3,022,647 |
Distributions to shareholders from: Net investment income | (3,435,701) | (3,024,804) |
Fund share transactions: Proceeds from shares sold | 566,794,514 | 733,051,760 |
Reinvestment of distributions | 1,012,569 | 926,841 |
Cost of shares redeemed | (631,167,896) | (695,075,364) |
Net increase (decrease) in net assets from Fund share transactions | (63,360,813) | 38,903,237 |
Increase (decrease) in net assets | (63,359,994) | 38,901,080 |
Net assets at beginning of period | 173,723,236 | 134,822,156 |
Net assets at end of period (including undistributed net investment income of $0 and $2,578, respectively) | $ 110,363,242 | $ 173,723,236 |
Other Information | ||
Shares outstanding at beginning of period | 173,721,896 | 134,819,039 |
Shares sold | 566,794,514 | 733,051,760 |
Shares issued to shareholders in reinvestment of distributions | 1,012,569 | 926,841 |
Shares redeemed | (631,167,896) | (695,075,744) |
Net increase (decrease) in Fund shares | (63,360,813) | 38,902,857 |
Shares outstanding at end of period | 110,361,083 | 173,721,896 |
The accompanying notes are an integral part of the financial statements.
NY Tax Free Money Fund
Years Ended December 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Income from investment operations: Net investment income | .027 | .017 | .005 | .003 | .006 |
Net realized and unrealized gain (loss) on investment transactionsa | — | — | — | — | — |
Total from investment operations | .027 | .017 | .005 | .003 | .006 |
Less distributions from: Net investment income | (.027) | (.017) | (.005) | (.003) | (.006) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%)b | 2.71 | 1.70 | .47 | .32 | .65 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 55 | 90 | 110 | 89 | 113 |
Ratio of expenses before expense reductions (%) | .98 | .87 | .88 | .83 | .82 |
Ratio of expenses after expense reductions (%) | .75 | .75 | .75 | .75 | .75 |
Ratio of net investment income (%) | 2.67 | 1.67 | .49 | .33 | .65 |
a Amount is less than $.005 per share. b Total return would have been lower had certain expenses not been reduced. |
Tax Free Money Fund Investment
Years Ended December 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Income from investment operations: Net investment income | .027 | .017 | .005 | .003 | .007 |
Net realized and unrealized gain (loss) on investment transactionsa | — | — | — | — | — |
Total from investment operations | .027 | .017 | .005 | .003 | .007 |
Less distributions from: Net investment income | (.027) | (.017) | (.005) | (.003) | (.007) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%)b | 2.71 | 1.72 | .49 | .33 | .72 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 110 | 174 | 135 | 168 | 166 |
Ratio of expenses before expense reductions (%) | .88 | .82 | .84 | .80 | .80 |
Ratio of expenses after expense reductions (%) | .75 | .75 | .75 | .75 | .75 |
Ratio of net investment income (%) | 2.61 | 1.73 | .46 | .32 | .72 |
a Amount is less than $.005 per share. b Total return would have been lower had certain expenses not been reduced. |
A. Significant Accounting Policies
DWS Advisor Funds (the ``Trust'') is registered under the Investment Company Act of 1940, as amended (the ``1940 Act''), as a Massachusetts business trust. NY Tax Free Money Fund (formerly NY Tax Free Money Fund Investment) and Tax Free Money Fund Investment (each a ``Fund,'' and collectively, the ``Funds'') are two of the funds the Trust offers to investors. Each Fund is an open-end, diversified management investment company.
Each 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 Funds in the preparation of their financial statements.
Security Valuation. Portfolio securities are valued utilizing the amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act and certain conditions therein. Under this method, which does not take into account unrealized capital gains or losses on securities, an instrument is initially valued at its cost and thereafter assumes a constant accretion/amortization rate to maturity of any discount or premium.
Federal Income Taxes. Each Fund's policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable and tax-exempt income to its shareholders. Accordingly, the Funds paid no federal income taxes and no federal income tax provisions were required.
At December 31, 2006, Tax Free Money Fund Investment had a net tax basis capital loss carryforward of $1,339, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2013, whichever occurs first.
During the year ended December 31, 2006, NY Tax Free Money Fund and Tax Free Money Fund Investment utilized $322 and $818 respectively, of its prior year capital loss carryforward.
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 ("FIN 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. On December 22, 2006, the SEC indicated that they would not object if a Fund implements FIN 48 in the first required financial statement reporting period for its fiscal year 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.
