UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number: 811-01236
Deutsche Market Trust
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue
New York, NY 10154-0004
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (212) 250-3220
Paul Schubert
60 Wall Street
New York, NY 10005
(Name and Address of Agent for Service)
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Date of fiscal year end:
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10/31
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Date of reporting period:
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10/31/2014
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ITEM 1.
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REPORT TO STOCKHOLDERS
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October 31, 2014
Annual Report
to Shareholders
Deutsche Global Income Builder Fund
(formerly DWS Global Income Builder Fund)
Contents
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3 Letter to Shareholders
4 Portfolio Management Review
12 Performance Summary
15 Investment Portfolio
48 Statement of Assets and Liabilities
50 Statement of Operations
52 Statement of Changes in Net Assets
53 Financial Highlights
59 Notes to Financial Statements
78 Report of Independent Registered Public Accounting Firm
79 Information About Your Fund's Expenses
81 Tax Information
82 Advisory Agreement Board Considerations and Fee Evaluation
87 Board Members and Officers
92 Account Management Resources
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This report must be preceded or accompanied by a prospectus. To obtain a summary prospectus, if available, or prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the fund. Please read the prospectus carefully before you invest.
Although allocation among different asset categories generally limits risk, portfolio management may favor an asset category that underperforms other assets or markets as a whole. Bond investments are subject to interest-rate, credit, liquidity and market risks to varying degrees. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increased volatility. Dividends are not guaranteed. If the dividend-paying stocks held by the fund reduce or stop paying dividends, the fund’s ability to generate income may be adversely affected. Preferred stocks, a type of dividend-paying stock, present certain additional risks. Because Exchange Traded Funds (ETFs) trade on a securities exchange, their shares may trade at a premium or discount to their net asset value. ETFs also incur fees and expenses so they may not fully match the performance of the indexes they are designed to track. Any fund that focuses in a particular segment of the market or region of the world will generally be more volatile than a fund that invests more broadly. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. The fund may lend securities to approved institutions. Small company stocks tend to be more volatile than medium-sized or large company stocks. Stocks may decline in value. See the prospectus for details.
Deutsche Asset & Wealth Management represents the asset management and wealth management activities conducted by Deutsche Bank AG or any of its subsidiaries, including the Advisor and DeAWM Distributors, Inc.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Dear Shareholder:
I am very pleased to tell you that the DWS funds have been renamed Deutsche funds, aligning more closely with the Deutsche Asset & Wealth Management brand. We are proud to adopt the Deutsche name — a brand that fully represents the global access, discipline and intelligence that support all of our products and services.
Deutsche Asset & Wealth Management combines the asset management and wealth management divisions of Deutsche Bank to deliver a comprehensive suite of active, passive and alternative investment capabilities. Your investment in the Deutsche funds means you have access to the thought leadership and resources of one of the world’s largest and most influential financial institutions.
In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.
In addition, key service providers have been renamed as follows:
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Former Name
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New name, effective August 11, 2014
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DWS Investments Distributors, Inc.
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DeAWM Distributors, Inc.
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DWS Trust Company
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DeAWM Trust Company
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DWS Investments Service Company
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DeAWM Service Company
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These changes have no effect on the day-to-day management of your investment, and there is no action required on your part. You will continue to experience the benefits that come from our decades of experience, in-depth research and worldwide network of investment professionals.
Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.
Best regards,
Brian Binder
President, Deutsche Funds
Market Overview and Fund Performance
All performance information below is historical and does not guarantee future results. Returns shown are for Class A shares, unadjusted for sales charges. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit deutschefunds.com for the most recent month-end performance of all share classes. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had. Please refer to pages 12 through 14 for more complete performance information.
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Investment Process
The fund invests in a broad range of both traditional asset classes (such as equity and fixed-income investments) and alternative asset classes (such as real estate, infrastructure, convertibles, commodities, currencies and absolute return strategies). The fund can buy many types of securities, among them common stocks, including dividend-paying stocks, convertible securities, corporate bonds, government bonds, inflation-indexed bonds, mortgage- and asset-backed securities, and exchange-traded funds (ETFs). The fund can invest in securities of any size, investment style category or credit quality, and from any country (including emerging markets).
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Deutsche Global Income Builder Fund returned 5.49% during the 12-month period ending October 31, 2014. The fund underperformed the 6.14% return of the S&P® Target Risk Moderate Index, which seeks to provide significant exposure to fixed income, while allocating a smaller portion of exposure to equities. In comparison, its two other benchmarks — the Russell 1000® Index, which tracks the performance of the 1,000 largest stocks in the Russell 3000® Index, and the Barclays U.S. Aggregate Bond Index, which represents domestic taxable investment-grade bonds — returned 16.78% and 4.14%, respectively. The fund comfortably outperformed the 4.65% average return of the funds in its Morningstar peer group, Tactical Allocation Funds.
Despite periodic concerns about economic trends and geopolitical disruptions, the past year brought a robust return for the global equity markets. Investors generally remained encouraged about economic trends in the United States and the United Kingdom, the stabilization of China’s growth trajectory and, perhaps most important, the continued accommodation being provided by the world’s central banks. Even as the U.S. Federal Reserve Board (the Fed) wrapped up its asset-purchase program, it remained steadfast in keeping its "lower for longer" interest-rate policy. Outside of the United States, the central banks in Europe and Japan both remained committed to providing aggressive monetary stimulus to their respective economies. In this environment, the MSCI All-Country World Index finished with a 12-month total return of 7.77%. Dividend stocks, while also providing healthy returns, nonetheless lagged the performance of the broader markets during the past year. Generally speaking, investors’ hearty risk appetite led to higher demand for faster-growing companies relative to the types of conservative, steady growers that populate the universe of dividend stocks.
The global bond market defied widespread negative expectations to deliver a healthy total return during the past 12 months. U.S. Treasury yields fell (as prices rose), reflecting an environment of sluggish global growth, the Fed’s favorable interest-rate policy and the periodic "flights to quality" sparked by geopolitical turmoil overseas. At the same time, the domestic economy remained strong enough to support an environment of healthy corporate earnings and improving balance sheets for U.S. corporations. This backdrop, together with investors’ ongoing appetite for yield, contributed to outperformance for investment-grade corporate, high-yield and emerging-markets bonds.
Fund Performance
When our team took over the fund in March 2012, we established an equal, 50-50 strategic weighting between stocks and bonds. We subsequently allowed the fund’s allocation to equities to increase to 65% of assets by the end of April 2014 as the stock market rallied, which enabled the fund to participate in stocks’ outperformance during this time. In May 2014, we reduced the fund's equity weighting on the belief that a more balanced weighting between stocks and bonds was appropriate given stocks’ long streak of outperformance. We reduced the equity weighting further during July in response to the rising risks for the global equity markets. We believe this reduced weighting is appropriate given our views regarding valuations, interest rates and economic growth.
The equity portion of the fund underperformed due largely to its investments in a small group of stocks that lagged during the past year, but we have retained our positions on the belief that they offer even more compelling opportunities after their downturns. These include the U.K. supermarket operator Tesco PLC, the oil-services company Transocean Ltd. and the German ATM producer Wincor Nixdorf AG. On the plus side, the fund’s largest contributor was the electric and gas utility stock UGI Corp. Our original purchase was based on our view that the stock was trading below the intrinsic value of the company, and this gap has since closed on the strength of UGI’s strong free cash flow and decision to increase its dividend. Microsoft Corp. also made a substantial contribution to performance during the 12-month period. We purchased the stock in late 2012 on the belief that it was undervalued given the size and stability of its cash flows. During the past year, it emerged as one of the leading mega-cap stocks in the technology sector, as investors were attracted to its compelling valuation, increased dividend and appointment of a new chief executive officer. Novartis AG, the Swiss pharmaceutical company, and Stryker Corp., a U.S.-based medical-device producer, also stood out as being top contributors.
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"The fund comfortably outperformed the 4.65% average return of the funds in its Morningstar peer group, Tactical Allocation Funds."
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The bond portfolio performed well, thanks to its substantial allocations to high-yield bonds and emerging-markets debt. We have emphasized these areas for many years on the belief that slowly improving economic growth would fuel outperformance for higher-yielding market segments. This has indeed been the case, so this positioning was a key factor in the bond portfolio’s 12-month results. We are aware of the potential risks after the extended run of outperformance for these sectors, and are prepared to adjust the portfolio when the need eventually arises. For now, however, we believe these market segments remain supported by the environment of steady economic growth and the accommodative policies of the world’s central banks. On the other side of the ledger, our decision to keep the fund’s duration — or interest-rate sensitivity — below that of the benchmark also weighed on performance for much of the year. Bond yields declined fairly steadily (as prices rose) from the beginning of January onward, but the bond portfolio's below-average duration prevented it from capitalizing on the full extent of the move.
Throughout the period, the fund used derivatives — including forward currency contracts — to hedge currency risk in certain portfolio positions, offsetting the potential impact of the downturn in foreign currencies relative to the U.S. dollar. It also used interest rate contracts to hedge against potential adverse interest rate movements on portfolio assets. In addition, the fund used derivatives including forward currency and interest rate contracts for non-hedging purposes to seek to enhance potential gains. Derivatives used for non-hedging purposes contributed to returns during the period.
Outlook and Positioning
Trading activity in the fund’s equity portfolio was higher than normal during the past year. We sold a number of stocks that reached what we believe were their fair values, and we decreased the fund’s weightings in several individual stocks where we saw the potential for continued upside, but where the risk-return trade-off was no longer as attractive as it was earlier in the year. In turn, we deployed the proceeds from these sales into companies where we believe valuations are more attractive.
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Five Largest Equity Holdings at October 31, 2014 (15.4% of Net Assets)
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1. British American Tobacco PLC
Manufactures, markets and sells cigarettes and other tobacco products
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3.6%
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2. Procter & Gamble Co.
Manufacturer of diversified consumer products
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3.2%
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3. UGI Corp.
Distributes and markets energy products and services
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3.0%
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4. PepsiCo, Inc.
Provider of soft drinks, snack foods and food services
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2.9%
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5. Verizon Communications, Inc.
An integrated telecommunications company
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2.7%
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Five Largest Fixed-Income Long-Term Securities at October 31, 2014 (5.3% of Net Assets)
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1. U.S. Treasury Note
1.0%, 8/31/2016
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2.2%
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2. Government of New Zealand
6.0%, 12/15/2017
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1.0%
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3. Republic of Singapore
3.375%, 9/1/2033
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1.0%
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4. Canadian Government Bond
3.5%, 12/1/2045
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0.6%
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5. Reynolds Group Issuer, Inc.
5.75%, 10/15/2020
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0.5%
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Portfolio holdings and characteristics are subject to change.
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The net effect of these moves was higher concentration in the stocks that we consider to be our "best ideas." In addition, our various decisions regarding individual stocks caused us to move away from stocks with growing dividends to a larger weighting in stocks with higher absolute dividends, stable earnings growth and more attractive valuations. Procter & Gamble Co., PepsiCo, Inc. and Verizon Communications, Inc. are examples of stocks we include in this category.
We were also active within the fund’s bond portfolio, taking profits in areas that have become fully valued and rotating into those that offer a more favorable trade-off of risk and return. We believe this active approach, in conjunction with our "go anywhere" investment mandate, provides the flexibility to take advantage of a broad range of market opportunities as they arise. This element of our strategy may become even more important if, as we expect, market conditions become more volatile in the months ahead.
Contrary to the expectations that prevailed at the beginning of this year, government bond yields have fallen thus far in 2014. While there is always the possibility that a "flight to quality" trade will occur at some point, we believe this move has largely played itself out and that the most likely scenario is that yields will begin to move higher over time. Accordingly, we took steps to cushion the impact of a potential increase in yields by trimming the bond portfolio’s duration in the latter part of the year. We believe this approach will help manage interest-rate risk, while at the same time allowing us to gain the full benefit of individual security selection in the credit-sensitive segments of the market. Overall, we remain focused on adding value through individual security selection, portfolio allocation and our "go anywhere" strategy.
Portfolio Management Team
William Chepolis, CFA, Managing Director
Portfolio Manager of the fund. Began managing the fund in 2005.
— Joined Deutsche Asset & Wealth Management in 1998 after 13 years of experience as vice president and portfolio manager for Norwest Bank where he managed the bank's fixed income and foreign exchange portfolios.
— Co-Head of Fixed Income for North America: New York.
— BIS, University of Minnesota.
Thomas Schuessler, PhD, Managing Director
Portfolio Manager of the fund. Began managing the fund in 2008.
— Joined Deutsche Asset & Wealth Management in 2001 after five years at Deutsche Bank where he managed various projects and worked in the office of the Chairman of the Management Board.
— Head of Equity Income and Member of the Asset Management CIO Executive Committee: Frankfurt.
— PhD, University of Heidelberg, studies in physics and economics at University of Heidelberg and University of Utah.
Philip G. Condon, Managing Director
Portfolio Manager of the fund. Began managing the fund in 2013.
— Joined Deutsche Asset & Wealth Management in 1983.
— Vice Chairman of Deutsche Asset & Wealth Management, Americas; formerly, Head of Municipal Bonds.
— BA and MBA, University of Massachusetts at Amherst.
Gary Russell, CFA, Managing Director
Portfolio Manager of the fund. Began managing the fund in 2013.
— Joined Deutsche Asset & Wealth Management in 1996. Served as the head of the High Yield group in Europe and as an Emerging Markets portfolio manager.
— Prior to that, he spent four years at Citicorp as a research analyst and structurer of collateralized mortgage obligations. Prior to Citicorp, he served as an officer in the US Army from 1988 to 1991.
— Co-Head of US Credit: New York.
— BS, United States Military Academy (West Point); MBA, New York University, Stern School of Business.
John D. Ryan, Director
Portfolio Manager of the fund. Began managing the fund in 2012.
— Joined Deutsche Asset & Wealth Management in 2010 from Northern Trust where he served as a senior portfolio manager. Previously, he served as a portfolio manager and head of credit trading for Deutsche Asset Management from 1998–2003.
— Over 19 years of investment industry experience.
— BA in Economics, University of Chicago; MBA, University of Chicago.
Fabian Degen, CFA, Assistant Vice President
Portfolio Manager of the fund. Began managing the fund in 2012.
— Joined Deutsche Asset & Wealth Management in 2007.
— Portfolio manager for US and Global Value Equity: Frankfurt.
— US and Global Fund Management: Frankfurt.
— Bachelor of International Business Administration in Investments and Finance from International University of Applied Sciences Bad Honnef, Bonn with educational exchanges at the University of Maine (USA).
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
Terms to Know
The S&P Target Risk Moderate Index is designed to measure the performance of S&P’s proprietary moderate target risk allocation model. The S&P Target Risk Moderate Index seeks to provide significant exposure to fixed income, while also allocating a smaller portion of exposure to equities in order to seek current income, some capital preservation and an opportunity for moderate-to-low capital appreciation.
The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.
The Barclays U.S. Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with average maturities of one year or more.
The MSCI All Country (AC) World Index tracks the performance of stocks in 45 countries comprising 24 developed and 21 emerging markets.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
The Morningstar Tactical Allocation Funds category consists of portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments.
Underweight means the fund holds a lower weighting in a given sector or security than the benchmark. Overweight means the fund holds a higher weighting.
Duration, which is expressed in years, measures the sensitivity of the price of a bond or bond fund to a change in interest rates.
Derivatives are contracts whose values can be based on a variety of instruments including indices, currencies or securities. They can be utilized for a variety of reasons including for hedging purposes; for risk management; for non-hedging purposes to seek to enhance potential gains; or as a substitute for direct investment in a particular asset class or to keep cash on hand to meet shareholder redemptions. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility.
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Class A
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1-Year
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5-Year
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10-Year
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Average Annual Total Returns as of 10/31/14
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|||
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Unadjusted for Sales Charge
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5.49%
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8.68%
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4.87%
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Adjusted for the Maximum Sales Charge (max 5.75% load)
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–0.57%
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7.40%
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4.26%
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Russell 1000® Index†
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16.78%
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16.98%
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8.54%
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Barclays U.S. Aggregate Bond Index††
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4.14%
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4.22%
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4.64%
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S&P® Target Risk Moderate Index†††
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6.14%
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7.46%
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5.32%
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Class B
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1-Year
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5-Year
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10-Year
|
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Average Annual Total Returns as of 10/31/14
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|||
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Unadjusted for Sales Charge
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4.52%
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7.59%
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4.15%
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Adjusted for the Maximum Sales Charge (max 4.00% CDSC)
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1.52%
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7.44%
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4.15%
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Russell 1000® Index†
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16.78%
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16.98%
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8.54%
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Barclays U.S. Aggregate Bond Index††
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4.14%
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4.22%
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4.64%
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S&P® Target Risk Moderate Index†††
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6.14%
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7.46%
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5.32%
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Class C
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1-Year
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5-Year
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10-Year
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Average Annual Total Returns as of 10/31/14
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|||
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Unadjusted for Sales Charge
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4.74%
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7.79%
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4.01%
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Adjusted for the Maximum Sales Charge (max 1.00% CDSC)
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4.74%
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7.79%
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4.01%
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Russell 1000® Index†
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16.78%
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16.98%
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8.54%
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Barclays U.S. Aggregate Bond Index††
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4.14%
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4.22%
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4.64%
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S&P® Target Risk Moderate Index†††
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6.14%
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7.46%
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5.32%
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Class S
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1-Year
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5-Year
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Life of Class*
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Average Annual Total Returns as of 10/31/14
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|||
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No Sales Charges
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5.70%
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8.91%
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4.84%
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Russell 1000® Index†
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16.78%
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16.98%
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8.26%
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Barclays U.S. Aggregate Bond Index††
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4.14%
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4.22%
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4.88%
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S&P® Target Risk Moderate Index†††
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6.14%
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7.46%
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5.27%
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Institutional Class
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1-Year
|
5-Year
|
10-Year
|
|
Average Annual Total Returns as of 10/31/14
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|||
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No Sales Charges
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5.77%
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8.98%
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5.17%
|
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Russell 1000® Index†
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16.78%
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16.98%
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8.54%
|
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Barclays U.S. Aggregate Bond Index††
|
4.14%
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4.22%
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4.64%
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S&P® Target Risk Moderate Index†††
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6.14%
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7.46%
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5.32%
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Performance in the Average Annual Total Returns table(s) above and the Growth of an Assumed $10,000 Investment line graph that follows is historical and does not guarantee future results. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit deutschefunds.com for the Fund's most recent month-end performance. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated March 1, 2014 are 0.90%, 1.90%, 1.72%, 0.71% and 0.65% for Class A, Class B, Class C, Class S and Institutional Class shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
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Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge)
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 |
 |
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Yearly periods ended October 31
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The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net initial investment of $9,425.
The growth of $10,000 is cumulative.
Performance of other share classes will vary based on the sales charges and the fee structure of those classes.
* Class S shares commenced operations on March 14, 2005. The performance shown for each index is for the time period of March 31, 2005 through October 31, 2014, which is based on the performance period of the life of Class S.
† The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.
†† The Barclays U.S. Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with average maturities of one year or more.
††† The S&P Target Risk Moderate Index is designed to measure the performance of S&P's proprietary moderate target risk allocation model. The S&P Target Risk Moderate Index seeks to provide significant exposure to fixed income, while also allocating a smaller portion of exposure to equities in order to seek current income, some capital preservation, and an opportunity for moderate to low capital appreciation.
On December 1, 2014, the S&P Target Risk Moderate Index replaced the Russell 1000 Index as the comparative broad-based securities market index because the Advisor believes that the S&P Target Risk Moderate Index more closely reflects the fund's investment strategies. On December 1, 2014, the Blended Index replaced the Barclays U.S. Aggregate Bond Index and the S&P Target Risk Moderate Index as the sole additional comparative index. The Advisor believes the Blended Index provides additional comparative performance information and represents the fund’s overall strategic asset allocations.
The Blended Index consists of an equally weighted blend (50%/50%) of the MSCI World High Dividend Yield Index and Barclays U.S. Universal Index.
MSCI World High Dividend Yield Index includes securities that offer a meaningfully higher-than-average dividend yield relative to the MSCI World Index and pass dividend sustainability and persistence screens. The index offers broad market coverage, and is free-float market capitalization-weighted to ensure that its performance can be replicated in institutional and retail portfolios. The index is calculated using closing local market prices and translates into US dollars using the London close foreign exchange rates.
Barclays U.S. Universal Index represents the union of the U.S. Aggregate Index, the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, and the non-ERISA portion of the CMBS Index.
