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
345 Park Avenue
New York, NY 10154-0004
(Name and Address of Agent for Service)
| Date of fiscal year end: | 11/30 |
| Date of reporting period: | 5/31/2017 |
| ITEM 1. | REPORT TO STOCKHOLDERS |
May 31, 2017
Semiannual
Report
to Shareholders
Deutsche Strategic Income Trust
Ticker Symbol: KST
Contents
|
3 Performance Summary 4 Important Notice 5 Portfolio Management Team 5 Portfolio Summary 8 Investment Portfolio 30 Statement of Assets and Liabilities 31 Statement of Operations 32 Statement of Cash Flows 33 Statements of Changes in Net Assets 34 Financial Highlights 35 Notes to Financial Statements 44 Dividend Reinvestment and Cash Purchase Plan 47 Additional Information 49 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 and less liquid 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 Management represents the asset management activities conducted by Deutsche Bank AG or any of its subsidiaries.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Performance Summary May 31, 2017 (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 5/31/17 | ||||
| Deutsche Strategic Income Trust | 6-Month‡ | 1-Year | 5-Year | 10-Year |
| Based on Net Asset Value(a) | 5.13% | 9.37% | 6.49% | 7.78% |
| Based on Market Price(a) | 8.32% | 12.90% | 5.25% | 7.15% |
| JPMorgan Emerging Markets Bond Global Diversified Index(b) | 7.76% | 9.77% | 6.48% | 7.25% |
| BofA Merrill Lynch US High Yield Master II Constrained Index(c) | 6.85% | 13.84% | 7.33% | 7.43% |
| Morningstar Closed-End High Yield Bond Funds Category (Based on Net Asset Value)(d) | 7.82% | 15.41% | 8.40% | 6.57% |
‡ 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, 2017 was 2.79% (1.98% excluding interest expense).
(b) 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.
(c) The BofA Merrill Lynch US High Yield Master II Constrained Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
(d) 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 5/31/17 | As of 11/30/16 | |
| Net Asset Value | $ 12.99 | $ 12.60 |
| Market Price | $ 12.45 | $ 11.72 |
| Premium (discount) | (4.16)% | (6.98)% |
Prices and net asset value fluctuate and are not guaranteed.
| Distribution Information | |
|
Six Months as of 5/31/17: Income Dividends |
$ .24 |
| May Income Dividend | $ .0400 |
| Current Annualized Distribution Rate (Based on Net Asset Value) as of 5/31/17† | 3.70% |
| Current Annualized Distribution Rate (Based on Market Price) as of 5/31/17† | 3.86% |
† Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value/market price on May 31, 2017. 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.
Important Notice
On July 13, 2016, the Board of Trustees approved the termination of the Fund, pursuant to which the Fund will make a liquidating distribution to shareholders no later than December 31, 2018.
Portfolio Management Team
Gary Russell, CFA, Managing Director
Portfolio Manager of the fund. Began managing the fund in 2006.
— Joined Deutsche Asset 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.
Thomas R. Bouchard, Director
Portfolio Manager of the fund. Began managing the fund in 2016.
— Joined Deutsche Asset Management in 2006 with six years of industry experience. Prior to joining, served as a High Yield Investment Analyst at Flagship Capital Management. He also served as an officer in the US Army from 1989 to 1997.
— Portfolio Manager for High Yield Strategies: New York.
— BS, University of Wisconsin — Madison; MBA in Finance, Boston College; MA in Strategic Studies from US Army War College.
Portfolio Summary (Unaudited)
| Asset Allocation (As a % of Investment Portfolio) | 5/31/17 | 11/30/16 |
| Corporate Bonds | 68% | 63% |
| Loan Participations and Assignments | 24% | 27% |
| Government & Agency Obligations | 3% | 3% |
| Asset-Backed | 3% | 3% |
| Cash Equivalents | 2% | 4% |
| Convertible Bonds | 0% | — |
| 100% | 100% |
|
Sector Diversification (As a % of Investment Portfolio excluding Cash Equivalents) |
5/31/17 | 11/30/16 |
| Consumer Discretionary | 26% | 25% |
| Materials | 16% | 15% |
| Industrials | 10% | 11% |
| Energy | 10% | 9% |
| Telecommunication Services | 8% | 9% |
| Health Care | 6% | 7% |
| Utilities | 5% | 6% |
| Information Technology | 4% | 3% |
| Consumer Staples | 4% | 4% |
| Financials | 4% | 4% |
| Emerging-Markets Sovereign Bonds | 3% | 3% |
| Asset-Backed | 2% | 3% |
| Real Estate | 2% | 1% |
| 100% | 100% |
|
Quality (Excludes Cash Equivalents) |
5/31/17 | 11/30/16 |
| AA | — | 0% |
| A | 0% | — |
| BBB | 21% | 22% |
| BB | 58% | 60% |
| B | 19% | 17% |
| Below B | 2% | 1% |
| Not Rated | 0% | 0% |
| 100% | 100% |
The quality ratings represent the higher of Moody's Investors Service, Inc. ("Moody's"), Fitch Ratings, Inc. ("Fitch") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's, Fitch and S&P represent their opinions as to the quality of the securities they rate. Credit quality measures a bond issuer's ability to repay interest and principal in a timely manner. Ratings are relative and subjective and are not absolute standards of quality. Credit quality does not remove market risk and is subject to change.
| Interest Rate Sensitivity | 5/31/17 | 11/30/16 |
| Effective Maturity | 4.8 years | 4.8 years |
| Effective Duration | 3.8 years | 3.8 years |
| Leverage (As a % of Total Assets) | 5/31/17 | 11/30/16 |
| 26% | 27% |
Effective maturity is the weighted average of the maturity date of bonds held by the fund taking into consideration any available maturity shortening features.
Effective duration is an approximate measure of the fund's sensitivity to interest rate changes taking into consideration any maturity shortening features.
Leverage results in additional risks and can magnify the effect of any gains or losses to greater extent than if leverage were not used.
Portfolio holdings and characteristics are subject to change.