Distributions of Income. The net investment income of each Fund is declared as a daily dividend and is distributed to shareholders monthly.
Permanent book and tax differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax differences will reverse in a subsequent period. There were no significant book to tax differences for the Funds.
At December 31, 2006, the Funds' components of distributable earnings (accumulated losses) on a tax-basis are as follows:
| NY Tax Free Money Fund | Tax Free Money Fund Investment |
Undistributed tax-exempt income | $ 3,304 | $ 2,580 |
In addition, the tax character of distributions paid to shareholders by the Funds is summarized as follows:
| Years Ended December 31, | |
| 2006 | 2005 |
NY Tax Free Money Fund Distributions from tax-exempt income | $ 2,200,822 | $ 1,680,695 |
Tax Free Money Fund Investment Distributions from tax-exempt income | $ 3,435,701 | $ 3,024,804 |
For tax purposes short-term capital gains distributions are considered ordinary income distributions.
Contingencies. In the normal course of business, the Funds may enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet been made. However, based on experience, the Funds expect the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date. Interest income is recorded on the accrual basis. 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. Expenses directly attributed to a fund are charged to that fund, while expenses which are attributed to the Trust are allocated among the funds in the Trust on the basis of relative net assets.
B. Fees and Transactions with Affiliates
Investment Management Agreement. Deutsche Asset Management, Inc. ("DAMI" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, is each Fund's Advisor. Effective January 1, 2007, DAMI, merged with Deutsche Investment Management Americas Inc. ("DIMA"), an indirect, wholly owned subsidiary of Deutsche Bank AG. The Board of each Fund approved a new investment management agreement between each Fund and DIMA. The new investment management agreement is identical in substance to the current investment management agreement for each Fund, except for the named investment advisor. Under the Investment Management Agreement, each Fund pays the Advisor an annual fee based on its average daily net assets, which is calculated daily and paid monthly at the annual rate of 0.15%.
For the period from January 1, 2006 through September 30, 2007, the Advisor contractually agreed to waive all or a portion of its fees and/or reimburse or pay certain operating expenses of each Fund, to the extent necessary, to maintain total operating expenses at 0.75% of its average daily net assets (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, and organizational and offering expenses).
Accordingly, for the year ended December 31, 2006, the total management fees charged, management fees waived and effective management fees for each Fund are as follows:
| Total Aggregated | Waived | Annual Effective Rate |
NY Tax Free Money Fund | $ 123,614 | $ — | .15% |
Tax Free Money Fund Investment | $ 197,077 | $ 8,701 | .14% |
Administrative Service Fee. Prior to June 1, 2006, for NY Tax Free Money Fund and July 1, 2006, for Tax Free Money Fund Investment, Investment Company Capital Corp. ("ICCC" or the "Administrator"), an affiliate of the Advisor, was the Administrator for each Fund and paid the Administrator an annual fee ("Administrative Service Fee") based on its average daily net assets, which was accrued daily and payable monthly at an annual rate of 0.60%.
For the period from January 1, 2006 through May 31, 2006, ICCC received an Administrative service fee of $208,530, of which $6,351 was waived for NY Tax Free Money Fund.
For the period from January 1, 2006 through June 30, 2006, ICCC received an Administrative Service Fee of $516,083, all of which has been paid for Tax Free Money Fund Investment.
Administration Fee. Effective June 1, 2006, the Administrator agreement with ICCC was terminated and NY Tax Free Money Fund entered into an Administrative Services Agreement with DIMA, pursuant to which DIMA provides most administrative services to NY Tax Free Money Fund. For all services provided under the Administrative Services Agreement, NY Tax Free Money Fund pays DIMA an annual fee ("Administration Fee") of 0.10% of its average daily net assets, computed and accrued daily and payable monthly. For the period from June 1, 2006 through December 31, 2006, DIMA received an Administration Fee of $47,654, of which $5,276 is unpaid.
Effective July 1, 2006, the Administrator agreement with ICCC was terminated and Tax Free Money Fund Investment entered into an Administrative Service Agreement with DIMA, pursuant to which DIMA provides most administrative services to Tax Free Money Fund Investment. For all services provided under the Administrative Services Agreement, Tax Free Money Fund Investment pays DIMA an annual fee ("Administration Fee") of 0.10% of the its average daily net assets, computed and accrued daily and payable monthly. For the period from July 1, 2006 through December 31, 2006, DIMA received an Administration Fee of $45,371, of which $8,613 is unpaid.