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Class A
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Class B
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Class C
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Class S
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Institutional Class
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Net Asset Value
|
||||||||||||||||||||
|
10/31/14
|
$ | 10.36 | $ | 10.37 | $ | 10.35 | $ | 10.36 | $ | 10.35 | ||||||||||
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10/31/13
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$ | 10.31 | $ | 10.31 | $ | 10.29 | $ | 10.31 | $ | 10.30 | ||||||||||
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Distribution Information as of 10/31/14
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||||||||||||||||||||
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Income Dividends, Twelve Months
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$ | .34 | $ | .24 | $ | .26 | $ | .36 | $ | .37 | ||||||||||
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Capital Gain Distributions, Twelve Months
|
$ | .16 | $ | .16 | $ | .16 | $ | .16 | $ | .16 | ||||||||||
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Shares
|
Value ($)
|
|||||||
|
Common Stocks 50.1%
|
||||||||
|
Consumer Discretionary 3.8%
|
||||||||
|
Hotels, Restaurants & Leisure 0.0%
|
||||||||
|
Dawn Holdings, Inc.* (a)
|
3 | 6,628 | ||||||
|
Trump Entertainment Resorts, Inc.*
|
8 | 0 | ||||||
| 6,628 | ||||||||
|
Media 1.4%
|
||||||||
|
Pearson PLC
|
273,371 | 5,121,208 | ||||||
|
Wolters Kluwer NV
|
348,417 | 9,306,351 | ||||||
| 14,427,559 | ||||||||
|
Specialty Retail 0.3%
|
||||||||
|
Staples, Inc. (b)
|
224,405 | 2,845,455 | ||||||
|
Textiles, Apparel & Luxury Goods 2.1%
|
||||||||
|
Coach, Inc.
|
649,495 | 22,329,638 | ||||||
|
Consumer Staples 15.0%
|
||||||||
|
Beverages 2.9%
|
||||||||
|
PepsiCo, Inc.
|
316,273 | 30,415,974 | ||||||
|
Food & Staples Retailing 1.1%
|
||||||||
|
Tesco PLC
|
4,170,999 | 11,599,993 | ||||||
|
Food Products 2.8%
|
||||||||
|
Nestle SA (Registered)
|
99,341 | 7,272,827 | ||||||
|
Unilever NV (CVA)
|
544,064 | 21,123,555 | ||||||
| 28,396,382 | ||||||||
|
Household Products 3.2%
|
||||||||
|
Procter & Gamble Co.
|
373,287 | 32,576,757 | ||||||
|
Tobacco 5.0%
|
||||||||
|
British American Tobacco PLC
|
658,764 | 37,415,921 | ||||||
|
Imperial Tobacco Group PLC
|
325,586 | 14,136,735 | ||||||
| 51,552,656 | ||||||||
|
Energy 3.0%
|
||||||||
|
Energy Equipment & Services 0.7%
|
||||||||
|
Transocean Ltd. (b)
|
229,605 | 6,849,117 | ||||||
|
Oil, Gas & Consumable Fuels 2.3%
|
||||||||
|
Canadian Natural Resources Ltd.
|
221,398 | 7,725,995 | ||||||
|
Canadian Oil Sands Ltd. (b)
|
1,027,134 | 16,094,394 | ||||||
| 23,820,389 | ||||||||
|
Financials 6.1%
|
||||||||
|
Diversified Financial Services 1.3%
|
||||||||
|
Leucadia National Corp.
|
542,537 | 12,901,530 | ||||||
|
Insurance 2.9%
|
||||||||
|
PartnerRe Ltd.
|
147,481 | 17,062,077 | ||||||
|
Powszechny Zaklad Ubezpieczen SA
|
45,486 | 6,822,401 | ||||||
|
Sampo Oyj "A"
|
118,768 | 5,689,793 | ||||||
| 29,574,271 | ||||||||
|
Real Estate Investment Trusts 1.9%
|
||||||||
|
HCP, Inc. (REIT)
|
454,065 | 19,965,238 | ||||||
|
Health Care 2.5%
|
||||||||
|
Health Care Equipment & Supplies 0.6%
|
||||||||
|
Stryker Corp.
|
66,056 | 5,781,882 | ||||||
|
Health Care Providers & Services 0.2%
|
||||||||
|
Rhoen-Klinikum AG
|
82,754 | 2,464,545 | ||||||
|
Pharmaceuticals 1.7%
|
||||||||
|
Novartis AG (Registered)
|
86,098 | 7,985,074 | ||||||
|
Sanofi
|
106,593 | 9,873,455 | ||||||
| 17,858,529 | ||||||||
|
Industrials 7.2%
|
||||||||
|
Aerospace & Defense 0.6%
|
||||||||
|
BAE Systems PLC
|
852,513 | 6,263,999 | ||||||
|
Air Freight & Logistics 1.9%
|
||||||||
|
C.H. Robinson Worldwide, Inc. (b)
|
234,997 | 16,264,142 | ||||||
|
Singapore Post Ltd.
|
2,459,682 | 3,792,481 | ||||||
| 20,056,623 | ||||||||
|
Building Products 0.0%
|
||||||||
|
Congoleum Corp.*
|
11,440 | 0 | ||||||
|
Commercial Services & Supplies 0.0%
|
||||||||
|
Quad Graphics, Inc.
|
61 | 1,345 | ||||||
|
Industrial Conglomerates 3.7%
|
||||||||
|
Jardine Matheson Holdings Ltd.
|
403,986 | 24,339,670 | ||||||
|
Koninklijke Philips NV
|
329,526 | 9,217,313 | ||||||
|
Smiths Group PLC
|
236,773 | 4,418,284 | ||||||
| 37,975,267 | ||||||||
|
Machinery 1.0%
|
||||||||
|
CNH Industrial NV
|
1,211,802 | 9,879,320 | ||||||
|
Information Technology 4.4%
|
||||||||
|
Communications Equipment 1.4%
|
||||||||
|
Cisco Systems, Inc.
|
592,244 | 14,492,211 | ||||||
|
Software 1.6%
|
||||||||
|
Microsoft Corp.
|
345,057 | 16,200,426 | ||||||
|
Technology Hardware, Storage & Peripherals 1.4%
|
||||||||
|
Diebold, Inc. (b)
|
168,275 | 5,961,983 | ||||||
|
Wincor Nixdorf AG
|
193,276 | 8,878,403 | ||||||
| 14,840,386 | ||||||||
|
Materials 1.2%
|
||||||||
|
Chemicals 0.6%
|
||||||||
|
Air Liquide SA
|
52,633 | 6,357,946 | ||||||
|
Metals & Mining 0.6%
|
||||||||
|
Franco-Nevada Corp.
|
124,405 | 5,823,706 | ||||||
|
Telecommunication Services 2.7%
|
||||||||
|
Diversified Telecommunication Services
|
||||||||
|
Verizon Communications, Inc.
|
547,985 | 27,536,005 | ||||||
|
Utilities 4.2%
|
||||||||
|
Electric Utilities 1.0%
|
||||||||
|
Southern Co.
|
224,973 | 10,429,748 | ||||||
|
Gas Utilities 3.0%
|
||||||||
|
UGI Corp. (b)
|
816,492 | 30,773,583 | ||||||
|
Multi-Utilities 0.2%
|
||||||||
|
National Grid PLC
|
178,707 | 2,649,536 | ||||||
|
Total Common Stocks (Cost $451,347,074)
|
516,646,644 | |||||||
|
Preferred Stock 0.0%
|
||||||||
|
Financials
|
||||||||
|
Ally Financial, Inc. Series G, 144A, 7.0% (Cost $280,281)
|
295 | 296,917 | ||||||
|
Rights 0.0%
|
||||||||
|
Health Care
|
||||||||
|
Rhoen-Klinikum AG, Expiration Date 10/14/2015* (Cost $0)
|
82,754 | 69,689 | ||||||
|
Warrants 0.0%
|
||||||||
|
Materials
|
||||||||
|
GEO Specialty Chemicals, Inc., Expiration Date 3/31/2015*
|
57,540 | 38,243 | ||||||
|
Hercules Trust II, Expiration Date 3/31/2029*
|
506 | 4,425 | ||||||
|
Total Warrants (Cost $90,209)
|
42,668 | |||||||
|
Principal Amount ($)(c)
|
Value ($)
|
||||||||
|
Corporate Bonds 25.9%
|
|||||||||
|
Consumer Discretionary 3.2%
|
|||||||||
|
AmeriGas Finance LLC:
|
|||||||||
|
6.75%, 5/20/2020
|
280,000 | 298,200 | |||||||
|
7.0%, 5/20/2022
|
840,000 | 907,200 | |||||||
|
Apex Tool Group LLC, 144A, 7.0%, 2/1/2021 (b)
|
190,000 | 171,000 | |||||||
|
APX Group, Inc.:
|
|||||||||
|
6.375%, 12/1/2019
|
195,000 | 191,588 | |||||||
|
144A, 8.75%, 12/1/2020
|
195,000 | 168,675 | |||||||
|
Asbury Automotive Group, Inc., 8.375%, 11/15/2020
|
55,000 | 59,400 | |||||||
|
Ashtead Capital, Inc., 144A, 6.5%, 7/15/2022
|
305,000 | 329,400 | |||||||
|
Ashton Woods U.S.A. LLC, 144A, 6.875%, 2/15/2021
|
325,000 | 318,500 | |||||||
|
Avis Budget Car Rental LLC, 5.5%, 4/1/2023
|
200,000 | 201,000 | |||||||
|
Bed Bath & Beyond, Inc.:
|
|||||||||
|
4.915%, 8/1/2034
|
340,000 | 338,036 | |||||||
|
5.165%, 8/1/2044
|
410,000 | 409,619 | |||||||
|
Block Communications, Inc., 144A, 7.25%, 2/1/2020
|
70,000 | 72,800 | |||||||
|
Boyd Gaming Corp., 9.0%, 7/1/2020 (b)
|
150,000 | 162,000 | |||||||
|
CCO Holdings LLC, 7.375%, 6/1/2020
|
3,610,000 | 3,869,469 | |||||||
|
Cequel Communications Holdings I LLC:
|
|||||||||
|
144A, 5.125%, 12/15/2021
|
1,390,000 | 1,356,987 | |||||||
|
144A, 6.375%, 9/15/2020
|
1,105,000 | 1,151,962 | |||||||
|
Clear Channel Worldwide Holdings, Inc.:
|
|||||||||
|
Series A, 6.5%, 11/15/2022
|
240,000 | 247,200 | |||||||
|
Series B, 6.5%, 11/15/2022
|
1,195,000 | 1,236,825 | |||||||
|
Series A, 7.625%, 3/15/2020
|
20,000 | 21,100 | |||||||
|
Series B, 7.625%, 3/15/2020
|
1,190,000 | 1,265,862 | |||||||
|
Cogeco Cable, Inc., 144A, 4.875%, 5/1/2020
|
25,000 | 25,000 | |||||||
|
Columbus International, Inc., 144A, 7.375%, 3/30/2021
|
1,500,000 | 1,590,000 | |||||||
|
CSC Holdings LLC, 144A, 5.25%, 6/1/2024
|
585,000 | 586,462 | |||||||
|
Cumulus Media Holdings, Inc., 7.75%, 5/1/2019 (b)
|
700,000 | 717,500 | |||||||
|
DISH DBS Corp.:
|
|||||||||
|
4.25%, 4/1/2018
|
290,000 | 297,250 | |||||||
|
5.0%, 3/15/2023
|
845,000 | 841,831 | |||||||
|
7.875%, 9/1/2019
|
1,120,000 | 1,300,600 | |||||||
|
Getty Images, Inc., 144A, 7.0%, 10/15/2020
|
245,000 | 188,650 | |||||||
|
Group 1 Automotive, Inc., 144A, 5.0%, 6/1/2022
|
335,000 | 331,650 | |||||||
|
Harron Communications LP, 144A, 9.125%, 4/1/2020
|
250,000 | 272,500 | |||||||
|
HD Supply, Inc.:
|
|||||||||
|
7.5%, 7/15/2020
|
130,000 | 138,450 | |||||||
|
11.5%, 7/15/2020
|
125,000 | 145,625 | |||||||
|
Hot Topic, Inc., 144A, 9.25%, 6/15/2021
|
160,000 | 172,000 | |||||||
|
iHeartCommunications, Inc.:
|
|||||||||
|
9.0%, 12/15/2019
|
870,000 | 879,244 | |||||||
|
11.25%, 3/1/2021
|
265,000 | 280,238 | |||||||
|
InRetail Consumer, 144A, 5.25%, 10/10/2021
|
1,000,000 | 1,012,500 | |||||||
|
Isle of Capri Casinos, Inc., 5.875%, 3/15/2021
|
130,000 | 133,250 | |||||||
|
Jo-Ann Stores Holdings, Inc., 144A, 9.75%, 10/15/2019 (PIK)
|
160,000 | 147,200 | |||||||
|
Live Nation Entertainment, Inc.:
|
|||||||||
|
144A, 5.375%, 6/15/2022
|
60,000 | 60,150 | |||||||
|
144A, 7.0%, 9/1/2020
|
370,000 | 393,125 | |||||||
|
MDC Partners, Inc., 144A, 6.75%, 4/1/2020
|
150,000 | 155,625 | |||||||
|
Mediacom Broadband LLC:
|
|||||||||
|
5.5%, 4/15/2021
|
45,000 | 45,788 | |||||||
|
6.375%, 4/1/2023
|
145,000 | 152,975 | |||||||
|
Mediacom LLC, 7.25%, 2/15/2022
|
20,000 | 21,600 | |||||||
|
MGM Resorts International:
|
|||||||||
|
6.625%, 12/15/2021 (b)
|
1,895,000 | 2,075,025 | |||||||
|
6.75%, 10/1/2020 (b)
|
560,000 | 614,600 | |||||||
|
8.625%, 2/1/2019
|
85,000 | 98,388 | |||||||
|
Numericable Group SA:
|
|||||||||
|
144A, 4.875%, 5/15/2019
|
470,000 | 468,825 | |||||||
|
144A, 6.0%, 5/15/2022
|
700,000 | 715,750 | |||||||
|
144A, 6.25%, 5/15/2024
|
850,000 | 874,437 | |||||||
|
Pinnacle Entertainment, Inc., 6.375%, 8/1/2021
|
265,000 | 283,550 | |||||||
|
Quebecor Media, Inc., 5.75%, 1/15/2023
|
200,000 | 206,000 | |||||||
|
Sabre Holdings Corp., 8.35%, 3/15/2016
|
20,000 | 21,425 | |||||||
|
Seminole Hard Rock Entertainment, Inc., 144A, 5.875%, 5/15/2021
|
130,000 | 128,050 | |||||||
|
Serta Simmons Holdings LLC, 144A, 8.125%, 10/1/2020 (b)
|
215,000 | 230,588 | |||||||
|
Servicios Corporativos Javer SAPI de CV, 144A, 9.875%, 4/6/2021
|
500,000 | 541,250 | |||||||
|
Springs Industries, Inc., 6.25%, 6/1/2021 (b)
|
310,000 | 304,187 | |||||||
|
Starz LLC, 5.0%, 9/15/2019
|
160,000 | 164,800 | |||||||
|
Taylor Morrison Communities, Inc., 144A, 5.25%, 4/15/2021
|
250,000 | 251,783 | |||||||
|
Time Warner Cable, Inc., 7.3%, 7/1/2038
|
245,000 | 337,077 | |||||||
|
TRI Pointe Holdings, Inc., 144A, 4.375%, 6/15/2019
|
215,000 | 213,925 | |||||||
|
Unitymedia Hessen GmbH & Co., KG, 144A, 5.5%, 1/15/2023
|
2,855,000 | 2,976,337 | |||||||
|
Viking Cruises Ltd., 144A, 8.5%, 10/15/2022
|
195,000 | 211,088 | |||||||
| 33,383,121 | |||||||||
|
Consumer Staples 1.7%
|
|||||||||
|
Big Heart Pet Brands, 7.625%, 2/15/2019
|
315,000 | 315,787 | |||||||
|
Chiquita Brands International, Inc., 7.875%, 2/1/2021
|
181,000 | 198,648 | |||||||
|
Cott Beverages, Inc., 144A, 5.375%, 7/1/2022
|
355,000 | 351,450 | |||||||
|
FAGE Dairy Industry SA, 144A, 9.875%, 2/1/2020
|
230,000 | 243,513 | |||||||
|
JBS Investments GmbH:
|
|||||||||
|
144A, 7.25%, 4/3/2024
|
470,000 | 499,375 | |||||||
|
144A, 7.75%, 10/28/2020
|
2,000,000 | 2,191,260 | |||||||
|
JBS U.S.A. LLC, 144A, 8.25%, 2/1/2020 (b)
|
2,040,000 | 2,182,800 | |||||||
|
Marfrig Overseas Ltd., 144A, 9.5%, 5/4/2020
|
500,000 | 528,125 | |||||||
|
Minerva Luxembourg SA:
|
|||||||||
|
144A, 7.75%, 1/31/2023
|
1,500,000 | 1,567,500 | |||||||
|
144A, 12.25%, 2/10/2022
|
500,000 | 577,500 | |||||||
|
Pilgrim's Pride Corp., 7.875%, 12/15/2018
|
2,046,000 | 2,132,955 | |||||||
|
Post Holdings, Inc., 144A, 6.75%, 12/1/2021
|
60,000 | 59,925 | |||||||
|
Reynolds Group Issuer, Inc., 5.75%, 10/15/2020
|
5,380,000 | 5,595,200 | |||||||
|
Smithfield Foods, Inc., 6.625%, 8/15/2022
|
250,000 | 272,500 | |||||||
|
The WhiteWave Foods Co., 5.375%, 10/1/2022
|
245,000 | 257,862 | |||||||
|
Tonon Bioenergia SA, 144A, 9.25%, 1/24/2020 (b)
|
1,000,000 | 810,000 | |||||||
| 17,784,400 | |||||||||
|
Energy 3.5%
|
|||||||||
|
Access Midstream Partners LP, 6.125%, 7/15/2022
|
60,000 | 65,250 | |||||||
|
Afren PLC, 144A, 10.25%, 4/8/2019
|
2,203,000 | 2,291,561 | |||||||
|
Antero Resources Corp., 144A, 5.125%, 12/1/2022
|
245,000 | 245,049 | |||||||
|
Antero Resources Finance Corp., 5.375%, 11/1/2021
|
190,000 | 192,850 | |||||||
|
Baytex Energy Corp.:
|
|||||||||
|
144A, 5.125%, 6/1/2021
|
335,000 | 326,625 | |||||||
|
144A, 5.625%, 6/1/2024
|
145,000 | 139,925 | |||||||
|
Berry Petroleum Co., LLC:
|
|||||||||
|
6.375%, 9/15/2022
|
195,000 | 181,350 | |||||||
|
6.75%, 11/1/2020
|
195,000 | 185,250 | |||||||
|
BreitBurn Energy Partners LP:
|
|||||||||
|
7.875%, 4/15/2022
|
1,065,000 | 1,021,734 | |||||||
|
8.625%, 10/15/2020
|
15,000 | 15,300 | |||||||
|
California Resources Corp.:
|
|||||||||
|
144A, 5.5%, 9/15/2021 (b)
|
245,000 | 249,900 | |||||||
|
144A, 6.0%, 11/15/2024
|
50,000 | 51,000 | |||||||
|
Chaparral Energy, Inc., 7.625%, 11/15/2022
|
345,000 | 336,375 | |||||||
|
Chesapeake Energy Corp., 3.481%**, 4/15/2019
|
270,000 | 270,186 | |||||||
|
CONSOL Energy, Inc., 144A, 5.875%, 4/15/2022
|
95,000 | 96,425 | |||||||
|
DCP Midstream LLC, 144A, 9.75%, 3/15/2019
|
850,000 | 1,087,316 | |||||||
|
Delek & Avner Tamar Bond Ltd., 144A, 5.082%, 12/30/2023
|
500,000 | 509,996 | |||||||
|
Ecopetrol SA, 5.875%, 5/28/2045
|
1,000,000 | 1,027,500 | |||||||
|
Endeavor Energy Resources LP, 144A, 7.0%, 8/15/2021
|
545,000 | 550,450 | |||||||
|
EP Energy LLC:
|
|||||||||
|
6.875%, 5/1/2019
|
145,000 | 150,800 | |||||||
|
7.75%, 9/1/2022
|
865,000 | 912,575 | |||||||
|
9.375%, 5/1/2020
|
65,000 | 71,013 | |||||||
|
EV Energy Partners LP, 8.0%, 4/15/2019
|
1,210,000 | 1,191,850 | |||||||
|
Halcon Resources Corp., 8.875%, 5/15/2021 (b)
|
1,508,000 | 1,236,560 | |||||||
|
Hilcorp Energy I LP, 144A, 5.0%, 12/1/2024
|
255,000 | 244,800 | |||||||
|
Holly Energy Partners LP, 6.5%, 3/1/2020
|
20,000 | 20,750 | |||||||
|
Ithaca Energy, Inc., 144A, 8.125%, 7/1/2019
|
225,000 | 193,500 | |||||||
|
Jupiter Resources, Inc., 144A, 8.5%, 10/1/2022
|
245,000 | 216,213 | |||||||
|
Kodiak Oil & Gas Corp., 5.5%, 1/15/2021
|
400,000 | 406,000 | |||||||
|
Linn Energy LLC, 6.25%, 11/1/2019 (b)
|
2,595,000 | 2,387,400 | |||||||
|
MEG Energy Corp., 144A, 7.0%, 3/31/2024
|
1,390,000 | 1,396,950 | |||||||
|
Memorial Resource Development Corp., 144A, 5.875%, 7/1/2022
|
255,000 | 248,625 | |||||||
|
Midstates Petroleum Co., Inc.:
|
|||||||||
|
9.25%, 6/1/2021 (b)
|
210,000 | 178,500 | |||||||
|
10.75%, 10/1/2020
|
230,000 | 204,700 | |||||||
|
Murphy Oil U.S.A., Inc., 6.0%, 8/15/2023
|
320,000 | 335,200 | |||||||
|
NGL Energy Partners LP, 144A, 5.125%, 7/15/2019
|
255,000 | 256,594 | |||||||
|
Northern Oil & Gas, Inc., 8.0%, 6/1/2020
|
680,000 | 634,100 | |||||||
|
Nostrum Oil & Gas Finance BV, 144A, 6.375%, 2/14/2019
|
1,000,000 | 1,002,500 | |||||||
|
Oasis Petroleum, Inc.:
|
|||||||||
|
6.5%, 11/1/2021
|
1,600,000 | 1,640,000 | |||||||
|
6.875%, 1/15/2023