For more complete details about the fund's investment portfolio, see page 8. A fact sheet is available on deutschefunds.com or upon request. Please see the Additional Information section on page 47 for contact information.
Investment Portfolio as of May 31, 2017 (Unaudited)
| Principal Amount ($)(a) | Value ($) | |||
| Corporate Bonds 92.3% | ||||
| Consumer Discretionary 24.9% | ||||
| 1011778 B.C. Unlimited Liability Co.: | ||||
| 144A, 4.25%, 5/15/2024 | 140,000 | 140,000 | ||
| 144A, 4.625%, 1/15/2022 | 40,000 | 41,120 | ||
| Adient Global Holdings Ltd., 144A, 4.875%, 8/15/2026 | 200,000 | 200,688 | ||
| Allison Transmission, Inc., 144A, 5.0%, 10/1/2024 | 150,000 | 153,000 | ||
| Ally Financial, Inc.: | ||||
| 3.25%, 2/13/2018 | 265,000 | 267,279 | ||
| 4.125%, 3/30/2020 | 590,000 | 609,812 | ||
| 5.75%, 11/20/2025 | 200,000 | 207,750 | ||
| Altice Financing SA, 144A, 7.5%, 5/15/2026 | 210,000 | 231,262 | ||
| Altice U.S. Finance I Corp., 144A, 5.5%, 5/15/2026 | 210,000 | 219,975 | ||
| AMC Entertainment Holdings, Inc., 144A, 5.875%, 11/15/2026 | 95,000 | 98,016 | ||
| AMC Networks, Inc., 5.0%, 4/1/2024 | 265,000 | 268,972 | ||
| American Axle & Manufacturing, Inc.: | ||||
| 144A, 6.25%, 4/1/2025 | 145,000 | 143,369 | ||
| 144A, 6.5%, 4/1/2027 | 175,000 | 172,812 | ||
| Asbury Automotive Group, Inc., 6.0%, 12/15/2024 | 295,000 | 301,822 | ||
| Ashtead Capital, Inc., 144A, 6.5%, 7/15/2022 | 120,000 | 124,350 | ||
| Ashton Woods U.S.A. LLC, 144A, 6.875%, 2/15/2021 | 130,000 | 132,600 | ||
| Beacon Roofing Supply, Inc., 6.375%, 10/1/2023 | 55,000 | 59,400 | ||
| Boyd Gaming Corp., 6.875%, 5/15/2023 | 50,000 | 54,125 | ||
| CalAtlantic Group, Inc., 5.25%, 6/1/2026 | 119,000 | 122,272 | ||
| Caleres, Inc., 6.25%, 8/15/2023 | 40,000 | 41,700 | ||
| Carlson Travel, Inc., 144A, 9.5%, 12/15/2024 | 200,000 | 206,000 | ||
| CCO Holdings LLC: | ||||
| 144A, 5.125%, 5/1/2023 | 120,000 | 126,226 | ||
| 144A, 5.125%, 5/1/2027 | 160,000 | 163,900 | ||
| 144A, 5.5%, 5/1/2026 | 765,000 | 808,620 | ||
| 144A, 5.875%, 4/1/2024 | 105,000 | 112,796 | ||
| 144A, 5.875%, 5/1/2027 | 155,000 | 165,075 | ||
| Cequel Communications Holdings I LLC: | ||||
| 144A, 5.125%, 12/15/2021 | 214,000 | 218,280 | ||
| 144A, 6.375%, 9/15/2020 | 19,000 | 19,475 | ||
| Clear Channel Worldwide Holdings, Inc., Series A, 7.625%, 3/15/2020 | 20,000 | 19,800 | ||
| CSC Holdings LLC: | ||||
| 5.25%, 6/1/2024 | 80,000 | 81,700 | ||
| 144A, 5.5%, 4/15/2027 | 310,000 | 324,669 | ||
| Cumberland Farms, Inc., 144A, 6.75%, 5/1/2025 | 32,000 | 33,520 | ||
| Dana Financing Luxembourg Sarl: | ||||
| 144A, 5.75%, 4/15/2025 | 205,000 | 214,225 | ||
| 144A, 6.5%, 6/1/2026 | 160,000 | 171,600 | ||
| Dana, Inc.: | ||||
| 5.375%, 9/15/2021 | 207,000 | 214,245 | ||
| 5.5%, 12/15/2024 | 55,000 | 57,200 | ||
| DISH DBS Corp.: | ||||
| 4.625%, 7/15/2017 | 400,000 | 400,500 | ||
| 5.875%, 7/15/2022 | 450,000 | 480,375 | ||
| 6.75%, 6/1/2021 | 30,000 | 33,225 | ||
| Dollar Tree, Inc.: | ||||
| 5.25%, 3/1/2020 | 315,000 | 324,450 | ||
| 5.75%, 3/1/2023 | 105,000 | 111,195 | ||
| Eldorado Resorts, Inc., 144A, 6.0%, 4/1/2025 | 70,000 | 73,588 | ||
| Fiat Chrysler Automobiles NV, 4.5%, 4/15/2020 | 310,000 | 316,587 | ||
| Goodyear Tire & Rubber Co.: | ||||
| 5.0%, 5/31/2026 | 130,000 | 133,981 | ||
| 5.125%, 11/15/2023 | 60,000 | 63,150 | ||
| Group 1 Automotive, Inc.: | ||||
| 5.0%, 6/1/2022 | 150,000 | 152,250 | ||
| 144A, 5.25%, 12/15/2023 | 210,000 | 212,625 | ||
| Hanesbrands, Inc., 144A, 4.625%, 5/15/2024 | 110,000 | 110,000 | ||
| HD Supply, Inc.: | ||||
| 144A, 5.25%, 12/15/2021 | 85,000 | 89,548 | ||
| 144A, 5.75%, 4/15/2024 | 55,000 | 58,644 | ||
| Hilton Worldwide Finance LLC, 144A, 4.625%, 4/1/2025 | 50,000 | 51,750 | ||
| Hot Topic, Inc., 144A, 9.25%, 6/15/2021 | 25,000 | 25,375 | ||
| Lennar Corp.: | ||||
| 4.125%, 1/15/2022 | 130,000 | 133,250 | ||
| 4.5%, 4/30/2024 | 40,000 | 40,450 | ||
| 4.75%, 11/15/2022 | 150,000 | 156,586 | ||
| MDC Partners, Inc., 144A, 6.5%, 5/1/2024 | 45,000 | 45,338 | ||
| Mediacom Broadband LLC, 6.375%, 4/1/2023 | 155,000 | 162,362 | ||
| NCL Corp., Ltd.: | ||||
| 144A, 4.625%, 11/15/2020 | 85,000 | 87,125 | ||
| 144A, 4.75%, 12/15/2021 | 80,000 | 82,400 | ||
| Nielsen Finance LLC, 144A, 5.0%, 4/15/2022 | 45,000 | 46,294 | ||
| Penn National Gaming, Inc., 144A, 5.625%, 1/15/2027 | 105,000 | 106,181 | ||
| Penske Automotive Group, Inc., 5.5%, 5/15/2026 | 85,000 | 84,788 | ||
| PetSmart, Inc., 144A, 5.875%, 6/1/2025 | 45,000 | 45,169 | ||
| PulteGroup, Inc., 4.25%, 3/1/2021 | 320,000 | 332,000 | ||
| Quebecor Media, Inc., 5.75%, 1/15/2023 | 80,000 | 84,800 | ||
| Rivers Pittsburgh Borrower LP, 144A, 6.125%, 8/15/2021 | 25,000 | 25,313 | ||
| Sally Holdings LLC, 5.625%, 12/1/2025 | 150,000 | 153,750 | ||
| Scientific Games International, Inc., 144A, 7.0%, 1/1/2022 | 340,000 | 362,950 | ||
| Seminole Hard Rock Entertainment, Inc., 144A, 5.875%, 5/15/2021 | 50,000 | 50,694 | ||
| SFR Group SA: | ||||
| 144A, 6.0%, 5/15/2022 | 290,000 | 303,412 | ||
| 144A, 7.375%, 5/1/2026 | 315,000 | 340,789 | ||
| Sirius XM Radio, Inc., 144A, 5.375%, 7/15/2026 | 150,000 | 153,750 | ||
| Springs Industries, Inc., 6.25%, 6/1/2021 | 115,000 | 118,737 | ||
| Suburban Propane Partners LP, 5.75%, 3/1/2025 | 45,000 | 44,888 | ||
| Tenneco, Inc., 5.0%, 7/15/2026 | 110,000 | 111,238 | ||
| Toll Brothers Finance Corp., 4.875%, 11/15/2025 | 95,000 | 98,800 | ||
| TRI Pointe Group, Inc., 4.875%, 7/1/2021 | 610,000 | 634,400 | ||
| Unitymedia Hessen GmbH & Co., KG, 144A, 5.5%, 1/15/2023 | 300,000 | 312,000 | ||
| UPCB Finance IV Ltd., 144A, 5.375%, 1/15/2025 | 305,000 | 316,559 | ||
| Viacom, Inc.: | ||||
| 5.875%, 2/28/2057 | 40,000 | 41,300 | ||
| 6.25%, 2/28/2057 | 45,000 | 46,285 | ||
| Viking Cruises Ltd.: | ||||
| 144A, 6.25%, 5/15/2025 | 80,000 | 77,600 | ||
| 144A, 8.5%, 10/15/2022 | 80,000 | 83,800 | ||
| Virgin Media Secured Finance PLC, 144A, 5.5%, 8/15/2026 | 200,000 | 206,000 | ||
| WMG Acquisition Corp., 144A, 5.0%, 8/1/2023 | 45,000 | 46,069 | ||
| 14,099,975 | ||||
| Consumer Staples 2.5% | ||||