Service Provider Fees. DWS Scudder Investments Service Company ("DWS-SISC"), an affiliate of the Advisor, is the transfer agent and dividend-paying agent for each Fund. Pursuant to a sub-transfer agency agreement between DWS-SISC and DST Systems, Inc. ("DST"), DWS-SISC has delegated certain transfer agent and dividend paying agent functions to DST. DWS-SISC compensates DST out of the shareholder servicing fee it receives from each Fund.
Prior to June 1, 2006, these fees were included in the Administrative Service Fee for NY Tax Free Money Fund. For the period June 1, 2006 through December 31, 2006, the amount charged the Fund by DWS-SISC aggregated $119,789, all of which was waived.
Prior to July 1, 2006, these fees were included in the Administrative service fee for Tax Free Money Fund Investment. For the period July 1, 2006 through December 31, 2006, the amount charged the Fund by DWS-SISC aggregated $57,168, all of which was waived.
Distribution Service Agreement. Effective June 1, 2006, for NY Tax Free Money Fund and July 1, 2006, for Tax Free Money Fund Investment, DWS Scudder Distributors, Inc. ("DWS-SDI"), an affiliate of the Advisor, provides information and administrative services ("Service Fee") to the Funds at an annual rate up to 0.25% of average daily net assets. DWS-SDI in turns has various agreements with financial service firms that provide these services and pays these fees based upon the assets of the shareholder accounts the firms service. For the periods from June 1, 2006, for NY Tax Free Money Fund and July 1, 2006, for Tax Free Money Fund Investment through December 31, 2006 the Service Fees were as follows:
| Total Aggregated | Waived | Unpaid at December 31, 2006 | Annualized Effective Rate |
NY Tax Free Money Fund | $ 119,136 | $ 66,486 | $ 31,267 | .11% |
Tax Free Money Fund Investment | $ 102,084 | $ 102,084 | $ — | .00% |
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Funds. For the year ended December 31, 2006, the amount charged to each Fund by DIMA included in the Statement of Operations under "reports to shareholders" is as follows:
| Total Aggregated | Unpaid at December 31, 2006 |
NY Tax Free Money Fund | $ 7,320 | $ 2,220 |
Tax Free Money Fund Investment | $ 7,320 | $ 2,220 |
Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregate 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 Chairperson of the Board and the Chairperson 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.
C. Expense Reductions
For the year ended December 31, 2006, the Advisor reimbursed the Funds a portion of the expected fee savings for the Advisor through May 31, 2006 and June 30, 2006 for NY Tax Free Money Fund and Tax Free Money Fund Investment, respectively, related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider as follows:
| Amount |
NY Tax Free Money Fund | $ 2,606 |
Tax Free Money Fund Investment | $ 4,465 |
In addition, the Funds have entered into arrangements with its custodian whereby credits realized as a result of uninvested cash advances were used to reduce a portion of each Fund's expenses. During the year ended December 31, 2006, the custodian fees were reduced under these agreements as follows:
| Amount |
NY Tax Free Money Fund | $ 171 |
Tax Free Money Fund Investment | $ 198 |
D. Line of Credit Agreement
The Funds 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. Each Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
E. Regulatory Matters and Litigation
Regulatory Settlements. On December 21, 2006, Deutsche Asset Management ("DeAM") settled proceedings with the Securities and Exchange Commission ("SEC") and the New York Attorney General on behalf of Deutsche Asset Management, Inc. ("DAMI") and Deutsche Investment Management Americas Inc. ("DIMA"), the investment advisors to many of the DWS Scudder funds, regarding allegations of improper trading of fund shares at DeAM and at the legacy Scudder and Kemper organizations prior to their acquisition by DeAM in April 2002. These regulators alleged that although the prospectuses for certain funds in the regulators' view indicated that the funds did not permit market timing, DAMI and DIMA breached their fiduciary duty to those funds in that their efforts to limit trading activity in the funds were not effective at certain times. The regulators also alleged that DAMI and DIMA breached their fiduciary duty to certain funds by entering into certain market timing arrangements with investors. These trading arrangements originated in businesses that existed prior to the currently constituted DeAM organization, which came together as a result of various mergers of the legacy Scudder, Kemper and Deutsche fund groups, and all of the arrangements were terminated prior to the start of the regulatory investigations that began in the summer of 2003. No current DeAM employee approved these trading arrangements. Under the terms of the settlements, DAMI and DIMA neither admitted nor denied any wrongdoing.