|
125,000 | 130,000 | |||||||
|
7.25%, 2/1/2019
|
315,000 | 324,450 | |||||||
|
Offshore Drilling Holding SA, 144A, 8.625%, 9/20/2020
|
1,000,000 | 1,050,200 | |||||||
|
Pacific Rubiales Energy Corp., 144A, 5.625%, 1/19/2025 (b)
|
905,000 | 860,610 | |||||||
|
Pertamina Persero PT:
|
|||||||||
|
144A, 5.25%, 5/23/2021
|
520,000 | 546,000 | |||||||
|
144A, 5.625%, 5/20/2043
|
1,000,000 | 957,500 | |||||||
|
Petroleos de Venezuela SA:
|
|||||||||
|
144A, 9.0%, 11/17/2021
|
2,200,000 | 1,394,250 | |||||||
|
144A, 9.75%, 5/17/2035
|
1,700,000 | 1,037,850 | |||||||
|
Petroleos Mexicanos, 2.251%**, 7/18/2018
|
1,000,000 | 1,035,000 | |||||||
|
QGOG Constellation SA, 144A, 6.25%, 11/9/2019
|
1,000,000 | 985,000 | |||||||
|
Regency Energy Partners LP, 5.0%, 10/1/2022
|
150,000 | 153,000 | |||||||
|
Reliance Holding U.S.A., Inc., 144A, 5.4%, 2/14/2022
|
1,000,000 | 1,088,873 | |||||||
|
RSP Permian, Inc., 144A, 6.625%, 10/1/2022
|
150,000 | 149,595 | |||||||
|
Sabine Pass Liquefaction LLC:
|
|||||||||
|
5.625%, 2/1/2021
|
685,000 | 717,537 | |||||||
|
5.625%, 4/15/2023
|
155,000 | 160,425 | |||||||
|
144A, 5.75%, 5/15/2024 (b)
|
610,000 | 630,587 | |||||||
|
SESI LLC, 7.125%, 12/15/2021
|
1,220,000 | 1,317,600 | |||||||
|
Seventy Seven Energy, Inc., 144A, 6.5%, 7/15/2022
|
70,000 | 65,800 | |||||||
|
Talos Production LLC, 144A, 9.75%, 2/15/2018
|
380,000 | 382,850 | |||||||
|
Targa Resources Partners LP, 144A, 4.125%, 11/15/2019
|
95,000 | 96,425 | |||||||
|
Transocean, Inc., 3.8%, 10/15/2022 (b)
|
1,155,000 | 1,039,991 | |||||||
|
Triangle U.S.A. Petroleum Corp., 144A, 6.75%, 7/15/2022
|
205,000 | 179,375 | |||||||
|
WPX Energy, Inc., 5.25%, 9/15/2024
|
185,000 | 180,375 | |||||||
| 36,255,965 | |||||||||
|
Financials 4.3%
|
|||||||||
|
AerCap Aviation Solutions BV, 6.375%, 5/30/2017
|
545,000 | 577,700 | |||||||
|
AerCap Ireland Capital Ltd., 144A, 3.75%, 5/15/2019
|
70,000 | 69,475 | |||||||
|
Banco Continental SAECA, 144A, 8.875%, 10/15/2017
|
1,000,000 | 1,065,000 | |||||||
|
Banco Davivienda SA, 144A, 5.875%, 7/9/2022 (b)
|
1,000,000 | 1,017,500 | |||||||
|
Banco do Brasil SA, 144A, 9.0%, 6/29/2049
|
1,300,000 | 1,277,900 | |||||||
|
Banco Santander Brasil SA, 144A, 8.0%, 3/18/2016
|
BRL
|
1,000,000 | 386,416 | ||||||
|
Barclays Bank PLC, 7.625%, 11/21/2022
|
1,000,000 | 1,089,375 | |||||||
|
BBVA Bancomer SA:
|
|||||||||
|
144A, 6.008%, 5/17/2022
|
500,000 | 521,875 | |||||||
|
144A, 6.75%, 9/30/2022
|
1,750,000 | 1,981,875 | |||||||
|
CBL & Associates LP, (REIT), 4.6%, 10/15/2024 (b)
|
1,525,000 | 1,536,881 | |||||||
|
CIMPOR Financial Operations BV, 144A, 5.75%, 7/17/2024
|
500,000 | 480,750 | |||||||
|
CIT Group, Inc.:
|
|||||||||
|
5.0%, 5/15/2017
|
170,000 | 178,075 | |||||||
|
5.25%, 3/15/2018
|
4,528,000 | 4,777,040 | |||||||
|
Country Garden Holdings Co., Ltd., 144A, 11.125%, 2/23/2018 (b)
|
2,400,000 | 2,565,000 | |||||||
|
Credit Agricole SA, 144A, 7.875%, 1/29/2049
|
605,000 | 624,481 | |||||||
|
Credit Suisse Group AG, 144A, 6.25%, 12/29/2049
|
340,000 | 330,650 | |||||||
|
Credito Real SAB de CV, 144A, 7.5%, 3/13/2019
|
2,000,000 | 2,110,000 | |||||||
|
Development Bank of Kazakhstan JSC, Series 3, REG S, 6.5%, 6/3/2020
|
1,000,000 | 1,085,000 | |||||||
|
Dubai Holding Commercial Operations MTN Ltd., 6.0%, 2/1/2017
|
GBP
|
1,000,000 | 1,634,574 | ||||||
|
E*TRADE Financial Corp., 6.375%, 11/15/2019
|
555,000 | 591,769 | |||||||
|
Everest Reinsurance Holdings, Inc., 4.868%, 6/1/2044
|
525,000 | 523,150 | |||||||
|
Fondo MIVIVIENDA SA, 144A, 3.5%, 1/31/2023
|
500,000 | 478,750 | |||||||
|
Hospitality Properties Trust, (REIT), 5.0%, 8/15/2022
|
940,000 | 990,902 | |||||||
|
HSBC Holdings PLC:
|
|||||||||
|
5.625%, 12/29/2049 (b)
|
1,015,000 | 1,031,469 | |||||||
|
6.375%, 12/29/2049
|
1,140,000 | 1,162,800 | |||||||
|
International Lease Finance Corp.:
|
|||||||||
|
3.875%, 4/15/2018
|
400,000 | 401,252 | |||||||
|
6.25%, 5/15/2019
|
350,000 | 382,812 | |||||||
|
8.75%, 3/15/2017
|
1,150,000 | 1,293,750 | |||||||
|
Kaisa Group Holdings Ltd., 144A, 8.875%, 3/19/2018
|
250,000 | 252,500 | |||||||
|
Lloyds Banking Group PLC, 4.5%, 11/4/2024 (d)
|
1,185,000 | 1,185,952 | |||||||
|
Macquarie Group Ltd., 144A, 6.0%, 1/14/2020
|
1,265,000 | 1,426,467 | |||||||
|
Morgan Stanley, Series H, 5.45%, 7/29/2049
|
140,000 | 140,656 | |||||||
|
MPT Operating Partnership LP, (REIT), 6.375%, 2/15/2022
|
30,000 | 31,875 | |||||||
|
National Savings Bank, 144A, 5.15%, 9/10/2019
|
500,000 | 495,000 | |||||||
|
Navient Corp., 5.5%, 1/25/2023 (b)
|
535,000 | 535,000 | |||||||
|
Neuberger Berman Group LLC, 144A, 5.625%, 3/15/2020
|
55,000 | 57,475 | |||||||
|
Popular, Inc., 7.0%, 7/1/2019
|
195,000 | 196,462 | |||||||
|
Royal Bank of Scotland Group PLC, 6.1%, 6/10/2023
|
800,000 | 864,909 | |||||||
|
Schahin II Finance Co. SPV Ltd., 144A, 5.875%, 9/25/2022 (b)
|
2,158,400 | 2,039,688 | |||||||
|
The Goldman Sachs Group, Inc., Series L, 5.7%, 12/29/2049 (b)
|
235,000 | 240,287 | |||||||
|
TIAA Asset Management Finance Co., LLC:
|
|||||||||
|
144A, 2.95%, 11/1/2019
|
945,000 | 946,802 | |||||||
|
144A, 4.125%, 11/1/2024
|
780,000 | 784,129 | |||||||
|
Trust F/1401, (REIT), 144A, 6.95%, 1/30/2044 (b)
|
2,000,000 | 2,270,000 | |||||||
|
Turkiye Is Bankasi, 144A, 6.0%, 10/24/2022 (b)
|
1,500,000 | 1,494,375 | |||||||
|
UniCredit SpA, REG S, 8.0%, 4/3/2049
|
300,000 | 300,750 | |||||||
|
Yapi ve Kredi Bankasi AS, 144A, 5.5%, 12/6/2022
|
1,000,000 | 951,216 | |||||||
| 44,379,764 | |||||||||
|
Health Care 1.5%
|
|||||||||
|
Aviv Healthcare Properties LP, 7.75%, 2/15/2019
|
110,000 | 115,500 | |||||||
|
Biomet, Inc.:
|
|||||||||
|
6.5%, 8/1/2020
|
330,000 | 353,100 | |||||||
|
6.5%, 10/1/2020
|
95,000 | 100,463 | |||||||
|
CHS/Community Health Systems, Inc.:
|
|||||||||
|
5.125%, 8/15/2018
|
1,080,000 | 1,123,200 | |||||||
|
6.875%, 2/1/2022 (b)
|
2,000,000 | 2,155,000 | |||||||
|
7.125%, 7/15/2020
|
735,000 | 795,637 | |||||||
|
Crimson Merger Sub, Inc., 144A, 6.625%, 5/15/2022
|
475,000 | 444,125 | |||||||
|
Endo Finance LLC, 144A, 5.375%, 1/15/2023
|
290,000 | 283,475 | |||||||
|
HCA, Inc.:
|
|||||||||
|
5.25%, 4/15/2025
|
190,000 | 196,888 | |||||||
|
6.5%, 2/15/2020
|
2,020,000 | 2,254,825 | |||||||
|
7.5%, 2/15/2022
|
2,220,000 | 2,577,975 | |||||||
|
Hologic, Inc., 6.25%, 8/1/2020
|
220,000 | 231,275 | |||||||
|
IMS Health, Inc., 144A, 6.0%, 11/1/2020
|
240,000 | 249,000 | |||||||
|
Mallinckrodt International Finance SA, 4.75%, 4/15/2023
|
370,000 | 355,200 | |||||||
|
Par Pharmaceutical Companies, Inc., 7.375%, 10/15/2020
|
350,000 | 371,875 | |||||||
|
Physio-Control International, Inc., 144A, 9.875%, 1/15/2019
|
52,000 | 56,030 | |||||||
|
Tenet Healthcare Corp., 6.25%, 11/1/2018
|
1,110,000 | 1,205,737 | |||||||
|
Valeant Pharmaceuticals International, Inc.:
|
|||||||||
|
144A, 6.375%, 10/15/2020
|
365,000 | 374,581 | |||||||
|
144A, 7.5%, 7/15/2021
|
1,515,000 | 1,621,050 | |||||||
| 14,864,936 | |||||||||
|
Industrials 2.6%
|
|||||||||
|
ADT Corp., 3.5%, 7/15/2022 (b)
|
220,000 | 196,900 | |||||||
|
Aguila 3 SA, 144A, 7.875%, 1/31/2018
|
190,000 | 190,475 | |||||||
|
Avianca Holdings SA, 144A, 8.375%, 5/10/2020
|
1,300,000 | 1,361,750 | |||||||
|
BE Aerospace, Inc., 6.875%, 10/1/2020
|
515,000 | 556,844 | |||||||
|
Belden, Inc., 144A, 5.5%, 9/1/2022
|
330,000 | 335,775 | |||||||
|
Bombardier, Inc.:
|
|||||||||
|
144A, 4.75%, 4/15/2019 (b)
|
140,000 | 143,850 | |||||||
|
144A, 5.75%, 3/15/2022 (b)
|
1,480,000 | 1,517,000 | |||||||
|
144A, 6.0%, 10/15/2022
|
235,000 | 241,316 | |||||||
|
144A, 7.75%, 3/15/2020
|
25,000 | 27,750 | |||||||
|
Carlson Travel Holdings, Inc., 144A, 7.5%, 8/15/2019 (PIK)
|
200,000 | 200,500 | |||||||
|
DigitalGlobe, Inc., 144A, 5.25%, 2/1/2021
|
145,000 | 141,012 | |||||||
|
Empresas ICA SAB de CV, 144A, 8.875%, 5/29/2024
|
1,000,000 | 1,015,000 | |||||||
|
Florida East Coast Holdings Corp., 144A, 6.75%, 5/1/2019
|
425,000 | 438,549 | |||||||
|
FTI Consulting, Inc., 6.0%, 11/15/2022
|
195,000 | 199,631 | |||||||
|
Gates Global LLC, 144A, 6.0%, 7/15/2022
|
285,000 | 276,450 | |||||||
|
GenCorp, Inc., 7.125%, 3/15/2021
|
500,000 | 531,250 | |||||||
|
Grupo KUO SAB De CV, 144A, 6.25%, 12/4/2022
|
1,900,000 | 1,953,903 | |||||||
|
Huntington Ingalls Industries, Inc.:
|
|||||||||
|
6.875%, 3/15/2018
|
65,000 | 67,925 | |||||||
|
7.125%, 3/15/2021
|
255,000 | 274,125 | |||||||
|
Kazakhstan Temir Zholy Finance BV, 144A, 6.375%, 10/6/2020
|
1,750,000 | 1,911,875 | |||||||
|
Kenan Advantage Group, Inc., 144A, 8.375%, 12/15/2018
|
390,000 | 407,550 | |||||||
|
Meritor, Inc.:
|
|||||||||
|
6.25%, 2/15/2024
|
95,000 | 96,900 | |||||||
|
6.75%, 6/15/2021
|
305,000 | 321,775 | |||||||
|
Mersin Uluslararasi Liman Isletmeciligi AS, 144A, 5.875%, 8/12/2020
|
2,000,000 | 2,125,400 | |||||||
|
Navios Maritime Holdings, Inc., 144A, 7.375%, 1/15/2022 (b)
|
1,400,000 | 1,407,000 | |||||||
|
Noble Group Ltd., REG S, 6.0%, 6/24/2049
|
1,000,000 | 971,200 | |||||||
|
Nortek, Inc., 8.5%, 4/15/2021
|
885,000 | 951,375 | |||||||
|
OAS Finance Ltd., 144A, 8.0%, 7/2/2021
|
1,000,000 | 935,000 | |||||||
|
Odebrecht Offshore Drilling Finance Ltd., 144A, 6.75%, 10/1/2022
|
762,960 | 799,201 | |||||||
|
Ply Gem Industries, Inc., 144A, 6.5%, 2/1/2022
|
185,000 | 181,994 | |||||||
|
Sanmina Corp., 144A, 4.375%, 6/1/2019
|
30,000 | 30,038 | |||||||
|
TAM Capital 3, Inc., 144A, 8.375%, 6/3/2021
|
500,000 | 535,000 | |||||||
|
TransDigm, Inc.:
|
|||||||||
|
6.0%, 7/15/2022
|
590,000 | 596,637 | |||||||
|
6.5%, 7/15/2024
|
175,000 | 180,250 | |||||||
|
7.5%, 7/15/2021
|
1,035,000 | 1,117,800 | |||||||
|
Triumph Group, Inc., 5.25%, 6/1/2022
|
145,000 | 146,812 | |||||||
|
United Rentals North America, Inc.:
|
|||||||||
|
6.125%, 6/15/2023
|
20,000 | 21,525 | |||||||
|
7.375%, 5/15/2020
|
100,000 | 108,500 | |||||||
|
7.625%, 4/15/2022
|
2,260,000 | 2,519,900 | |||||||
|
Votorantim Cimentos SA, 144A, 7.25%, 4/5/2041
|
1,000,000 | 1,039,500 | |||||||
|
Watco Companies LLC, 144A, 6.375%, 4/1/2023
|
150,000 | 152,250 | |||||||
|
XPO Logistics, Inc., 144A, 7.875%, 9/1/2019 (b)
|
120,000 | 125,700 | |||||||
| 26,353,187 | |||||||||
|
Information Technology 1.6%
|
|||||||||
|
Activision Blizzard, Inc., 144A, 5.625%, 9/15/2021
|
1,195,000 | 1,271,181 | |||||||
|
Alliance Data Systems Corp., 144A, 5.25%, 12/1/2017
|
245,000 | 252,350 | |||||||
|
Audatex North America, Inc., 144A, 6.0%, 6/15/2021
|
65,000 | 68,738 | |||||||
|
BMC Software Finance, Inc., 144A, 8.125%, 7/15/2021
|
370,000 | 354,275 | |||||||
|
Boxer Parent Co., Inc., 144A, 9.0%, 10/15/2019 (PIK)
|
280,000 | 251,126 | |||||||
|
Cardtronics, Inc., 144A, 5.125%, 8/1/2022
|
205,000 | 203,975 | |||||||
|
CDW LLC:
|
|||||||||
|
6.0%, 8/15/2022
|
280,000 | 295,400 | |||||||
|
8.5%, 4/1/2019
|
2,376,000 | 2,518,560 | |||||||
|
CyrusOne LP, 6.375%, 11/15/2022
|
95,000 | 99,988 | |||||||
|
EarthLink Holdings Corp., 7.375%, 6/1/2020
|
265,000 | 270,300 | |||||||
|
Entegris, Inc., 144A, 6.0%, 4/1/2022
|
140,000 | 142,450 | |||||||
|
Equinix, Inc., 5.375%, 4/1/2023
|
690,000 | 711,563 | |||||||
|
First Data Corp.:
|
|||||||||
|
144A, 6.75%, 11/1/2020
|
432,000 | 462,240 | |||||||
|
144A, 7.375%, 6/15/2019 (b)
|
2,800,000 | 2,968,000 | |||||||
|
144A, 8.75%, 1/15/2022 (PIK)
|
190,000 | 207,575 | |||||||
|
144A, 8.875%, 8/15/2020
|
745,000 | 806,463 | |||||||
|
Hughes Satellite Systems Corp.:
|
|||||||||
|
6.5%, 6/15/2019
|
250,000 | 270,625 | |||||||
|
7.625%, 6/15/2021
|
915,000 | 1,017,937 | |||||||
|
KLA-Tencor Corp., 4.65%, 11/1/2024 (d)
|
920,000 | 922,961 | |||||||
|
NXP BV, 144A, 3.75%, 6/1/2018
|
330,000 | 332,475 | |||||||
|
Tencent Holdings Ltd., 144A, 3.375%, 5/2/2019
|
3,000,000 | 3,050,346 | |||||||
| 16,478,528 | |||||||||
|
Materials 2.5%
|
|||||||||
|
Anglo American Capital PLC:
|
|||||||||
|
144A, 4.125%, 4/15/2021
|
550,000 | 557,925 | |||||||
|
144A, 4.125%, 9/27/2022 (b)
|
1,000,000 | 1,007,688 | |||||||
|
Berry Plastics Corp., 5.5%, 5/15/2022
|
1,095,000 | 1,099,106 | |||||||
|
Braskem Finance Ltd., 6.45%, 2/3/2024
|
1,600,000 | 1,697,200 | |||||||
|
Cascades, Inc., 144A, 5.5%, 7/15/2022
|
215,000 | 212,313 | |||||||
|
Cemex SAB de CV, 144A, 6.5%, 12/10/2019
|
1,000,000 | 1,071,250 | |||||||
|
Clearwater Paper Corp., 144A, 5.375%, 2/1/2025
|
355,000 | 359,437 | |||||||
|
Cliffs Natural Resources, Inc., 5.2%, 1/15/2018 (b)
|
620,000 | 545,600 | |||||||
|
Corp. Nacional del Cobre de Chile, 144A, 4.875%, 11/4/2044 (d)
|
300,000 | 296,945 | |||||||
|
Evraz Group SA, 144A, 6.75%, 4/27/2018
|
600,000 | 564,226 | |||||||
|
First Quantum Minerals Ltd.:
|
|||||||||
|
144A, 6.75%, 2/15/2020
|
969,000 | 937,507 | |||||||
|
144A, 7.0%, 2/15/2021
|
499,000 | 489,644 | |||||||
|
FMG Resources (August 2006) Pty Ltd., 144A, 6.0%, 4/1/2017
|
130,000 | 132,600 | |||||||
|
Fresnillo PLC, 144A, 5.5%, 11/13/2023
|
1,000,000 | 1,051,700 | |||||||
|
Glencore Funding LLC, 144A, 4.125%, 5/30/2023
|
530,000 | 527,908 | |||||||
|
GTL Trade Finance, Inc., 144A, 5.893%, 4/29/2024
|
2,000,000 | 2,075,000 | |||||||
|
Hexion U.S. Finance Corp.:
|
|||||||||
|
6.625%, 4/15/2020
|
1,030,000 | 1,030,000 | |||||||
|
8.875%, 2/1/2018
|
450,000 | 444,937 | |||||||
|
Huntsman International LLC, 5.125%, 4/15/2021
|
EUR
|
250,000 | 326,345 | ||||||
|
Kaiser Aluminum Corp., 8.25%, 6/1/2020
|
225,000 | 246,375 | |||||||
|
Metalloinvest Finance Ltd., 144A, 5.625%, 4/17/2020
|
500,000 | 453,125 | |||||||
|
Novelis, Inc., 8.75%, 12/15/2020
|
4,725,000 | 5,156,156 | |||||||
|
Polymer Group, Inc., 7.75%, 2/1/2019
|
297,000 | 308,880 | |||||||
|
Rain CII Carbon LLC, 144A, 8.25%, 1/15/2021 (b)
|
200,000 | 204,000 | |||||||
|
Sealed Air Corp.:
|
|||||||||
|
144A, 8.125%, 9/15/2019
|
30,000 | 32,513 | |||||||
|
144A, 8.375%, 9/15/2021
|
30,000 | 33,975 | |||||||
|
Signode Industrial Group Lux SA, 144A, 6.375%, 5/1/2022
|
190,000 | 184,300 | |||||||
|
Tronox Finance LLC, 6.375%, 8/15/2020 (b)
|
225,000 | 231,188 | |||||||
|
Turkiye Sise ve Cam Fabrikalari AS, 144A, 4.25%, 5/9/2020
|
2,000,000 | 1,963,480 | |||||||
|
Vedanta Resources PLC, 144A, 6.0%, 1/31/2019
|
900,000 | 918,000 | |||||||
|
WR Grace & Co-Conn:
|
|||||||||
|
144A, 5.125%, 10/1/2021
|
120,000 | 125,026 | |||||||
|
144A, 5.625%, 10/1/2024
|
60,000 | 63,225 | |||||||
|
Yamana Gold, Inc., 144A, 4.95%, 7/15/2024
|
1,040,000 | 1,017,206 | |||||||
| 25,364,780 | |||||||||
|
Telecommunication Services 4.3%
|
|||||||||
|
Altice SA, 144A, 7.75%, 5/15/2022
|
220,000 | 231,000 | |||||||
|
America Movil SAB de CV, 6.45%, 12/5/2022
|
MXN
|
7,000,000 | 510,253 | ||||||
|
Bharti Airtel International Netherlands BV, 144A, 5.35%, 5/20/2024
|
1,500,000 | 1,612,020 | |||||||
|
CenturyLink, Inc., Series V, 5.625%, 4/1/2020
|
100,000 | 106,000 | |||||||
|
Cincinnati Bell, Inc.:
|
|||||||||
|
8.375%, 10/15/2020
|
3,615,000 | 3,877,087 | |||||||
|
8.75%, 3/15/2018
|
807,000 | 835,245 | |||||||
|
CommScope, Inc., 144A, 5.0%, 6/15/2021
|
290,000 | 289,275 | |||||||
|
Digicel Group Ltd.:
|
|||||||||
|
144A, 7.125%, 4/1/2022
|
760,000 | 763,800 | |||||||
|
144A, 8.25%, 9/30/2020
|
910,000 | 950,950 | |||||||
|
Digicel Ltd., 144A, 8.25%, 9/1/2017
|
3,450,000 | 3,531,937 | |||||||
|
Frontier Communications Corp.:
|
|||||||||
|
6.25%, 9/15/2021
|