| Aramark Services, Inc.: | ||||
| 4.75%, 6/1/2026 | 305,000 | 316,376 | ||
| 5.125%, 1/15/2024 | 60,000 | 63,300 | ||
| B&G Foods, Inc., 5.25%, 4/1/2025 | 215,000 | 222,525 | ||
| Chobani LLC, 144A, 7.5%, 4/15/2025 | 25,000 | 26,293 | ||
| Cott Beverages, Inc., 5.375%, 7/1/2022 | 145,000 | 150,619 | ||
| JBS Investments GmbH, 144A, 7.25%, 4/3/2024 | 200,000 | 185,500 | ||
| JBS U.S.A. LUX SA: | ||||
| 144A, 5.75%, 6/15/2025 | 60,000 | 58,238 | ||
| 144A, 7.25%, 6/1/2021 | 205,000 | 204,487 | ||
| 144A, 8.25%, 2/1/2020 | 65,000 | 65,650 | ||
| Post Holdings, Inc.: | ||||
| 144A, 5.5%, 3/1/2025 | 60,000 | 62,850 | ||
| 144A, 5.75%, 3/1/2027 | 75,000 | 78,491 | ||
| 1,434,329 | ||||
| Energy 13.2% | ||||
| Antero Midstream Partners LP, 144A, 5.375%, 9/15/2024 | 70,000 | 71,662 | ||
| Antero Resources Corp.: | ||||
| 5.125%, 12/1/2022 | 100,000 | 101,125 | ||
| 5.375%, 11/1/2021 | 85,000 | 87,444 | ||
| 5.625%, 6/1/2023 | 60,000 | 61,500 | ||
| Blue Racer Midstream LLC, 144A, 6.125%, 11/15/2022 | 65,000 | 66,788 | ||
| Carrizo Oil & Gas, Inc., 6.25%, 4/15/2023 | 75,000 | 72,937 | ||
| Cheniere Corpus Christi Holdings LLC: | ||||
| 144A, 5.125%, 6/30/2027 | 105,000 | 106,444 | ||
| 5.875%, 3/31/2025 | 105,000 | 112,744 | ||
| 7.0%, 6/30/2024 | 100,000 | 112,000 | ||
| Chesapeake Energy Corp.: | ||||
| 144A, 8.0%, 1/15/2025 | 100,000 | 99,500 | ||
| 144A, 8.0%, 6/15/2027 (b) | 40,000 | 39,200 | ||
| Continental Resources, Inc.: | ||||
| 4.5%, 4/15/2023 | 165,000 | 161,287 | ||
| 5.0%, 9/15/2022 | 580,000 | 580,725 | ||
| Crestwood Midstream Partners LP: | ||||
| 144A, 5.75%, 4/1/2025 | 80,000 | 81,800 | ||
| 6.25%, 4/1/2023 | 40,000 | 41,475 | ||
| DCP Midstream Operating LP, 2.7%, 4/1/2019 | 200,000 | 199,000 | ||
| Diamondback Energy, Inc., 144A, 4.75%, 11/1/2024 | 130,000 | 130,325 | ||
| Energy Transfer Equity LP, 7.5%, 10/15/2020 | 500,000 | 558,750 | ||
| EP Energy LLC, 144A, 8.0%, 11/29/2024 | 50,000 | 51,625 | ||
| Gulfport Energy Corp.: | ||||
| 144A, 6.0%, 10/15/2024 | 35,000 | 34,300 | ||
| 144A, 6.375%, 5/15/2025 | 70,000 | 69,475 | ||
| 6.625%, 5/1/2023 | 30,000 | 30,225 | ||
| Hilcorp Energy I LP, 144A, 5.75%, 10/1/2025 | 110,000 | 107,800 | ||
| Holly Energy Partners LP, 144A, 6.0%, 8/1/2024 | 80,000 | 84,500 | ||
| Laredo Petroleum, Inc., 6.25%, 3/15/2023 | 90,000 | 89,887 | ||
| MEG Energy Corp.: | ||||
| 144A, 6.375%, 1/30/2023 | 200,000 | 171,500 | ||
| 144A, 6.5%, 1/15/2025 | 149,000 | 145,647 | ||
| Murphy Oil Corp., 6.875%, 8/15/2024 | 65,000 | 68,088 | ||
| Murphy Oil U.S.A., Inc., 5.625%, 5/1/2027 | 45,000 | 47,081 | ||
| Newfield Exploration Co.: | ||||
| 5.375%, 1/1/2026 | 45,000 | 47,025 | ||
| 5.75%, 1/30/2022 | 80,000 | 85,200 | ||
| Noble Holding International Ltd., 7.7%, 4/1/2025 | 55,000 | 47,850 | ||
| NuStar Logistics LP, 5.625%, 4/28/2027 | 157,000 | 164,065 | ||
| Oasis Petroleum, Inc.: | ||||
| 6.875%, 3/15/2022 | 30,000 | 30,338 | ||
| 6.875%, 1/15/2023 | 10,000 | 10,088 | ||
| Parsley Energy LLC: | ||||
| 144A, 5.25%, 8/15/2025 | 35,000 | 35,263 | ||
| 144A, 5.375%, 1/15/2025 | 55,000 | 55,688 | ||
| PDC Energy, Inc., 144A, 6.125%, 9/15/2024 | 60,000 | 61,350 | ||
| Peabody Energy Corp.: | ||||
| 144A, 6.0%, 3/31/2022 | 15,000 | 15,075 | ||
| 144A, 6.375%, 3/31/2025 | 110,000 | 110,000 | ||
| Petrobras Global Finance BV, 6.125%, 1/17/2022 | 110,000 | 114,455 | ||
| Precision Drilling Corp., 144A, 7.75%, 12/15/2023 | 40,000 | 41,300 | ||
| Range Resources Corp.: | ||||
| 4.875%, 5/15/2025 | 165,000 | 156,956 | ||
| 144A, 5.0%, 8/15/2022 | 100,000 | 98,250 | ||
| 144A, 5.875%, 7/1/2022 | 65,000 | 66,463 | ||
| Ras Laffan Liquefied Natural Gas Co., Ltd. II, 144A, 5.298%, 9/30/2020 | 94,225 | 99,149 | ||
| Rice Energy, Inc., 7.25%, 5/1/2023 | 15,000 | 16,031 | ||
| Sabine Pass Liquefaction LLC: | ||||
| 5.625%, 2/1/2021 | 260,000 | 284,417 | ||
| 5.625%, 4/15/2023 | 150,000 | 167,331 | ||
| 144A, 5.875%, 6/30/2026 | 155,000 | 174,881 | ||
| Summit Midstream Holdings LLC, 5.75%, 4/15/2025 | 40,000 | 41,000 | ||
| Sunoco LP: | ||||
| 5.5%, 8/1/2020 | 50,000 | 51,625 | ||
| 6.25%, 4/15/2021 | 250,000 | 263,750 | ||
| 6.375%, 4/1/2023 | 45,000 | 47,925 | ||
| Targa Resources Partners LP, 144A, 5.375%, 2/1/2027 | 170,000 | 177,225 | ||
| Tesoro Corp.: | ||||
| 144A, 4.75%, 12/15/2023 | 50,000 | 52,625 | ||
| 144A, 5.125%, 12/15/2026 | 125,000 | 133,750 | ||
| Tesoro Logistics LP: | ||||
| 5.25%, 1/15/2025 | 170,000 | 179,775 | ||
| 6.125%, 10/15/2021 | 30,000 | 31,294 | ||
| 6.375%, 5/1/2024 | 65,000 | 70,687 | ||
| Trinidad Drilling Ltd., 144A, 6.625%, 2/15/2025 | 35,000 | 34,825 | ||
| Weatherford International Ltd.: | ||||
| 4.5%, 4/15/2022 | 105,000 | 97,387 | ||
| 144A, 9.875%, 2/15/2024 | 170,000 | 191,250 | ||
| Whiting Petroleum Corp.: | ||||
| 5.75%, 3/15/2021 | 95,000 | 93,195 | ||
| 6.25%, 4/1/2023 | 70,000 | 69,650 | ||
| WildHorse Resource Development Corp., 144A, 6.875%, 2/1/2025 | 165,000 | 160,050 | ||
| WPX Energy, Inc.: | ||||
| 6.0%, 1/15/2022 | 150,000 | 151,500 | ||
| 7.5%, 8/1/2020 | 150,000 | 158,250 | ||
| 7,471,772 | ||||
| Financials 4.4% | ||||
| AerCap Ireland Capital DAC: | ||||
| 3.95%, 2/1/2022 | 200,000 | 209,216 | ||
| 4.625%, 10/30/2020 | 670,000 | 713,210 | ||
| Aircastle Ltd., 4.125%, 5/1/2024 | 155,000 | 157,712 | ||
| Alliance Data Systems Corp., 144A, 5.25%, 12/1/2017 | 95,000 | 95,950 | ||
| CIT Group, Inc.: | ||||
| 3.875%, 2/19/2019 | 415,000 | 425,894 | ||
| 5.0%, 8/15/2022 | 400,000 | 432,880 | ||
| Corp. Financiera de Desarrollo SA, 144A, 4.75%, 2/8/2022 | 250,000 | 267,675 | ||
| E*TRADE Financial Corp.: | ||||
| 4.625%, 9/15/2023 | 60,000 | 62,160 | ||
| 5.375%, 11/15/2022 | 50,000 | 52,591 | ||
| Tempo Acquisition LLC, 144A, 6.75%, 6/1/2025 | 45,000 | 46,013 | ||
| 2,463,301 | ||||
| Health Care 5.1% | ||||
| Alere, Inc., 144A, 6.375%, 7/1/2023 | 60,000 | 64,875 | ||
| Community Health Systems, Inc., 144A, 6.25%, 3/31/2023 | 35,000 | 36,286 | ||
| Endo Dac, 144A, 6.0%, 2/1/2025 | 45,000 | 40,320 | ||