The terms of the SEC settlement, which identified improper trading in the legacy Deutsche and Kemper mutual funds only, provide for payment of disgorgement in the amount of $17.2 million. The terms of the settlement with the New York Attorney General provide for payment of disgorgement in the amount of $102.3 million, which is inclusive of the amount payable under the SEC settlement, plus a civil penalty in the amount of $20 million. The total amount payable by DeAM, approximately $122.3 million, would be distributed to funds in accordance with a distribution plan to be developed by a distribution consultant. The funds' investment advisors do not believe these amounts will have a material adverse financial impact on them or materially affect their ability to perform under their investment management agreements with the DWS funds. The above-described amounts are not material to Deutsche Bank, and have already been reserved.
Among the terms of the settled orders, DeAM is subject to certain undertakings regarding the conduct of its business in the future, including: formation of a Code of Ethics Oversight Committee to oversee all matters relating to issues arising under the advisors' Code of Ethics; establishment of an Internal Compliance Controls Committee having overall compliance oversight responsibility of the advisors; engagement of an Independent Compliance Consultant to conduct a comprehensive review of the advisors' supervisory compliance and other policies and procedures designed to prevent and detect breaches of fiduciary duty, breaches of the Code of Ethics and federal securities law violations by the advisors and their employees; and commencing in 2008, the advisors shall undergo a compliance review by an independent third party.
In addition, DeAM is subject to certain further undertakings relating to the governance of the mutual funds, including that: at least 75% of the members of the Boards of Trustees/Directors overseeing the DWS Funds continue to be independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors continue to be independent of DeAM; DeAM maintain existing management fee reductions for certain funds for a period of five years and not increase management fees for certain funds during this period; the funds retain a senior officer (or independent consultants) responsible for assisting in the review of fee arrangements and monitoring compliance by the funds and the investment advisors with securities laws, fiduciary duties, codes of ethics and other compliance policies, the expense of which shall be borne by DeAM; and periodic account statements, fund prospectuses and the mutual funds' web site contain additional disclosure and/or tools that assist investors in understanding the fees and costs associated with an investment in the funds and the impact of fees and expenses on fund returns.
DeAM has also settled proceedings with the Illinois Secretary of State regarding market timing matters. The terms of the Illinois settlement provide for investor education contributions totaling approximately $4 million and a payment in the amount of $2 million to the Securities Audit and Enforcement Fund.
On September 28, 2006, the SEC and the National Association of Securities Dealers ("NASD") announced final agreements in which Deutsche Investment Management Americas Inc. ("DIMA"), Deutsche Asset Management, Inc. ("DAMI") and Scudder Distributors, Inc. ("SDI") (now known as DWS Scudder Distributors, Inc.) settled administrative proceedings regarding disclosure of brokerage allocation practices in connection with sales of the Scudder Funds' (now known as the DWS Scudder Funds) shares during 2001-2003. The agreements with the SEC and NASD are reflected in orders which state, among other things, that DIMA and DAMI failed to disclose potential conflicts of interest to the fund Boards and to shareholders relating to SDI's use of certain funds' brokerage commissions to reduce revenue sharing costs to broker-dealer firms with whom it had arrangements to market and distribute Scudder Fund shares. These directed brokerage practices were discontinued in October 2003.
Under the terms of the settlements, in which DIMA, DAMI and SDI neither admitted nor denied any of the regulators' findings, DIMA, DAMI and SDI agreed to pay disgorgement, prejudgment interest and civil penalties in the total amount of $19.3 million. The portion of the settlements distributed to the funds was approximately $17.8 million and was paid to the funds as prescribed by the settlement orders based upon the amount of brokerage commissions from each fund used to satisfy revenue sharing agreements with broker-dealers who sold fund shares. Based on the prescribed settlement order, the Funds were not entitled to a portion of the settlement.
As part of the settlements, DIMA, DAMI and SDI also agreed to implement certain measures and undertakings relating to revenue sharing payments including making additional disclosures in the fund Prospectuses or Statements of Additional Information, adopting or modifying relevant policies and procedures and providing regular reporting to the fund Boards.
Private Litigation Matters. The matters alleged in the regulatory settlements described above also serve as the general basis of a number of private class action lawsuits involving the DWS funds. These lawsuits name as defendants various persons, including certain DWS funds, the funds' investment advisors and their affiliates, and certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each DWS fund's investment advisor has agreed to indemnify the applicable DWS funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making similar allegations.