185,000 | 191,128 | |||||||
|
6.875%, 1/15/2025
|
185,000 | 187,313 | |||||||
|
7.125%, 1/15/2023
|
940,000 | 1,001,100 | |||||||
|
8.5%, 4/15/2020
|
1,645,000 | 1,895,862 | |||||||
|
Intelsat Jackson Holdings SA:
|
|||||||||
|
5.5%, 8/1/2023
|
595,000 | 596,488 | |||||||
|
7.25%, 10/15/2020
|
45,000 | 48,038 | |||||||
|
7.5%, 4/1/2021
|
4,720,000 | 5,109,400 | |||||||
|
Intelsat Luxembourg SA, 8.125%, 6/1/2023
|
100,000 | 106,250 | |||||||
|
Level 3 Communications, Inc., 8.875%, 6/1/2019
|
70,000 | 75,075 | |||||||
|
Level 3 Escrow II, Inc., 144A, 5.375%, 8/15/2022
|
830,000 | 844,525 | |||||||
|
Level 3 Financing, Inc.:
|
|||||||||
|
144A, 6.125%, 1/15/2021 (b)
|
525,000 | 550,594 | |||||||
|
7.0%, 6/1/2020
|
725,000 | 773,938 | |||||||
|
8.625%, 7/15/2020
|
2,480,000 | 2,728,000 | |||||||
|
Millicom International Cellular SA, 144A, 4.75%, 5/22/2020
|
2,510,000 | 2,478,625 | |||||||
|
SBA Communications Corp., 5.625%, 10/1/2019
|
190,000 | 197,600 | |||||||
|
Sprint Communications, Inc.:
|
|||||||||
|
6.0%, 11/15/2022 (b)
|
340,000 | 339,150 | |||||||
|
144A, 7.0%, 3/1/2020
|
365,000 | 407,158 | |||||||
|
144A, 9.0%, 11/15/2018
|
1,745,000 | 2,052,556 | |||||||
|
Sprint Corp., 144A, 7.125%, 6/15/2024
|
1,485,000 | 1,525,837 | |||||||
|
T-Mobile U.S.A., Inc., 6.625%, 11/15/2020
|
740,000 | 779,775 | |||||||
|
tw telecom holdings, Inc.:
|
|||||||||
|
5.375%, 10/1/2022
|
330,000 | 364,650 | |||||||
|
6.375%, 9/1/2023
|
265,000 | 302,100 | |||||||
|
UPCB Finance III Ltd., 144A, 6.625%, 7/1/2020
|
450,000 | 473,625 | |||||||
|
UPCB Finance V Ltd., 144A, 7.25%, 11/15/2021
|
1,660,000 | 1,826,000 | |||||||
|
UPCB Finance VI Ltd., 144A, 6.875%, 1/15/2022
|
150,000 | 163,875 | |||||||
|
Wind Acquisition Finance SA, 144A, 6.5%, 4/30/2020
|
210,000 | 218,400 | |||||||
|
Windstream Corp.:
|
|||||||||
|
6.375%, 8/1/2023 (b)
|
245,000 | 246,838 | |||||||
|
7.5%, 4/1/2023
|
80,000 | 84,000 | |||||||
|
7.75%, 10/15/2020 (b)
|
2,555,000 | 2,721,075 | |||||||
|
7.75%, 10/1/2021
|
720,000 | 770,400 | |||||||
|
7.875%, 11/1/2017
|
2,595,000 | 2,888,754 | |||||||
| 44,655,696 | |||||||||
|
Utilities 0.7%
|
|||||||||
|
AES Corp.:
|
|||||||||
|
3.234%**, 6/1/2019
|
160,000 | 159,150 | |||||||
|
8.0%, 10/15/2017
|
14,000 | 15,890 | |||||||
|
8.0%, 6/1/2020
|
95,000 | 110,306 | |||||||
|
Calpine Corp.:
|
|||||||||
|
5.375%, 1/15/2023
|
340,000 | 343,400 | |||||||
|
5.75%, 1/15/2025 (b)
|
340,000 | 344,250 | |||||||
|
Dynegy Finance I, Inc., 144A, 7.625%, 11/1/2024
|
65,000 | 68,900 | |||||||
|
Hrvatska Elektroprivreda, 144A, 6.0%, 11/9/2017
|
2,000,000 | 2,096,000 | |||||||
|
NRG Energy, Inc., 144A, 6.25%, 5/1/2024
|
1,270,000 | 1,311,275 | |||||||
|
Perusahaan Listrik Negara PT, 144A, 5.25%, 10/24/2042 (b)
|
3,000,000 | 2,715,000 | |||||||
|
RJS Power Holdings LLC, 144A, 5.125%, 7/15/2019
|
260,000 | 258,700 | |||||||
| 7,422,871 | |||||||||
|
Total Corporate Bonds (Cost $264,627,493)
|
266,943,248 | ||||||||
|
Asset-Backed 0.7%
|
|||||||||
|
Automobile Receivables 0.2%
|
|||||||||
|
AmeriCredit Automobile Receivables Trust, "E", Series 2011-2, 144A, 5.48%, 9/10/2018
|
1,939,864 | 1,993,144 | |||||||
|
Miscellaneous 0.5%
|
|||||||||
|
ARES CLO Ltd., "D", Series 2012-3A, 144A, 4.878%**, 1/17/2024
|
2,000,000 | 2,000,156 | |||||||
|
Hilton Grand Vacations Trust, "B", Series 2014-AA, 144A, 2.07%, 11/25/2026
|
1,828,036 | 1,811,256 | |||||||
|
VOLT XXIV LLC, "A1", Series 2014-NPL3, 144A, 3.25%, 11/25/2053
|
1,504,975 | 1,507,129 | |||||||
| 5,318,541 | |||||||||
|
Total Asset-Backed (Cost $7,304,036)
|
7,311,685 | ||||||||
|
Mortgage-Backed Securities Pass-Throughs 0.3%
|
|||||||||
|
Federal Home Loan Mortgage Corp., 6.0%, 11/1/2021
|
96,184 | 108,560 | |||||||
|
Federal National Mortgage Association:
|
|||||||||
|
3.0%, 8/1/2041 (d)
|
3,000,000 | 2,992,149 | |||||||
|
6.5%, with various maturities from 4/1/2017 until 6/1/2017
|
142,095 | 150,188 | |||||||
|
Government National Mortgage Association, 6.5%, 8/20/2034
|
116,379 | 132,607 | |||||||
|
Total Mortgage-Backed Securities Pass-Throughs (Cost $3,368,867)
|
3,383,504 | ||||||||
|
Commercial Mortgage-Backed Securities 0.5%
|
|||||||||
|
Del Coronado Trust, "M", Series 2013-HDMZ, 144A, 5.153%**, 3/15/2018
|
470,000 | 471,034 | |||||||
|
JPMorgan Chase Commercial Mortgage Securities Corp.:
|
|||||||||
|
"C", Series 2012-HSBC, 144A, 4.021%, 7/5/2032
|
1,180,000 | 1,204,885 | |||||||
|
"A4", Series 2007-C1, 5.716%, 2/15/2051
|
821,868 | 895,783 | |||||||
|
LB-UBS Commercial Mortgage Trust, "A4", Series 2007-C6, 5.858%, 7/15/2040
|
1,033,760 | 1,096,162 | |||||||
|
Prudential Commercial Mortgage Trust, "F", Series 2003-PWR1, 144A, 4.98%**, 2/11/2036
|
1,700,000 | 1,683,150 | |||||||
|
Total Commercial Mortgage-Backed Securities (Cost $5,356,939)
|
5,351,014 | ||||||||
|
Collateralized Mortgage Obligations 2.0%
|
|||||||||
|
Federal Home Loan Mortgage Corp.:
|
|||||||||
|
"KO", Series 4180, Principal Only, Zero Coupon, 1/15/2043
|
823,535 | 502,770 | |||||||
|
"HI", Series 3979, Interest Only, 3.0%, 12/15/2026
|
2,517,242 | 276,471 | |||||||
|
"IC", Series 3971, Interest Only, 3.0%, 3/15/2026
|
1,115,146 | 119,210 | |||||||
|
"IK", Series 4048, Interest Only, 3.0%, 5/15/2027
|
3,541,935 | 464,810 | |||||||
|
"PI", Series 3987, Interest Only, 3.0%, 1/15/2027
|
4,683,904 | 590,308 | |||||||
|
"PI", Series 4017, Interest Only, 3.0%, 3/15/2027
|
1,437,011 | 167,668 | |||||||
|
"ZG", Series 4213, 3.5%, 6/15/2043
|
2,451,572 | 2,434,346 | |||||||
|
"LI", Series 3720, Interest Only, 4.5%, 9/15/2025
|
3,562,229 | 529,775 | |||||||
|
"PI", Series 3843, Interest Only, 4.5%, 5/15/2038
|
4,542,218 | 545,804 | |||||||
|
Federal National Mortgage Association:
|
|||||||||
|
"WO", Series 2013-27, Principal Only, Zero Coupon, 12/25/2042
|
1,200,000 | 593,337 | |||||||
|
"JZ", Series 2012-4, 4.0%, 9/25/2041
|
1,723,692 | 1,850,132 | |||||||
|
"I", Series 2003-84, Interest Only, 6.0%, 9/25/2033
|
605,188 | 121,911 | |||||||
|
"PI", Series 2006-20, Interest Only, 6.528%***, 11/25/2030
|
2,949,680 | 493,095 | |||||||
|
Freddie Mac Structured Agency Credit Risk Debt Notes:
|
|||||||||
|
"M3", Series 2014-DN2, 3.755%**, 4/25/2024
|
3,500,000 | 3,284,876 | |||||||
|
"M3", Series 2014-DN4, 4.702%, 10/25/2024
|
1,930,000 | 1,931,372 | |||||||
|
Government National Mortgage Association:
|
|||||||||
|
"ZJ", Series 2013-106, 3.5%, 7/20/2043
|
479,447 | 470,863 | |||||||
|
"QI", Series 2011-112, Interest Only, 4.0%, 5/16/2026
|
2,414,048 | 256,897 | |||||||
|
"AI", Series 2010-25, Interest Only, 4.5%, 3/16/2023
|
784,833 | 26,668 | |||||||
|
"BI", Series 2010-30, Interest Only, 4.5%, 7/20/2039
|
631,497 | 91,436 | |||||||
|
"ND", Series 2010-130, 4.5%, 8/16/2039
|
3,400,000 | 3,712,015 | |||||||
|
"NI", Series 2011-80, Interest Only, 4.5%, 5/16/2038
|
2,426,767 | 170,423 | |||||||
|
"IN", Series 2009-69, Interest Only, 5.5%, 8/20/2039
|
2,050,818 | 346,523 | |||||||
|
"IQ", Series 2011-18, Interest Only, 5.5%, 1/16/2039
|
775,582 | 88,428 | |||||||
|
"IV", Series 2009-69, Interest Only, 5.5%, 8/20/2039
|
2,024,932 | 357,559 | |||||||
|
"IJ", Series 2009-75, Interest Only, 6.0%, 8/16/2039
|
1,522,876 | 282,221 | |||||||
|
"AI", Series 2007-38, Interest Only, 6.308%***, 6/16/2037
|
439,377 | 68,316 | |||||||
|
"SC", Series 2002-33, Interest Only, 7.248%***, 5/16/2032
|
852,574 | 147,645 | |||||||
|
Residential Funding Mortgage Securities I, Inc., "M1", Series 2003-S17, 5.5%, 9/25/2033
|
1,157,152 | 1,080,284 | |||||||
|
Total Collateralized Mortgage Obligations (Cost $19,647,197)
|
21,005,163 | ||||||||
|
Government & Agency Obligations 8.9%
|
|||||||||
|
Other Government Related (e) 0.2%
|
|||||||||
|
Banco de Costa Rica, 144A, 5.25%, 8/12/2018
|
800,000 | 822,720 | |||||||
|
TMK OAO, 144A, 6.75%, 4/3/2020
|
1,000,000 | 901,250 | |||||||
| 1,723,970 | |||||||||
|
Sovereign Bonds 4.2%
|
|||||||||
|
Canadian Government Bond, 3.5%, 12/1/2045
|
CAD
|
5,660,000 | 5,998,731 | ||||||
|
Government of New Zealand, Series 1217, REG S, 6.0%, 12/15/2017
|
NZD
|
12,700,000 | 10,561,835 | ||||||
|
Kingdom of Bahrain, 144A, 6.0%, 9/19/2044
|
870,000 | 897,188 | |||||||
|
Perusahaan Penerbit SBSN Indonesia III, 144A, 4.35%, 9/10/2024 (b)
|
500,000 | 501,250 | |||||||
|
Republic of Belarus, REG S, 8.75%, 8/3/2015
|
1,000,000 | 1,020,200 | |||||||
|
Republic of Colombia, 5.625%, 2/26/2044
|
300,000 | 334,982 | |||||||
|
Republic of Costa Rica, 144A, 4.25%, 1/26/2023
|
300,000 | 285,000 | |||||||
|
Republic of Croatia, 144A, 6.75%, 11/5/2019
|
2,250,000 | 2,494,687 | |||||||
|
Republic of Ecuador, 144A, 7.95%, 6/20/2024
|
1,446,000 | 1,511,070 | |||||||
|
Republic of El Salvador:
|
|||||||||
|
144A, 6.375%, 1/18/2027
|
425,000 | 435,625 | |||||||
|
144A, 7.65%, 6/15/2035
|
1,200,000 | 1,308,000 | |||||||
|
Republic of Hungary:
|
|||||||||
|
4.0%, 3/25/2019
|
1,000,000 | 1,024,500 | |||||||
|
Series 19/A, 6.5%, 6/24/2019
|
HUF
|
90,600,000 | 422,333 | ||||||
|
Republic of Panama, 4.0%, 9/22/2024
|
520,000 | 531,700 | |||||||
|
Republic of Paraguay, 144A, 6.1%, 8/11/2044 (b)
|
600,000 | 642,750 | |||||||
|
Republic of Peru, 144A, 5.7%, 8/12/2024
|
300,000 | 102,581 | |||||||
|
Republic of Singapore, 3.375%, 9/1/2033
|
SGD
|
12,377,000 | 10,386,015 | ||||||
|
Republic of Slovenia, 144A, 5.5%, 10/26/2022
|
200,000 | 219,750 | |||||||
|
Republic of South Africa, Series R204, 8.0%, 12/21/2018
|
ZAR
|
13,200,000 | 1,237,465 | ||||||
|
Republic of Sri Lanka, 144A, 5.125%, 4/11/2019
|
1,000,000 | 1,028,800 | |||||||
|
Republic of Turkey, 7.1%, 3/8/2023
|
TRY
|
1,700,000 | 699,840 | ||||||
|
United Mexican States:
|
|||||||||
|
Series M, 4.75%, 6/14/2018
|
MXN
|
10,400,000 | 774,294 | ||||||
|
Series M 20, 8.5%, 5/31/2029
|
MXN
|
5,200,000 | 459,357 | ||||||
| 42,877,953 | |||||||||
|
U.S. Government Sponsored Agency 0.4%
|
|||||||||
|
Federal National Mortgage Association, 3.0%, 11/15/2027
|
4,500,000 | 4,285,720 | |||||||
|
U.S. Treasury Obligations 4.1%
|
|||||||||
|
U.S. Treasury Bills:
|
|||||||||
|
0.03%****, 12/11/2014 (f)
|
390,000 | 389,996 | |||||||
|
0.035%****, 2/12/2015 (f)
|
3,625,000 | 3,624,797 | |||||||
|
0.055%****, 12/11/2014 (f)
|
156,000 | 155,998 | |||||||
|
U.S. Treasury Bonds:
|
|||||||||
|
3.375%, 5/15/2044
|
1,570,000 | 1,665,549 | |||||||
|
3.625%, 2/15/2044
|
887,000 | 984,362 | |||||||
|
5.375%, 2/15/2031
|
2,000,000 | 2,701,250 | |||||||
|
U.S. Treasury Notes:
|
|||||||||
|
1.0%, 8/31/2016 (g) (h)
|
22,480,000 | 22,704,800 | |||||||
|
1.0%, 9/30/2016
|
2,500,000 | 2,523,827 | |||||||
|
1.5%, 5/31/2019
|
500,000 | 499,063 | |||||||
|
1.625%, 7/31/2019
|
965,000 | 967,337 | |||||||
|
1.625%, 8/15/2022
|
3,000,000 | 2,891,016 | |||||||
|
2.375%, 8/15/2024
|
1,288,000 | 1,293,031 | |||||||
|
2.5%, 5/15/2024
|
1,754,000 | 1,782,229 | |||||||
| 42,183,255 | |||||||||
|
Total Government & Agency Obligations (Cost $91,748,113)
|
91,070,898 | ||||||||
|
Convertible Bond 0.1%
|
|||||||||
|
Materials
|
|||||||||
|
GEO Specialty Chemicals, Inc., 144A, 7.5%, 3/31/2015 (PIK) (Cost $628,435)
|
622,934 | 1,090,631 | |||||||
|
Loan Participations and Assignments 5.8%
|
|||||||||
|
Senior Loans**
|
|||||||||
|
Alliance Mortgage Cycle Loan, Term Loan A, 9.5%, 6/15/2010*
|
233,333 | 0 | |||||||
|
Atlantic Broadband Finance LLC, Term Loan B, 3.25%, 12/2/2019
|
1,365,482 | 1,352,339 | |||||||
|
Avis Budget Car Rental LLC, Term Loan B, 3.0%, 3/15/2019
|
1,492,424 | 1,477,500 | |||||||
|
Berry Plastics Holding Corp.:
|
|||||||||
|
Term Loan D, 3.5%, 2/8/2020
|
1,492,424 | 1,464,449 | |||||||
|
Term Loan E, 3.75%, 1/6/2021
|
2,542,009 | 2,502,290 | |||||||
|
Big Heart Pet Brands, Term Loan, 3.5%, 3/8/2020
|
5,054,600 | 4,876,122 | |||||||
|
CBS Outdoor Americas Capital LLC, Term Loan B, 3.0%, 1/31/2021
|
1,500,000 | 1,477,125 | |||||||
|
Cequel Communications LLC, Term Loan B, 3.5%, 2/14/2019
|
1,492,343 | 1,479,942 | |||||||
|
Chrysler Group LLC, Term Loan B, 3.25%, 12/31/2018
|
1,492,500 | 1,480,560 | |||||||
|
CSC Holdings, Inc., Term Loan B, 2.654%, 4/17/2020
|
2,719,623 | 2,664,550 | |||||||
|
DaVita HealthCare Partners, Inc., Term Loan B, 3.5%, 6/24/2021
|
4,398,975 | 4,370,690 | |||||||
|
Del Monte Foods, Inc., First Lien Term Loan, 4.253%, 2/18/2021
|
2,873,731 | 2,707,601 | |||||||
|
Delos Finance SARL, Term Loan B, 3.5%, 3/6/2021
|
1,500,000 | 1,495,312 | |||||||
|
Hilton Worldwide Finance LLC, Term Loan B2, 3.5%, 10/26/2020
|
4,634,386 | 4,595,573 | |||||||
|
Level 3 Financing, Inc., Term Loan B5, 3.5%, 1/31/2022
|
605,000 | 608,497 | |||||||
|
NRG Energy, Inc., Term Loan B, 2.75%, 7/2/2018
|
4,158,889 | 4,096,069 | |||||||
|
Par Pharmaceutical Companies, Inc., Term Loan B2, 4.0%, 9/30/2019
|
1,497,695 | 1,477,731 | |||||||
|
Pinnacle Foods Finance LLC:
|
|||||||||
|
Term Loan G, 3.25%, 4/29/2020
|
781,815 | 768,692 | |||||||
|
Term Loan H, 3.25%, 4/29/2020
|
2,671,508 | 2,626,666 | |||||||
|
Ply Gem Industries, Inc., Term Loan, 4.0%, 2/1/2021
|
4,611,314 | 4,539,285 | |||||||
|
Polymer Group, Inc., First Lien Term Loan, 4.25%, 12/19/2019
|
1,500,000 | 1,505,625 | |||||||
|
Quebecor Media, Inc., Term Loan B1, 3.25%, 8/17/2020
|
2,038,505 | 1,986,279 | |||||||
|
Samson Investment Co., Second Lien Term Loan, 5.0%, 9/25/2018
|
720,000 | 668,830 | |||||||
|
SBA Senior Financial II LLC, Term Loan B1, 3.25%, 3/24/2021
|
1,496,250 | 1,473,634 | |||||||
|
Seminole Tribe of Florida, Term Loan, 3.0%, 4/29/2020
|
1,443,548 | 1,441,296 | |||||||
|
Spansion LLC, Term Loan, 3.75%, 12/19/2019
|
1,492,462 | 1,471,008 | |||||||
|
Transdigm, Inc., Term Loan C, 3.0%, 2/28/2020
|
1,500,000 | 1,478,677 | |||||||
|
Valeant Pharmaceuticals International, Inc.:
|
|||||||||
|
Term Loan B, 3.5%, 12/11/2019
|
340,803 | 338,646 | |||||||
|
Term Loan B, 3.5%, 2/13/2019
|
1,298,670 | 1,290,554 | |||||||
|
Visteon Corp., Term Delay Draw B, 3.5%, 4/9/2021
|
1,496,250 | 1,479,417 | |||||||
|
Total Loan Participations and Assignments (Cost $60,322,117)
|
59,194,959 | ||||||||
|
Preferred Security 0.0%
|
|||||||||
|
Materials
|
|||||||||
|
Hercules, Inc., 6.5%, 6/30/2029 (Cost $71,425)
|
141,000 | 128,310 | |||||||
|
Contract Amount
|
Value ($)
|
|||||||
|
Call Options Purchased 0.0%
|
||||||||
|
Options on Interest Rate Swap Contracts
|
||||||||
|
Pay Fixed Rate — 3.72% – Receive Floating — LIBOR, Swap Expiration Date 4/22/2026, Option Expiration Date 4/20/20161 (Cost $463,890)
|
9,400,000 | 117,039 | ||||||
|
Shares
|
Value ($)
|
|||||||
|
Securities Lending Collateral 5.7%
|
||||||||
|
Daily Assets Fund Institutional, 0.08% (i) (j) (Cost $58,864,912)
|
58,864,912 | 58,864,912 | ||||||
|
Cash Equivalents 6.0%
|
||||||||
|
Central Cash Management Fund, 0.07% (i) (Cost $61,462,135)
|
61,462,135 | 61,462,135 | ||||||
|
% of Net Assets
|
Value ($)
|
|||||||
|
Total Investment Portfolio (Cost $1,025,583,123)†
|
106.0 | 1,092,979,416 | ||||||
|
Other Assets and Liabilities, Net
|
(6.0 | ) | (61,383,597 | ) | ||||
|
Net Assets
|
100.0 | 1,031,595,819 | ||||||
The following table represents a senior loan that is in default:
|
Security
|
Coupon
|
Maturity Date
|
Principal Amount
|
Cost ($)
|
Value ($)
|
|||||||||||||
|
Alliance Mortgage Cycle Loan*
|
9.5 | % |
6/15/2010
|
USD
|
233,333 | 233,333 | 0 | |||||||||||
* Non-income producing security.