| Endo Finance LLC: | ||||
| 144A, 5.375%, 1/15/2023 | 80,000 | 72,600 | ||
| 144A, 5.75%, 1/15/2022 | 80,000 | 76,700 | ||
| Fresenius Medical Care U.S. Finance II, Inc., 144A, 6.5%, 9/15/2018 | 45,000 | 47,306 | ||
| HCA, Inc.: | ||||
| 4.5%, 2/15/2027 | 150,000 | 154,320 | ||
| 4.75%, 5/1/2023 | 300,000 | 319,995 | ||
| 5.25%, 6/15/2026 | 170,000 | 184,671 | ||
| 6.5%, 2/15/2020 | 340,000 | 373,575 | ||
| Hill-Rom Holdings, Inc., 144A, 5.0%, 2/15/2025 | 50,000 | 51,250 | ||
| Hologic, Inc., 144A, 5.25%, 7/15/2022 | 30,000 | 31,500 | ||
| LifePoint Health, Inc.: | ||||
| 144A, 5.375%, 5/1/2024 | 120,000 | 120,900 | ||
| 5.5%, 12/1/2021 | 105,000 | 109,069 | ||
| 5.875%, 12/1/2023 | 85,000 | 87,975 | ||
| Mallinckrodt International Finance SA: | ||||
| 144A, 4.875%, 4/15/2020 | 25,000 | 25,000 | ||
| 144A, 5.625%, 10/15/2023 | 50,000 | 48,000 | ||
| Tenet Healthcare Corp.: | ||||
| 4.631%**, 6/15/2020 | 60,000 | 60,450 | ||
| 144A, 7.5%, 1/1/2022 | 70,000 | 76,204 | ||
| Valeant Pharmaceuticals International, Inc.: | ||||
| 144A, 5.375%, 3/15/2020 | 110,000 | 102,443 | ||
| 144A, 5.875%, 5/15/2023 | 105,000 | 85,509 | ||
| 144A, 6.125%, 4/15/2025 | 155,000 | 124,775 | ||
| 144A, 6.5%, 3/15/2022 | 70,000 | 73,486 | ||
| 144A, 7.0%, 3/15/2024 | 165,000 | 174,489 | ||
| 144A, 7.5%, 7/15/2021 | 385,000 | 356,849 | ||
| 2,898,547 | ||||
| Industrials 9.1% | ||||
| ADT Corp.: | ||||
| 3.5%, 7/15/2022 | 55,000 | 53,762 | ||
| 5.25%, 3/15/2020 | 90,000 | 94,950 | ||
| 6.25%, 10/15/2021 | 155,000 | 170,500 | ||
| Air Lease Corp., 4.75%, 3/1/2020 | 1,110,000 | 1,182,443 | ||
| Allegion PLC, 5.875%, 9/15/2023 | 30,000 | 32,400 | ||
| Belden, Inc., 144A, 5.5%, 9/1/2022 | 135,000 | 139,050 | ||
| Bombardier, Inc.: | ||||
| 144A, 5.75%, 3/15/2022 | 130,000 | 129,350 | ||
| 144A, 6.0%, 10/15/2022 | 95,000 | 95,060 | ||
| 144A, 8.75%, 12/1/2021 | 36,000 | 40,050 | ||
| Booz Allen Hamilton, Inc., 144A, 5.125%, 5/1/2025 | 20,000 | 20,450 | ||
| CNH Industrial Capital LLC, 3.875%, 7/16/2018 | 60,000 | 61,050 | ||
| Covanta Holding Corp.: | ||||
| 5.875%, 3/1/2024 | 85,000 | 83,937 | ||
| 5.875%, 7/1/2025 | 55,000 | 53,625 | ||
| DR Horton, Inc., 4.0%, 2/15/2020 | 30,000 | 31,260 | ||
| EnerSys, 144A, 5.0%, 4/30/2023 | 15,000 | 15,469 | ||
| FTI Consulting, Inc., 6.0%, 11/15/2022 | 80,000 | 83,100 | ||
| GFL Environmental, Inc., 144A, 5.625%, 5/1/2022 | 55,000 | 55,412 | ||
| Huntington Ingalls Industries, Inc.: | ||||
| 144A, 5.0%, 12/15/2021 | 120,000 | 124,200 | ||
| 144A, 5.0%, 11/15/2025 | 60,000 | 64,200 | ||
| KAR Auction Services, Inc., 144A, 5.125%, 6/1/2025 | 70,000 | 71,400 | ||
| Kenan Advantage Group, Inc., 144A, 7.875%, 7/31/2023 | 80,000 | 83,400 | ||
| Koppers, Inc., 144A, 6.0%, 2/15/2025 | 135,000 | 141,750 | ||
| Masonite International Corp., 144A, 5.625%, 3/15/2023 | 65,000 | 68,250 | ||
| Moog, Inc., 144A, 5.25%, 12/1/2022 | 50,000 | 52,125 | ||
| Novelis Corp.: | ||||
| 144A, 5.875%, 9/30/2026 | 165,000 | 170,775 | ||
| 144A, 6.25%, 8/15/2024 | 85,000 | 89,556 | ||
| Oshkosh Corp.: | ||||
| 5.375%, 3/1/2022 | 60,000 | 62,475 | ||
| 5.375%, 3/1/2025 | 240,000 | 250,800 | ||
| Park Aerospace Holdings Ltd.: | ||||
| 144A, 5.25%, 8/15/2022 | 175,000 | 183,641 | ||
| 144A, 5.5%, 2/15/2024 | 165,000 | 173,766 | ||
| Ply Gem Industries, Inc., 6.5% , 2/1/2022 | 145,000 | 151,075 | ||
| Prime Security Services Borrower LLC, 144A, 9.25%, 5/15/2023 | 10,000 | 10,933 | ||
| Ritchie Bros Auctioneers, Inc., 144A, 5.375%, 1/15/2025 | 60,000 | 62,100 | ||
| Spirit AeroSystems, Inc., 5.25%, 3/15/2022 | 105,000 | 109,319 | ||
| Summit Materials LLC: | ||||
| 144A, 5.125%, 6/1/2025 (b) | 20,000 | 20,250 | ||
| 6.125%, 7/15/2023 | 100,000 | 104,500 | ||
| 8.5%, 4/15/2022 | 45,000 | 50,513 | ||
| Tennant Co., 144A, 5.625%, 5/1/2025 | 20,000 | 20,800 | ||
| United Rentals North America, Inc.: | ||||
| 5.5%, 5/15/2027 | 153,000 | 157,207 | ||
| 5.875%, 9/15/2026 | 110,000 | 116,599 | ||
| 6.125%, 6/15/2023 | 10,000 | 10,555 | ||
| 7.625%, 4/15/2022 | 43,000 | 44,881 | ||
| USG Corp., 144A, 4.875%, 6/1/2027 | 110,000 | 111,100 | ||
| Welbilt, Inc., 9.5%, 2/15/2024 | 43,000 | 49,880 | ||
| WESCO Distribution, Inc., 5.375%, 6/15/2024 | 80,000 | 83,200 | ||
| XPO Logistics, Inc., 144A, 6.125%, 9/1/2023 | 30,000 | 31,650 | ||
| ZF North America Capital, Inc., 144A, 4.0%, 4/29/2020 | 150,000 | 155,907 | ||
| 5,168,675 | ||||
| Information Technology 4.3% | ||||
| ACI Worldwide, Inc., 144A, 6.375%, 8/15/2020 | 35,000 | 35,897 | ||
| Cardtronics, Inc.: | ||||
| 5.125%, 8/1/2022 | 50,000 | 50,750 | ||
| 144A, 5.5%, 5/1/2025 | 120,000 | 123,000 | ||
| CDK Global, Inc., 144A, 4.875%, 6/1/2027 | 30,000 | 30,319 | ||
| CDW LLC, 5.0%, 9/1/2025 | 60,000 | 61,800 | ||
| Change Healthcare Holdings LLC, 144A, 5.75%, 3/1/2025 | 135,000 | 138,712 | ||
| Dell International LLC: | ||||
| 144A, 4.42%, 6/15/2021 | 195,000 | 205,492 | ||
| 144A, 5.875%, 6/15/2021 | 65,000 | 68,697 | ||
| EMC Corp., 1.875%, 6/1/2018 | 300,000 | 298,223 | ||
| Entegris, Inc., 144A, 6.0%, 4/1/2022 | 55,000 | 57,337 | ||
| First Data Corp., 144A, 7.0%, 12/1/2023 | 100,000 | 108,000 | ||
| Gartner, Inc., 144A, 5.125%, 4/1/2025 | 40,000 | 41,800 | ||
| Jabil Circuit, Inc., 5.625%, 12/15/2020 | 105,000 | 113,925 | ||
| Match Group, Inc., 6.375%, 6/1/2024 | 50,000 | 54,500 | ||
| Micron Technology, Inc.: | ||||
| 5.5%, 2/1/2025 | 14,000 | 14,604 | ||
| 7.5%, 9/15/2023 | 170,000 | 189,907 | ||
| NCR Corp.: | ||||
| 5.875%, 12/15/2021 | 20,000 | 20,850 | ||
| 6.375%, 12/15/2023 | 50,000 | 53,500 | ||
| Netflix, Inc., 5.875%, 2/15/2025 | 150,000 | 164,625 | ||
| Nielsen Co. Luxembourg SARL, 144A, 5.0%, 2/1/2025 | 100,000 | 102,000 | ||
| NXP BV, 144A, 4.125%, 6/1/2021 | 200,000 | 211,000 | ||
| Riverbed Technology, Inc., 144A, 8.875%, 3/1/2023 | 45,000 | 45,113 | ||
| Symantec Corp., 144A, 5.0%, 4/15/2025 | 100,000 | 103,750 | ||
| Western Digital Corp.: | ||||
| 144A, 7.375%, 4/1/2023 | 45,000 | 49,253 | ||