Based on currently available information, the funds' investment advisors believe the likelihood that the pending lawsuits will have a material adverse financial impact on a DWS fund is remote and such actions are not likely to materially affect their ability to perform under their investment management agreements with the DWS funds.
F. Fund Merger
On June 28, 2006, the Board of Tax Free Money Fund Investment approved, in principle, the merger of the Tax Free Money Fund Investment (the "Acquired Fund") into the Cash Account Trust: Tax-Exempt Portfolio.
Completion of the merger is subject to a number of conditions, including final approval by each Fund's Board and approval by shareholders of the Acquired Fund at the shareholder meeting expected to be held on or about February 23, 2007.
Report of Independent Registered Public Accounting Firm
To the Trustees of DWS Advisor Funds and Shareholders of NY Tax Free Money Fund (formerly NY Tax Free Money Fund Investment) and Tax Free Money Fund Investment:
In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, 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 NY Tax Free Money Fund and Tax Free Money Fund Investment (the ``Funds'') at December 31, 2006, and the results of each of their operations, the changes in each of their 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 Funds' 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 December 31, 2006 by correspondence with the custodian and broker, provide a reasonable basis for our opinion.
As described in Note F, on June 28, 2006, the Board of Tax Free Money Fund Investment approved, in principle, the merger of the Tax Free Money Fund Investment (the "Acquired Fund") into the Cash Account Trust: Tax-Exempt Portfolio.
Boston, Massachusetts | PricewaterhouseCoopers LLP |
Of the dividends paid from net investment income for the NY Tax Free Money Fund and Tax Free Money Fund Investment for the taxable year ended December 31, 2006, 100% are designated as exempt interest dividends for federal income tax purposes.
Please contact 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 (800) 621-1048.
Investment Management Agreement Approval
NY Tax Free Money Fund
The Fund's Trustees approved the continuation of the Fund's investment management agreement with DAMI in September 2006. The Fund's investment management 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 the present time, all but one of your Fund's Trustees are independent of DAMI 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 management 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 management 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.
The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interest of shareholders. As you may know, DAMI 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 DAMI'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 investment management 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 DAMI by similar funds and institutional accounts advised by DAMI (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 lower than the median (1st 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 DAMI, 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 while the Fund's investment management fee schedule does not include breakpoints, the Board intends to seek implementation of one or more breakpoints once the Fund reaches an efficient operating size. The Board concluded that the Fund's fee schedule represents an appropriate sharing between Fund shareholders and DAMI 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 (Investment Class shares) are expected to be lower than the median (2nd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2005). 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 DAMI 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 DAMI, both absolute and relative to various benchmarks and industry peer groups. The Board noted that the Fund's performance (Investment Class shares) was in the 4th quartile of the applicable Lipper universe for each of the one-, three- and five-year periods ended June 30, 2006. The Board also observed that the Fund has underperformed its benchmark in each of the one-, three- and five-year periods ended June 30, 2006. The Board recognized that DAMI 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 DAMI. The Board considered extensive information regarding DAMI, including DAMI'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 investment management 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 DAMI have benefited and should continue to benefit the Fund and its shareholders.
The costs of the services to, and profits realized by, DAMI and its affiliates from their relationships with the Fund. The Board reviewed information concerning the costs incurred and profits realized by DAMI during 2005 from providing investment management services to the Fund (and, separately, to the entire DWS Scudder fund complex), and reviewed with DAMI the cost allocation methodology used to determine DAMI's profitability. In analyzing DAMI's costs and profits, the Board also reviewed the fees paid to and services provided by DAMI 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 DAMI and its affiliates as a result of DAMI's relationship with the Fund. As part of this review, the Board considered information provided by an independent accounting firm engaged to review DAMI'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 DAMI 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 DAMI and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.
The practices of DAMI 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 DAMI, 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 DAMI and its affiliates) research services from third parties that are generally useful to DAMI 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.
DAMI's commitment to and record of compliance, including its written compliance policies and procedures. In this regard, the Board considered DAMI'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 DAMI to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of DAMI's chief compliance officer, (ii) the large number of compliance personnel who report to DAMI'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 investment management 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 agreement.
In December 2006, the Board approved an amended and restated investment management agreement with Deutsche Investment Management Americas Inc. ("DIMA") in connection with the merger of DAMI into DIMA. In determining to approve this agreement, the Board considered Deutsche Bank's representations that this change was administrative in nature, and would not involve any change in operations or services provided to the fund, or to the personnel involved with providing such services.