** Floating rate securities' yields vary with a designated market index or market rate, such as the coupon-equivalent of the U.S. Treasury Bill rate. These securities are shown at their current rate as of October 31, 2014.
*** Current yield; not a coupon rate.
****Annualized yield at time of purchase; not a coupon rate.
† The cost for federal income tax purposes was $1,028,826,666. At October 31, 2014, net unrealized appreciation for all securities based on tax cost was $64,152,750. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $97,532,082 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $33,379,332.
(a) The Fund may purchase securities that are subject to legal or contractual restrictions on resale ("restricted securities"). Restricted securities are securities which have not been registered with the Securities and Exchange Commission under the Securities Act of 1933. The Fund may be unable to sell a restricted security and it may be more difficult to determine a market value for a restricted security. Moreover, if adverse market conditions were to develop during the period between the Fund's decision to sell a restricted security and the point at which the Fund is permitted or able to sell such security, the Fund might obtain a price less favorable than the price that prevailed when it decided to sell. This investment practice, therefore, could have the effect of increasing the level of illiquidity of the Fund. The future value of these securities is uncertain and there may be changes in the estimated value of these securities.
|
Schedule of Restricted Securities
|
Acquisition Date
|
Cost ($)
|
Value ($)
|
Value as % of Net Assets
|
|||||||||
|
Dawn Holdings, Inc.*
|
August 2013
|
9,378 | 6,628 | 0.00 | |||||||||
(b) All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of all securities loaned at October 31, 2014 amounted to $57,139,609, which is 5.5% of net assets.
(c) Principal amount stated in U.S. dollars unless otherwise noted.
(d) When-issued or delayed delivery security included.
(e) Government-backed debt issued by financial companies or government-sponsored enterprises.
(f) At October 31, 2014, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.
(g) At October 31, 2014, this security has been pledged, in whole or in part, to cover initial margin requirements for open centrally cleared swap contracts.
(h) At October 31, 2014, this security has been pledged, in whole or in part, as collateral for open over-the-counter derivatives.
(i) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(j) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
CLO: Collateralized Loan Obligation
CVA: Certificaten Van Aandelen (Certificate of Deposit)
Interest Only: Interest Only (IO) bonds represent the "interest only" portion of payments on a pool of underlying mortgages or mortgage-backed securities. IO securities are subject to prepayment risk of the pool of underlying mortgages.
LIBOR: London Interbank Offered Rate
PIK: Denotes that all or a portion of the income is paid in-kind in the form of additional principal.
Principal Only: Principal Only (PO) bonds represent the "principal only" portion of payments on a pool of underlying mortgages or mortgage-backed securities.
REG S: Securities sold under Regulation S may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
REIT: Real Estate Investment Trust
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.
At October 31, 2014, open futures contracts purchased were as follows:
|
Futures
|
Currency
|
Expiration Date
|
Contracts
|
Notional Value ($)
|
Unrealized Appreciation/ (Depreciation) ($)
|
|||||||||
|
10 Year Australian Bond
|
AUD
|
12/15/2014
|
142 | 15,343,916 | 308,270 | |||||||||
|
10 Year Canadian Bond
|
CAD
|
12/18/2014
|
35 | 4,255,401 | (20,264 | ) | ||||||||
|
10 Year U.S. Treasury Note
|
USD
|
12/19/2014
|
616 | 77,837,375 | 627,079 | |||||||||
|
U.S. Treasury Long Bond
|
USD
|
12/19/2014
|
50 | 7,054,688 | 104,203 | |||||||||
|
Total net unrealized appreciation
|
1,019,288 | |||||||||||||
At October 31, 2014, open futures contracts sold were as follows:
|
Futures
|
Currency
|
Expiration Date
|
Contracts
|
Notional Value ($)
|
Unrealized Appreciation/ (Depreciation) ($)
|
|||||||||
|
10 Year U.S. Treasury Note
|
USD
|
12/19/2014
|
49 | 6,191,609 | 99,440 | |||||||||
|
5 Year U.S. Treasury Note
|
USD
|
12/31/2014
|
390 | 46,577,578 | (343,034 | ) | ||||||||
|
Euro-OAT Futures
|
EUR
|
12/8/2014
|
55 | 9,984,223 | (183,201 | ) | ||||||||
|
U.S. Treasury Long Bond
|
USD
|
12/19/2014
|
134 | 18,906,563 | (353,817 | ) | ||||||||
|
Ultra Long U.S. Treasury Bond
|
USD
|
12/19/2014
|
25 | 3,920,313 | (75,831 | ) | ||||||||
|
Total net unrealized depreciation
|
(856,443 | ) | ||||||||||||
At October 31, 2014, open credit default swap contracts sold were as follows:
|
Bilateral Swaps
|
|||||||||||||||||||||
|
Effective/
Expiration Dates
|
Notional Amount ($) (k)
|
Fixed Cash Flows Received
|
Underlying Debt Obligation/
Quality Rating (l)
|
Value ($)
|
Upfront Payments Paid ($)
|
Unrealized Appreciation ($)
|
|||||||||||||||
|
12/20/2011
3/20/2017
|
150,000 | 2 | 5.0 | % |
CIT Group, Inc.,
5.5%, 2/15/2019, BB–
|
14,783 | 3,014 | 11,769 | |||||||||||||
|
9/20/2012
12/20/2017
|
490,000 | 3 | 5.0 | % |
General Motors Corp., 3.3%, 12/20/2017, BB+
|
63,165 | 22,843 | 40,322 | |||||||||||||
|
Total unrealized appreciation
|
52,091 | ||||||||||||||||||||
(k) The maximum potential amount of future undiscounted payments that the Fund could be required to make under a credit default swap contract would be the notional amount of the contract. These potential amounts would be partially offset by any recovery values of the referenced debt obligation or net amounts received from the settlement of buy protection credit default swap contracts entered into by the Fund for the same referenced debt obligation, if any.
(l) The quality ratings represent the higher of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings and are unaudited.
At October 31, 2014, open interest rate swap contracts were as follows:
|
Centrally Cleared Swaps
|
||||||||||||||
|
Effective/
Expiration Dates
|
Notional Amount ($)
|
Cash Flows Paid by the
Fund
|
Cash Flows Received by the Fund
|
Value ($)
|
Unrealized Appreciation/ (Depreciation)
($)
|
|||||||||
|
6/3/2014
6/3/2025
|
8,800,000 |
Fixed — 3.0%
|
Floating — LIBOR
|
(499,818 | ) | (487,373 | ) | |||||||
|
10/21/2014
10/21/2044
|
19,000,000 |
Fixed — 3.093%
|
Floating — LIBOR
|
(187,321 | ) | (187,321 | ) | |||||||
|
12/30/2014
12/30/2024
|
11,100,000 |
Fixed — 3.524%
|
Floating — LIBOR
|
(990,919 | ) | (989,861 | ) | |||||||
|
12/30/2014
12/30/2034
|
2,200,000 |
Fixed — 4.01%
|
Floating — LIBOR
|
(353,531 | ) | (354,174 | ) | |||||||
|
5/11/2015
5/11/2045
|
8,800,000 |
Fixed — 3.56%
|
Floating — LIBOR
|
(755,893 | ) | (750,963 | ) | |||||||
|
12/30/2014
12/30/2016
|
2,700,000 |
Floating — LIBOR
|
Fixed — 1.173%
|
19,253 | 19,563 | |||||||||
|
12/30/2014
12/30/2019
|
10,400,000 |
Floating — LIBOR
|
Fixed — 2.522%
|
341,035 | 349,396 | |||||||||
|
12/30/2014
12/30/2044
|
1,800,000 |
Floating — LIBOR
|
Fixed — 4.081%
|
363,606 | 365,815 | |||||||||
|
Total net unrealized depreciation
|
(2,034,918 | ) | ||||||||||||
|
Bilateral Swap
|
||||||||||||||||||
|
Effective/
Expiration Dates
|
Notional Amount ($)
|
Cash Flows Paid by the Fund
|
Cash Flows Received by the Fund
|
Value ($)
|
Upfront Payments Paid/
(Received) ($)
|
Unrealized Appreciation
($)
|
||||||||||||
|
6/3/2013
6/3/2025
|
8,800,000 | 1 |
Floating — LIBOR
|
Fixed — 3.0%
|
69,646 | — | 69,646 | |||||||||||
At October 31, 2014, open written options contracts were as follows:
|
Options on Interest Rate Swap Contracts
|
||||||||||||||
|
Swap Effective/
Expiration Dates
|
Contract Amount
|
Option Expiration Date
|
Premiums Received ($)
|
Value ($) (m)
|
||||||||||
|
Call Options
Receive Fixed — 4.22% – Pay Floating — LIBOR
|
4/22/2016
4/22/2026
|
9,400,000 | 1 |
4/20/2016
|
335,110 | (54,899 | ) | |||||||
|
Receive Fixed — 4.48% – Pay Floating — LIBOR
|
5/9/2016
5/11/2026
|
8,800,000 | 1 |
5/5/2016
|
98,780 | (36,947 | ) | |||||||
|
Receive Fixed — 5.132% – Pay Floating — LIBOR
|
3/17/2016
3/17/2026
|
8,800,000 | 1 |
3/15/2016
|
63,580 | (8,233 | ) | |||||||
|
Receive Fixed — 5.132% – Pay Floating — LIBOR
|
3/17/2016
3/17/2026
|
8,800,000 | 4 |
3/15/2016
|
103,840 | (8,233 | ) | |||||||
|
Total Call Options
|
601,310 | (108,312 | ) | |||||||||||
|
Put Options
Pay Fixed — 1.132% – Receive Floating — LIBOR
|
3/17/2016
3/17/2026
|
8,800,000 | 1 |
3/15/2016
|
63,580 | (4,520 | ) | |||||||
|
Pay Fixed — 1.132% – Receive Floating — LIBOR
|
3/17/2016
3/17/2026
|
8,800,000 | 4 |
3/15/2016
|
22,440 | (4,520 | ) | |||||||
|
Pay Fixed — 2.48% – Receive Floating — LIBOR
|
5/9/2016
5/11/2026
|
8,800,000 | 1 |
5/5/2016
|
98,780 | (149,841 | ) | |||||||
|
Pay Fixed — 2.64% – Receive Floating — LIBOR
|
8/10/2015
8/10/2045
|
7,900,000 | 1 |
8/6/2015
|
73,865 | (117,658 | ) | |||||||
|
Pay Fixed — 2.796% – Receive Floating — LIBOR
|
6/5/2015
6/5/2045
|
7,900,000 | 4 |
6/3/2015
|
84,530 | (137,054 | ) | |||||||
|
Pay Fixed — 2.88% – Receive Floating — LIBOR
|
9/30/2015
9/30/2045
|
19,000,000 | 5 |
9/28/2015
|
397,537 | (579,285 | ) | |||||||
|
Pay Fixed — 3.005% – Receive Floating — LIBOR
|
3/6/2015
3/6/2045
|
7,900,000 | 1 |
3/4/2015
|
82,950 | (183,975 | ) | |||||||
|
Pay Fixed — 3.035% – Receive Floating — LIBOR
|
2/15/2015
2/3/2045
|
7,900,000 | 4 |
1/30/2015
|
97,565 | (180,047 | ) | |||||||
|
Pay Fixed — 3.088% – Receive Floating — LIBOR
|
1/28/2015
1/28/2045
|
8,800,000 | 6 |
1/26/2015
|
88,771 | (232,036 | ) | |||||||
|
Total Put Options
|
1,010,018 | (1,588,936 | ) | |||||||||||
|
Total
|
1,611,328 | (1,697,248 | ) | |||||||||||
(m) Unrealized depreciation on written options on interest rate swap contracts at October 31, 2014 was $85,920.
Counterparties:
1 Nomura International PLC
2 Credit Suisse
3 UBS AG
4 BNP Paribas
5 Morgan Stanley
6 Barclays Bank PLC
As of October 31, 2014, the Fund had the following open forward foreign currency exchange contracts:
|
Contracts to Deliver
|
In Exchange For
|
Settlement Date
|
Unrealized Appreciation ($)
|
Counterparty
|
|||||||||||
|
JPY
|
573,878,400 |
GBP
|
3,200,000 |
11/10/2014
|
9,511 |
Bank of America
|
|||||||||
|
USD
|
5,183,212 |
KRW
|
5,545,000,000 |
11/10/2014
|
3,927 |
Morgan Stanley
|
|||||||||
|
NZD
|
5,750,000 |
USD
|
4,516,165 |
11/10/2014
|
36,646 |
Barclays Bank PLC
|
|||||||||
|
EUR
|
6,100,000 |
USD
|
7,713,395 |
11/10/2014
|
68,887 |
Barclays Bank PLC
|
|||||||||
|
KRW
|
5,545,000,000 |
USD
|
5,207,795 |
11/10/2014
|
20,656 |
Morgan Stanley
|
|||||||||
|
JPY
|
840,000,000 |
USD
|
7,519,066 |
11/10/2014
|
40,486 |
Morgan Stanley
|
|||||||||
|
JPY
|
840,000,000 |
USD
|
7,512,241 |
11/10/2014
|
33,661 |
Barclays Bank PLC
|
|||||||||
|
NZD
|
6,600,000 |
USD
|
5,162,487 |
11/10/2014
|
20,779 |
Morgan Stanley
|
|||||||||
|
USD
|
5,443,239 |
ZAR
|
60,600,000 |
11/12/2014
|
43,789 |
UBS AG
|
|||||||||
|
ZAR
|
20,200,000 |
USD
|
1,856,146 |
11/12/2014
|
27,136 |
BNP Paribas
|
|||||||||
|
ZAR
|
20,200,000 |
USD
|
1,855,586 |
11/12/2014
|
26,576 |
UBS AG
|
|||||||||
|
GBP
|
1,071,210 |
USD
|
1,713,628 |
12/18/2014
|
614 |
Morgan Stanley
|
|||||||||
|
EUR
|
259,700 |
USD
|
328,900 |
1/15/2015
|
3,302 |
Citigroup, Inc.
|
|||||||||
|
SGD
|
20,513,010 |
USD
|
16,135,523 |
1/20/2015
|
171,657 |
Australia & New Zealand Banking Group Ltd.
|
|||||||||
|
EUR
|
4,622,450 |
USD
|
5,896,339 |
1/20/2015
|
100,734 |
Societe Generale
|
|||||||||
|
Total unrealized appreciation
|
608,361 | ||||||||||||||
|
Contracts to Deliver
|
In Exchange For
|
Settlement Date
|
Unrealized Depreciation ($)
|
Counterparty
|
|||||||||||
|
USD
|
1,714,257 |
GBP
|
1,071,210 |
11/3/2014
|
(642 | ) |
Morgan Stanley
|
||||||||
|
NZD
|
6,600,000 |
CAD
|
5,743,452 |
11/10/2014
|
(46,579 | ) |
Societe Generale
|
||||||||
|
GBP
|
3,200,000 |
JPY
|
548,163,840 |
11/10/2014
|
(238,450 | ) |
Morgan Stanley
|
||||||||
|
USD
|
5,436,386 |
MXN
|
72,300,000 |
11/10/2014
|
(69,400 | ) |
UBS AG
|
||||||||
|
USD
|
5,236,506 |
NZD
|
6,600,000 |
11/10/2014
|
(94,798 | ) |
Barclays Bank PLC
|
||||||||
|
USD
|
15,240,279 |
JPY
|
1,680,000,000 |
11/10/2014
|
(283,118 | ) |
Morgan Stanley
|
||||||||
|
ZAR
|
9,300,000 |
USD
|
834,414 |
12/8/2014
|
(4,025 | ) |
Barclays Bank PLC
|
||||||||
|
USD
|
5,913,953 |
EUR
|
4,622,450 |
1/20/2015
|
(118,348 | ) |
Citigroup, Inc.
|
||||||||
|
CAD
|
6,854,260 |
USD
|
6,065,309 |
1/20/2015
|
(4,439 | ) |
Australia & New Zealand Banking Group Ltd.
|
||||||||
|
Total unrealized depreciation
|
(859,799 | ) | |||||||||||||
|
Currency Abbreviations
|
|
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
EUR Euro
GBP British Pound
HUF Hungarian Forint
JPY Japanese Yen
KRW South Korean Won
MXN Mexican Peso
NZD New Zealand Dollar
SGD Singapore Dollar
TRY Turkish Lira
USD United States Dollar
ZAR South African Rand
|
For information on the Fund's policy and additional disclosures regarding options purchased, futures contracts, credit default swap contracts, interest rate swap contracts, written option contracts and forward foreign currency exchange contracts, please refer to Note B in the accompanying Notes to Financial Statements.
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of October 31, 2014 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
|
Assets
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
Common Stocks (n)
|
||||||||||||||||
|
Consumer Discretionary
|
$ | 25,175,093 | $ | 14,427,559 | $ | 6,628 | $ | 39,609,280 | ||||||||
|
Consumer Staples
|
62,992,731 | 91,549,031 | — | 154,541,762 | ||||||||||||
|
Energy
|
30,669,506 | — | — | 30,669,506 | ||||||||||||
|
Financials
|
49,928,845 | 12,512,194 | — | 62,441,039 | ||||||||||||
|
Health Care
|
5,781,882 | 20,323,074 | — | 26,104,956 | ||||||||||||
|
Industrials
|
16,265,487 | 57,911,067 | — | 74,176,554 | ||||||||||||
|
Information Technology
|
36,654,620 | 8,878,403 | — | 45,533,023 | ||||||||||||
|
Materials
|
5,823,706 | 6,357,946 | — | 12,181,652 | ||||||||||||
|
Telecommunication Services
|
26,480,745 | 1,055,260 | — | 27,536,005 | ||||||||||||
|
Utilities
|
41,203,331 | 2,649,536 | — | 43,852,867 | ||||||||||||
|
Preferred Stock
|
— | 296,917 | — | 296,917 | ||||||||||||
|
Rights
|
— | 69,689 | — | 69,689 | ||||||||||||
|
Warrants
|
— | — | 42,668 | 42,668 | ||||||||||||
|
Fixed Income Investments (n)
|
||||||||||||||||
|
Corporate Bonds
|
— | 266,943,248 | — | 266,943,248 | ||||||||||||
|
Asset Backed
|
— | 7,311,685 | — | 7,311,685 | ||||||||||||
|
Mortgage-Backed Securities Pass-Throughs
|
— | 3,383,504 | — | 3,383,504 | ||||||||||||
|
Commercial Mortgage- Backed Securities
|
— | 5,351,014 | — | 5,351,014 | ||||||||||||
|
Collateralized Mortgage Obligations
|
— | 21,005,163 | — | 21,005,163 | ||||||||||||
|
Government & Agency Obligations
|
— | 91,070,898 | — | 91,070,898 | ||||||||||||
|
Convertible Bond
|
— | — | 1,090,631 | 1,090,631 | ||||||||||||
|
Loan Participations and Assignments
|
— | 59,194,959 | — | 59,194,959 | ||||||||||||
|
Preferred Security
|
— | 128,310 | — | 128,310 | ||||||||||||
|
Short-Term Investments (n)
|
120,327,047 | — | — | 120,327,047 | ||||||||||||
|
Derivatives (o)
|
||||||||||||||||
|
Purchased Options
|
— | 117,039 | — | 117,039 | ||||||||||||
|
Futures Contracts
|
1,138,992 | — | — | 1,138,992 | ||||||||||||
|
Credit Default Swap Contracts
|
— | 52,091 | — | 52,091 | ||||||||||||
|
Interest Rate Swap Contracts
|
— | 804,420 | — | 804,420 | ||||||||||||
|
Forward Foreign Currency Exchange Contracts
|
— | 608,361 | — | 608,361 | ||||||||||||
|
Total
|
$ | 422,441,985 | $ | 672,001,368 | $ | 1,139,927 | $ | 1,095,583,280 | ||||||||
|
Liabilities
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
Derivatives (o)
|
||||||||||||||||
|
Futures Contracts
|
$ | (976,147 | ) | $ | — | $ | — | $ | (976,147 | ) | ||||||
|
Written Options
|
— | (1,697,248 | ) | — | (1,697,248 | ) | ||||||||||
|
Interest Rate Swap Contracts
|
— | (2,769,692 | ) | — | (2,769,692 | ) | ||||||||||
|
Forward Foreign Currency Exchange Contracts
|
— | (859,799 | ) | — | (859,799 | ) | ||||||||||
|
Total
|
$ | (976,147 | ) | $ | (5,326,739 | ) | $ | — | $ | (6,302,886 | ) | |||||
There have been no transfers between fair value measurement levels during the year ended October 31, 2014.
(n) See Investment Portfolio for additional detailed categorizations.
(o) Derivatives include value of options purchased; unrealized appreciation (depreciation) on open futures contracts, credit default swap contracts, interest rate swap contracts and forward foreign currency exchange contracts; and written options, at value.