| 10.5%, 4/1/2024 | 75,000 | 87,900 | ||
| 2,430,954 | ||||
| Materials 15.8% | ||||
| AK Steel Corp.: | ||||
| 7.0%, 3/15/2027 | 415,000 | 417,075 | ||
| 7.5%, 7/15/2023 | 300,000 | 324,375 | ||
| Anglo American Capital PLC: | ||||
| 144A, 4.125%, 9/27/2022 | 200,000 | 204,000 | ||
| 144A, 4.75%, 4/10/2027 | 200,000 | 206,500 | ||
| 144A, 4.875%, 5/14/2025 | 300,000 | 311,079 | ||
| Ardagh Packaging Finance PLC: | ||||
| 144A, 6.0%, 2/15/2025 | 200,000 | 208,500 | ||
| 144A, 7.25%, 5/15/2024 | 200,000 | 218,250 | ||
| Ball Corp., 4.375%, 12/15/2020 | 45,000 | 47,306 | ||
| Berry Plastics Corp., 5.5%, 5/15/2022 | 160,000 | 166,800 | ||
| BWAY Holding Co., 144A, 5.5%, 4/15/2024 | 235,000 | 240,288 | ||
| Cascades, Inc., 144A, 5.5%, 7/15/2022 | 55,000 | 55,963 | ||
| Chemours Co.: | ||||
| 5.375%, 5/15/2027 | 145,000 | 150,800 | ||
| 6.625%, 5/15/2023 | 60,000 | 64,043 | ||
| 7.0%, 5/15/2025 | 25,000 | 27,688 | ||
| Clearwater Paper Corp., 144A, 5.375%, 2/1/2025 | 55,000 | 53,900 | ||
| Constellium NV: | ||||
| 144A, 6.625%, 3/1/2025 | 250,000 | 241,250 | ||
| 144A, 7.875%, 4/1/2021 | 250,000 | 269,062 | ||
| FMG Resources (August 2006) Pty Ltd., 144A, 5.125%, 5/15/2024 | 70,000 | 70,700 | ||
| Freeport-McMoRan, Inc.: | ||||
| 2.3%, 11/14/2017 | 225,000 | 224,438 | ||
| 2.375%, 3/15/2018 | 495,000 | 494,505 | ||
| 3.55%, 3/1/2022 | 150,000 | 140,250 | ||
| Greif, Inc., 7.75%, 8/1/2019 | 230,000 | 253,287 | ||
| Hexion, Inc.: | ||||
| 6.625%, 4/15/2020 | 50,000 | 46,500 | ||
| 144A, 10.375%, 2/1/2022 | 25,000 | 25,313 | ||
| Hudbay Minerals, Inc.: | ||||
| 144A, 7.25%, 1/15/2023 | 120,000 | 125,400 | ||
| 144A, 7.625%, 1/15/2025 | 30,000 | 32,231 | ||
| Huntsman International LLC, 5.125%, 11/15/2022 | 250,000 | 269,375 | ||
| Kaiser Aluminum Corp., 5.875%, 5/15/2024 | 80,000 | 84,400 | ||
| Mercer International, Inc., 144A, 6.5%, 2/1/2024 | 70,000 | 72,800 | ||
| NOVA Chemicals Corp.: | ||||
| 144A, 4.875%, 6/1/2024 (b) | 250,000 | 250,625 | ||
| 144A, 5.25%, 6/1/2027 (b) | 165,000 | 165,206 | ||
| Plastipak Holdings, Inc., 144A, 6.5%, 10/1/2021 | 100,000 | 102,500 | ||
| Platform Specialty Products Corp.: | ||||
| 144A, 6.5%, 2/1/2022 | 65,000 | 66,950 | ||
| 144A, 10.375%, 5/1/2021 | 50,000 | 55,438 | ||
| Reynolds Group Issuer, Inc.: | ||||
| 144A, 5.125%, 7/15/2023 | 175,000 | 182,000 | ||
| 5.75%, 10/15/2020 | 920,000 | 944,610 | ||
| 6.875%, 2/15/2021 | 132,868 | 136,189 | ||
| 144A, 7.0%, 7/15/2024 | 20,000 | 21,525 | ||
| Sealed Air Corp.: | ||||
| 144A, 4.875%, 12/1/2022 | 35,000 | 36,531 | ||
| 144A, 5.125%, 12/1/2024 | 15,000 | 15,788 | ||
| Teck Resources Ltd.: | ||||
| 3.75%, 2/1/2023 | 250,000 | 245,937 | ||
| 4.75%, 1/15/2022 | 500,000 | 522,500 | ||
| 5.4%, 2/1/2043 | 150,000 | 140,250 | ||
| 144A, 8.5%, 6/1/2024 | 30,000 | 34,650 | ||
| Tronox Finance LLC, 6.375%, 8/15/2020 | 275,000 | 277,750 | ||
| United States Steel Corp., 144A, 8.375%, 7/1/2021 | 185,000 | 203,038 | ||
| Volcan Cia Minera SAA, 144A, 5.375%, 2/2/2022 | 420,000 | 427,875 | ||
| WR Grace & Co-Conn: | ||||
| 144A, 5.125%, 10/1/2021 | 30,000 | 31,950 | ||
| 144A, 5.625%, 10/1/2024 | 15,000 | 16,181 | ||
| 8,923,571 | ||||
| Real Estate 2.6% | ||||
| CyrusOne LP: | ||||
| 144A, (REIT), 5.0%, 3/15/2024 | 55,000 | 56,238 | ||
| 144A, (REIT), 5.375%, 3/15/2027 | 70,000 | 72,100 | ||
| Equinix, Inc.: | ||||
| (REIT), 5.375%, 1/1/2022 | 70,000 | 73,959 | ||
| (REIT), 5.375%, 4/1/2023 | 265,000 | 277,508 | ||
| (REIT), 5.375%, 5/15/2027 | 210,000 | 220,960 | ||
| (REIT), 5.75%, 1/1/2025 | 50,000 | 54,000 | ||
| (REIT), 5.875%, 1/15/2026 | 50,000 | 54,360 | ||
| Howard Hughes Corp., 144A, 5.375%, 3/15/2025 | 165,000 | 170,156 | ||
| Iron Mountain, Inc., 144A, (REIT), 4.375%, 6/1/2021 | 60,000 | 62,381 | ||
| MPT Operating Partnership LP: | ||||
| (REIT), 5.25%, 8/1/2026 | 20,000 | 21,000 | ||
| (REIT), 6.375%, 2/15/2022 | 110,000 | 113,712 | ||
| (REIT), 6.375%, 3/1/2024 | 105,000 | 114,450 | ||
| VEREIT Operating Partnership LP: | ||||
| (REIT), 4.125%, 6/1/2021 | 125,000 | 131,065 | ||
| (REIT), 4.875%, 6/1/2026 | 50,000 | 52,863 | ||
| 1,474,752 | ||||
| Telecommunication Services 8.4% | ||||
| CenturyLink, Inc.: | ||||
| Series V, 5.625%, 4/1/2020 | 40,000 | 42,400 | ||
| Series T, 5.8%, 3/15/2022 | 150,000 | 156,937 | ||
| Series S, 6.45%, 6/15/2021 | 165,000 | 178,406 | ||
| Series W, 6.75%, 12/1/2023 | 185,000 | 197,719 | ||
| Series Y, 7.5%, 4/1/2024 | 165,000 | 180,675 | ||
| CommScope Technologies LLC, 144A, 5.0%, 3/15/2027 | 70,000 | 70,000 | ||
| CommScope, Inc., 144A, 5.0%, 6/15/2021 | 95,000 | 97,434 | ||
| Frontier Communications Corp.: | ||||
| 6.25%, 9/15/2021 | 45,000 | 42,188 | ||
| 7.125%, 1/15/2023 | 235,000 | 203,569 | ||
| 8.5%, 4/15/2020 | 35,000 | 37,100 | ||
| 10.5%, 9/15/2022 | 220,000 | 216,425 | ||
| Hughes Satellite Systems Corp., 7.625%, 6/15/2021 | 90,000 | 102,150 | ||
| Intelsat Jackson Holdings SA, 144A, 8.0%, 2/15/2024 | 186,000 | 200,764 | ||
| Level 3 Financing, Inc.: | ||||
| 5.375%, 8/15/2022 | 215,000 | 221,450 | ||
| 5.375%, 1/15/2024 | 60,000 | 62,888 | ||
| 6.125%, 1/15/2021 | 60,000 | 61,350 | ||
| Millicom International Cellular SA, 144A, 6.0%, 3/15/2025 | 200,000 | 210,660 | ||
| Sprint Capital Corp., 8.75%, 3/15/2032 | 80,000 | 100,850 | ||
| Sprint Communications, Inc.: | ||||
| 144A, 7.0%, 3/1/2020 | 85,000 | 94,350 | ||
| 7.0%, 8/15/2020 | 500,000 | 552,500 | ||
| Sprint Corp., 7.125%, 6/15/2024 | 440,000 | 494,945 | ||
| T-Mobile U.S.A., Inc.: | ||||
| 6.0%, 4/15/2024 | 351,000 | 378,202 | ||
| 6.125%, 1/15/2022 | 40,000 | 42,150 | ||
| 6.375%, 3/1/2025 | 151,000 | 163,646 | ||
| 6.5%, 1/15/2026 | 5,000 | 5,519 | ||
| Telesat Canada, 144A, 8.875%, 11/15/2024 | 80,000 | 89,600 | ||
| Wind Acquisition Finance SA, 144A, 6.5%, 4/30/2020 | 80,000 | 82,700 | ||
| Zayo Group LLC: | ||||
| 144A, 5.75%, 1/15/2027 | 110,000 | 116,038 | ||
| 6.0%, 4/1/2023 | 205,000 | 216,787 | ||
| 6.375%, 5/15/2025 | 139,000 | 149,425 | ||
| 4,768,827 | ||||
