Edgar Filing: DEUTSCHE STRATEGIC INCOME TRUST

sr53115sit.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM N-CSRS

Investment Company Act file number: 811-08382

Deutsche Strategic Income 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)

Date of fiscal year end:	11/30

Date of reporting period:	5/31/2015

ITEM 1.	REPORT TO STOCKHOLDERS

May 31, 2015

Semiannual Report

to Shareholders

Deutsche Strategic Income Trust

Ticker Symbol: KST

Contents

3 Performance Summary

5 Portfolio Management

5 Portfolio Summary

7 Investment Portfolio

33 Statement of Assets and Liabilities

35 Statement of Operations

36 Statement of Cash Flows

38 Statement of Changes in Net Assets

39 Financial Highlights

41 Notes to Financial Statements

55 Dividend Reinvestment and Cash Purchase Plan

58 Additional Information

60 Privacy Statement

The fund's investment objective is to provide high current income.

Closed-end funds, unlike open-end funds, are not continuously offered. There is a one time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the fund's shares is determined by a number of factors, several of which are beyond the control of the fund. Therefore, the fund cannot predict whether its shares will trade at, below or above net asset value.

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. Investments in lower-quality ("junk bonds") and non-rated securities present greater risk of loss than investments in higher-quality securities. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Leverage results in additional risks and can magnify the effect of any gains or losses. Emerging markets tend to be more volatile than the markets of more mature economies, and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. Investing in foreign securities presents certain risks, such as currency fluctuations, political and economic changes, and market risks.

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

Performance Summary May 31, 2015 (Unaudited)

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

Fund specific data and performance are provided for informational purposes only and are not intended for trading purposes.

Average Annual Total Returns as of 5/31/15
Deutsche Strategic Income Trust	6-Month‡	1-Year	5-Year	10-Year
Based on Net Asset Value(a)	2.10%	2.30%	9.90%	9.12%
Based on Market Price(a)	1.58%	–0.78%	8.56%	7.95%
Credit Suisse High Yield Index(b)	2.55%	1.54%	8.86%	7.88%
JP Morgan Emerging Markets Bond Global Diversified Index(c)	0.89%	2.46%	7.51%	7.82%
Blended Index(d)	1.72%	2.01%	8.22%	7.90%
Morningstar Closed-End High Yield Bond Funds Category (Based on Net Asset Value)(e)	2.78%	2.25%	11.04%	8.14%

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

(a) Total return based on net asset value reflects changes in the Fund's net asset value during each period. Total return based on market price reflects changes in market price. Each figure assumes that dividend and capital gain distributions, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund's shares traded during the period. Expenses of the Fund include management fee, interest expense and other fund expenses. Total returns shown take into account these fees and expenses. The expense ratio of the Fund for the six months ended May 31, 2015 was 1.81% (1.38% excluding interest expense).

(b) The Credit Suisse High Yield Index is an unmanaged, unleveraged, trader-priced portfolio constructed to mirror the global high-yield debt market.

(c) The JPMorgan Emerging Markets Bond Global Diversified Index is an unmanaged, unleveraged index that tracks total returns for U.S.-dollar-denominated debt instruments issued by emerging-market sovereign entities, including Brady bonds, loans and Eurobonds, and quasi-sovereign entities. The index limits exposure to any one country.

(d) The Blended Index consists of 50% in the Credit Suisse High Yield Index and 50% in the JPMorgan Emerging Markets Bond Global Diversified Index.

Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

(e) Morningstar's Closed-End High Yield Bond Funds category represents high-yield bond portfolios that concentrate on lower-quality bonds, which are riskier than those of higher-quality companies. These portfolios generally offer higher yields than other types of portfolios, but they are also more vulnerable to economic and credit risk. These portfolios primarily invest in U.S. high-income debt securities where at least 65% or more of bond assets are not rated or are rated by a major agency such as Standard & Poor's or Moody's at the level of BB (considered speculative for taxable bonds) and below. Morningstar figures represent the average of the total returns based on net asset value reported by all of the closed-end funds designated by Morningstar, Inc. as falling into the Closed-End High Yield Bond Funds category. Category returns assume reinvestment of all distributions. It is not possible to invest directly in a Morningstar category.

Net Asset Value and Market Price
	As of 5/31/15		As of 11/30/14
Net Asset Value	$	13.31	$	13.71
Market Price	$	11.60	$	12.01

Prices and net asset value fluctuate and are not guaranteed.

Distribution Information
Six Months as of 5/31/15: Income Dividends	$	.44
Capital Gain Distributions	$	.16
May Income Dividend	$	.0650
Current Annualized Distribution Rate (Based on Net Asset Value) as of 5/31/15†		5.86	%
Current Annualized Distribution Rate (Based on Market Price) as of 5/31/15†		6.72	%

† Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value/market price on May 31, 2015. Distribution rate simply measures the level of dividends and is not a complete measure of performance. Distribution rates are historical, not guaranteed and will fluctuate. Distributions do not include return of capital or other non-income sources.

Portfolio Management

Gary Russell, CFA, Managing Director

Portfolio Manager of the fund. Began managing the fund in 2006.

— 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.

— Head of US High Yield Bonds: New York.

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

Portfolio Summary (Unaudited)

Investment Portfolio as of May 31, 2015 (Unaudited)

		Principal Amount ($)(a)		Value ($)