The accompanying notes are an integral part of the financial statements.
|
as of October 31, 2014
|
||||
|
Assets
|
||||
|
Investments:
Investments in non-affiliated securities, at value (cost $905,256,076) — including $57,139,609 of securities loaned
|
$ | 972,652,369 | ||
|
Investment in Daily Assets Fund Institutional (cost $58,864,912)*
|
58,864,912 | |||
|
Investment in Central Cash Management Fund (cost $61,462,135)
|
61,462,135 | |||
|
Total investments in securities, at value (cost $1,025,583,123)
|
1,092,979,416 | |||
|
Cash
|
1,110,221 | |||
|
Foreign currency, at value (cost $1,088,101)
|
1,057,580 | |||
|
Receivable for investments sold
|
3,526,082 | |||
|
Receivable for investments sold — when-issued securities
|
6,157,897 | |||
|
Receivable for Fund shares sold
|
430,523 | |||
|
Dividends receivable
|
1,077,146 | |||
|
Interest receivable
|
5,673,388 | |||
|
Receivable for variation margin on centrally cleared swaps
|
237,798 | |||
|
Unrealized appreciation on bilateral swap contracts
|
121,737 | |||
|
Unrealized appreciation on forward foreign currency exchange contracts
|
608,361 | |||
|
Upfront payments paid on bilateral swap contracts
|
25,857 | |||
|
Foreign taxes recoverable
|
525,048 | |||
|
Other assets
|
38,850 | |||
|
Total assets
|
1,113,569,904 | |||
|
Liabilities
|
||||
|
Payable upon return of securities loaned
|
58,864,912 | |||
|
Payable for investments purchased
|
7,147,446 | |||
|
Payable for investments purchased — when-issued securities
|
11,530,125 | |||
|
Payable for Fund shares redeemed
|
579,258 | |||
|
Payable for variation margin on futures contracts
|
80,061 | |||
|
Options written, at value (premiums received $1,611,328)
|
1,697,248 | |||
|
Unrealized depreciation on forward foreign currency exchange contracts
|
859,799 | |||
|
Accrued management fee
|
321,560 | |||
|
Accrued Trustees' fees
|
11,815 | |||
|
Other accrued expenses and payables
|
881,861 | |||
|
Total liabilities
|
81,974,085 | |||
|
Net assets, at value
|
$ | 1,031,595,819 | ||
* Represents collateral on securities loaned.
The accompanying notes are an integral part of the financial statements.
|
Statement of Assets and Liabilities as of October 31, 2014 (continued)
|
||||
|
Net Assets Consist of
|
||||
|
Undistributed net investment income
|
15,823,909 | |||
|
Net unrealized appreciation (depreciation) on:
Investments
|
67,396,293 | |||
|
Swap contracts
|
(1,913,181 | ) | ||
|
Futures
|
162,845 | |||
|
Foreign currency
|
(330,014 | ) | ||
|
Written options
|
(85,920 | ) | ||
|
Accumulated net realized gain (loss)
|
68,504,174 | |||
|
Paid-in capital
|
882,037,713 | |||
|
Net assets, at value
|
$ | 1,031,595,819 | ||
|
Net Asset Value
|
||||
|
Class A
Net Asset Value and redemption price per share ($750,728,413 ÷ 72,467,989 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)
|
$ | 10.36 | ||
|
Maximum offering price per share (100 ÷ 94.25 of $10.36)
|
$ | 10.99 | ||
|
Class B
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($1,973,364 ÷ 190,359 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)
|
$ | 10.37 | ||
|
Class C
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($27,099,336 ÷ 2,618,343 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)
|
$ | 10.35 | ||
|
Class R6
Net Asset Value, offering and redemption price per share ($9,774 ÷ 944 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)
|
$ | 10.35 | ||
|
Class S
Net Asset Value, offering and redemption price per share ($248,632,799 ÷ 23,996,376 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)
|
$ | 10.36 | ||
|
Institutional Class
Net Asset Value, offering and redemption price per share ($3,152,133 ÷ 304,552 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)
|
$ | 10.35 | ||
The accompanying notes are an integral part of the financial statements.
|
for the year ended October 31, 2014
|
||||
|
Investment Income
|
||||
|
Income:
Dividends (net of foreign taxes withheld of $1,094,268)
|
$ | 21,301,049 | ||
|
Interest
|
20,250,502 | |||
|
Income distributions — Central Cash Management Fund
|
32,120 | |||
|
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
|
397,915 | |||
|
Total income
|
41,981,586 | |||
|
Expenses:
Management fee
|
3,885,830 | |||
|
Administration fee
|
1,050,224 | |||
|
Services to shareholders
|
1,490,006 | |||
|
Distribution and service fees
|
2,105,613 | |||
|
Custodian fee
|
111,375 | |||
|
Professional fees
|
130,715 | |||
|
Reports to shareholders
|
121,253 | |||
|
Registration fees
|
81,528 | |||
|
Trustees' fees and expenses
|
44,963 | |||
|
Other
|
99,011 | |||
|
Total expenses
|
9,120,518 | |||
|
Net investment income
|
32,861,068 | |||
|
Realized and Unrealized Gain (Loss)
|
||||
|
Net realized gain (loss) from:
Investments
|
69,542,565 | |||
|
Swap contracts
|
(113,487 | ) | ||
|
Futures
|
(1,671,075 | ) | ||
|
Written options
|
972,290 | |||
|
Foreign currency
|
3,381,233 | |||
| 72,111,526 | ||||
|
Change in net unrealized appreciation (depreciation) on:
Investments
|
(47,665,778 | ) | ||
|
Swap contracts
|
(1,815,932 | ) | ||
|
Futures
|
2,357,610 | |||
|
Written options
|
(381,530 | ) | ||
|
Foreign currency
|
(884,662 | ) | ||
| (48,390,292 | ) | |||
|
Net gain (loss)
|
23,721,234 | |||
|
Net increase (decrease) in net assets resulting from operations
|
$ | 56,582,302 | ||
The accompanying notes are an integral part of the financial statements.
|
Years Ended October 31,
|
||||||||
|
Increase (Decrease) in Net Assets
|
2014
|
2013
|
||||||
|
Operations:
Net investment income
|
$ | 32,861,068 | $ | 30,952,833 | ||||
|
Net realized gain (loss)
|
72,111,526 | 19,435,271 | ||||||
|
Change in net unrealized appreciation (depreciation)
|
(48,390,292 | ) | 84,648,649 | |||||
|
Net increase (decrease) in net assets resulting from operations
|
56,582,302 | 135,036,753 | ||||||
|
Distributions to shareholders from:
Net investment income:
Class A
|
(25,171,540 | ) | (21,681,142 | ) | ||||
|
Class B
|
(55,718 | ) | (70,002 | ) | ||||
|
Class C
|
(617,381 | ) | (376,265 | ) | ||||
|
Class R6*
|
(102 | ) | — | |||||
|
Class S
|
(8,673,219 | ) | (7,378,047 | ) | ||||
|
Institutional Class
|
(101,519 | ) | (67,767 | ) | ||||
|
Net realized gains:
Class A
|
(11,687,777 | ) | (20,430,948 | ) | ||||
|
Class B
|
(44,142 | ) | (123,850 | ) | ||||
|
Class C
|
(331,678 | ) | (466,410 | ) | ||||
|
Class S
|
(3,738,187 | ) | (6,460,646 | ) | ||||
|
Institutional Class
|
(36,487 | ) | (54,815 | ) | ||||
|
Total distributions
|
(50,457,750 | ) | (57,109,892 | ) | ||||
|
Fund share transactions:
Proceeds from shares sold
|
66,750,548 | 57,311,888 | ||||||
|
Reinvestment of distributions
|
47,968,220 | 54,107,801 | ||||||
|
Payments for shares redeemed
|
(129,967,063 | ) | (156,220,375 | ) | ||||
|
Net increase (decrease) in net assets from Fund share transactions
|
(15,248,295 | ) | (44,800,686 | ) | ||||
|
Increase (decrease) in net assets
|
(9,123,743 | ) | 33,126,175 | |||||
|
Net assets at beginning of period
|
1,040,719,562 | 1,007,593,387 | ||||||
|
Net assets at end of period (including undistributed net investment income of $15,823,909 and $14,151,926, respectively)
|
$ | 1,031,595,819 | $ | 1,040,719,562 | ||||
* For the period from August 25, 2014 (commencement of operations of Class R6) to October 31, 2014.
The accompanying notes are an integral part of the financial statements.
|
Years Ended October 31,
|
|||||||||||||||||||||
|
Class A
|
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||||
|
Selected Per Share Data
|
|||||||||||||||||||||
|
Net asset value, beginning of period
|
$ | 10.31 | $ | 9.56 | $ | 8.91 | $ | 8.85 | $ | 8.10 | |||||||||||
|
Income (loss) from investment operations:
Net investment incomea
|
.32 | .29 | .25 | .14 | .13 | ||||||||||||||||
|
Net realized and unrealized gain (loss)
|
.23 | 1.01 | .60 | .05 | .86 | ||||||||||||||||
|
Total from investment operations
|
.55 | 1.30 | .85 | .19 | .99 | ||||||||||||||||
|
Less distributions from:
Net investment income
|
(.34 | ) | (.28 | ) | (.20 | ) | (.13 | ) | (.17 | ) | |||||||||||
|
Net realized gains
|
(.16 | ) | (.27 | ) | — | — | (.07 | ) | |||||||||||||
|
Total distributions
|
(.50 | ) | (.55 | ) | (.20 | ) | (.13 | ) | (.24 | ) | |||||||||||
|
Net asset value, end of period
|
$ | 10.36 | $ | 10.31 | $ | 9.56 | $ | 8.91 | $ | 8.85 | |||||||||||
|
Total Return (%)b
|
5.49 | 14.14 | 9.67 | 2.11 | 12.44 | ||||||||||||||||
|
Ratios to Average Net Assets and Supplemental Data
|
|||||||||||||||||||||
|
Net assets, end of period ($ millions)
|
751 | 770 | 748 | 780 | 874 | ||||||||||||||||
|
Ratio of expenses (%)
|
.90 | .90 | .91 | .93 | .97 | ||||||||||||||||
|
Ratio of net investment income (%)
|
3.10 | 3.00 | 2.67 | 1.58 | 1.51 | ||||||||||||||||
|
Portfolio turnover rate (%)
|
100 | 90 | 204 | 137 | 251 | ||||||||||||||||
|
a Based on average shares outstanding during the period.
b Total return does not reflect the effect of any sales charges.
|
|||||||||||||||||||||
|
Years Ended October 31,
|
|||||||||||||||||||||
|
Class B
|
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||||
|
Selected Per Share Data
|
|||||||||||||||||||||
|
Net asset value, beginning of period
|
$ | 10.31 | $ | 9.57 | $ | 8.91 | $ | 8.85 | $ | 8.11 | |||||||||||
|
Income (loss) from investment operations:
Net investment incomea
|
.22 | .19 | .15 | .06 | .04 | ||||||||||||||||
|
Net realized and unrealized gain (loss)
|
.24 | 1.01 | .62 | .03 | .87 | ||||||||||||||||
|
Total from investment operations
|
.46 | 1.20 | .77 | .09 | .91 | ||||||||||||||||
|
Less distributions from:
Net investment income
|
(.24 | ) | (.19 | ) | (.11 | ) | (.03 | ) | (.10 | ) | |||||||||||
|
Net realized gains
|
(.16 | ) | (.27 | ) | — | — | (.07 | ) | |||||||||||||
|
Total distributions
|
(.40 | ) | (.46 | ) | (.11 | ) | (.03 | ) | (.17 | ) | |||||||||||
|
Net asset value, end of period
|
$ | 10.37 | $ | 10.31 | $ | 9.57 | $ | 8.91 | $ | 8.85 | |||||||||||
|
Total Return (%)b
|
4.52 | 12.88 | c | 8.70 | 1.06 | 11.25 | |||||||||||||||
|
Ratios to Average Net Assets and Supplemental Data
|
|||||||||||||||||||||
|
Net assets, end of period ($ millions)
|
2 | 3 | 5 | 6 | 10 | ||||||||||||||||
|
Ratio of expenses (%)
|
1.93 | 1.90 | 1.89 | 1.89 | 2.00 | ||||||||||||||||
|
Ratio of net investment income (%)
|
2.08 | 1.99 | 1.66 | .62 | .48 | ||||||||||||||||
|
Portfolio turnover rate (%)
|
100 | 90 | 204 | 137 | 251 | ||||||||||||||||
|
a Based on average shares outstanding during the period.
b Total return does not reflect the effect of any sales charges.
c Total return would have been lower had certain expenses not been reduced.
|
|||||||||||||||||||||
|
Years Ended October 31,
|
|||||||||||||||||||||
|
Class C
|
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||||
|
Selected Per Share Data
|
|||||||||||||||||||||
|
Net asset value, beginning of period
|
$ | 10.29 | $ | 9.55 | $ | 8.89 | $ | 8.84 | $ | 8.08 | |||||||||||
|
Income (loss) from investment operations:
Net investment incomea
|
.24 | .21 | .17 | .07 | .06 | ||||||||||||||||
|
Net realized and unrealized gain (loss)
|
.24 | 1.00 | .62 | .03 | .87 | ||||||||||||||||
|
Total from investment operations
|
.48 | 1.21 | .79 | .10 | .93 | ||||||||||||||||
|
Less distributions from:
Net investment income
|
(.26 | ) | (.20 | ) | (.13 | ) | (.05 | ) | (.10 | ) | |||||||||||
|
Net realized gains
|
(.16 | ) | (.27 | ) | — | — | (.07 | ) | |||||||||||||
|
Total distributions
|
(.42 | ) | (.47 | ) | (.13 | ) | (.05 | ) | (.17 | ) | |||||||||||
|
Net asset value, end of period
|
$ | 10.35 | $ | 10.29 | $ | 9.55 | $ | 8.89 | $ | 8.84 | |||||||||||
|
Total Return (%)b
|
4.74 | 13.09 | 8.90 | 1.16 | 11.49 | ||||||||||||||||
|
Ratios to Average Net Assets and Supplemental Data
|
|||||||||||||||||||||
|
Net assets, end of period ($ millions)
|
27 | 21 | 17 | 19 | 21 | ||||||||||||||||
|
Ratio of expenses (%)
|
1.69 | 1.72 | 1.74 | 1.75 | 1.79 | ||||||||||||||||
|
Ratio of net investment income (%)
|
2.31 | 2.16 | 1.84 | .76 | .68 | ||||||||||||||||
|
Portfolio turnover rate (%)
|
100 | 90 | 204 | 137 | 251 | ||||||||||||||||
|
a Based on average shares outstanding during the period.
b Total return does not reflect the effect of any sales charges.
|
|||||||||||||||||||||
|
Class R6
|
Period Ended 10/31/14a
|
|||
|
Selected Per Share Data
|
||||
|
Net asset value, beginning of period
|
$ | 10.70 | ||
|
Income (loss) from investment operations:
Net investment incomeb
|
.05 | |||
|
Net realized and unrealized gain (loss)
|
(.29 | ) | ||
|
Total from investment operations
|
(.24 | ) | ||
|
Less distributions from:
Net investment income
|
(.11 | ) | ||
|
Net asset value, end of period
|
$ | 10.35 | ||
|
Total Return (%)
|
(2.26 | )** | ||
|
Ratios to Average Net Assets and Supplemental Data
|
||||
|
Net assets, end of period ($ thousands)
|
10 | |||
|
Ratio of expenses (%)
|
.56 | * | ||
|
Ratio of net investment income (%)
|
2.83 | * | ||
|
Portfolio turnover rate (%)
|
100 | c | ||
|
a For the period from August 25, 2014 (commencement of operations) to October 31, 2014.
b Based on average shares outstanding during the period.
c Represents the Fund's portfolio turnover rate for the year ended October 31, 2014.
* Annualized
** Not annualized
|
||||
|
Years Ended October 31,
|
|||||||||||||||||||||
|
Class S
|
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||||
|
Selected Per Share Data
|
|||||||||||||||||||||
|
Net asset value, beginning of period
|
$ | 10.31 | $ | 9.56 | $ | 8.91 | $ | 8.85 | $ | 8.10 | |||||||||||
|
Income (loss) from investment operations:
Net investment incomea
|
.34 | .31 | .27 | .16 | .14 | ||||||||||||||||
|
Net realized and unrealized gain (loss)
|
.23 | 1.01 | .60 | .04 | .87 | ||||||||||||||||
|
Total from investment operations
|
.57 | 1.32 | .87 | .20 | 1.01 | ||||||||||||||||
|
Less distributions from:
Net investment income
|
(.36 | ) | (.30 | ) | (.22 | ) | (.14 | ) | (.19 | ) | |||||||||||
|
Net realized gains
|
(.16 | ) | (.27 | ) | — | — | (.07 | ) | |||||||||||||
|
Total distributions
|
(.52 | ) | (.57 | ) | (.22 | ) | (.14 | ) | (.26 | ) | |||||||||||
|
Net asset value, end of period
|
$ | 10.36 | $ | 10.31 | $ | 9.56 | $ | 8.91 | $ | 8.85 | |||||||||||
|
Total Return (%)
|
5.70 | 14.37 | 9.90 | 2.20 | 12.84 | ||||||||||||||||
|
Ratios to Average Net Assets and Supplemental Data
|
|||||||||||||||||||||
|
Net assets, end of period ($ millions)
|
249 | 245 | 236 | 241 | 258 | ||||||||||||||||
|
Ratio of expenses (%)
|
.69 | .71 | .71 | .73 | .77 | ||||||||||||||||
|
Ratio of net investment income (%)
|
3.30 | 3.19 | 2.88 | 1.78 | 1.70 | ||||||||||||||||
|
Portfolio turnover rate (%)
|
100 | 90 | 204 | 137 | 251 | ||||||||||||||||
|
a Based on average shares outstanding during the period.
|
|||||||||||||||||||||
|
Years Ended October 31,
|
|||||||||||||||||||||
|
Institutional Class
|
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||||
|
Selected Per Share Data
|
|||||||||||||||||||||
|
Net asset value, beginning of period
|
$ | 10.30 | $ | 9.56 | $ | 8.91 | $ | 8.86 | $ | 8.11 | |||||||||||
|
Income (loss) from investment operations:
Net investment incomea
|
.35 | .32 | .27 | .17 | .16 | ||||||||||||||||
|
Net realized and unrealized gain (loss)
|
.23 | 1.00 | .61 | .04 | .87 | ||||||||||||||||
|
Total from investment operations
|
.58 | 1.32 | .88 | .21 | 1.03 | ||||||||||||||||
|
Less distributions from:
Net investment income
|
(.37 | ) | (.31 | ) | (.23 | ) | (.16 | ) | (.21 | ) | |||||||||||
|
Net realized gains
|
(.16 | ) | (.27 | ) | — | — | (.07 | ) | |||||||||||||
|
Total distributions
|
(.53 | ) | (.58 | ) | (.23 | ) | (.16 | ) | (.28 | ) | |||||||||||
|
Net asset value, end of period
|
$ | 10.35 | $ | 10.30 | $ | 9.56 | $ | 8.91 | $ | 8.86 | |||||||||||
|
Total Return (%)
|
5.77 | 14.32 | 10.02 | 2.37 | 12.85 | ||||||||||||||||
|
Ratios to Average Net Assets and Supplemental Data
|
|||||||||||||||||||||
|
Net assets, end of period ($ millions)
|
3 | 2 | 2 | 1 | 4 | ||||||||||||||||
|
Ratio of expenses (%)
|
.64 | .65 | .65 | .61 | .60 | ||||||||||||||||
|
Ratio of net investment income (%)
|
3.34 | 3.25 | 2.94 | 1.90 | 1.87 | ||||||||||||||||
|
Portfolio turnover rate (%)
|
100 | 90 | 204 | 137 | 251 | ||||||||||||||||
|
a Based on average shares outstanding during the period.
|
|||||||||||||||||||||
A. Organization and Significant Accounting Policies
Deutsche Global Income Builder Fund (formerly DWS Global Income Builder Fund) (the "Fund") is a diversified series of Deutsche Market Trust (formerly DWS Market Trust) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares of the Fund are closed to new purchases, except exchanges or the reinvestment of dividends or other distributions. Class B shares were offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Class C shares do not automatically convert into another class. Institutional Class shares are generally available only to qualified institutions, are not subject to initial or contingent deferred sales charges and generally have lower ongoing expenses than other classes. Class S shares are not subject to initial or contingent deferred sales charges and are only available to a limited group of investors. Class R6 shares commenced operations on August 25, 2014. Class R6 shares are not subject to initial or contingent deferred sales charges and are generally available only to certain retirement plans.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution and service fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are generally categorized as Level 1 securities. For certain international equity securities, in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.
Debt securities and loan participations and assignments are valued at prices supplied by independent pricing services approved by the Fund's Board. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers, and loan participations and assignments are valued at the mean of the most recent bid and ask quotations or evaluated prices, as applicable, obtained from broker-dealers. Certain securities may be valued on the basis of a price provided by a single source or broker-dealer. No active trading market may exist for some senior loans and they may be subject to restrictions on resale. The inability to dispose of senior loans in a timely fashion could result in losses. These securities are generally categorized as Level 2.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost, which approximates value, and are categorized as Level 2. Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.
Swap contracts are valued daily based upon prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer. Swap contracts are generally categorized as Level 2.
Exchange-traded options are valued at the last sale price or, in the absence of a sale, the mean between the closing bid and asked prices or at the most recent asked price (bid for purchased options) if no bid or asked price are available. Exchange-traded options are generally categorized as Level 1. Over-the-counter written or purchased options are valued at prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer with which the option was traded. Over-the-counter written or purchased options are generally categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security's disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company's or issuer's financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains benefits of owning the securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of October 31, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.
When-Issued/Delayed Delivery Securities. The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Additionally, the Fund may be required to post securities and/or cash collateral in accordance with the terms of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery transactions from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
The Fund has reviewed the tax positions for the open tax years as of October 31, 2014 and has determined that no provision for income tax and/or uncertain tax provisions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund are declared and distributed to shareholders quarterly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in mortgage-backed securities, premium amortization on debt securities, investments in futures, swap contracts, and forward foreign currency exchange contracts, recognition of certain foreign currency gains (losses) as ordinary income (loss) and certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At October 31, 2014, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
|
Undistributed ordinary income*
|
$ | 23,409,982 | ||
|
Undistributed long-term capital gains
|
$ | 63,799,211 | ||
|
Net unrealized appreciation (depreciation) on investments
|
$ | 64,152,750 |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
|
Years Ended October 31,
|
||||||||
|
2014
|
2013
|
|||||||
|
Distributions from ordinary income*
|
$ | 35,838,576 | $ | 29,573,223 | ||||
|
Distributions from long-term capital gains
|
$ | 14,619,174 | $ | 27,536,669 | ||||
* For tax purposes, short-term capital gain distributions are considered ordinary income distributions.