Tax Free Money Fund Investment
The Fund's Trustees approved the continuation of the Fund's investment management agreement with DAMI in September 2006. The Fund's investment management 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 the present time, all but one of your Fund's Trustees are independent of DAMI 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 management 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 management 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.
The Trustees believe that a long-term relationship with a capable, conscientious advisor is in the best interest of shareholders. As you may know, DAMI 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 DAMI'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 investment management 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 DAMI by similar funds and institutional accounts advised by DAMI (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 lower than the median (1st 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 DAMI, 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 while the Fund's investment management fee schedule does not include breakpoints, the Board intends to seek implementation of one or more breakpoints once the Fund reaches an efficient operating size. The Board concluded that the Fund's fee schedule represents an appropriate sharing between Fund shareholders and DAMI 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 (Investment Class shares) are expected to be lower than the median (2nd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2005). 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 DAMI 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 DAMI, 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 (Investment Class shares) was in the 3rd quartile, 3rd quartile and 4th quartile, respectively, of the applicable Lipper universe. The Board also observed that the Fund has underperformed its benchmark in each of the one-, three- and five-year periods ended June 30, 2006. The Board recognized that DAMI 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 DAMI. The Board considered extensive information regarding DAMI, including DAMI'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 investment management 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 DAMI have benefited and should continue to benefit the Fund and its shareholders.
The costs of the services to, and profits realized by, DAMI and its affiliates from their relationships with the Fund. The Board reviewed information concerning the costs incurred and profits realized by DAMI during 2005 from providing investment management services to the Fund (and, separately, to the entire DWS Scudder fund complex), and reviewed with DAMI the cost allocation methodology used to determine DAMI's profitability. In analyzing DAMI's costs and profits, the Board also reviewed the fees paid to and services provided by DAMI 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 DAMI and its affiliates as a result of DAMI's relationship with the Fund. As part of this review, the Board considered information provided by an independent accounting firm engaged to review DAMI'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 DAMI 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 DAMI and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.
The practices of DAMI 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 DAMI, 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 DAMI and its affiliates) research services from third parties that are generally useful to DAMI 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.
DAMI's commitment to and record of compliance, including its written compliance policies and procedures. In this regard, the Board considered DAMI'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 DAMI to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of DAMI's chief compliance officer; (ii) the large number of compliance personnel who report to DAMI'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 investment management 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 agreement.
In December 2006, the Board approved an amended and restated investment management agreement with Deutsche Investment Management Americas, Inc. ("DIMA") in connection with the merger of DAMI into DIMA. In determining to approve this agreement, the Board considered Deutsche Bank's representations that this change was administrative in nature, and would not involve any change in operations or services provided to the fund, or to the personnel involved with providing such services.
The following table presents certain information regarding the Board Members and Officers of the Trust as of December 31, 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.
Independent Board Members | ||
Name, Year of Birth, Position with the Fund and Length of Time Served | Business Experience and Directorships During the Past Five Years | Number of Funds in Fund Complex Overseen |
Dawn-Marie Driscoll (1946) Chairperson since 2006 Board Member since 2006 | President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley College; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Advisory Board, Center for Business Ethics, Bentley College; Trustee, Southwest Florida Community Foundation (charitable organization). Former Directorships: Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 87 |
Henry P. Becton, Jr. (1943) Board Member since 2006 | President, WGBH Educational Foundation. Directorships: Association of Public Television Stations; Becton Dickinson and Company1 (medical technology company); Belo Corporation1 (media company); Boston Museum of Science; Public Radio International. Former Directorships: American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service | 85 |
Keith R. Fox (1954) Board Member since 2006 | Managing General Partner, Exeter Capital Partners (a series of private equity funds). Directorships: Progressive Holding Corporation (kitchen goods importer and distributor); Natural History, Inc. (magazine publisher); Box Top Media Inc. (advertising). Former Directorships: The Kennel Shop (retailer) | 87 |
Kenneth C. Froewiss (1945) Board Member since 2006 | Clinical Professor of Finance, NYU Stern School of Business (1997-present); Member, Finance Committee, Association for Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996) | 87 |