Corporate Bonds 86.5%
Consumer Discretionary 15.9%
1011778 BC ULC, 144A, 4.625%, 1/15/2022			40,000		40,050
Ally Financial, Inc.:
3.25%, 2/13/2018			265,000		264,337
4.125%, 3/30/2020			90,000		90,000
AMC Entertainment, Inc., 5.875%, 2/15/2022			80,000		83,400
AmeriGas Finance LLC:
6.75%, 5/20/2020			165,000		176,550
7.0%, 5/20/2022			135,000		145,125
APX Group, Inc., 6.375%, 12/1/2019			75,000		74,906
Arcelik AS, 144A, 5.0%, 4/3/2023			220,000		211,383
Asbury Automotive Group, Inc., 6.0%, 12/15/2024			150,000		156,937
Ashtead Capital, Inc., 144A, 6.5%, 7/15/2022			120,000		128,850
Ashton Woods U.S.A. LLC, 144A, 6.875%, 2/15/2021			125,000		117,500
Avis Budget Car Rental LLC:
144A, 5.25%, 3/15/2025			140,000		137,200
5.5%, 4/1/2023			215,000		220,375
Block Communications, Inc., 144A, 7.25%, 2/1/2020			155,000		159,262
Boyd Gaming Corp., 6.875%, 5/15/2023			50,000		50,875
Cablevision Systems Corp., 5.875%, 9/15/2022			165,000		164,587
CCO Holdings LLC:
144A, 5.125%, 5/1/2023			120,000		120,600
144A, 5.375%, 5/1/2025			90,000		90,675
144A, 5.875%, 5/1/2027			155,000		156,163
Cequel Communications Holdings I LLC:
144A, 5.125%, 12/15/2021			214,000		202,765
144A, 6.375%, 9/15/2020			340,000		346,800
Clear Channel Worldwide Holdings, Inc.:
Series A, 6.5%, 11/15/2022			95,000		99,513
Series B, 6.5%, 11/15/2022			135,000		142,931
Series A, 7.625%, 3/15/2020			20,000		20,875
Series B, 7.625%, 3/15/2020			230,000		243,225
Cogeco Cable, Inc., 144A, 4.875%, 5/1/2020			10,000		10,300
CSC Holdings LLC, 144A, 5.25%, 6/1/2024			185,000		181,069
Dana Holding Corp., 5.5%, 12/15/2024			55,000		56,100
DISH DBS Corp.:
4.625%, 7/15/2017			400,000		415,500
5.0%, 3/15/2023			125,000		120,469
6.75%, 6/1/2021			30,000		32,044
Family Tree Escrow LLC:
144A, 5.25%, 3/1/2020			315,000		330,356
144A, 5.75%, 3/1/2023			105,000		110,775
Fiat Chrysler Automobiles NV, 144A, 4.5%, 4/15/2020			110,000		111,925
Goodyear Tire & Rubber Co., 6.5%, 3/1/2021			150,000		159,750
Group 1 Automotive, Inc., 144A, 5.0%, 6/1/2022			150,000		150,750
Harron Communications LP, 144A, 9.125%, 4/1/2020			155,000		167,981
HD Supply, Inc.:
144A, 5.25%, 12/15/2021			85,000		88,400
7.5%, 7/15/2020			30,000		32,438
11.5%, 7/15/2020			105,000		122,850
Hot Topic, Inc., 144A, 9.25%, 6/15/2021			55,000		59,538
iHeartCommunications, Inc.:
9.0%, 12/15/2019			195,000		191,587
11.25%, 3/1/2021			50,000		50,500
Jaguar Land Rover Automotive PLC, 144A, 3.5%, 3/15/2020			305,000		305,000
Jo-Ann Stores Holdings, Inc., 144A, 9.75%, 10/15/2019			50,000		47,750
Live Nation Entertainment, Inc.:
144A, 5.375%, 6/15/2022			20,000		20,500
144A, 7.0%, 9/1/2020			130,000		138,938
MDC Partners, Inc., 144A, 6.75%, 4/1/2020			90,000		89,325
Mediacom Broadband LLC:
5.5%, 4/15/2021			20,000		19,900
6.375%, 4/1/2023			155,000		161,200
Mediacom LLC, 7.25%, 2/15/2022			45,000		47,700
MGM Resorts International:
6.0%, 3/15/2023			85,000		88,081
6.75%, 10/1/2020			163,000		176,651
7.625%, 1/15/2017			100,000		107,625
8.625%, 2/1/2019			205,000		235,750
Nielsen Finance LLC, 144A, 5.0%, 4/15/2022			45,000		45,169
Numericable-SFR:
144A, 4.875%, 5/15/2019			195,000		196,170
144A, 6.0%, 5/15/2022			290,000		292,537
Penske Automotive Group, Inc., 5.375%, 12/1/2024			200,000		207,000
Pinnacle Entertainment, Inc., 6.375%, 8/1/2021			60,000		64,050
Quebecor Media, Inc., 5.75%, 1/15/2023			80,000		83,000
Sabre GLBL, Inc., 144A, 5.375%, 4/15/2023			5,000		5,088
Seminole Hard Rock Entertainment, Inc., 144A, 5.875%, 5/15/2021			50,000		50,500
Serta Simmons Holdings LLC, 144A, 8.125%, 10/1/2020			45,000		47,934
Sirius XM Radio, Inc., 144A, 5.875%, 10/1/2020			80,000		83,300
Spectrum Brands, Inc., 144A, 5.75%, 7/15/2025			40,000		41,200
Springs Industries, Inc., 6.25%, 6/1/2021			115,000		113,275
Starz LLC, 5.0%, 9/15/2019			60,000		61,800
Suburban Propane Partners LP, 5.75%, 3/1/2025			45,000		46,575
TRI Pointe Holdings, Inc., 144A, 4.375%, 6/15/2019			55,000		54,175
UCI International, Inc., 8.625%, 2/15/2019			45,000		40,500
Unitymedia Hessen GmbH & Co., KG, 144A, 5.5%, 1/15/2023			300,000		309,375
Viking Cruises Ltd.:
144A, 6.25%, 5/15/2025			80,000		80,200
144A, 8.5%, 10/15/2022			80,000		89,600
Visant Corp., 10.0%, 10/1/2017			20,000		16,850
					9,403,934
Consumer Staples 2.0%
Chiquita Brands International, Inc., 7.875%, 2/1/2021			16,000		17,400
Cott Beverages, Inc.:
144A, 5.375%, 7/1/2022			145,000		142,100
144A, 6.75%, 1/1/2020			55,000		57,888
FAGE Dairy Industry SA, 144A, 9.875%, 2/1/2020			90,000		94,725
JBS Investments GmbH, 144A, 7.25%, 4/3/2024			195,000		208,650
JBS U.S.A. LLC:
144A, 5.75%, 6/15/2025 (b)			60,000		60,600
144A, 7.25%, 6/1/2021			205,000		216,582
144A, 8.25%, 2/1/2020			65,000		69,323
Marfrig Overseas Ltd., 144A, 9.5%, 5/4/2020			100,000		101,500
Pilgrim's Pride Corp., 144A, 5.75%, 3/15/2025			60,000		60,900
Post Holdings, Inc., 144A, 6.75%, 12/1/2021			45,000		44,550
Roundy's Supermarkets, Inc., 144A, 10.25%, 12/15/2020			20,000		17,350
Smithfield Foods, Inc., 6.625%, 8/15/2022			4,000		4,323
The WhiteWave Foods Co., 5.375%, 10/1/2022			60,000		64,800
					1,160,691
Energy 13.9%
Afren PLC, 144A, 10.25%, 4/8/2019*			140,000		60,200
Antero Resources Corp.:
5.125%, 12/1/2022			100,000		99,750
5.375%, 11/1/2021			85,000		86,062
144A, 5.625%, 6/1/2023			60,000		61,620
Baytex Energy Corp.:
144A, 5.125%, 6/1/2021			25,000		24,313
144A, 5.625%, 6/1/2024			35,000		33,775
Berry Petroleum Co., LLC:
6.375%, 9/15/2022			75,000		61,500
6.75%, 11/1/2020			215,000		183,825
Blue Racer Midstream LLC, 144A, 6.125%, 11/15/2022			35,000		36,260
California Resources Corp.:
5.0%, 1/15/2020			40,000		38,100
5.5%, 9/15/2021			102,000		96,645
6.0%, 11/15/2024			40,000		36,800
Carrizo Oil & Gas, Inc., 6.25%, 4/15/2023			75,000		76,500
Chaparral Energy, Inc., 7.625%, 11/15/2022			70,000		56,000
Chesapeake Energy Corp.:
5.75%, 3/15/2023			195,000		192,562
6.125%, 2/15/2021			15,000		15,263
6.625%, 8/15/2020			75,000		78,360
Concho Resources, Inc., 5.5%, 4/1/2023			115,000		116,725
Continental Resources, Inc., 3.8%, 6/1/2024			55,000		51,358
Crestwood Midstream Partners LP:
6.125%, 3/1/2022			60,000		62,625
144A, 6.25%, 4/1/2023			30,000		31,595
Delek & Avner Tamar Bond Ltd., 144A, 5.082%, 12/30/2023			200,000		204,500
Ecopetrol SA, 5.875%, 9/18/2023			200,000		214,900
Endeavor Energy Resources LP:
144A, 7.0%, 8/15/2021			195,000		194,512
144A, 8.125%, 9/15/2023			30,000		31,125
Energy Transfer Equity LP, 5.5%, 6/1/2027			30,000		30,188
EP Energy LLC, 144A, 6.375%, 6/15/2023			70,000		70,088
EV Energy Partners LP, 8.0%, 4/15/2019			375,000		361,875
Gulfport Energy Corp., 144A, 6.625%, 5/1/2023			30,000		30,600
Halcon Resources Corp.:
144A, 8.625%, 2/1/2020			140,000		142,100
8.875%, 5/15/2021			20,000		14,050
9.75%, 7/15/2020			45,000		32,513
Hilcorp Energy I LP, 144A, 5.75%, 10/1/2025 (b)			110,000		109,931
Holly Energy Partners LP, 6.5%, 3/1/2020			45,000		45,000
Laredo Petroleum, Inc., 6.25%, 3/15/2023			90,000		92,925
Linn Energy LLC, 6.25%, 11/1/2019			55,000		47,025
MEG Energy Corp.:
144A, 6.5%, 3/15/2021			85,000		82,450
144A, 7.0%, 3/31/2024			270,000		260,550
Memorial Resource Development Corp., 144A, 5.875%, 7/1/2022			65,000		63,538
Murphy Oil U.S.A., Inc., 6.0%, 8/15/2023			110,000		116,875
Newfield Exploration Co.:
5.375%, 1/1/2026			45,000		46,575
5.75%, 1/30/2022			80,000		84,400
Northern Oil & Gas, Inc., 8.0%, 6/1/2020			230,000		217,350
Nostrum Oil & Gas Finance BV, 144A, 6.375%, 2/14/2019			200,000		189,000
Oasis Petroleum, Inc.:
6.875%, 3/15/2022			175,000		178,937
6.875%, 1/15/2023			60,000		60,900
Odebrecht Offshore Drilling Finance Ltd.:
144A, 6.625%, 10/1/2022			284,700		254,237
144A, 6.75%, 10/1/2022			232,525		210,133
Offshore Drilling Holding SA, 144A, 8.625%, 9/20/2020			200,000		179,500
QGOG Atlantic, 144A, 5.25%, 7/30/2018			398,175		374,284
Range Resources Corp., 144A, 4.875%, 5/15/2025			65,000		65,000
Ras Laffan Liquefied Natural Gas Co., Ltd. II, 144A, 5.298%, 9/30/2020			143,175		155,166
Regency Energy Partners LP:
5.0%, 10/1/2022			40,000		41,824
5.875%, 3/1/2022			10,000		10,950
Reliance Industries Ltd., 144A, 4.125%, 1/28/2025			250,000		253,036
Rice Energy, Inc., 144A, 7.25%, 5/1/2023			15,000		15,600
RSP Permian, Inc., 144A, 6.625%, 10/1/2022			140,000		145,600
Sabine Pass Liquefaction LLC:
5.625%, 2/1/2021			260,000		268,450
5.625%, 4/15/2023			100,000		101,750
144A, 5.625%, 3/1/2025			75,000		75,000
5.75%, 5/15/2024			260,000		264,225
Seven Generations Energy Ltd., 144A, 6.75%, 5/1/2023			25,000		25,188
Sunoco LP, 144A, 6.375%, 4/1/2023			45,000		46,800
Talos Production LLC, 144A, 9.75%, 2/15/2018			145,000		127,237
Targa Resources Partners LP:
144A, 4.125%, 11/15/2019			20,000		20,000
144A, 5.0%, 1/15/2018			155,000		160,037
TerraForm Power Operating LLC, 144A, 5.875%, 2/1/2023			75,000		77,437
Transportadora de Gas Internacional SA ESP, 144A, 5.7%, 3/20/2022			200,000		213,200
Triangle U.S.A. Petroleum Corp., 144A, 6.75%, 7/15/2022			50,000		42,250
Whiting Petroleum Corp.:
5.75%, 3/15/2021			55,000		55,963
144A, 6.25%, 4/1/2023			290,000		297,250
WPX Energy, Inc., 5.25%, 1/15/2017			295,000		302,375
					8,204,237
Financials 5.4%
Banco de Credito del Peru, 144A, 4.25%, 4/1/2023			250,000		254,750
Banco do Brasil SA, 144A, 9.0%, 6/29/2049			200,000		183,750
Banco Santander Brasil SA, 144A, 8.0%, 3/18/2016	BRL		300,000		89,445
BBVA Bancomer SA, 144A, 6.75%, 9/30/2022			200,000		227,100
CIT Group, Inc.:
3.875%, 2/19/2019			415,000		416,038
5.0%, 5/15/2017			80,000		82,944
CNO Financial Group, Inc.:
4.5%, 5/30/2020			150,000		155,055
5.25%, 5/30/2025			45,000		46,688
Corpbanca SA, 144A, 3.875%, 9/22/2019			500,000		507,625
Credit Agricole SA, 144A, 7.875%, 1/29/2049			125,000		133,052
Denali Borrower LLC, 144A, 5.625%, 10/15/2020			85,000		90,206
E*TRADE Financial Corp.:
4.625%, 9/15/2023			60,000		60,300
5.375%, 11/15/2022			50,000		52,250
Hellas Telecommunications Finance, 144A, 8.011%*, 7/15/2015	EUR		109,187		0
MPT Operating Partnership LP:
(REIT), 6.375%, 2/15/2022			110,000		118,800
(REIT), 6.875%, 5/1/2021			110,000		117,838
Neuberger Berman Group LLC, 144A, 5.875%, 3/15/2022			110,000		118,250
Popular, Inc., 7.0%, 7/1/2019			55,000		56,375
Societe Generale SA, 144A, 7.875%, 12/29/2049			190,000		195,225
The Goldman Sachs Group, Inc., Series L, 5.7%, 12/29/2049			95,000		96,040
Yapi ve Kredi Bankasi AS, 144A, 5.5%, 12/6/2022			200,000		193,916
					3,195,647
Health Care 8.4%
Community Health Systems, Inc.:
5.125%, 8/15/2018			695,000		714,981
5.125%, 8/1/2021			20,000		20,750
6.875%, 2/1/2022			80,000		85,401