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Fund is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments. All premiums and discounts are amortized/accreted for financial reporting purposes, with the exception of securities in default of principal.
B. Derivative Instruments
Swaps. A swap is a contract between two parties to exchange future cash flows at periodic intervals based on the notional amount of the swap. A bilateral swap is a transaction between the fund and a counterparty where cash flows are exchanged between the two parties. A centrally cleared swap is a transaction executed between the fund and a counterparty, then cleared by a clearing member through a central clearinghouse. The central clearinghouse serves as the counterparty, with whom the fund exchanges cash flows.
The value of a swap is adjusted daily, and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Statement of Assets and Liabilities. Gains or losses are realized when the swap expires or is closed. Certain risks may arise when entering into swap transactions including counterparty default; liquidity; or unfavorable changes in interest rates or the value of the underlying reference security, commodity or index. In connection with bilateral swaps, securities and/or cash may be identified as collateral in accordance with the terms of the swap agreement to provide assets of value and recourse in the event of default. The maximum counterparty credit risk is the net present value of the cash flows to be received from or paid to the counterparty over the term of the swap, to the extent that this amount is beneficial to the Fund, in addition to any related collateral posted to the counterparty by the Fund. This risk may be partially reduced by a master netting arrangement between the Fund and the counterparty. Upon entering into a centrally cleared swap, the Fund is required to deposit with a financial intermediary cash or securities ("initial margin") in an amount equal to a certain percentage of the notional amount of the swap. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the swap. In a cleared swap transaction, counterparty risk is minimized as the central clearinghouse acts as the counterparty.
An upfront payment, if any, made by the Fund is recorded as an asset in the Statement of Assets and Liabilities. An upfront payment, if any, received by the Fund is recorded as a liability in the Statement of Assets and Liabilities. Payments received or made at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations.
Interest Rate Swaps. Interest rate swaps are agreements in which the Fund agrees to pay to the counterparty a fixed rate payment in exchange for the counterparty agreeing to pay to the Fund a variable rate payment, or the Fund agrees to receive from the counterparty a fixed rate payment in exchange for the counterparty agreeing to receive from the Fund a variable rate payment. The payment obligations are based on the notional amount of the swap. For the year ended October 31, 2014, the Fund entered into interest rate swap agreements to gain exposure to different parts of the yield curve while managing overall duration.
A summary of the open interest rate swap contracts as of October 31, 2014 is included in a table following the Fund's Investment Portfolio. For the year ended October 31, 2014, the investment in interest rate swap contracts had a total notional amount generally indicative of a range from $27,600,000 to $73,600,000.
Credit Default Swaps. Credit default swaps are agreements between a buyer and a seller of protection against predefined credit events for the reference entity. The Fund may enter into credit default swaps to gain exposure to an underlying issuer's credit quality characteristics without directly investing in that issuer or to hedge against the risk of a credit event on debt securities. As a seller of a credit default swap, the Fund is required to pay the par (or other agreed-upon) value of the referenced entity to the counterparty with the occurrence of a credit event by a third party, such as a U.S. or foreign corporate issuer, on the reference entity, which would likely result in a loss to the Fund. In return, the Fund receives from the counterparty a periodic stream of payments over the term of the swap provided that no credit event has occurred. If no credit event occurs, the Fund keeps the stream of payments with no payment obligations. The Fund may also buy credit default swaps, in which case the Fund functions as the counterparty referenced above. This involves the risk that the swap may expire worthless. It also involves counterparty risk that the seller may fail to satisfy its payment obligations to the Fund with the occurrence of a credit event. When the Fund sells a credit default swap, it will cover its commitment. This may be achieved by, among other methods, maintaining cash or liquid assets equal to the aggregate notional value of the reference entities for all outstanding credit default swaps sold by the Fund. For the year ended October 31, 2014, the Fund entered into credit default swap agreements to gain exposure to the underlying issuer's credit quality characteristics.
Under the terms of a credit default swap, the Fund receives or makes periodic payments based on a specified interest rate on a fixed notional amount. These payments are recorded as a realized gain or loss in the Statement of Operations. Payments received or made as a result of a credit event or termination of the swap are recognized, net of a proportional amount of the upfront payment, as realized gains or losses in the Statement of Operations.
A summary of the open credit default swap contracts as of October 31, 2014 is included in a table following the Fund's Investment Portfolio. For the year ended October 31, 2014, the investment in credit default swap contracts sold had a total notional value of $640,000.
Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). For the year ended October 31, 2014, the Fund entered into interest rate futures to gain exposure to different parts of the yield curve while managing overall duration. The Fund also entered into interest rate futures contracts for non-hedging purposes to seek to enhance potential gains.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary cash or securities ("initial margin") in an amount equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. Gains or losses are realized when the contract expires or is closed. Since all futures contracts are exchange traded, counterparty risk is minimized as the exchange's clearinghouse acts as the counterparty and guarantees the futures against default.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid market will limit the Fund's ability to close out a futures contract prior to the settlement date and the risk that the futures contract is not well correlated with the security, index or currency to which it relates. Risk of loss may exceed amounts disclosed in the Statement of Assets and Liabilities.
A summary of the open futures contracts as of October 31, 2014, is included in a table following the Fund's Investment Portfolio. For the year ended October 31, 2014, the investment in futures contracts purchased had a total notional value generally indicative of a range from approximately $15,214,000 to $134,792,000, and the investment in futures contracts sold had a total notional value generally indicative of a range from approximately $37,496,000 to $127,031,000.
Options. An option contract is a contract in which the writer (seller) of the option grants the buyer of the option, upon payment of a premium, the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. The Fund may write or purchase interest rate swaption agreements which are options to enter into a pre-defined swap agreement. The interest rate swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer upon exercise. Certain options, including options on indices and interest rate options, will require cash settlement by the Fund if exercised. For the year ended October 31, 2014, the Fund entered into options on interest rate swaps in order to hedge against potential adverse interest rate movements of portfolio assets.
If the Fund writes a covered call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Fund writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. The Fund's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the Fund's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities hedged.
A summary of the open purchased option contracts as of October 31, 2014 is included in the Fund's Investment Portfolio. A summary of open written option contracts is included in the table following the Fund's Investment Portfolio. For the year ended October 31, 2014, the investment in written option contracts had a total value generally indicative of a range from approximately $742,000 to $1,697,000, and purchased option contracts had a total value generally indicative of a range from approximately $117,000 to $461,000 .
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. For the year ended October 31, 2014, the Fund entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings, to facilitate transactions in foreign currency denominated securities and to enhance total returns.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. On the settlement date of the forward currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was closed. Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. The maximum counterparty credit risk to the Fund is measured by the unrealized gain on appreciated contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
A summary of the open forward currency contracts as of October 31, 2014, is included in a table following the Fund's Investment Portfolio. For the year ended October 31, 2014, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $58,799,000 to $82,709,000, and the investment in forward currency contracts long vs. U.S. dollars had a total contract value generally indicative of a range from approximately $9,920,000 to $74,740,000. The investment in forward currency contracts long vs. other foreign currencies sold had a total contract value generally indicative of a range from approximately $6,086,000 to $110,561,000.
The following tables summarize the value of the Fund's derivative instruments held as of October 31, 2014 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
|
Asset Derivatives
|
Purchased Options
|
Forward Contracts
|
Swap Contracts
|
Futures Contracts
|
Total
|
|||||||||||||||
|
Interest Rate Contracts (a) (b)
|
$ | 117,039 | $ | — | $ | 804,420 | $ | 1,138,992 | $ | 2,060,451 | ||||||||||
|
Credit Contracts (a)
|
— | — | 52,091 | — | 52,091 | |||||||||||||||
|
Foreign Exchange Contracts (c)
|
— | 608,361 | — | — | 608,361 | |||||||||||||||
| $ | 117,039 | $ | 608,361 | $ | 856,511 | $ | 1,138,992 | $ | 2,720,903 | |||||||||||
|
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts:
(a) Investments in securities, at value (includes purchased options) and unrealized appreciation on bilateral swap contracts
(b) Includes cumulative appreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities.
(c) Unrealized appreciation on forward foreign currency exchange contracts
|
|
Liability Derivatives
|
Written Options
|
Forward Contracts
|
Swap Contracts
|
Futures Contracts
|
Total
|
|||||||||||||||
|
Interest Rate Contracts (a) (b)
|
$ | (1,697,248 | ) | $ | — | $ | (2,769,692 | ) | $ | (976,147 | ) | $ | (5,443,087 | ) | ||||||
|
Foreign Exchange Contracts (c)
|
— | (859,799 | ) | — | — | (859,799 | ) | |||||||||||||
| $ | (1,697,248 | ) | $ | (859,799 | ) | $ | (2,769,692 | ) | $ | (976,147 | ) | $ | (6,302,886 | ) | ||||||
|
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts:
(a) Options written, at value
(b) Includes cumulative depreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities.
(c) Unrealized depreciation on forward foreign currency exchange contracts
|
||||||||||||||||||||
Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the year ended October 31, 2014 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
|
Realized Gain (Loss)
|
Written Options
|
Forward Contracts
|
Swap Contracts
|
Futures Contracts
|
Total
|
|||||||||||||||
|
Interest Rate Contracts (a)
|
$ | 972,290 | $ | — | $ | (142,376 | ) | $ | (1,671,075 | ) | $ | (841,161 | ) | |||||||
|
Credit Contracts (a)
|
— | — | 28,889 | — | 28,889 | |||||||||||||||
|
Foreign Exchange Contracts (b)
|
— | 4,459,563 | — | — | 4,459,563 | |||||||||||||||
| $ | 972,290 | $ | 4,459,563 | $ | (113,487 | ) | $ | (1,671,075 | ) | $ | 3,647,291 | |||||||||
|
Each of the above derivatives is located in the following Statement of Operations accounts:
(a) Net realized gain (loss) from written options, swap contracts and futures, respectively
(b) Net realized gain (loss) from foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)
|
||||||||||||||||||||
|
Change in Net Unrealized Appreciation (Depreciation)
|
||||||||||||||||||||||||
|
Purchased Options
|
Written Options
|
Forward Contracts
|
Swap Contracts
|
Futures Contracts
|
Total
|
|||||||||||||||||||
|
Interest Rate Contracts (a)
|
$ | (343,921 | ) | $ | (381,530 | ) | $ | — | $ | (1,808,540 | ) | $ | 2,357,610 | $ | (176,381 | ) | ||||||||
|
Credit Contracts (a)
|
— | — | — | (7,392 | ) | — | (7,392 | ) | ||||||||||||||||
|
Foreign Exchange Contracts (b)
|
— | — | (797,159 | ) | — | — | (797,159 | ) | ||||||||||||||||
| $ | (343,921 | ) | $ | (381,530 | ) | $ | (797,159 | ) | $ | (1,815,932 | ) | $ | 2,357,610 | $ | (980,932 | ) | ||||||||
|
Each of the above derivatives is located in the following Statement of Operations accounts:
(a) Change in net unrealized appreciation (depreciation) on investments (includes purchased options), written options, swaps contracts and futures, respectively
(b) Change in net unrealized appreciation (depreciation) on foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)
|
||||||||||||||||||||||||
As of October 31, 2014, the Fund has transactions subject to enforceable master netting agreements. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by counterparty, including any collateral exposure, is included in the following tables:
|
Counterparty
|
Gross Amounts of Assets Presented in the Statement of Assets and Liabilities
|
Financial Instruments and Derivatives Available for Offset
|
Cash Collateral Received
|
Non-Cash Collateral Received
|
Net Amount of Derivative Assets
|
|||||||||||||||
|
Australia & New Zealand Banking Group Ltd.
|
$ | 171,657 | $ | (4,439 | ) | $ | — | $ | — | $ | 167,218 | |||||||||
|
Bank of America
|
9,511 | — | — | — | 9,511 | |||||||||||||||
|
Barclays Bank PLC
|
139,194 | (139,194 | ) | — | — | — | ||||||||||||||
|
BNP Paribas
|
27,136 | (27,136 | ) | — | — | — | ||||||||||||||
|
Citigroup, Inc.
|
3,302 | (3,302 | ) | — | — | — | ||||||||||||||
|
Credit Suisse
|
11,769 | — | — | — | 11,769 | |||||||||||||||
|
Morgan Stanley
|
86,462 | (86,462 | ) | — | — | — | ||||||||||||||
|
Nomura International PLC
|
186,685 | (186,685 | ) | — | — | — | ||||||||||||||
|
Societe Generale
|
100,734 | (46,579 | ) | — | — | 54,155 | ||||||||||||||
|
UBS AG
|
110,687 | (69,400 | ) | — | — | 41,287 | ||||||||||||||
| $ | 847,137 | $ | (563,197 | ) | $ | — | $ | — | $ | 283,940 | ||||||||||
|
Counterparty
|
Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities
|
Financial Instruments and Derivatives Available for Offset
|
Cash Collateral Pledged
|
Non-Cash Collateral Pledged (a)
|
Net Amount of Derivative Liabilities
|
|||||||||||||||
|
Australia & New Zealand Banking Group Ltd.
|
$ | 4,439 | $ | (4,439 | ) | $ | — | $ | — | $ | — | |||||||||
|
Barclays Bank PLC
|
330,859 | (139,194 | ) | — | — | 191,665 | ||||||||||||||
|
BNP Paribas
|
329,854 | (27,136 | ) | — | (212,100 | ) | 90,618 | |||||||||||||
|
Citigroup, Inc.
|
118,348 | (3,302 | ) | — | — | 115,046 | ||||||||||||||
|
Morgan Stanley
|
1,101,495 | (86,462 | ) | — | (848,400 | ) | 166,633 | |||||||||||||
|
Nomura International PLC
|
556,073 | (186,685 | ) | — | (369,388 | ) | — | |||||||||||||
|
Societe Generale
|
46,579 | (46,579 | ) | — | — | — | ||||||||||||||
|
UBS AG
|
69,400 | (69,400 | ) | — | — | — | ||||||||||||||
| $ | 2,557,047 | $ | (563,197 | ) | $ | — | $ | (1,429,888 | ) | $ | 563,962 | |||||||||
(a) The actual collateral pledged may be more than the amount shown.
C. Purchases and Sales of Securities
During the year ended October 31, 2014, purchases and sales of investment securities (excluding short-term investments and U.S. Treasury securities) aggregated $934,913,247 and $1,031,522,898, respectively. Purchases and sales of U.S. Treasury securities aggregated $58,555,849 and $44,236,496, respectively.
For the year ended October 31, 2014, transactions for written options on interest rate swap contracts were as follows:
|
Contract Amount
|
Premiums
|
|||||||
|
Outstanding, beginning of period
|
136,800,000 | $ | 1,649,190 | |||||
|
Options written
|
77,000,000 | 1,022,778 | ||||||
|
Options closed
|
(83,400,000 | ) | (995,740 | ) | ||||
|
Options expired
|
(8,800,000 | ) | (64,900 | ) | ||||
|
Outstanding, end of period
|
121,600,000 | $ | 1,611,328 | |||||
D. Related Parties
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
Under the Management Agreement, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly at the following rates:
|
First $1.5 billion of the Fund's average daily net assets
|
.370 | % | ||
|
Next $500 million of such net assets
|
.345 | % | ||
|
Next $1.5 billion of such net assets
|
.310 | % | ||
|
Next $2.0 billion of such net assets
|
.300 | % | ||
|
Next $2.0 billion of such net assets
|
.290 | % | ||
|
Next $2.5 billion of such net assets
|
.280 | % | ||
|
Next $2.5 billion of such net assets
|
.270 | % | ||
|
Over $12.5 billion of such net assets
|
.260 | % |
Accordingly, for the year ended October 31, 2014, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.37% of the Fund's average daily net assets.
For the period from November 1, 2013 through September 30, 2014 and for the period from August 25, 2014 (commencement of operations) through September 30, 2014 for Class R6 shares the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
|
Class A
|
1.25%
|
|
Class B
|
2.00%
|
|
Class C
|
2.00%
|
|
Class R6
|
1.03%
|
|
Class S
|
1.00%
|
|
Institutional Class
|
1.00%
|
Effective October 1, 2014 through September 30, 2015, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
|
Class A
|
1.28%
|
|
Class B
|
2.03%
|
|
Class C
|
2.03%
|
|
Class R6
|
1.03%
|
|
Class S
|
1.03%
|
|
Institutional Class
|
1.03%
|
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the year ended October 31, 2014, the Administration Fee was $1,050,224, of which $86,908 is unpaid.
Service Provider Fees. DeAWM Service Company ("DSC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement among DSC and DST Systems, Inc. ("DST"), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended October 31, 2014, the amounts charged to the Fund by DSC were as follows:
|
Services to Shareholders
|
Total Aggregated
|
Unpaid at October 31, 2014
|
||||||
|
Class A
|
$ | 606,933 | $ | 149,074 | ||||
|
Class B
|
9,375 | 2,158 | ||||||
|
Class C
|
22,096 | 5,714 | ||||||
|
Class S
|
312,674 | 76,476 | ||||||
|
Institutional Class
|
1,177 | 310 | ||||||
| $ | 952,255 | $ | 233,732 | |||||
Distribution and Service Fees. Under the Fund's Class B and C 12b-1 Plans, DeAWM Distributors, Inc. ("DDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of each of Class B and C shares. In accordance with the Fund's Underwriting and Distribution Services Agreement, DDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the year ended October 31, 2014, the Distribution Fee was as follows:
|
Distribution Fee
|
Total Aggregated
|
Unpaid at October 31, 2014
|
||||||
|
Class B
|
$ | 18,906 | $ | 1,258 | ||||
|
Class C
|
185,930 | 17,019 | ||||||
| $ | 204,836 | $ | 18,277 | |||||
In addition, DDI provides information and administrative services for a fee ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the year ended October 31, 2014, the Service Fee was as follows:
|
Service Fee
|
Total Aggregated
|
Unpaid at October 31, 2014
|
Annual
Rate
|
|||||||||
|
Class A
|
$ | 1,834,531 | $ | 312,265 | .24 | % | ||||||
|
Class B
|
6,136 | 882 | .24 | % | ||||||||
|
Class C
|
60,110 | 11,346 | .24 | % | ||||||||
| $ | 1,900,777 | $ | 324,493 | |||||||||
Underwriting and Contingent Deferred Sales Charge. DDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the year ended October 31, 2014 aggregated $35,504.
In addition, DDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the year ended October 31, 2014, the CDSC for Class B and C shares aggregated $1,453 and $645, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions for Class A shares. For the year ended October 31, 2014, DDI received $2,187 for Class A shares.
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory, filing services to the Fund. For the year ended October 31, 2014, the amount charged to the Fund by DIMA included in the Statement of Operations under "Reports to shareholders" aggregated $32,146, of which $6,580 is unpaid.
Trustees' Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and Vice Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in Central Cash Management Fund and Deutsche Variable NAV Money Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund seeks to provide a high level of current income consistent with liquidity and the preservation of capital. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the Investment Company Act of 1940, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. Central Cash Management Fund seeks to maintain a stable net asset value, and Deutsche Variable NAV Money Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. Central Cash Management Fund does not pay the Advisor an investment management fee. To the extent that Deutsche Variable NAV Money Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund's assets invested in Deutsche Variable NAV Money Fund.
Security Lending Fees. Deutsche Bank AG serves as lending agent for the Fund. For the year ended October 31, 2014, the Fund incurred lending agent fees to Deutsche Bank AG for the amount of $35,951.
E. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $400 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at October 31, 2014.
F. Share Transactions
The following table summarizes share and dollar activity in the Fund:
|
Year Ended October 31, 2014
|
Year Ended October 31, 2013
|
|||||||||||||||
|
Shares
|
Dollars
|
Shares
|
Dollars
|
|||||||||||||
|
Shares sold
|
||||||||||||||||
|
Class A
|
3,298,655 | $ | 34,490,105 | 3,731,870 | $ | 36,794,746 | ||||||||||
|
Class B
|
10,428 | 107,897 | 13,962 | 135,940 | ||||||||||||
|
Class C
|
848,483 | 8,814,026 | 529,755 | 5,241,086 | ||||||||||||
|
Class R6*
|
934 | 10,001 | — | — | ||||||||||||
|
Class S
|
2,141,067 | 22,393,773 | 1,451,527 | 14,329,764 | ||||||||||||
|
Institutional Class
|
89,441 | 934,746 | 82,108 | 810,352 | ||||||||||||
| $ | 66,750,548 | $ | 57,311,888 | |||||||||||||
|
Shares issued to shareholders in reinvestment of distributions
|
||||||||||||||||
|
Class A
|
3,459,461 | $ | 35,398,861 | 4,206,787 | $ | 40,209,412 | ||||||||||
|
Class B
|
9,752 | 99,352 | 20,051 | 191,099 | ||||||||||||
|
Class C
|
88,969 | 910,438 | 84,202 | 803,778 | ||||||||||||
|
Class R6*
|
10 | 102 | — | — | ||||||||||||
|
Class S
|
1,115,603 | 11,421,461 | 1,336,469 | 12,781,072 | ||||||||||||
|
Institutional Class
|
13,449 | 138,006 | 12,793 | 122,440 | ||||||||||||
| $ | 47,968,220 | $ | 54,107,801 | |||||||||||||
|
Shares redeemed
|
||||||||||||||||
|
Class A
|
(8,963,514 | ) | $ | (93,368,859 | ) | (11,508,919 | ) | $ | (113,177,626 | ) | ||||||
|
Class B
|
(130,088 | ) | (1,354,945 | ) | (212,395 | ) | (2,095,021 | ) | ||||||||
|
Class C
|
(340,018 | ) | (3,531,018 | ) | (400,008 | ) | (3,929,282 | ) | ||||||||
|
Class S
|
(3,020,761 | ) | (31,423,515 | ) | (3,730,347 | ) | (36,621,616 | ) | ||||||||
|
Institutional Class
|
(27,634 | ) | (288,726 | ) | (40,668 | ) | (396,830 | ) | ||||||||
| $ | (129,967,063 | ) | $ | (156,220,375 | ) | |||||||||||
|
Net increase (decrease)
|
||||||||||||||||
|
Class A
|
(2,205,398 | ) | $ | (23,479,893 | ) | (3,570,262 | ) | $ | (36,173,468 | ) | ||||||
|
Class B
|
(109,908 | ) | (1,147,696 | ) | (178,382 | ) | (1,767,982 | ) | ||||||||
|
Class C
|
597,434 | 6,193,446 | 213,949 | 2,115,582 | ||||||||||||
|
Class R6*
|
944 | 10,103 | — | — | ||||||||||||
|
Class S
|
235,909 | 2,391,719 | (942,351 | ) | (9,510,780 | ) | ||||||||||
|
Institutional Class
|
75,256 | 784,026 | 54,233 | 535,962 | ||||||||||||
| $ | (15,248,295 | ) | $ | (44,800,686 | ) | |||||||||||
* For the period from August 25, 2014 (commencement of operations of Class R6) to October 31, 2014.