Martin J. Gruber (1937) Board Member since 1999 | Nomura Professor of Finance, Leonard N. Stern School of Business, New York University (since September 1965); Director, Japan Equity Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since January 2000), Singapore Fund, Inc. (since January 2000), National Bureau of Economic Research (since January 2006). Formerly, Trustee, TIAA (pension funds) (January 1996-January 2000); Trustee, CREF and CREF Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen Mutual Funds (January 1985-January 2001) | 87 |
Richard J. Herring (1946) Board Member since 1999 | Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Co-Director, Wharton Financial Institutions Center (since July 2000). Formerly, Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000); Director, Lauder Institute of International Management Studies (since July 2000-June 2006) | 87 |
Graham E. Jones (1933) Board Member since 2002 | Senior Vice President, BGK Realty, Inc. (commercial real estate) (since 1995). Formerly, Trustee of various investment companies managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005) | 87 |
Rebecca W. Rimel (1951) Board Member since 2002 | President and Chief Executive Officer, The Pew Charitable Trusts (charitable foundation) (1994 to present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001 to present). Formerly, Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983 to 2004); Board Member, Investor Education (charitable organization) (2004-2005) | 87 |
Philip Saunders, Jr. (1935) Board Member since 1986 | Principal, Philip Saunders Associates (economic and financial consulting) (since November 1988). Formerly, Director, Financial Industry Consulting, Wolf & Company (consulting) (1987-1988); President, John Hancock Home Mortgage Corporation (1984-1986); Senior Vice President of Treasury and Financial Services, John Hancock Mutual Life Insurance Company, Inc. (1982-1986) | 87 |
William N. Searcy, Jr. (1946) Board Member since 2002 | Private investor since October 2003; Trustee of eight open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998). Formerly, Pension & Savings Trust Officer, Sprint Corporation1 (telecommunications) (November 1989-September 2003) | 87 |
Jean Gleason Stromberg (1943) Board Member since 2006 | Retired. Formerly, Consultant (1997-2001); Director, US Government Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation; Service Source, Inc. Former Directorships: Mutual Fund Directors Forum (2002-2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987-1990 and 1994-1996) | 87 |
Carl W. Vogt (1936) Board Member since 2006 | Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm); formerly, President (interim) of Williams College (1999-2000); formerly, President of certain funds in the Deutsche Asset Management family of funds (formerly, Flag Investors family of funds) (registered investment companies) (1999-2000). Directorships: Yellow Corporation (trucking); American Science & Engineering (x-ray detection equipment). Former Directorships: ISI Family of Funds (registered investment companies, four funds overseen); National Railroad Passenger Corporation (Amtrak); Waste Management, Inc. (solid waste disposal). Formerly, Chairman and Member, National Transportation Safety Board | 85 |
Interested Board Member | ||
Name, Year of Birth, Position with the Fund and Length of Time Served | Business Experience and Directorships During the Past Five Years | Number of Funds in Fund Complex Overseen |
Axel Schwarzer2 (1958) Board Member since 2006 | Managing Director4, Deutsche Asset Management; Head of Deutsche Asset Management Americas; CEO of DWS Scudder; formerly, board member of DWS Investments, Germany (1999-2005); formerly, Head of Sales and Product Management for the Retail and Private Banking Division of Deutsche Bank in Germany (1997-1999); formerly, various strategic and operational positions for Deutsche Bank Germany Retail and Private Banking Division in the field of investment funds, tax driven instruments and asset management for corporates (1989-1996) | 86 |
Officers3 | |
Name, Year of Birth, Position with the Fund and Length of Time Served | Principal Occupation(s) During Past 5 Years and Other Directorships Held |
Michael G. Clark5 (1965) President, 2006-present | Managing Director4, Deutsche Asset Management (2006-present); President of DWS family of funds; formerly, Director of Fund Board Relations (2004-2006) and Director of Product Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President Operations, Merrill Lynch Asset Management (1999-2000) |
John Millette6 (1962) Vice President and Secretary, 2003-present | Director4, Deutsche Asset Management |
Paul H. Schubert5 (1963) Chief Financial Officer, 2004-present Treasurer, 2005-present | Managing Director4, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998) |
Patricia DeFilippis5 (1963) Assistant Secretary, 2005-present | Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co. LLC (1998-2003) |
Elisa D. Metzger5 (1962) Assistant Secretary 2005-present | Director4, Deutsche Asset Management (since September 2005); formerly, Counsel, Morrison and Foerster LLP (1999-2005) |
Caroline Pearson6 (1962) Assistant Secretary, 2002-present | Managing Director4, Deutsche Asset Management |
Scott M. McHugh6 (1971) Assistant Treasurer, 2005-present | Director4, Deutsche Asset Management |
Kathleen Sullivan D'Eramo6 (1957) Assistant Treasurer, 2003-present | Director4, Deutsche Asset Management |
John Robbins5 (1966) Anti-Money Laundering Compliance Officer, 2005-present | Managing Director4, Deutsche Asset Management (since 2005); formerly, Chief Compliance Officer and Anti-Money Laundering Compliance Officer for GE Asset Management (1999-2005) |
Robert Kloby5 (1962) Chief Compliance Officer, 2006-present | Managing Director4, Deutsche Asset Management (2004-present); formerly, Chief Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company (1984-1988) |
J. Christopher Jackson5 (1951) Chief Legal Officer, 2006-present | Director4, Deutsche Asset Management (2006-present); formerly, Director, Senior Vice President, General Counsel and Assistant Secretary, Hansberger Global Investors, Inc. (1996-2006); Director, National Society of Compliance Professionals (2002-2005)(2006-2009) |
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.