7.125%, 7/15/2020			750,000		799,687
Concordia Healthcare Corp., 144A, 7.0%, 4/15/2023			30,000		30,188
Endo Finance LLC:
144A, 5.375%, 1/15/2023			80,000		78,200
144A, 5.75%, 1/15/2022			80,000		81,200
144A, 6.0%, 2/1/2025			45,000		45,563
Fresenius Medical Care U.S. Finance, Inc., 144A, 6.5%, 9/15/2018			45,000		49,950
HCA, Inc.:
6.5%, 2/15/2020			340,000		379,525
7.5%, 2/15/2022			170,000		198,900
Hologic, Inc., 6.25%, 8/1/2020			80,000		82,900
IMS Health, Inc., 144A, 6.0%, 11/1/2020			100,000		104,000
LifePoint Health, Inc., 5.5%, 12/1/2021			105,000		110,381
Mallinckrodt International Finance SA, 144A, 4.875%, 4/15/2020			50,000		51,188
Par Pharmaceutical Companies, Inc., 7.375%, 10/15/2020			125,000		133,750
Physio-Control International, Inc., 144A, 9.875%, 1/15/2019			62,000		66,656
Valeant Pharmaceuticals International, Inc.:
144A, 5.375%, 3/15/2020			110,000		114,675
144A, 5.875%, 5/15/2023			105,000		108,806
144A, 6.125%, 4/15/2025			305,000		317,200
144A, 6.375%, 10/15/2020			90,000		96,019
144A, 6.75%, 8/15/2018			820,000		866,637
144A, 7.5%, 7/15/2021			385,000		421,190
					4,957,747
Industrials 10.2%
ADT Corp.:
3.5%, 7/15/2022			55,000		50,589
4.125%, 4/15/2019			15,000		15,263
5.25%, 3/15/2020			90,000		95,175
6.25%, 10/15/2021			60,000		64,350
Aerojet Rocketdyne Holdings, Inc., 7.125%, 3/15/2021			185,000		197,950
Air Lease Corp., 4.75%, 3/1/2020			110,000		117,425
Apex Tool Group LLC, 144A, 7.0%, 2/1/2021			70,000		63,700
Artesyn Embedded Technologies, Inc., 144A, 9.75%, 10/15/2020			105,000		108,937
Belden, Inc., 144A, 5.5%, 9/1/2022			135,000		138,375
Bombardier, Inc.:
144A, 4.75%, 4/15/2019			60,000		58,200
144A, 5.5%, 9/15/2018			30,000		29,700
144A, 5.75%, 3/15/2022			90,000		82,125
144A, 6.0%, 10/15/2022			95,000		86,094
144A, 7.5%, 3/15/2025			30,000		28,688
144A, 7.75%, 3/15/2020			465,000		480,112
Casella Waste Systems, Inc., 7.75%, 2/15/2019			140,000		143,850
CNH Capital LLC, 3.25%, 2/1/2017			335,000		335,837
Covanta Holding Corp., 5.875%, 3/1/2024			85,000		87,550
CTP Transportation Products LLC, 144A, 8.25%, 12/15/2019			105,000		111,562
DigitalGlobe, Inc., 144A, 5.25%, 2/1/2021			55,000		55,011
DP World Ltd., 144A, 6.85%, 7/2/2037			250,000		285,982
DR Horton, Inc., 4.0%, 2/15/2020			30,000		30,150
Edgewell Personal Care Co., 144A, 5.5%, 6/15/2025 (b)			15,000		15,000
Empresas ICA SAB de CV, 144A, 8.875%, 5/29/2024			200,000		172,500
EnerSys, 144A, 5.0%, 4/30/2023			15,000		15,188
Florida East Coast Holdings Corp., 144A, 6.75%, 5/1/2019			85,000		84,788
FTI Consulting, Inc.:
6.0%, 11/15/2022			80,000		85,000
6.75%, 10/1/2020			295,000		308,644
Garda World Security Corp., 144A, 7.25%, 11/15/2021			105,000		102,900
Gates Global LLC, 144A, 6.0%, 7/15/2022			70,000		64,575
Huntington Ingalls Industries, Inc., 144A, 5.0%, 12/15/2021			120,000		124,800
Kenan Advantage Group, Inc., 144A, 8.375%, 12/15/2018			220,000		229,350
Masonite International Corp., 144A, 5.625%, 3/15/2023			65,000		67,275
Meritor, Inc.:
6.25%, 2/15/2024			80,000		81,300
6.75%, 6/15/2021			115,000		119,312
Moog, Inc., 144A, 5.25%, 12/1/2022			50,000		51,500
Navios Maritime Holdings, Inc., 144A, 7.375%, 1/15/2022			310,000		282,875
Nortek, Inc., 8.5%, 4/15/2021			85,000		92,119
Oshkosh Corp.:
5.375%, 3/1/2022			60,000		62,550
144A, 5.375%, 3/1/2025			5,000		5,175
Ply Gem Industries, Inc., 6.5%, 2/1/2022			145,000		143,013
SBA Communications Corp., 5.625%, 10/1/2019			75,000		79,125
Spirit AeroSystems, Inc., 5.25%, 3/15/2022			105,000		110,250
Titan International, Inc., 6.875%, 10/1/2020			185,000		170,894
TransDigm, Inc.:
6.0%, 7/15/2022			95,000		96,306
6.5%, 7/15/2024			55,000		56,100
7.5%, 7/15/2021			305,000		330,162
Triumph Group, Inc., 5.25%, 6/1/2022			45,000		44,550
United Rentals North America, Inc.:
4.625%, 7/15/2023			50,000		50,000
6.125%, 6/15/2023			10,000		10,450
7.625%, 4/15/2022			120,000		131,100
USG Corp., 144A, 5.5%, 3/1/2025			5,000		5,175
Wise Metals Group LLC, 144A, 8.75%, 12/15/2018			75,000		80,063
XPO Logistics, Inc., 144A, 7.875%, 9/1/2019			75,000		80,531
					6,019,195
Information Technology 6.3%
ACI Worldwide, Inc., 144A, 6.375%, 8/15/2020			35,000		36,881
Activision Blizzard, Inc., 144A, 5.625%, 9/15/2021			335,000		358,031
Alliance Data Systems Corp., 144A, 5.25%, 12/1/2017			95,000		98,800
Audatex North America, Inc.:
144A, 6.0%, 6/15/2021			110,000		114,789
144A, 6.125%, 11/1/2023			35,000		36,400
BMC Software Finance, Inc., 144A, 8.125%, 7/15/2021			165,000		149,119
Boxer Parent Co., Inc., 144A, 9.0%, 10/15/2019			115,000		94,300
Cardtronics, Inc., 144A, 5.125%, 8/1/2022			50,000		49,750
CDW LLC:
5.5%, 12/1/2024			200,000		209,500
6.0%, 8/15/2022			115,000		123,625
CyrusOne LP, 6.375%, 11/15/2022			40,000		42,000
EarthLink Holdings Corp., 7.375%, 6/1/2020			95,000		99,275
Entegris, Inc., 144A, 6.0%, 4/1/2022			55,000		57,475
Equinix, Inc.:
5.375%, 1/1/2022			70,000		72,844
5.375%, 4/1/2023			265,000		272,950
5.75%, 1/1/2025			50,000		51,500
First Data Corp.:
144A, 6.75%, 11/1/2020			435,000		464,363
144A, 7.375%, 6/15/2019			95,000		98,800
144A, 8.75%, 1/15/2022			180,000		192,600
Freescale Semiconductor, Inc., 144A, 6.0%, 1/15/2022			100,000		107,750
Infor U.S., Inc., 144A, 6.5%, 5/15/2022			70,000		72,723
Jabil Circuit, Inc., 5.625%, 12/15/2020			105,000		114,056
Micron Technology, Inc.:
144A, 5.25%, 8/1/2023			70,000		70,000
144A, 5.625%, 1/15/2026			70,000		68,775
NCR Corp.:
5.875%, 12/15/2021			20,000		20,350
6.375%, 12/15/2023			50,000		51,500
Open Text Corp., 144A, 5.625%, 1/15/2023			60,000		60,638
Project Homestake Merger Corp., 144A, 8.875%, 3/1/2023			45,000		44,944
Sanmina Corp., 144A, 4.375%, 6/1/2019			10,000		10,050
Tencent Holdings Ltd., 144A, 3.375%, 5/2/2019			500,000		515,657
					3,759,445
Materials 9.3%
ArcelorMittal SA, 5.125%, 6/1/2020 (b)			20,000		20,300
Berry Plastics Corp., 5.5%, 5/15/2022			160,000		163,700
Cascades, Inc., 144A, 5.5%, 7/15/2022			55,000		54,725
Cemex SAB de CV, 144A, 6.5%, 12/10/2019			200,000		213,520
Chemours Co.:
144A, 6.625%, 5/15/2023			145,000		147,175
144A, 7.0%, 5/15/2025			25,000		25,438
CITIC Ltd., REG S, 6.8%, 1/17/2023			500,000		587,250
Clearwater Paper Corp., 144A, 5.375%, 2/1/2025			90,000		91,125
Coveris Holding Corp., 144A, 10.0%, 6/1/2018			90,000		95,400
Coveris Holdings SA, 144A, 7.875%, 11/1/2019			215,000		219,837
Evolution Escrow Issuer LLC, 144A, 7.5%, 3/15/2022			70,000		69,650
First Quantum Minerals Ltd.:
144A, 6.75%, 2/15/2020			45,000		43,987
144A, 7.0%, 2/15/2021			170,000		164,687
Greif, Inc., 7.75%, 8/1/2019			230,000		261,050
Hexion, Inc.:
6.625%, 4/15/2020			220,000		207,350
8.875%, 2/1/2018			60,000		55,050
Huntsman International LLC, 8.625%, 3/15/2021			20,000		21,150
Kaiser Aluminum Corp., 8.25%, 6/1/2020			100,000		108,750
KGHM International Ltd., 144A, 7.75%, 6/15/2019			250,000		260,250
Novelis, Inc., 8.75%, 12/15/2020			490,000		522,002
Plastipak Holdings, Inc., 144A, 6.5%, 10/1/2021			100,000		103,000
Platform Specialty Products Corp., 144A, 6.5%, 2/1/2022			65,000		68,250
Reynolds Group Issuer, Inc.:
5.75%, 10/15/2020			920,000		957,950
6.875%, 2/15/2021			205,000		216,275
Sealed Air Corp.:
144A, 4.875%, 12/1/2022			35,000		35,263
144A, 5.125%, 12/1/2024			15,000		15,263
Signode Industrial Group Lux SA, 144A, 6.375%, 5/1/2022			75,000		75,000
Tronox Finance LLC, 6.375%, 8/15/2020			75,000		72,000
Turkiye Sise ve Cam Fabrikalari AS, 144A, 4.25%, 5/9/2020			200,000		196,756
Volcan Cia Minera SAA, 144A, 5.375%, 2/2/2022			420,000		416,892
WR Grace & Co-Conn:
144A, 5.125%, 10/1/2021			30,000		30,975
144A, 5.625%, 10/1/2024			15,000		15,788
					5,535,808
Telecommunication Services 13.0%
B Communications Ltd., 144A, 7.375%, 2/15/2021			105,000		111,956
Bharti Airtel International Netherlands BV, 144A, 5.125%, 3/11/2023			200,000		215,816
CenturyLink, Inc.:
Series V, 5.625%, 4/1/2020			40,000		41,750
Series N, 6.0%, 4/1/2017			500,000		531,250
Series W, 6.75%, 12/1/2023			105,000		112,088
CommScope, Inc.:
144A, 4.375%, 6/15/2020 (b)			40,000		40,350
144A, 5.0%, 6/15/2021			95,000		94,763
Digicel Group Ltd.:
144A, 7.125%, 4/1/2022			95,000		92,388
144A, 8.25%, 9/30/2020			487,000		505,019
Digicel Ltd., 144A, 7.0%, 2/15/2020			200,000		207,500
Frontier Communications Corp.:
6.25%, 9/15/2021			45,000		43,341
6.875%, 1/15/2025			195,000		177,937
7.125%, 1/15/2023			515,000		493,112
8.25%, 4/15/2017			119,000		130,007
8.5%, 4/15/2020			35,000		37,450
Hughes Satellite Systems Corp.:
6.5%, 6/15/2019			247,000		271,700
7.625%, 6/15/2021			90,000		101,138
Intelsat Jackson Holdings SA:
5.5%, 8/1/2023			165,000		151,543
7.5%, 4/1/2021			465,000		471,975
Level 3 Financing, Inc.:
5.375%, 8/15/2022			215,000		219,837
144A, 5.375%, 5/1/2025			60,000		59,700
6.125%, 1/15/2021			60,000		63,600
7.0%, 6/1/2020			145,000		155,331
Millicom International Cellular SA, 144A, 6.0%, 3/15/2025			200,000		201,256
Plantronics, Inc., 144A, 5.5%, 5/31/2023			30,000		30,450
Sprint Communications, Inc.:
144A, 7.0%, 3/1/2020			85,000		93,819
144A, 9.0%, 11/15/2018			305,000		349,606
Sprint Corp., 7.125%, 6/15/2024			440,000		425,700
T-Mobile U.S.A., Inc.:
6.125%, 1/15/2022			40,000		41,950
6.375%, 3/1/2025			230,000		240,062
6.625%, 11/15/2020			65,000		68,088
Turk Telekomunikasyon AS, 144A, 3.75%, 6/19/2019			500,000		500,270
UPCB Finance IV Ltd., 144A, 5.375%, 1/15/2025			305,000		305,381
UPCB Finance V Ltd., 144A, 7.25%, 11/15/2021			90,000		98,100
UPCB Finance VI Ltd., 144A, 6.875%, 1/15/2022			171,000		184,466
Virgin Media Secured Finance PLC, 144A, 5.25%, 1/15/2026			85,000		85,106
Wind Acquisition Finance SA, 144A, 6.5%, 4/30/2020			80,000		85,000
Windstream Services LLC:
6.375%, 8/1/2023			95,000		79,800
7.5%, 4/1/2023			150,000		134,625
7.75%, 10/15/2020			30,000		30,488
7.75%, 10/1/2021			265,000		250,425
Zayo Group LLC:
144A, 6.0%, 4/1/2023			60,000		60,419
144A, 6.375%, 5/15/2025			75,000		75,188
					7,669,750
Utilities 2.1%
Calpine Corp.:
5.375%, 1/15/2023			85,000		85,425
5.75%, 1/15/2025			85,000		85,531
Dynegy, Inc., 144A, 7.625%, 11/1/2024			15,000		16,088
Energy Future Holdings Corp., Series Q, 6.5%, 11/15/2024*			110,000		111,100
Hrvatska Elektroprivreda, 144A, 6.0%, 11/9/2017			200,000		209,600
Lamar Funding Ltd., 144A, 3.958%, 5/7/2025			250,000		250,625
NGL Energy Partners LP, 5.125%, 7/15/2019			70,000		69,475
NRG Energy, Inc.:
6.25%, 5/1/2024			285,000		291,412
7.875%, 5/15/2021			80,000		85,700
RJS Power Holdings LLC, 144A, 5.125%, 7/15/2019			70,000		69,475
					1,274,431
Total Corporate Bonds (Cost $50,907,076)					51,180,885