To the Board of Trustees of Deutsche Market Trust and the Shareholders of Deutsche Global Income Builder Fund:
We have audited the accompanying statement of assets and liabilities of Deutsche Global Income Builder Fund (formerly DWS Global Income Builder Fund) (a series of Deutsche Market Trust (formerly DWS Market Trust)) ("the Fund"), including the schedule of investments, as of October 31, 2014, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits 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 and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Deutsche Global Income Builder Fund at October 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
 |
||
|
Boston, Massachusetts
December 22, 2014
|
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2014 to October 31, 2014).
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. Subject to certain exceptions, an account maintenance fee of $20.00 assessed once per calendar year for Classes A, B, C and S shares may apply for accounts with balances less than $10,000. This fee is not included in these tables. If it was, the estimate of expenses paid for Classes A, B, C and S shares during the period would be higher, and account value during the period would be lower, by this amount.
|
Expenses and Value of a $1,000 Investment for the six months ended October 31, 2014 (Unaudited)
|
||||||||||||||||||||||||
|
Actual Fund Return
|
Class A
|
Class B
|
Class C
|
Class R6*
|
Class S
|
Institutional Class
|
||||||||||||||||||
|
Beginning Account Value 5/1/14
|
$ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||
|
Ending Account Value 10/31/14
|
$ | 998.10 | $ | 993.00 | $ | 994.10 | $ | 977.40 | $ | 999.10 | $ | 999.40 | ||||||||||||
|
Expenses Paid per $1,000**
|
$ | 4.53 | $ | 9.59 | $ | 8.54 | $ | 1.03 | $ | 3.48 | $ | 3.28 | ||||||||||||
|
Hypothetical 5% Fund Return
|
Class A
|
Class B
|
Class C
|
Class R6
|
Class S
|
Institutional Class
|
||||||||||||||||||
|
Beginning Account Value 5/1/14
|
$ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||||
|
Ending Account Value 10/31/14
|
$ | 1,020.67 | $ | 1,015.58 | $ | 1,016.64 | $ | 1,022.38 | $ | 1,021.73 | $ | 1,021.93 | ||||||||||||
|
Expenses Paid per $1,000**
|
$ | 4.58 | $ | 9.70 | $ | 8.64 | $ | 2.85 | $ | 3.52 | $ | 3.31 | ||||||||||||
* For the period from August 25, 2014 (commencement of operations of Class R6) to October 31, 2014.
** Expenses (hypothetical expenses if Class R6 had been in existence from May 1, 2014) are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365.
|
Annualized Expense Ratios
|
Class A
|
Class B
|
Class C
|
Class R6
|
Class S
|
Institutional Class
|
|
Deutsche Global Income Builder Fund
|
.90%
|
1.91%
|
1.70%
|
.56%
|
.69%
|
.65%
|
For more information, please refer to the Fund's prospectus.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to http://apps.finra.org/fundanalyzer/1/fa.aspx.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $70,281,000 as capital gain dividends for its year ended October 31, 2014.
The Fund paid distributions of $0.15 per share from net long-term capital gains during its year ended October 31, 2014.
For corporate shareholders, 18% of the income dividends paid during the Fund's fiscal year ended October 31, 2014, qualified for the dividends received deduction.
For federal income tax purposes, the Fund designates approximately $24,635,000, or the maximum amount allowable under tax law, as qualified dividend income.
A total of 1% of the dividends distributed during the fiscal year was derived from interest on U.S. government securities, which is generally exempt from state income tax.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call (800) 728-3337.
The Board of Trustees approved the renewal of Deutsche Global Income Builder Fund’s investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2014.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
— In September 2014, all of the Fund’s Trustees were independent of DIMA and its affiliates.
— The Trustees met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board’s Contract Committee, in coordination with the Board’s Fixed Income and Asset Allocation Oversight Committee, reviewed comprehensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability compiled by a fee consultant retained by the Fund’s Independent Trustees (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.
— The Independent Trustees regularly meet privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations.
— In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund’s Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements.
— Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee’s findings and recommendations.
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund’s shareholders. DIMA is part of Deutsche Bank AG ("DB"), a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are 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.
As part of the contract review process, the Board carefully considered the fees and expenses of each Deutsche fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
In 2012, DB combined its Asset Management (of which DIMA was a part) and Wealth Management divisions into a new Asset and Wealth Management ("AWM") division. DB has advised the Independent Trustees that the U.S. asset management business is a critical and integral part of DB, and that DB will continue to invest in AWM a significant portion of the savings it has realized by combining its Asset and Wealth Management divisions, including ongoing enhancements to AWM’s investment capabilities. DB also has confirmed its commitment to maintaining strong legal and compliance groups within the AWM division.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to a peer universe), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2013, the Fund’s performance (Class A shares) was in the 2nd quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one-, three- and five-year periods ended December 31, 2013.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2013). The Board noted that the Fund’s Class A shares total (net) operating expenses (excluding 12b-1 fees) were expected to be lower than the median (1st quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2013, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class’s total (net) operating expenses to the applicable Lipper Universe Expenses. 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 noted that the expense limitations agreed to by DIMA helped to ensure that the Fund’s total (net) operating expenses would remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to a comparable fund and considered differences between the Fund and the comparable fund. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts and funds offered primarily to European investors ("Deutsche Europe funds") managed by DIMA and its affiliates. The Board noted that DIMA indicated that it does not manage any institutional accounts or Deutsche Europe funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs and pre-tax profits realized by DIMA from advising the Deutsche U.S. mutual funds ("Deutsche Funds"), as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities, along with the incidental public relations benefits to DIMA related to Deutsche Funds advertising and cross-selling opportunities among DIMA products and services. The Board concluded that management fees were reasonable in light of these fallout benefits.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of both DIMA’s chief compliance officer and the Fund’s chief compliance officer; (ii) the large number of DIMA compliance personnel; and (iii) the substantial commitment of resources by DIMA and its affiliates to compliance matters.
Based on all of the information considered and the conclusions reached, the Board unanimously determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and 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.
The following table presents certain information regarding the Board Members and Officers of the fund. 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 Kenneth C. Froewiss, Chairman, Deutsche Mutual Funds, P.O. Box 390601, Cambridge, MA 02139. Except as otherwise noted below, 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 Served1
|
Business Experience and Directorships During the Past Five Years
|
Number of Funds in Deutsche Fund Complex Overseen
|
Other Directorships Held by Board Member
|
|
|
Kenneth C. Froewiss (1945)
Chairperson since 2013, and Board Member since 2001
|
Adjunct Professor of Finance, NYU Stern School of Business (September 2009–present; Clinical Professor from 1997–September 2009); Member, Finance Committee, Association for Asian Studies (2002–present); Director, Mitsui Sumitomo Insurance Group (US) (2004–present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996)
|
105
|
—
|
|
|
William McClayton (1944)
Vice Chairperson since 2013, and Board Member since 2004
|
Private equity investor (since October 2009); previously, Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Directorship: Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Trustee, Ravinia Festival
|
105
|
—
|
|
|
John W. Ballantine (1946)
Board Member since 1999
|
Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); former Directorships: Director and former Chairman of the Board, Healthways, Inc.2 (provider of disease and care management services) (2003–2014); Stockwell Capital Investments PLC (private equity); First Oak Brook Bancshares, Inc. and Oak Brook Bank; Prisma Energy International
|
105
|
Portland General Electric2 (utility company) (2003– present)
|
|
|
Henry P. Becton, Jr. (1943)
Board Member since 1990
|
Vice Chair and former President, WGBH Educational Foundation. Directorships: Public Radio International; Public Radio Exchange (PRX); North Bennett Street School (Boston); former Directorships: Belo Corporation2 (media company); The PBS Foundation; Association of Public Television Stations; Boston Museum of Science; American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service; Connecticut College
|
105
|
Lead Director, Becton Dickinson and Company2 (medical technology company)
|
|
|
Dawn-Marie Driscoll (1946)
Board Member since 1987
|
Emeritus Executive Fellow, Center for Business Ethics, Bentley University; formerly: President, Driscoll Associates (consulting firm); Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene's (retail) (1978–1988). Directorships: Director of ICI Mutual Insurance Company (since 2007); Advisory Board, Center for Business Ethics, Bentley University; Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); former Directorships: Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees)
|
105
|
—
|
|
|
Keith R. Fox, CFA (1954)
Board Member since 1996
|
Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); The Kennel Shop (retailer); former Chairman, National Association of Small Business Investment Companies; former Directorships: BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) (2011–2012)
|
105
|
—
|
|
|
Paul K. Freeman (1950)
Board Member since 1993
|
Consultant, World Bank/Inter-American Development Bank; Chair, Governing Council of the Independent Directors Council (Chairman of Education Committee); formerly: Project Leader, International Institute for Applied Systems Analysis (1998–2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986–1998); Directorships: Denver Zoo Foundation (December 2012–present); former Directorships: Prisma Energy International
|
105
|
—
|
|
|
Richard J. Herring (1946)
Board Member since 1990
|
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; Co-Chair, U.S. Shadow Financial Regulatory Committee; Executive Director, Financial Economists Roundtable; formerly: Vice Dean and Director, Wharton Undergraduate Division (July 1995–June 2000); Director, Lauder Institute of International Management Studies (July 2000–June 2006)
|
105
|
Director, Aberdeen Singapore and Japan Funds (since 2007); Independent Director of Barclays Bank Delaware (since September 2010)
|
|
|
Rebecca W. Rimel (1951)
Board Member since 1995
|
President and Chief Executive Officer, The Pew Charitable Trusts (charitable organization) (1994 to present); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012)
|
105
|
Director, Becton Dickinson and Company2 (medical technology company) (2012– present); Director, BioTelemetry Inc.2 (health care) (2009– present)
|
|
|
William N. Searcy, Jr. (1946)
Board Member since 1993
|
Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012)
|
105
|
—
|
|
|
Jean Gleason Stromberg (1943)
Board Member since 1997
|
Retired. Formerly, Consultant (1997–2001); Director, Financial Markets U.S. Government Accountability Office (1996–1997); Partner, Norton Rose Fulbright, L.L.P. (law firm) (1978–1996). Directorships: The William and Flora Hewlett Foundation (charitable organization); former Directorships: Service Source, Inc. (nonprofit), Mutual Fund Directors Forum (2002–2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987–1990 and 1994–1996)
|
105
|
—
|
|
|
Robert H. Wadsworth
(1940)
Board Member since 1999
|
President, Robert H. Wadsworth & Associates, Inc. (consulting firm) (1983 to present); Director, The Phoenix Boys Choir Association
|
105
|
—
|
|
|
Officers4
|
||
|
Name, Year of Birth, Position with the Fund and Length of Time Served5
|
Business Experience and Directorships During the Past Five Years
|
|
|
Brian E. Binder8 (1972)
President and Chief Executive Officer, 2013–present
|
Managing Director3 and Head of Fund Administration, Deutsche Asset & Wealth Management (2013–present); formerly: Head of Business Management and Consulting at Invesco, Ltd. (2010–2012); Chief Administrative Officer, Van Kampen Funds Inc. (2008–2010); and Chief Administrative Officer, Morgan Stanley Investment Management Americas Distribution (2003–2008)
|
|
|
John Millette7 (1962)
Vice President and Secretary, 1999–present
|
Director,3 Deutsche Asset & Wealth Management
|
|
|
Melinda Morrow6 (1970)
Vice President,
2012–present
|
Director,3 Deutsche Asset & Wealth Management
|
|
|
Paul H. Schubert6 (1963)
Chief Financial Officer, 2004–present
Treasurer, 2005–present
|
Managing Director,3 Deutsche Asset & Wealth 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)
|
|
|
Caroline Pearson7 (1962)
Chief Legal Officer,
2010–present
|
Managing Director,3 Deutsche Asset & Wealth Management; formerly: Assistant Secretary for DWS family of funds (1997–2010)
|
|
|
Robert Kloby6 (1962)
Chief Compliance Officer, 2006–present
|
Managing Director,3 Deutsche Asset & Wealth Management
|
|
|
Wayne Salit6 (1967)
Anti-Money Laundering Compliance Officer, 2014–present
|
Director,3 Deutsche Asset & Wealth Management; formerly: Managing Director, AML Compliance Officer at BNY Mellon (2011–2014); and Director, AML Compliance Officer at Deutsche Bank (2004–2011)
|
|
|
Hepsen Uzcan7 (1974)
Assistant Secretary, 2013–present
|
Director,3 Deutsche Asset & Wealth Management
|
|
|
Paul Antosca7 (1957)
Assistant Treasurer, 2007–present
|
Director,3 Deutsche Asset & Wealth Management
|
|
|
Jack Clark7 (1967)
Assistant Treasurer, 2007–present
|
Director,3 Deutsche Asset & Wealth Management
|
|
|
Diane Kenneally7 (1966)
Assistant Treasurer, 2007–present
|
Director,3 Deutsche Asset & Wealth Management
|
|
1 The length of time served represents the year in which the Board Member joined the board of one or more Deutsche funds currently overseen by the Board.
2 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
3 Executive title, not a board directorship.
4 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the fund.
5 The length of time served represents the year in which the officer was first elected in such capacity for one or more Deutsche funds.
6 Address: 60 Wall Street, New York, NY 10005.
7 Address: One Beacon Street, Boston, MA 02108.
8 Address: 222 South Riverside Plaza, Chicago, IL 60606.
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: (800) 728-3337.
|
For More Information
|
The automated telephone system allows you to access personalized account information and obtain information on other Deutsche funds using either your voice or your telephone keypad. Certain account types within Classes A, B, C and S also have the ability to purchase, exchange or redeem shares using this system.
For more information, contact your financial advisor. You may also access our automated telephone system or speak with a Shareholder Service representative by calling:
(800) 728-3337
|
|
|
Web Site
|
deutschefunds.com
View your account transactions and balances, trade shares, monitor your asset allocation, subscribe to fund and account updates by e-mail, and change your address, 24 hours a day.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about Deutsche funds, retirement planning information, and more.
|
|
|
Written Correspondence
|
Deutsche Asset & Wealth Management
PO Box 219151
Kansas City, MO 64121-9151
|
|
|
Proxy Voting
|
The fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our Web site — deutschefunds.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
|
|
|
Portfolio Holdings
|
Following the fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form will be available on the SEC's Web site at sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. The fund's portfolio holdings are also posted on deutschefunds.com from time to time. Please see the fund's current prospectus for more information.
|
|
|
Principal Underwriter
|
If you have questions, comments or complaints, contact:
DeAWM Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148
|
|
|
Investment Management
|
Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset & Wealth Management, is the investment advisor for the fund. DIMA and its predecessors have more than 80 years of experience managing mutual funds and DIMA provides a full range of investment advisory services to both institutional and retail clients.
DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution engaged in a wide variety of financial services, including investment management, retail, private and commercial banking, investment banking and insurance.
Deutsche Asset & Wealth Management is the retail brand name in the U.S. for the wealth management and asset management activities of Deutsche Bank AG and DIMA. Deutsche Asset & Wealth Management is committed to delivering the investing expertise, insight and resources of this global investment platform to American investors.
|
|
|
Class A
|
Class B
|
Class C
|
Class S
|
Institutional Class
|
||
|
Nasdaq Symbol
|
KTRAX
|
KTRBX
|
KTRCX
|
KTRSX
|
KTRIX
|
|
|
CUSIP Number
|
25159K 820
|
25159K 812
|
25159K 796
|
25159K 788
|
25159K 770
|
|
|
Fund Number
|
002
|
202
|
302
|
2033
|
1402
|
|
For shareholders of Class R6
|
||
|
Automated Information Line
|
DeAWM Flex Plan Access (800) 728-3337
24-hour access to your retirement plan account.
|
|
|
Web Site
|
deutschefunds.com
Click "Retirement Plans" to reallocate assets, process transactions, review your funds, and subscribe to fund updates by e-mail through our secure online account access.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about Deutsche funds, retirement planning information, and more.
|
|
|
For More Information
|
(800) 728-3337
To speak with a service representative.
|
|
|
Written Correspondence
|
DeAWM Service Company
222 South Riverside Plaza
Chicago, IL 60606-5806
|
|
|
Class R6
|
||
|
Nasdaq Symbol
|
KTRZX
|
|
|
CUSIP Number
|
25159K 721
|
|
|
Fund Number
|
1633
|
Notes
Notes
|
ITEM 2.
|
CODE OF ETHICS
|
|
As of the end of the period covered by this report, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
|
|
|
ITEM 3.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
|
The fund’s 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 fund’s Board of Trustees has determined that there are several "audit committee financial experts" (as such term has been defined by the Regulations) serving on the fund’s audit committee including Mr. Paul K. Freeman, the chair of the fund’s audit committee. An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933 and the designation or identification of a person as an “audit committee financial expert” does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.
|
|
|
ITEM 4.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
DEUTSCHE GLOBAL INCOME BUILDER FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that Ernst & Young LLP (“EY”), 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 EY provided to the Fund.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
|
Fiscal Year Ended October 31,
|
Audit Fees Billed to Fund
|
Audit-Related Fees Billed to Fund
|
Tax Fees Billed to Fund
|
All Other Fees Billed to Fund
|
||||||||||||
|
2014
|
$ | 96,741 | $ | 0 | $ | 10,053 | $ | 0 | ||||||||
|
2013
|
$ | 96,741 | $ | 0 | $ | 10,053 | $ | 0 | ||||||||
The above “Tax Fees” were billed for professional services rendered for tax return preparation.
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 EY to Deutsche Investment Management Americas, Inc. (“DIMA” or the “Adviser”), and any entity controlling, controlled by or under common control with DIMA (“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 Ended October 31,
|
Audit-Related Fees Billed to Adviser and Affiliated Fund Service Providers
|
Tax Fees Billed to Adviser and Affiliated Fund Service Providers
|
All Other Fees Billed to Adviser and Affiliated Fund Service Providers
|
|||||||||
|
2014
|
$ | 0 | $ | 291,072 | $ | 7,017,733 | ||||||
|
2013
|
$ | 0 | $ | 362,466 | $ | 0 | ||||||
The above “Tax Fees” were billed in connection with tax compliance services and agreed upon procedures. All other engagement fees were billed for services in connection with agreed upon procedures for DIMA and other related entities.
Non-Audit Services
The following table shows the amount of fees that EY billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that EY 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 EY about any non-audit services that EY rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating EY’s independence.
|
Fiscal Year Ended October 31,
|
Total Non-Audit Fees Billed to Fund
(A)
|
Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund)
(B)
|
Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements)
(C)
|
Total of (A), (B) and (C)
|
||||||||||||
|
2014
|
$ | 10,053 | $ | 7,308,805 | $ | 411,123 | $ | 7,729,981 | ||||||||
|
2013
|
$ | 10,053 | $ | 362,466 | $ | 557,067 | $ | 929,586 | ||||||||
All other engagement fees were billed for services in connection with agreed upon procedures and tax compliance for DIMA and other related entities.
Audit Committee Pre-Approval Policies and Procedures. Generally, each Fund’s Audit Committee must pre approve (i) all services to be performed for a Fund by a Fund’s Independent Registered Public Accounting Firm and (ii) all non-audit services to be performed by a Fund’s Independent Registered Public Accounting Firm for the DIMA Entities with respect to operations and financial reporting of the Fund, except that the Chairperson or Vice Chairperson of each Fund’s Audit Committee may grant the pre-approval for non-audit services described in items (i) and (ii) above for non-prohibited services for engagements of less than $100,000. All such delegated pre approvals shall be presented to each Fund’s Audit Committee no later than the next Audit Committee meeting.
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
According to the registrant’s principal Independent Registered Public Accounting Firm, substantially all of the principal Independent Registered Public Accounting Firm's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal Independent Registered Public Accounting Firm.
***
In connection with the audit of the 2013 and 2014 financial statements, the Fund entered into an engagement letter with EY. The terms of the engagement letter required by EY, and agreed to by the Audit Committee, include provisions in which the parties consent to the sole jurisdiction of federal courts in New York, Boston or the Northern District of Illinois, as well as a waiver of right to a trial by jury and an exclusion of punitive damages.
|
ITEM 5.
|
AUDIT COMMITTEE OF LISTED REGISTRANTS
|
|
|
Not applicable
|
||
|
ITEM 6.
|
SCHEDULE OF INVESTMENTS
|
|
|
Not applicable
|
||
|
ITEM 7.
|
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
|
|
|
Not applicable
|
||
|
ITEM 8.
|
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
|
|
|
Not applicable
|
||
|
ITEM 9.
|
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
|
|
|
Not applicable
|
||
|
ITEM 10.
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
|
|
There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board. The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Kenneth C. Froewiss, Independent Chairman, Deutsche Mutual Funds, P.O. Box 390601, Cambridge, MA 02139.
|
||
|
ITEM 11.
|
CONTROLS AND PROCEDURES
|
|
|
(a)
|
The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
|
|
|
(b)
|
There have been no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.
|
|
|
ITEM 12.
|
EXHIBITS
|
|
|
(a)(1)
|
Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.
|
|
|
(a)(2)
|
Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.
|
|
|
(b)
|
Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.
|
|
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:
|
Deutsche Global Income Builder Fund, a series of Deutsche Market Trust
|
|
By:
|
/s/Brian E. Binder
Brian E. Binder
President
|
|
Date:
|
December 30, 2014
|
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.
|
By:
|
/s/Brian E. Binder
Brian E. Binder
President
|
|
Date:
|
December 30, 2014
|
|
By:
|
/s/Paul Schubert
Paul Schubert
Chief Financial Officer and Treasurer
|
|
Date:
|
December 30, 2014
|