4 Executive title, not a board directorship.
5 Address: 345 Park Avenue, New York, New York 10154.
6 Address: Two International Place, Boston, MA 02110.
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.
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Automated Information Line | Institutional Investor Services (800) 703-1313 Personalized account information, information on other DeAM funds and services via touchtone telephone and the ability to exchange or redeem shares. | |
For More Information | (800) 730-1313, option 1 To speak with a fund service representative. | |
Written Correspondence | Deutsche Asset Management PO Box 219210Kansas City, MO 64121-9210 | |
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-scudder.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 Scudder Distributors, Inc. 222 South Riverside PlazaChicago, IL 60606-5808 www.dws-scudder.com (800) 621-1148 |
| NY Tax Free Money Fund | Tax Free Money Fund Investment |
Nasdaq Symbol | BNYXX | BTXXX |
CUSIP Number | 23336Y 698 | 23336Y 714 |
Fund Number | 844 | 839 |
Notes
Notes
Notes
Notes
Notes
ITEM 2. | CODE OF ETHICS |
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| As of the end of the period, December 31, 2006, NY Tax Free Money Fund and Tax Free Money Fund Investment have a code of ethics, as defined in Item 2 of Form N-CSR, that applies to their 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.
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ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
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| 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. |
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ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
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NY TAX FREE MONEY 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 | Audit Fees Billed to Fund | Audit-Related | Tax Fees Billed to Fund | All |
2006 | $37,500 | $128 | $0 | $0 |
2005 | $35,650 | $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 | Audit-Related | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All |
2006 | $155,500 | $11,930 | $0 |
2005 | $268,900 | $197,605 | $0 |
The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures related to fund mergers and additional costs related to annual audits 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 | Total (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) |
2006 | $0 | $11,930 | $0 | $11,930 |
2005 | $0 | $197,605 | $104,635 | $302,240 |
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.
TAX FREE MONEY FUND INVESTMENT
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 | Audit Fees Billed to Fund | Audit-Related | Tax Fees Billed to Fund | All |
2006 | $38,000 | $128 | $0 | $0 |
2005 | $35,650 | $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 | Audit-Related | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All |
2006 | $155,500 | $11,930 | $0 |
2005 | $268,900 | $197,605 | $0 |
The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures related to fund mergers and additional costs related to annual audits 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 | Total (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) |
2006 | $0 | $11,930 | $0 | $11,930 |
2005 | $0 | $197,605 | $104,635 | $302,240 |
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.
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ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
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| Not Applicable |
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ITEM 6. | SCHEDULE OF INVESTMENTS |
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| Not Applicable |
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ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
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| Not applicable. |
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ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
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| Not applicable. |
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
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| Not Applicable. |
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
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| 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. |
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ITEM 11. | CONTROLS AND PROCEDURES |
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| (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. |
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| (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. |
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ITEM 12. | EXHIBITS |
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| (a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
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| (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. |
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| (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: | NY Tax Free Money Fund and Tax Free Money Fund Investment, a series of DWS Advisor Funds |
By: | /s/Michael G. Clark |
| Michael G. Clark |
President
Date: | March 1, 2007 |
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: | NY Tax Free Money Fund and Tax Free Money Fund Investment, a series of DWS Advisor Funds |
By: | /s/Michael G. Clark |
| Michael G. Clark |
President
Date: | March 1, 2007 |
By: | /s/Paul Schubert |
| Paul Schubert |
Chief Financial Officer and Treasurer
Date: | March 1, 2007 |