Asset-Backed 0.6%
Miscellaneous
Apidos CDO, "C", Series 2015-21A, 144A, 3.827%, 7/18/2027 (b) (Cost $368,025)			375,000		368,018

Government & Agency Obligations 8.1%
Other Government Related (c) 0.5%
VTB Bank OJSC, 144A, 6.315%, 2/22/2018			265,000		267,841
Sovereign Bonds 7.6%
Dominican Republic, 144A, 5.5%, 1/27/2025			100,000		101,500
Federative Republic of Brazil, 12.5%, 1/5/2016	BRL		625,000		195,662
Hazine Mustesarligi Varlik Kiralama AS, 144A, 2.803%, 3/26/2018			500,000		498,260
KazAgro National Management Holding JSC, 144A, 4.625%, 5/24/2023			250,000		224,375
Perusahaan Penerbit SBSN Indonesia III, 144A, 4.325%, 5/28/2025			200,000		199,600
Republic of Argentina-Inflation Linked Bond, 5.83%, 12/31/2033	ARS		481		180
Republic of El Salvador:
144A, 6.375%, 1/18/2027			75,000		74,344
144A, 7.65%, 6/15/2035			100,000		103,875
Republic of Hungary:
4.0%, 3/25/2019			200,000		208,500
Series 19/A, 6.5%, 6/24/2019	HUF		11,600,000		47,446
Republic of Indonesia, 144A, 3.375%, 4/15/2023			200,000		192,750
Republic of Panama, 9.375%, 1/16/2023			665,000		917,700
Republic of Poland, Series 0725, 3.25%, 7/25/2025	PLN		180,000		49,435
Republic of Slovenia:
144A, 4.75%, 5/10/2018			200,000		213,870
144A, 5.5%, 10/26/2022			500,000		568,792
Republic of South Africa, Series R204, 8.0%, 12/21/2018	ZAR		900,000		75,384
Republic of Sri Lanka, 144A, 5.125%, 4/11/2019			200,000		199,250
Republic of Uruguay, 5.1%, 6/18/2050			40,000		40,300
Republic of Vietnam, 144A, 4.8%, 11/19/2024			200,000		203,750
United Mexican States:
3.6%, 1/30/2025			200,000		201,100
4.6%, 1/23/2046			200,000		196,750
					4,512,823
Total Government & Agency Obligations (Cost $4,843,784)					4,780,664