| Utilities 2.0% | ||||
| AmeriGas Partners LP: | ||||
| 5.5%, 5/20/2025 | 160,000 | 162,000 | ||
| 5.75%, 5/20/2027 | 145,000 | 146,450 | ||
| Calpine Corp., 5.75%, 1/15/2025 | 95,000 | 90,131 | ||
| Dynegy, Inc., 7.625%, 11/1/2024 | 140,000 | 135,800 | ||
| NGL Energy Partners LP, 5.125%, 7/15/2019 | 70,000 | 70,175 | ||
| NRG Energy, Inc.: | ||||
| 6.25%, 7/15/2022 | 300,000 | 306,561 | ||
| 6.625%, 1/15/2027 | 45,000 | 44,213 | ||
| 7.25%, 5/15/2026 | 160,000 | 163,600 | ||
| 7.875%, 5/15/2021 | 6,000 | 6,210 | ||
| 1,125,140 | ||||
| Total Corporate Bonds (Cost $50,447,858) | 52,259,843 | |||
| Asset-Backed 3.3% | ||||
| Miscellaneous | ||||
| Apidos CLO XXI, "C", Series 2015-21A, 144A, 4.574%**, 7/18/2027 | 375,000 | 375,909 | ||
| Babson CLO Ltd., "D", Series 2015-2A, 144A, 4.83%**, 7/20/2027 | 1,000,000 | 1,001,227 | ||
| Cumberland Park CLO Ltd., "D", Series 2015-2A, 144A, 4.43%**, 7/20/2026 | 500,000 | 498,732 | ||
| Total Asset-Backed (Cost $1,831,977) | 1,875,868 | |||
| Government & Agency Obligations 4.5% | ||||
| Other Government Related (c) 0.9% | ||||
| Southern Gas Corridor CJSC, 144A, 6.875%, 3/24/2026 | 200,000 | 221,040 | ||
| VTB Bank OJSC, 144A, 6.315%, 2/22/2018 | 265,000 | 272,689 | ||
| 493,729 | ||||
| Sovereign Bonds 3.6% | ||||
| Dominican Republic, 144A, 6.875%, 1/29/2026 | 100,000 | 111,758 | ||
| KazAgro National Management Holding JSC, 144A, 4.625%, 5/24/2023 | 250,000 | 250,750 | ||
| Perusahaan Penerbit SBSN, 144A, 4.325%, 5/28/2025 | 200,000 | 207,240 | ||
| Republic of Argentina-Inflation Linked Bond, 5.83%, 12/31/2033 | ARS | 481 | 230 | |
| Republic of Hungary, Series 19/A, 6.5%, 6/24/2019 | HUF | 11,600,000 | 47,732 | |
| Republic of Panama, 9.375%, 1/16/2023 | 665,000 | 851,200 | ||
| Republic of Sri Lanka: | ||||
| 144A, 5.125%, 4/11/2019 | 200,000 | 205,025 | ||
| 144A, 5.75%, 1/18/2022 | 365,000 | 378,973 | ||
| 2,052,908 | ||||
| Total Government & Agency Obligations (Cost $2,479,249) | 2,546,637 | |||
| Loan Participations and Assignments 32.0% | ||||
| Senior Loans** | ||||
| Consumer Discretionary 9.0% | ||||
| 1011778 B.C. Unlimited Liability Co., Term Loan B3, 3.309%, 2/16/2024 | 426,131 | 427,303 | ||
| Altice U.S. Finance I Corp., Term Loan, 3.283%, 7/15/2025 | 406,292 | 406,148 | ||
| Atlantic Broadband Finance LLC, Term Loan B, 3.545%, 11/30/2019 | 967,575 | 973,622 | ||
| Hilton Worldwide Finance LLC, Term Loan B2, 3.024%, 10/25/2023 | 872,866 | 879,016 | ||
| Quebecor Media, Inc., Term Loan B1, 3.432%, 8/17/2020 | 926,437 | 933,191 | ||
| Seminole Tribe of Florida, Term Loan, 3.397%, 4/29/2020 | 763,200 | 766,421 | ||
| Visteon Corp., Term Delay Draw B, 3.334%, 3/24/2024 | 700,000 | 705,397 | ||
| 5,091,098 | ||||
| Consumer Staples 2.7% | ||||
| Albertson's LLC, Term Loan B6, 4.45%, 6/22/2023 | 496,554 | 500,313 | ||
| Pinnacle Foods Finance LLC, Term Loan B, 2.995%, 2/2/2024 | 1,042,388 | 1,048,845 | ||
| 1,549,158 | ||||
| Energy 0.1% | ||||
| MEG Energy Corp., Term Loan B, 4.627%, 12/31/2023 | 40,200 | 40,170 | ||
| Health Care 2.9% | ||||
| Community Health Systems, Inc.: | ||||
| Term Loan G, 3.798%, 12/31/2019 | 69,714 | 69,837 | ||
| Term Loan H, 4.048%, 1/27/2021 | 120,630 | 120,800 | ||
| DaVita HealthCare Partners, Inc., Term Loan B, 3.795%, 6/24/2021 | 1,104,760 | 1,115,459 | ||
| Valeant Pharmaceuticals International, Inc., Term Loan B, 5.75%, 4/1/2022 | 337,532 | 343,945 | ||
| 1,650,041 | ||||
| Industrials 4.8% | ||||
| AerCap Holdings NV, Term Loan A, 3.397%, 10/6/2023 | 425,000 | 429,815 | ||
| Ply Gem Industries, Inc., Term Loan, 4.147%, 2/1/2021 | 598,641 | 603,505 | ||
| Sabre GLBL, Inc., Term Loan B, 3.795%, 2/22/2024 | 492,650 | 498,456 | ||
| TransDigm, Inc., Term Loan F, 4.045%, 6/9/2023 | 467,320 | 468,757 | ||
| Waste Industries U.S.A., Inc., Term Loan, 3.795%, 2/27/2020 | 689,447 | 696,345 | ||
| 2,696,878 | ||||
| Information Technology 1.1% | ||||
| First Data Corp., Term Loan, 3.529%, 4/26/2024 | 618,375 | 622,385 | ||
| Materials 4.6% | ||||
| American Rock Salt Holdings LLC, First Lien Term Loan, 4.897%, 5/20/2021 | 723,806 | 727,425 | ||
| Axalta Coating Systems U.S. Holdings, Inc., Term Loan B1, 3.647%, 2/1/2023 | 376,486 | 379,142 | ||
| Berry Plastics Group, Inc.: | ||||
| Term Loan K, 3.244%, 2/8/2020 | 616,273 | 620,716 | ||
| Term Loan L, 3.244%, 1/6/2021 | 304,001 | 306,105 | ||
| MacDermid, Inc., Term Loan B6, 4.045%, 6/7/2023 | 425,014 | 428,391 | ||
| PolyOne Corp., Term Loan B, 3.277%, 11/12/2022 | 162,939 | 164,602 | ||
| 2,626,381 | ||||
| Telecommunication Services 1.6% | ||||
| DigitalGlobe, Inc., Term Loan B, 3.795%, 1/15/2024 | 219,450 | 220,136 | ||
| Level 3 Financing, Inc., Term Loan B, 3.26%, 2/22/2024 | 665,000 | 666,782 | ||
| 886,918 | ||||
| Utilities 5.2% | ||||
| Calpine Corp., Term Loan B5, 3.9%, 1/15/2024 | 1,822,538 | 1,821,599 | ||
| NRG Energy, Inc., Term Loan B, 3.295%, 6/30/2023 | 1,102,733 | 1,103,252 | ||
| 2,924,851 | ||||
| Total Loan Participations and Assignments (Cost $17,990,026) | 18,087,880 | |||
| Convertible Bond 0.2% | ||||
| Materials | ||||
| GEO Specialty Chemicals, Inc., 144A, 7.5%, 10/30/2018 (PIK) (Cost $118,071) | 117,913 | 116,378 | ||
Shares |
Value ($) | |||
| Common Stocks 0.0% | ||||
| Industrials 0.0% | ||||
| Quad Graphics, Inc. | 31 | 690 | ||
| Materials 0.0% | ||||
| GEO Specialty Chemicals, Inc.* | 11,502 | 4,358 | ||
| Total Common Stocks (Cost $19,550) | 5,048 | |||
| Warrant 0.0% | ||||
| Materials | ||||
| Hercules Trust II, Expiration Date 3/31/2029* (Cost $20,981) | 95 | 2,969 | ||
| Cash Equivalents 2.9% | ||||
| Deutsche Central Cash Management Government Fund, 0.85% (d) (Cost $1,656,813) | 1,656,813 | 1,656,813 | ||
| % of Net Assets | Value ($) | |
| Total Investment Portfolio (Cost $74,564,525)† | 135.2 | 76,551,436 |
| Other Assets and Liabilities, Net | 0.1 | 71,705 |
| Notes Payable | (35.3) | (20,000,000) |
| Net Assets | 100.0 | 56,623,141 |
* 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, 2017.