Loan Participations and Assignments 37.9%
Senior Loans**
Consumer Discretionary 12.5%
1011778 BC Unlimited Liability Co., Term Loan B, 3.75%, 12/10/2021			435,000		435,907
Atlantic Broadband Finance LLC, Term Loan B, 3.25%, 11/30/2019			1,005,709		1,005,603
Avis Budget Car Rental LLC, Term Loan B, 3.0%, 3/15/2019			364,422		366,244
Cequel Communications LLC, Term Loan B, 3.5%, 2/14/2019			412,566		414,113
CSC Holdings, Inc., Term Loan B, 2.685%, 4/17/2020			984,411		981,222
Goodyear Tire & Rubber Co., Second Lien Term Loan, 4.75%, 4/30/2019			775,000		782,262
Hilton Worldwide Finance LLC, Term Loan B2, 3.5%, 10/26/2020			997,719		1,000,648
Petco Animal Supplies, Inc., Term Loan, 4.0%, 11/24/2017			142,675		143,229
Polymer Group, Inc., First Lien Term Loan, 5.25%, 12/19/2019			414,750		417,342
Quebecor Media, Inc., Term Loan B1, 3.25%, 8/17/2020			945,688		940,368
Seminole Tribe of Florida, Term Loan, 3.0%, 4/29/2020			911,600		912,967
					7,399,905
Consumer Staples 4.0%
Albertson's LLC, Term Loan B2, 5.375%, 3/21/2019			712,992		717,762
HJ Heinz Co., Term Loan B2, 3.25%, 6/5/2020			452,037		452,830
Pinnacle Foods Finance LLC:
Term Loan G, 3.0%, 4/29/2020			317,792		317,486
Term Loan H, 3.0%, 4/29/2020			727,613		726,805
Vogue International, Inc., Term Loan, 5.75%, 2/14/2020			163,350		165,188
					2,380,071
Energy 1.1%
MEG Energy Corp., Term Loan, 3.75%, 3/31/2020			646,638		637,588
Financials 1.0%
Asurion LLC, Second Lien Term Loan, 8.5%, 3/3/2021			140,000		143,719
Delos Finance SARL, Term Loan B, 3.5%, 3/6/2021			425,000		426,024
					569,743
Health Care 4.1%
Amsurg Corp., First Lien Term Loan B, 3.75%, 7/16/2021			218,350		219,381
Community Health Systems, Inc.:
Term Loan G, 3.75%, 12/31/2019			73,020		73,121
Term Loan H, 4.0%, 1/27/2021			134,355		134,838
DaVita HealthCare Partners, Inc., Term Loan B, 3.5%, 6/24/2021			1,127,480		1,132,204
Par Pharmaceutical Companies, Inc., Term Loan B2, 4.0%, 9/30/2019			315,666		316,230
Valeant Pharmaceuticals International, Inc.:
Term Loan B, 3.5%, 2/13/2019			291,407		291,609
Term Loan B, 3.5%, 12/11/2019			275,431		276,077
					2,443,460
Industrials 3.6%
BE Aerospace, Inc., Term Loan B, 4.0%, 12/16/2021			249,375		252,218
Ply Gem Industries, Inc., Term Loan, 4.0%, 2/1/2021			991,216		993,818
Transdigm, Inc., Term Loan C, 3.75%, 2/28/2020			475,718		475,510
WP CPP Holdings LLC, First Lien Term Loan, 4.75%, 12/28/2019			442,204		445,300
					2,166,846
Information Technology 1.1%
First Data Corp., Term Loan, 4.185%, 3/24/2021			490,000		492,389
Freescale Semiconductor, Inc., Term Loan B4, 4.25%, 2/28/2020			138,596		139,192
					631,581
Materials 4.9%
American Rock Salt Holdings LLC, First Lien Term Loan, 4.75%, 5/20/2021			739,413		740,799
Axalta Coating Systems U.S. Holdings, Inc., Term Loan, 3.75%, 2/1/2020			527,608		528,267
Berry Plastics Holding Corp.:
Term Loan D, 3.5%, 2/8/2020			736,842		736,698
Term Loan E, 3.75%, 1/6/2021			304,001		304,509
MacDermid, Inc.:
Term Loan B2, 4.75%, 6/7/2020			350,000		352,662
First Lien Term Loan, 4.5%, 6/7/2020			225,975		227,428
					2,890,363
Telecommunication Services 2.6%
Crown Castle International Corp., Term Loan B, 3.0%, 1/31/2019			657,600		659,152
DigitalGlobe, Inc., Term Loan B, 3.75%, 1/31/2020			14,700		14,750
Level 3 Financing, Inc.:
Term Loan B5, 4.0%, 1/31/2022			180,000		180,254
Term Loan B, 4.5%, 1/15/2020			485,000		485,609
Syniverse Holdings, Inc., Term Loan B, 4.0%, 4/23/2019			208,447		200,566
					1,540,331
Utilities 3.0%
Calpine Corp., Term Loan B5, LIBOR plus 2.75%, 5/19/2022			655,000		655,819
NRG Energy, Inc., Term Loan B, 2.75%, 7/2/2018			1,122,521		1,118,031
					1,773,850
Total Loan Participations and Assignments (Cost $22,397,920)					22,433,738

Convertible Bond 0.3%
Materials
GEO Specialty Chemicals, Inc., 144A, 7.5%, 10/30/2018 (Cost $103,996)			105,307		192,448

Preferred Security 0.3%
Materials
Hercules, Inc., 6.5%, 6/30/2029 (Cost $120,321)			175,000		159,250

	Shares		Value ($)

Common Stocks 0.0%
Consumer Discretionary 0.0%
Dawn Holdings, Inc.* (d)		2		2,351
Industrials 0.0%
Congoleum Corp.*		2,000		0
Quad Graphics, Inc.		29		593
				593
Materials 0.0%
GEO Specialty Chemicals, Inc.*		11,502		8,070
Total Common Stocks (Cost $25,413)				11,014

Preferred Stock 0.2%
Consumer Discretionary
Ally Financial, Inc., Series G, 144A, 7.0% (Cost $113,300)		122		123,830

Warrants 0.0%
Materials
Hercules Trust II, Expiration Date 3/31/2029* (Cost $20,981)		95		697

	Contract Amount		Value ($)

Call Options Purchased 0.0%
Options on Interest Rate Swap Contracts
Pay Fixed Rate — 3.72% – Receive Floating — 3-Month LIBOR, Swap Expiration Date 4/22/2026, Option Expiration Date 4/20/20161 (Cost $9,870)		200,000		470

	Shares		Value ($)

Cash Equivalents 4.4%
Central Cash Management Fund, 0.09% (e) (Cost $2,606,076)		2,606,076		2,606,076

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $81,516,762)†		138.3			81,857,090
Other Assets and Liabilities, Net		(37.2	)		(22,000,000	)
Notes Payable		(1.1	)		(688,342	)
Net Assets		100.0			59,168,748

The following table represents bonds that are in default:

Security	Coupon			Maturity Date	Principal Amount		Cost ($)		Value ($)
Afren PLC*		10.25	%	4/8/2019	USD	140,000		166,600		60,200
Energy Future Holdings Corp.*		6.5	%	11/15/2024	USD	110,000		66,218		111,100
Hellas Telecommunications Finance*		8.011	%	7/15/2015	EUR	109,187		32,169		0
								264,987		171,300

* 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 May 31, 2015.

† The cost for federal income tax purposes was $81,849,623. At May 31, 2015, net unrealized appreciation for all securities based on tax cost was $7,467. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $1,399,355 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,391,888.

(a) Principal amount stated in U.S. dollars unless otherwise noted.

(b) When-issued security.

(d) 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 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

5,863

2,351

0.0

(e) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

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.

LIBOR: London Interbank Offered Rate; 3-Month LIBOR rate at May 31, 2015 is 0.28%.

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

At May 31, 2015, open written options contracts were as follows:

Options on Interest Rate Swap Contracts

Swap Effective/

Expiration Date

Contract Amount

Option Expiration Date

Premium Received ($)

Value ($) (f)

Call Options

Receive Fixed — 4.22% – Pay Floating — 3-Month LIBOR

4/22/2016

4/22/2026

200,000

4/20/2016

7,130

(143

)

(f) Unrealized appreciation on written options on interest rate swap contracts at May 31, 2015 was $6,987.

At May 31, 2015, open credit default swap contracts sold were as follows:

Bilateral Swaps
Effective/ Expiration Dates	Notional Amount ($) (g)			Fixed Cash Flows Received			Underlying Debt Obligation/ Quality Rating (h)	Value ($)		Upfront Payments Paid/ (Received) ($)		Unrealized Appreciation ($)
6/20/2013 9/20/2018		260,000	2		5.0	%	Sprint Communications, Inc., 6.0%, 12/1/2016, B+		19,956		10,210		9,746
1/21/2015 3/20/2020		100,000	3		5.0	%	General Motors Corp., 6.25%, 10/2/2043, BBB–		17,808		15,289		2,519
4/14/2015 6/20/2020		75,000	4		5.0	%	CCO Holdings LLC, 7.25%, 10/30/2017, BB–		8,698		7,287		1,411
Total unrealized appreciation													13,676

(g) 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.

(h) 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.

Counterparties:

1 Nomura International PLC

2 Bank of America

3 Credit Suisse

4 Barclays Bank PLC

As of May 31, 2015, the Fund had the following open forward foreign currency exchange contracts:

Contracts to Deliver		In Exchange For		Settlement Date	Unrealized Appreciation ($)		Counterparty
USD	336,747	ZAR	4,100,000	6/8/2015		386	Morgan Stanley
ZAR	4,100,000	USD	344,061	6/8/2015		6,928	BNP Paribas
ZAR	4,100,000	USD	343,974	6/8/2015		6,841	Morgan Stanley
MXN	4,450,000	USD	297,665	6/8/2015		8,858	BNP Paribas
PLN	200,000	USD	53,596	6/8/2015		170	UBS AG
MXN	1,480,000	USD	98,845	6/25/2015		2,913	BNP Paribas
MXN	13,500	USD	878	6/25/2015		3	Citigroup, Inc.
COP	1,080,000,000	USD	449,575	6/30/2015		24,085	Morgan Stanley
CAD	423,826	MXN	5,400,000	6/30/2015		9,256	Nomura International PLC
ZAR	11,300,000	USD	950,002	6/30/2015		24,240	BNP Paribas
CAD	5,850	USD	4,866	6/30/2015		165	Nomura International PLC
Total unrealized appreciation						83,845

Contracts to Deliver		In Exchange For		Settlement Date	Unrealized Depreciation ($)			Counterparty
USD	344,133	ZAR	4,100,000	6/8/2015		(7,000	)	BNP Paribas
USD	292,532	MXN	4,450,000	6/8/2015		(3,726	)	BNP Paribas
USD	94,483	MXN	1,450,600	6/25/2015		(457	)	BNP Paribas
MXN	5,400,000	CAD	429,676	6/30/2015		(4,554	)	Nomura International PLC
USD	435,990	COP	1,080,000,000	6/30/2015		(10,500	)	Morgan Stanley
USD	642,285	ZAR	7,700,000	6/30/2015		(11,456	)	BNP Paribas
USD	304,362	ZAR	3,600,000	6/30/2015		(9,429	)	Barclays Bank PLC
USD	585,811	ZAR	7,200,000	8/14/2015		(512	)	BNP Paribas
Total unrealized depreciation						(47,634	)

Currency Abbreviations

ARS Argentine Peso

BRL Brazilian Real

CAD Canadian Dollar

COP Colombian Peso

EUR Euro

HUF Hungarian Forint

MXN Mexican Peso

PLN Polish Zloty

USD United States Dollar

ZAR South African Rand

For information on the Fund's policy and additional disclosures regarding options purchased, credit default swap contracts, forward foreign currency exchange contracts and written options 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 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 May 31, 2015 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		Level			Level		Total

Fixed Income Investments (i)
Corporate Bonds	$	—	$	51,180,885		$	—	$	51,180,885
Asset-Backed		—		368,018			—		368,018
Government & Agency Obligations		—		4,780,664			—		4,780,664
Loan Participations and Assignments		—		22,433,738			—		22,433,738
Convertible Bond		—		—			192,448		192,448
Preferred Security		—		159,250			—		159,250
Common Stocks		593		—			10,421		11,014
Preferred Stock (i)		—		123,830			—		123,830
Warrants (i)		—		—			697		697
Short-Term Investments (i)		2,606,076		—			—		2,606,076
Derivatives (j)
Purchased Options		—		470			—		470
Credit Default Swap Contracts		—		13,676			—		13,676
Forward Foreign Currency Exchange Contracts		—		83,845			—		83,845
Total	$	2,606,669	$	79,144,376		$	203,566	$	81,954,611
Liabilities	Level		Total			Level		Total

Derivatives (j)
Written Options	$	—	$	(143	)	$	—	$	(143	)
Forward Foreign Currency Exchange Contracts		—		(47,634	)		—		(47,634	)
Total	$	—	$	(47,777	)	$	—	$	(47,777	)

During the period ended May 31, 2015, the amount of transfers between Level 3 and Level 2 was $163,970. Investments were transferred from Level 3 to Level 2 as a result of the availability of a pricing source supported by observable inputs.

Transfers between price levels are recognized at the beginning of the reporting period.

(i) See Investment Portfolio for additional detailed categorizations.

(j) Derivatives include value of options purchased, unrealized appreciation (depreciation) on credit default swap contracts, forward foreign currency exchange contracts, and written options, at value.

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

Statement of Assets and Liabilities

as of May 31, 2015 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $78,910,686)	$	79,251,014
Investment in Central Cash Management Fund (cost $2,606,076)		2,606,076
Total investments in securities, at value (cost $81,516,762)		81,857,090
Cash		900,613
Foreign currency, at value (cost $7,935)		7,878
Receivable for investments sold		563,270
Receivable for investments sold — when-issued securities		274,104
Interest receivable		986,461
Unrealized appreciation on bilateral swap contracts		13,676
Unrealized appreciation on forward foreign currency exchange contracts		83,845
Upfront payments paid on bilateral swap contracts		32,786
Foreign taxes recoverable		266
Other assets		1,824
Total assets		84,721,813
Liabilities
Payable for investments purchased		2,435,664
Payable for investments purchased — when-issued securities		886,765
Payable for Fund shares repurchased		10,474
Notes payable		22,000,000
Interest on notes payable		25,381
Options written, at value (premium received $7,130)		143
Unrealized depreciation on forward foreign currency exchange contracts		47,634
Accrued management fee		43,257
Accrued Trustees' fees		3,882
Other accrued expenses and payables		99,865
Total liabilities		25,553,065
Net assets, at value	$	59,168,748

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

Statement of Assets and Liabilities as of May 31, 2015 (Unaudited) (continued)
Net Assets Consist of
Distributions in excess of net investment income		(212,173	)
Net unrealized appreciation (depreciation) on: Investments		340,328
Swap contracts		13,676
Foreign currency		34,916
Written options		6,987
Accumulated net realized gain (loss)		(1,409,829	)
Paid-in capital		60,394,843
Net assets, at value		59,168,748
Net Asset Value
Net Asset Value per share ($59,168,748 ÷ 4,444,869 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)	$	13.31

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

Statement of Operations

for the six months ended May 31, 2015 (Unaudited)
Investment Income
Income: Interest	$	2,152,674
Dividends		7,628
Income distributions — Central Cash Management Fund		859
Total income		2,161,161
Expenses: Management fee		251,850
Services to shareholders		2,039
Custodian fee		35,633
Professional fees		48,782
Reports to shareholders		24,532
Trustees' fees and expenses		5,275
Interest expenses		129,494
Stock exchange listing fees		11,836
Other		27,563
Total expenses		537,004
Net investment income		1,624,157
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		(1,182,923	)
Swap contracts		88,315
Foreign currency		(22,086	)
		(1,116,694	)
Change in net unrealized appreciation (depreciation): Investments		346,754
Swap contracts		(79,309	)
Written options		526
Foreign currency		35,341
		303,312
Net gain (loss)		(813,382	)
Net increase (decrease) in net assets resulting from operations	$	810,775

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

Statement of Cash Flows

for the six months ended May 31, 2015 (Unaudited)
Increase (Decrease) in Cash: Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations	$	810,775
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) in operating activities: Purchases of long-term investments		(16,834,604	)
Net purchases, sales and maturities of short-term investments		(1,955,744	)
Net amortization of premium/(accretion of discount)		87,487
Proceeds from sales and maturities of long-term investments		23,015,789
(Increase) decrease in interest receivable		95,959
(Increase) decrease in other assets		1,552
(Increase) decrease in receivable for investments sold		120,807
(Increase) decrease on receivable for investments sold — when-issued securities		(274,104	)
(Increase) decrease in upfront payments paid/received on credit default swap contracts		3,391
(Increase) decrease in written options, at value		(526	)
Increase (decrease) in interest on notes payable		(19,048	)
Increase (decrease) in payable for investments purchased		2,186,914
Increase (decrease) in payable for investments purchased — when-issued securities		181,765
Increase (decrease) in other accrued expenses and payables		(34,938	)
Change in unrealized (appreciation) depreciation on investments		(346,754	)
Change in unrealized (appreciation) depreciation on swap contracts		79,309
Change in unrealized (appreciation) depreciation on forward foreign currency exchange contracts		(34,351	)
Net realized (gain) loss from investments		1,182,923
Cash provided (used) by operating activities		8,266,602
Cash Flows from Financing Activities
Net increase (decrease) in notes payable		(4,500,000	)
Payment for shares repurchased		(410,027	)
Distributions paid (net of reinvestment of distributions)		(2,657,871	)
Cash provided (used) by financing activities		(7,567,898	)
Increase (decrease) in cash		(698,704	)
Cash at beginning of period (including foreign currency)		209,787
Cash at end of period (including foreign currency)	$	908,491
Supplemental Disclosure
Interest paid on notes	$	(148,452	)

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended May 31, 2015 (Unaudited)			Year Ended November 30, 2014
Operations: Net investment income	$	1,624,157		$	3,836,397
Operations: Net investment income	$	1,624,157		$	3,836,397
Net realized gain (loss)		(1,116,694	)		1,345,829
Change in net unrealized appreciation (depreciation)		303,312			(2,364,913	)
Net increase (decrease) in net assets resulting from operations		810,775			2,817,313
Distributions to shareholders from: Net investment income		(1,963,641	)		(4,458,973	)
Net realized gains		(694,230	)		—
Total distributions		(2,657,871	)		(4,458,973	)
Fund share transactions: Cost of shares repurchased		(409,663	)		(2,674,982	)
Increase (decrease) in net assets		(2,256,759	)		(4,316,642	)
Net assets at beginning of period		61,425,507			65,742,149
Net assets at end of period (including distributions in excess of net investment income and undistributed net investment income of $212,173 and $127,311, respectively)	$	59,168,748		$	61,425,507
Other Information
Shares outstanding at beginning of period		4,479,857			4,694,846
Shares repurchased		(34,988	)		(214,989	)
Shares outstanding at end of period		4,444,869			4,479,857

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

Financial Highlights

				Years Ended November 30,
	Six Months Ended 5/31/15 (Unaudited)			2014			2013			2012			2011			2010
Selected Per Share Data
Net asset value, beginning of period	$	13.71		$	14.00		$	14.32		$	13.00		$	13.66		$	12.68
Income (loss) from investment operations: Net investment incomea		.36			.83			.92			1.08			1.14			1.18
Net realized and unrealized gain (loss)		(.17	)		(.23	)		(.14	)		1.43			(.46	)		.95
Total from investment operations		.19			.60			.78			2.51			.68			2.13
Less distributions from: Net investment income		(.44	)		(.96	)		(1.10	)		(1.19	)		(1.34	)		(1.15	)
Net realized gains		(.16	)		—			—			—			—			—
Total distributions		(.60	)		(.96	)		(1.10	)		(1.19	)		(1.34	)		(1.15	)
NAV accretion resulting from repurchases of shares at a discount to NAVa		.01			.07			—			—			.00	***		—
Net asset value, end of period	$	13.31		$	13.71		$	14.00		$	14.32		$	13.00		$	13.66
Market price, end of period	$	11.60		$	12.01		$	13.07		$	14.26		$	12.83		$	13.21
Total Return
Based on net asset value (%)b		2.10	**		5.58			5.78			19.96			5.33			18.32
Based on market price (%)b		1.58	**		(.93	)		(.83	)		21.04			7.50			30.72
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		59			61			66			67			61			64
Ratio of expenses (including interest expense) (%)		1.81	*		1.83			1.85			1.94			1.96			2.19
Ratio of expenses (excluding interest expense) (%)		1.38	*		1.35			1.33			1.30			1.33			1.53
Ratio of net investment income (%)		5.48	*		5.88			6.50			7.77			8.42			8.95
Portfolio turnover rate (%)		21	**		70			72			45			56			77
Total debt outstanding, end of period ($ thousands)		22,000			26,500			28,000			29,500			27,000			25,000
Asset coverage per $1,000 of debtc		3,689			3,318			3,348			3,278			3,257			3,565
a Based on average shares outstanding during the period. b Total return based on net asset value reflects changes in the Fund's net asset value during each period. Total return based on market price reflects changes in market price. Each figure assumes that dividend and capital gain distributions, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund's shares traded during the period. c Asset coverage equals the total net assets plus borrowings of the Fund divided by the borrowings outstanding at period end. * Annualized Not annualized * Amount is less than $.005.

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Strategic Income Trust (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end, diversified management investment company organized as a Massachusetts business trust.

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.

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 asked 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.

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.

Investments in open-end investment companies are valued at their net asset value each business day 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 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.

Securities Lending. The Fund is approved to participate in securities lending, but had no securities on loan during the six months ended May 31, 2015. 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 the 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 price. 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.

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.

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.