† The cost for federal income tax purposes was $74,790,426. At May 31, 2017, net unrealized appreciation for all securities based on tax cost was $1,761,010. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $2,122,356 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $361,346.
(a) Principal amount stated in U.S. dollars unless otherwise noted.
(b) When-issued security.
(c) Government-backed debt issued by financial companies or government sponsored enterprises.
(d) 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.
CJSC: Closed Joint Stock Company
CLO: Collateralized Loan Obligation
JSC: Joint Stock Company
OJSC: Open Joint Stock Company
PIK: Denotes that all or a portion of the income is paid in-kind in the form of additional principal.
REIT: Real Estate Investment Trust
SBSN: Surat Berharga Syariah Negara (Islamic Based Government Securities)
| Currency Abbreviations |
|
ARS Argentine Peso HUF Hungarian Forint |
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of May 31, 2017 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total | |
| Fixed Income Investments (e) | |||||
| Corporate Bonds | $ — | $ 52,259,843 | $ — | $ 52,259,843 | |
| Asset-Backed | — | 1,875,868 | — | 1,875,868 | |
| Government & Agency Obligations | — | 2,546,637 | — | 2,546,637 | |
| Loan Participations and Assignments | — | 18,087,880 | — | 18,087,880 | |
| Convertible Bond | — | — | 116,378 | 116,378 | |
| Common Stocks (e) | 690 | — | 4,358 | 5,048 | |
| Warrant | — | — | 2,969 | 2,969 | |
| Short-Term Investments | 1,656,813 | — | — | 1,656,813 | |
| Total | $ 1,657,503 | $ 74,770,228 | $ 123,705 | $ 76,551,436 | |
There have been no transfers between fair value measurement levels during the period ended May 31, 2017.
(e) See Investment Portfolio for additional detailed categorizations.
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities
| as of May 31, 2017 (Unaudited) | |
| Assets | |
|
Investments: Investments in non-affiliated securities, at value (cost $72,907,712) |
$ 74,894,623 |
| Investment in Deutsche Central Cash Management Government Fund (cost $1,656,813) | 1,656,813 |
| Total investments in securities, at value (cost $74,564,525) | 76,551,436 |
| Cash | 12,041 |
| Foreign currency, at value (cost $16,741) | 16,570 |
| Receivable for investments sold — when-issued securities | 74,725 |
| Dividends receivable | 9 |
| Interest receivable | 856,884 |
| Foreign taxes recoverable | 315 |
| Other assets | 1,556 |
| Total assets | 77,513,536 |
| Liabilities | |
| Payable for investments purchased — when-issued securities | 550,000 |
| Payable for investments purchased | 106,557 |
| Notes payable | 20,000,000 |
| Interest on notes payable | 98,876 |
| Accrued management fee | 40,014 |
| Accrued Trustees' fees | 1,148 |
| Other accrued expenses and payables | 93,800 |
| Total liabilities | 20,890,395 |
| Net assets, at value | $ 56,623,141 |
| Net Assets Consist of | |
| Undistributed net investment income | 97,921 |
|
Net unrealized appreciation (depreciation) on: Investments |
1,986,911 |
| Foreign currency | (77) |
| Accumulated net realized gain (loss) | (4,682,553) |
| Paid-in capital | 59,220,939 |
| Net assets, at value | 56,623,141 |
| Net Asset Value | |
| Net Asset Value per share ($56,623,141 ÷ 4,358,304 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 12.99 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations
| for the six months ended May 31, 2017 (Unaudited) | |
| Investment Income | |
|
Income: Interest |
$ 1,910,349 |
| Dividends | 19 |
| Income distributions — Deutsche Central Cash Management Government Fund | 11,071 |
| Total income | 1,921,439 |
|
Expenses: Management fee |
237,254 |
| Services to shareholders | 2,066 |
| Custodian fee | 26,568 |
| Professional fees | 214,880 |
| Reports to shareholders | 25,388 |
| Trustees' fees and expenses | 4,478 |
| Interest expenses | 225,681 |
| Stock exchange listing fees | 11,502 |
| Other | 29,708 |
| Total expenses | 777,525 |
| Net investment income | 1,143,914 |
| Realized and Unrealized Gain (Loss) | |
|
Net realized gain (loss) from: Investments |
271,204 |
| Foreign currency | (253) |
| 270,951 | |
|
Change in net unrealized appreciation (depreciation): Investments |
1,323,229 |
| Foreign currency | 1,474 |
| 1,324,703 | |
| Net gain (loss) | 1,595,654 |
| Net increase (decrease) in net assets resulting from operations | $ 2,739,568 |
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flows
| for the six months ended May 31, 2017 (Unaudited) | |
|
Increase (Decrease) in Cash: Cash Flows from Operating Activities | |
| Net increase (decrease) in net assets resulting from operations | $ 2,739,568 |
|
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 |
(18,444,142) |
| Net purchases, sales and maturities of short-term investments | 1,096,974 |
| Net amortization of premium/(accretion of discount) | (8,697) |
| Proceeds from sales and maturities of long-term investments | 17,314,927 |
| (Increase) decrease in interest receivable | (19,486) |
| (Increase) decrease in other assets | 1,613 |
| (Increase) decrease in receivable for investments sold | 854,834 |
| (Increase) decrease in receivable for investments sold — when-issued securities | (44,500) |
| Increase (decrease) in interest on notes payable | 90,218 |
| Increase (decrease) in payable for investments purchased | (475,450) |
| Increase (decrease) in payable for investments purchased — when-issued securities | 110,000 |
| Increase (decrease) in other accrued expenses and payables | (77,961) |
| Change in unrealized (appreciation) depreciation on investments | (1,323,229) |
| Net realized (gain) loss from investments | (271,204) |
| Cash provided (used) by operating activities | 1,543,465 |
| Cash Flows from Financing Activities | |
| Net increase (decrease) in notes payable | (500,000) |
| Distributions paid (net of reinvestment of distributions) | (1,045,993) |
| Cash provided (used) by financing activities | (1,545,993) |
| Increase (decrease) in cash | (2,528) |
| Cash at beginning of period (including foreign currency) | 31,139 |
| Cash at end of period (including foreign currency) | $ 28,611 |
| Supplemental Disclosure | |
| Interest paid on notes | $ (135,463) |
The accompanying notes are an integral part of the financial statements.
Statements of Changes in Net Assets
| Increase (Decrease) in Net Assets | Six Months Ended May 31, 2017 (Unaudited) | Year Ended November 30, 2016 | |
|
Operations: Net investment income |
$ 1,143,914 | $ 2,710,244 | |
| Net realized gain (loss) | 270,951 | (1,414,255) | |
| Change in net unrealized appreciation (depreciation) | 1,324,703 | 2,438,803 | |
| Net increase (decrease) in net assets resulting from operations | 2,739,568 | 3,734,792 | |
|
Distributions to shareholders from: Net investment income |
(1,045,993) | (2,795,943) | |
| Return of capital | — | (40,937) | |
| Total distributions | (1,045,993) | (2,836,880) | |
|
Fund share transactions: Cost of shares repurchased |
— | (596,297) | |
| Increase (decrease) in net assets | 1,693,575 | 301,615 | |
| Net assets at beginning of period | 54,929,566 | 54,627,951 | |
| Net assets at end of period (including undistributed net investment income of $97,921 and $0, respectively) | $ 56,623,141 | $ 54,929,566 | |
| Other Information | |||
| Shares outstanding at beginning of period | 4,358,304 | 4,415,736 | |
| Shares repurchased | — | (57,432) | |
| Shares outstanding at end of period | 4,358,304 | 4,358,304 | |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
| Six Months Ended 5/31/17 (Unaudited) | Years Ended November 30, | ||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||
| Selected Per Share Data | |||||||
| Net asset value, beginning of period | $ 12.60 | $ 12.37 | $ 13.71 | $ 14.00 | $ 14.32 | $ 13.00 | |
|
Income (loss) from investment operations: Net investment incomea |
.26 | .62 | .69 | .83 | .92 | 1.08 | |
| Net realized and unrealized gain (loss) | .37 | .24 | (1.11) | (.23) | (.14) | 1.43 | |
| Total from investment operations | .63 | .86 | (.42) | .60 | .78 | 2.51 | |
|
Less distributions from: Net investment income |
(.24) | (.64) | (.74) | (.96) | (1.10) | (1.19) | |
| Net realized gains | — | — | (.16) | — | — | — | |
| Return of capital | — | (.01) | (.05) | — | — | — | |
| Total distributions | (.24) | (.65) | (.95) | (.96) | (1.10) | (1.19) | |
| NAV accretion resulting from repurchases of shares at a discount to NAVa | — | .02 | .03 | .07 | — | — | |
| Net asset value, end of period | $ 12.99 | $ 12.60 | $ 12.37 | $ 13.71 | $ 14.00 | $ 14.32 | |
| Market price, end of period | $ 12.45 | $ 11.72 | $ 10.29 | $ 12.01 | $ 13.07 | $ 14.26 | |
| Total Return | |||||||
| Based on net asset value (%)b | 5.13** | 7.82 | (1.95) | 5.58 | 5.78 | 19.96 | |
| Based on market price (%)b | 8.32** | 20.56 | (6.89) | (.93) | (.83) | 21.04 | |
| Ratios to Average Net Assets and Supplemental Data | |||||||
| Net assets, end of period ($ millions) | 57 | 55 | 55 | 61 | 66 | 67 | |
| Ratio of expenses (including interest expense) (%) | 2.50* | 2.24 | 1.80 | 1.83 | 1.85 | 1.94 | |
| Ratio of expenses (excluding interest expense) (%) | 1.69* | 1.59 | 1.37 | 1.35 | 1.33 | 1.30 | |
| Ratio of net investment income (%) | 4.39* | 5.01 | 5.33 | 5.88 | 6.50 | 7.77 | |
| Portfolio turnover rate (%) | 23** | 37 | 48 | 70 | 72 | 45 | |
| Total debt outstanding, end of period ($ thousands) | 20,000 | 20,500 | 20,100 | 26,500 | 28,000 | 29,500 | |
| Asset coverage per $1,000 of debtc | 3,831 | 3,679 | 3,718 | 3,318 | 3,348 | 3,278 | |
|
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 | |||||||
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.
On July 13, 2016, the Board of Trustees approved the termination of the Fund, pursuant to which the Fund will make a liquidating distribution to shareholders no later than December 31, 2018.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. 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.
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, 2017. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. The Fund 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 securities lending agreement. The Fund may invest the cash collateral into a joint trading account in affiliated money market funds managed by Deutsche Investment Management Americas Inc. Deutsche Investment Management Americas Inc. receives a management/administration fee (0.12% annualized effective rate as of May 31, 2017) on the cash collateral invested in Deutsche Government & Agency Securities Portfolio. 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. The 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. If affiliates of the Advisor participate in the primary and secondary market for senior loans, legal limitations may restrict the Fund's ability to participate in restructuring or acquiring some senior loans. 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, 2017.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies and to distribute all of its taxable income to its shareholders.
At November 30, 2016, the Fund had $4,752,000 of tax basis capital loss carryforwards, which may be applied against realized net taxable capital gains indefinitely, including short-term losses ($1,405,000) and long-term losses ($3,347,000).
The Fund has reviewed the tax positions for the open tax years as of November 30, 2016 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 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. Purchases and Sales of Securities
During the six months ended May 31, 2017, purchases and sales of investment securities (excluding short-term investments) aggregated $18,444,142 and $17,314,927, respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. 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. Deutsche AM 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, 2017, the amount charged to the Fund by DSC aggregated $546, of which $299 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, 2017, the amount charged to the Fund by DIMA included in the Statement of Operations under "Reports to shareholders" aggregated $8,300, of which $7,135 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 Deutsche Central Cash Management Government Fund, which is managed by the Advisor. The Fund indirectly bears its proportionate share of the expenses of Deutsche Central Cash Management Government Fund. Deutsche Central Cash Management Government Fund does not pay the Advisor an investment management fee. Deutsche Central Cash Management Government Fund seeks maximum current income to the extent consistent with stability of principal.
D. Investing in High-Yield Debt Securities
High-yield debt securities or junk bonds are generally regarded as speculative with respect to the issuer’s continuing ability to meet principal and interest payments. The Fund’s performance could be hurt if an issuer of a debt security suffers an adverse change in financial condition that results in the issuer not making timely payments of interest or principal, a security downgrade or an inability to meet a financial obligation. High-yield debt securities’ total return and yield may generally be expected to fluctuate more than the total return and yield of investment-grade debt securities. A real or perceived economic downturn or an increase in market interest rates could cause a decline in the value of high-yield debt securities, and/or result in increased portfolio turnover, which could result in a decline in net asset value of the fund, reduce liquidity for certain investments and/or increase costs. High-yield debt securities are often thinly traded and can be more difficult to sell and value accurately than investment-grade debt securities as there may be no established secondary market. Investments in high yield debt securities could increase liquidity risk for the fund. In addition, the market for high-yield debt securities can experience sudden and sharp volatility which is generally associated more with investments in stocks.
E. 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.
F. Borrowings
The Fund has a secured line of credit with a commercial bank in an amount up to $27,000,000, a maturity date of December 20, 2017 and a borrowing rate at the applicable LIBOR rate plus 0.95% (0.90% prior to December 21, 2016). 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, 2017, the Fund had a notes payable outstanding of $20,000,000. The weighted average outstanding daily balance of all loans during the six months ended May 31, 2017 was approximately $21,808,000, with a weighted average annual borrowing cost of 2.08%. 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.
G. 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. There were no shares repurchased during the six months ended May 31, 2017. During the year ended November 30, 2016, the Fund purchased 57,432 shares of beneficial interest on the open market at a total cost of $596,297 ($10.38 average per share). The average discount on these purchases, comparing the purchase price to the net asset value at the time of purchase, was 13.45%.
On September 11, 2015, the Fund announced that the Fund's Board of Trustees extended the Fund's existing open market share repurchase program for an additional 12-month period. On February 26, 2016, the Board announced an increase in the authorized share repurchase amount up to 10% of the Fund's outstanding shares of common stock in open-market transactions over the period from December 1, 2015 until November 30, 2016, when the Fund's shares trade at a discount to net asset value. On September 21, 2016, the Fund announced that the Fund's Board of Trustees extended the Fund's existing open market share repurchase program for an additional 12-month period. The Fund may continue to purchase outstanding shares of common stock in open-market transactions over the period from December 1, 2016 until November 30, 2017, when the Fund's shares trade at a discount to Net Asset Value. The Board's authorization of the repurchase program extension follows the previous repurchase program, which commenced on December 1, 2015 and ran until November 20, 2016.
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 Deutsche AM 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 Deutsche AM 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 Deutsche AM Service Company at P.O. Box 219066, Kansas City, Missouri 64121-9066 or (800) 294-4366.
Additional Information
| Automated Information Line |
Deutsche AM 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 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 |
Deutsche AM 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 most recent 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 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. |
| NYSE Symbol | KST |
| CUSIP Number | 25160F 109 |
Privacy Statement
| FACTS | What Does Deutsche Asset 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 Management chooses to share and whether you can limit this sharing. | ||
| Reasons we can share your personal information | Does Deutsche Asset 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? | Deutsche AM Distributors, Inc; Deutsche Investment Management Americas Inc.; Deutsche AM Investor Services, Inc.; Deutsche AM Trust Company; the Deutsche Funds |
| What we do | |
| How does Deutsche Asset 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 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. |
| 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 Management does not jointly market. |
| Rev. 05/2017 | |
Notes
Notes
Notes
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 | - | $ - | n/a | n/a |
| January 1 through January 31 | - | $ - | n/a | n/a |
| February 1 through February 28 | - | $ - | n/a | n/a |
| March 1 through March 31 | - | $ - | n/a | n/a |
| April 1 through April 30 | - | $ - | n/a | n/a |
| May 1 through May 31 | - | $ - | n/a | n/a |
| Total | - | $ - | n/a | |
| The Fund may from time to time repurchase shares in the open market. | ||||
| On September 21, 2016, the Fund announced that the Fund's Board of Trustees extended the Fund's existing open market share repurchase program for an additional 12 month period. The Fund may continue to purchase outstanding shares of common stock in open-market transactions over the period December 1, 2016 until November 30, 2017, when the Fund's shares trade at a discount to net asset value. The Board's authorization of the repurchase program extension follows the previous repurchase program, which commenced on December 1, 2015 and ran until November 30, 2016. | ||||
| 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 Keith R. Fox, Deutsche Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. | ||
| 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: | 7/28/2017 |
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: | 7/28/2017 |
| By: |
/s/Paul Schubert Paul Schubert Chief Financial Officer and Treasurer |
| Date: | 7/28/2017 |