Loan Participations and Assignments. Loan Participations and Assignments are portions of loans originated by banks and sold in pieces to investors. These floating-rate loans ("Loans") in which the Fund invests are arranged between the borrower and one or more financial institutions ("Lenders"). These Loans may take the form of Senior Loans, which are corporate obligations often issued in connection with recapitalizations, acquisitions, leveraged buy outs and refinancing. The Fund invests in such Loans in the form of participations in Loans ("Participations") or assignments of all or a portion of Loans from third parties ("Assignments"). Participations typically result in the Fund having a contractual relationship with only the Lender, not with the borrower. The Fund has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In connection with purchasing Participations, the Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, or any rights of set off against the borrower, and the Fund will not benefit directly from any collateral supporting the Loan in which it has purchased the Participation. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. Assignments typically result in the Fund having a direct contractual relationship with the borrower, and the Fund may enforce compliance by the borrower with the terms of the loan agreement. Loans held by the Fund are generally in the form of Assignments, but the Fund may also invest in Participations. All Loans involve interest rate risk, liquidity risk and credit risk, including the potential default or insolvency of the borrower.

Statement of Cash Flows. Information on financial transactions which have been settled through the receipt and disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows represents the cash and foreign currency positions at the Fund's custodian bank at May 31, 2015.

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 November 30, 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 monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The 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 forward currency contracts, swap contracts, certain securities sold at a loss and premium amortization on debt securities. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.

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

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

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis net of foreign withholding taxes. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. 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.

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 six months ended May 31, 2015, 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 May 31, 2015 is included in a table following the Fund's Investment Portfolio. For the six months ended May 31, 2015, the investment in credit default swap contracts sold had a total notional amount generally indicative of a range from approximately $360,000 to $1,385,000.

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 on 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, will require cash settlement by the Fund if exercised. For the six months ended May 31, 2015, 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 or currencies hedged.

A summary of the open purchased option contracts as of May 31, 2015 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 six months ended May 31, 2015, the investment in written option contracts had a total value generally indicative of a range from $0 to approximately $1,000, and purchased option contracts had a total value generally indicative of a range from $0 to approximately $2,000.

Forward Foreign Currency Exchange Contracts. The Fund is subject to foreign exchange rate risk in its securities denominated in foreign currencies. Changes in exchange rates between foreign currencies and the U.S. dollar may affect the U.S. dollar value of foreign securities or the income or gains received on these securities. 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 six months ended May 31, 2015, 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 for non-hedging purposes to seek to enhance potential gains.

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 May 31, 2015 is included in a table following the Fund's Investment Portfolio. For the six months ended May 31, 2015, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $196,000 to $2,543,000, and the investment in forward currency contracts long vs. U.S. dollars had a total contract value generally indicative of a range from approximately $282,000 to $3,036,000. The investment in forward currency contracts long vs. other foreign currencies sold had a total contract value generally indicative of a range from $0 to approximately $703,000.

The following tables summarize the value of the Fund's derivative instruments held as of May 31, 2015 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		Total
Interest Rate Contracts (a)	$	470	$	—	$	—	$	470
Foreign Exchange Contracts (b)		—		83,845		—		83,845
Credit Contracts (a)		—		—		13,676		13,676
	$	470	$	83,845	$	13,676	$	97,991
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) Unrealized appreciation on forward foreign currency exchange contracts

Liability Derivatives	Written Options			Forward Contracts			Total
Interest Rate Contracts (a)	$	(143	)	$	—		$	(143	)
Foreign Exchange Contracts (b)		—			(47,634	)		(47,634	)
	$	(143	)	$	(47,634	)	$	(47,777	)
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Options written, at value (b) 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 six months ended May 31, 2015 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:

Realized Gain (Loss)	Forward Contracts			Swap Contracts		Total
Credit Contracts (a)	$	—		$	88,315	$	88,315
Foreign Exchange Contracts (b)		(2,817	)		—		(2,817	)
	$	(2,817	)	$	88,315	$	85,498
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Net realized gain (loss) from swap contracts (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			Total
Interest Rate Contracts (a)	$	(1,100	)	$	526	$	—	$	—		$	(574	)
Credit Contracts (a)		—			—		—		(79,309	)		(79,309	)
Foreign Exchange Contracts (b)		—			—		34,351		—			34,351
	$	(1,100	)	$	526	$	34,351	$	(79,309	)	$	(45,532	)
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 and swap contracts, 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 May 31, 2015, 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			Collateral Received		Net Amount of Derivative Assets
BNP Paribas	$	42,939	$	(23,151	)	$	—	$	19,788
Barclays Bank PLC		1,411		(1,411	)		—		—
Citigroup, Inc.		3		—			—		3
Credit Suisse		2,519		—			—		2,519
Morgan Stanley		31,312		(10,500	)		—		20,812
Nomura International PLC		9,891		(4,697	)		—		5,194
Bank of America		9,746		—			—		9,746
UBS AG		170		—			—		170
	$	97,991	$	(39,759	)	$	—	$	58,232
Counterparty	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Collateral Pledged		Net Amount of Derivative Liabilities
Barclays Bak PLC	$	9,429	$	(1,411	)	$	—	$	8,018
BNP Paribas		23,151		(23,151	)		—		—
Morgan Stanley		10,500		(10,500	)		—		—
Nomura International PLC		4,697		(4,697	)		—		—
	$	47,777	$	(39,759	)	$	—	$	8,018

C. Purchases and Sales of Securities

During the six months ended May 31, 2015, purchases and sales of investment securities (excluding short-term investments) aggregated $16,834,604 and $23,015,789, respectively.

For the six months ended May 31, 2015, transactions for written options on interest rate swap contracts were as follows:

	Contract Amount		Premiums
Outstanding, beginning of period		200,000	$	7,130
Outstanding, end of period		200,000	$	7,130

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. In addition to portfolio management services, the Advisor provides certain administrative services in accordance with the Investment Management Agreement. The management fee payable under the Investment Management Agreement is equal to an annual rate of 0.85% of the Fund's average weekly net assets, computed and accrued daily and payable monthly.

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 between 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 six months ended May 31, 2015, the amount charged to the Fund by DSC aggregated $523, of which $274 is unpaid.

Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the six months ended May 31, 2015, the amount charged to the Fund by DIMA included in the Statement of Operations under "Reports to shareholders" aggregated $8,493, all of which 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 Vehicle. The Fund may invest uninvested cash balances in Central Cash Management Fund, which is managed by the Advisor. The Fund indirectly bears its proportionate share of the expenses of Central Cash Management Fund. Central Cash Management Fund does not pay the Advisor an investment management fee. Central Cash Management Fund seeks a high level of current income consistent with liquidity and the preservation of capital.

E. Investing in High-Yield Securities

The Fund's performance could be hurt if a security declines in credit quality or goes into default, or if an issuer does not make timely payments of interest or principal. Because the issuers of high-yield debt securities or junk bonds (debt securities rated below the fourth-highest category) may be in uncertain financial health, the risk of loss from default by the issuer is significantly greater. Prices and yields of high-yield securities will fluctuate over time and, during periods of economic uncertainty, volatility of high-yield securities may adversely affect a fund's net asset value. Because the Fund may invest in securities not paying current interest or in securities already in default, these risks may be more pronounced.

F. Investing in Emerging Markets

Investing in emerging markets may involve special risks and considerations not typically associated with investing in developed markets. These risks include revaluation of currencies, high rates of inflation or deflation, repatriation restrictions on income and capital, and future adverse political, social and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls or delayed settlements, and may have prices that are more volatile or less easily assessed than those of comparable securities of issuers in developed markets.

G. Borrowings

The Fund has a secured line of credit with a commercial bank in an amount up to $30,000,000 with a maturity date of December 23, 2015. Loans under the facility generally bear interest at the overnight LIBOR rate plus 0.80% (0.85% prior to December 24, 2014). A commitment fee on the unused portion of the facility is charged to the Fund and is included with "interest expense" in the Statement of Operations.

At May 31, 2015, the Fund had a notes payable outstanding of $22,000,000. The weighted average outstanding daily balance of all loans during the six months ended May 31, 2015 was approximately $23,850,000, with a weighted average annualized borrowing cost of 1.09%. The borrowings were valued at cost, which approximates fair value.

Leverage involves risks and special considerations for the Fund's stockholders, including the likelihood of greater volatility of net asset value and market price of, and dividends on, the Fund's shares than a comparable portfolio without leverage; the risk that fluctuations in interest rates on such borrowings will reduce the return to stockholders; and the effect of leverage in a declining market, which is likely to cause a greater decline in the net asset value of the Fund's shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the Fund's shares.

Changes in the value of the Fund's portfolio will be borne by the stockholders. If there is a net decrease (or increase) in the value of the Fund's investment portfolio, leverage will decrease (or increase) the net asset value per share to a greater extent than if leverage were not used. It is also possible that the Fund will be required to sell assets at a time when it would otherwise not do so, possibly at a loss, in order to meet payment obligations on borrowings to comply with asset coverage or other restrictions imposed by the lender. The Fund is subject to certain restrictions on its investments under the terms of its credit agreement. Moreover, certain covenants contained in the credit agreement impose asset coverage or portfolio composition requirements that are more stringent than those imposed on the Fund by the 1940 Act.

There is no assurance that the Fund's leveraging strategy will be successful.

H. Share Repurchases

The Board has authorized the Fund to effect periodic repurchases of its outstanding shares in the open market from time to time when the Fund's shares trade at a discount to their net asset value. During the six months ended May 31, 2015, the Fund repurchased 34,988 shares of beneficial interest on the open market at a total cost of $409,663 ($11.71 average per share). The average discount of these purchases, comparing the purchase price to net asset value at the time of purchase, was 12.22%.

Dividend Reinvestment and Cash Purchase Plan

The Board of Trustees of the Fund has established a Dividend Reinvestment and Cash Purchase Plan (the "Plan") for shareholders that elect to have all dividends and distributions automatically reinvested in shares of the Fund (each a "Participant"). DST Systems, Inc. (the "Plan Agent") has been appointed by the Fund’s Board of Trustees to act as agent for each Participant.

A summary of the Plan is set forth below. Shareholders may obtain a copy of the entire Dividend Reinvestment and Cash Purchase Plan by visiting the Fund’s Web site at deutschefunds.com or by calling (800) 294-4366.

If you wish to participate in the Plan and your shares are held in your own name, contact DeAWM Service Company (the "Transfer Agent") at P.O. Box 219066, Kansas City, Missouri 64121-9066 or (800) 294-4366 for the appropriate form. Current shareholders may join the Plan by either enrolling their shares with the Transfer Agent or making an initial cash deposit of at least $250 with the Transfer Agent. First-time investors in the Fund may join the Plan by making an initial cash deposit of at least $250 with the Transfer Agent. Initial cash deposits will be invested within approximately 30 days. If your shares are held in the name of a broker or other nominee, you should contact the broker or nominee in whose name your shares are held to determine whether and how you may participate in the Plan.

The Transfer Agent will establish a Dividend Investment Account (the "Account") for each Participant in the Plan. The Transfer Agent will credit to the Account of each Participant any cash dividends and capital gains distributions (collectively, "Distributions") paid on shares of the Fund (the "Shares") and any voluntary cash contributions made pursuant to the Plan. Shares in a Participant’s Account are transferable upon proper written instructions to the Transfer Agent.

If, on the valuation date for a Distribution, Shares are trading at a discount from net asset value per Share, the Plan Agent shall apply the amount of such Distribution payable to a Participant (less a Participant’s pro rata share of brokerage commissions incurred with respect to open-market purchases in connection with the reinvestment of such Distribution) to the purchase on the open market of Shares for a Participant’s Account. If, on the valuation date for a Distribution, Shares are trading at a premium over net asset value per Share, the Fund will issue on the payment date, Shares valued at net asset value per Share on the valuation date to the Transfer Agent in the aggregate amount of the funds credited to a Participant’s Account. The Fund will increase the price at which Shares may be issued under the Plan to 95% of the fair market value of the Shares on the valuation date if the net asset value per Share of the Shares on the valuation date is less than 95% of the fair market value of the Shares on the valuation date. The valuation date will be the payment date for Distributions. Open-market purchases will be made on or shortly after the valuation date for Distributions, and in no event more than 30 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities law.

A Participant may from time to time make voluntary cash contributions to his or her Account in a minimum amount of $100 in any month (with a $36,000 annual limit) for the purchase on the open market of Shares for the Participant’s Account. Such voluntary contributions will be invested by the Plan Agent on or shortly after the 15th of each month and in no event more than 30 days after such dates, except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities law. Voluntary cash contributions received from a Participant on or prior to the fifth day preceding the 15th of each month will be applied by the Plan Agent to the purchase of additional Shares as of that investment date. No interest will be paid on voluntary cash contributions held until investment. Consequently, Participants are strongly urged to ensure that their payments are received by the Transfer Agent on or prior to the fifth day preceding the 15th of any month. Voluntary cash contributions should be made in U.S. dollars and be sent by first-class mail, postage prepaid only to the following address (deliveries to any other address do not constitute valid delivery):

Deutsche Strategic Income Trust

Dividend Reinvestment and Cash Purchase Plan

c/o DeAWM Service Company

P.O. Box 219066

Kansas City, MO 64121-9066

(800) 294-4366

Participants may withdraw their entire voluntary cash contribution by written notice received by the Transfer Agent not less than 48 hours before such payment is to be invested.

The cost of Shares acquired for each Participant’s Account in connection with the Plan shall be determined by the average cost per Share, including brokerage commissions, of the Shares acquired. There will be no brokerage charges with respect to Shares issued directly by the Fund as a result of Distributions. However, each Participant will pay a pro rata share of brokerage commissions incurred with respect to open market purchases.

The reinvestment of Distributions does not relieve the Participant of any tax that many be payable on the Distributions. The Transfer Agent will report to each Participant the taxable amount of Distributions credited to his or her Account. Participants will be treated for federal income tax purposes as receiving the amount of the Distributions made by the Fund, which amount generally will be either equal to the amount of the cash distribution the Participant would have received if the Participant had elected to receive cash or, for Shares issued by the Fund, the fair market value of the Shares issued to the Participant.

The Fund may amend the Plan at any time or times but, only by mailing to each Participant appropriate written notice at least 90 days prior to the effective date thereof except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority in which case such amendment shall be effective as soon as practicable. The Plan also may be terminated by the Fund.

Shareholders may withdraw from the Plan at any time by giving the Transfer Agent a written notice. A notice of withdrawal will be effective immediately following receipt of the notice by the Transfer Agent provided the notice is received by the Transfer Agent at least ten calendar days prior to the record date for the Distribution; otherwise such withdrawal will be effective after the investment of the current Distribution. When a Participant withdraws from the Plan, or when the Plan is terminated by the Fund, the Participant will receive a certificate for full Shares in the Account, plus a check for any fractional Shares based on market price; or, if a Participant so desires, the Transfer Agent will notify the Plan Agent to sell his or her Shares in the Plan and send the proceeds to the Participant, less brokerage commissions.

All correspondence and inquiries concerning the Plan, and requests for additional information about the Plan, should be directed to DeAWM Service Company at P.O. Box 219066, Kansas City, Missouri 64121-9066 or (800) 294-4366.

Additional Information


Automated Information Line		Deutsche AWM Closed-End Fund Info Line (800) 349-4281
Web Site		deutschefunds.com Obtain fact sheets, financial reports, press releases and webcasts when available.
Written Correspondence		Deutsche Asset & Wealth Management Attn: Secretary of the Deutsche Funds One Beacon Street Boston, MA 02108
Legal Counsel		Vedder Price P.C. 222 North LaSalle Street Chicago, IL 60601
Dividend Reinvestment Plan Agent		DST Systems, Inc. 333 W. 11th Street, 5th Floor Kansas City, MO 64105
Shareholder Service Agent and Transfer Agent		DeAWM Service Company P.O. Box 219066 Kansas City, MO 64121-9066 (800) 294-4366
Custodian		State Street Bank and Trust Company State Street Financial Center One Lincoln Street Boston, MA 02111
Independent Registered Public Accounting Firm		Ernst & Young LLP 200 Clarendon Street Boston, MA 02116
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 as of the month-end are posted on deutschefunds.com on or after the last day of the following month. More frequent posting of portfolio holdings information may be made from time to time on deutschefunds.com.
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.
NYSE Symbol		KST
CUSIP Number		25160F 109

Privacy Statement

FACTS	What Does Deutsche Asset & Wealth Management Do With Your Personal Information?
Why?	Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share and protect your personal information. Please read this notice carefully to understand what we do.
What?	The types of personal information we collect and share can include: — Social Security number — Account balances — Purchase and transaction history — Bank account information — Contact information such as mailing address, e-mail address and telephone number
How?	All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information, the reasons Deutsche Asset & Wealth Management chooses to share and whether you can limit this sharing.
Reasons we can share your personal information		Does Deutsche Asset & Wealth Management share?	Can you limit this sharing?
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders or legal investigations		Yes	No
For our marketing purposes — to offer our products and services to you		Yes	No
For joint marketing with other financial companies		No	We do not share
For our affiliates' everyday business purposes — information about your transactions and experiences		No	We do not share
For our affiliates' everyday business purposes — information about your creditworthiness		No	We do not share
For non-affiliates to market to you		No	We do not share
Questions?	Call (800) 728-3337 or e-mail us at service@db.com


Who we are
Who is providing this notice?	DeAWM Distributors, Inc.; Deutsche Investment Management Americas Inc.; DeAWM Trust Company; the Deutsche Funds
What we do
How does Deutsche Asset & Wealth Management protect my personal information?	To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does Deutsche Asset & Wealth Management collect my personal information?	We collect your personal information, for example. When you: — open an account — give us your contact information — provide bank account information for ACH or wire transactions — tell us where to send money — seek advice about your investments
Why can't I limit all sharing?	Federal law gives you the right to limit only — sharing for affiliates' everyday business purposes — information about your creditworthiness — affiliates from using your information to market to you — sharing for non-affiliates to market to you State laws and individual companies may give you additional rights to limit sharing.
Definitions
Affiliates	Companies related by common ownership or control. They can be financial or non-financial companies. Our affiliates include financial companies with the DWS or Deutsche Bank ("DB") name, such as DB AG Frankfurt and DB Alex Brown.
Non-affiliates	Companies not related by common ownership or control. They can be financial and non-financial companies. Non-affiliates we share with include account service providers, service quality monitoring services, mailing service providers and verification services to help in the fight against money laundering and fraud.
Joint marketing	A formal agreement between non-affiliated financial companies that together market financial products or services to you. Deutsche Asset & Wealth Management does not jointly market.
		Rev. 08/2014

Notes


ITEM 2.	CODE OF ETHICS

	Not applicable.

ITEM 3.	AUDIT COMMITTEE FINANCIAL EXPERT

	Not applicable

ITEM 4.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

	Not applicable

ITEM 5.	AUDIT COMMITTEE OF LISTED REGISTRANTS

	Not applicable

ITEM 6.	SCHEDULE OF INVESTMENTS

	Not applicable

ITEM 7.	DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

	Not applicable

ITEM 8.	PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

	Not applicable

ITEM 9.	PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS

	(a)		(b)		(c)		(d)
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
December 1 through December 31		6,300	$	11.63		n/a		n/a
January 1 through January 31		5,754	$	11.63		n/a		n/a
February 1 through February 28		5,434	$	11.79		n/a		n/a
March 1 through March 31		6,600	$	11.72		n/a		n/a
April 1 through April 30		5,200	$	11.74		n/a		n/a
May 1 through May 31		5,700	$	11.61		n/a		n/a
Total		34,988	$	11.71		n/a

The Fund may from time to time repurchase shares in the open market.


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)	Not applicable

	(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 Strategic Income Trust


By:	/s/Brian E. Binder Brian E. Binder President

Date:	July 30, 2015

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:	July 30, 2015



By:	/s/Paul Schubert Paul Schubert Chief Financial Officer and Treasurer

Date:	July 30, 2015