WASHINGTON, D. C. 20549
Deutsche Value Series, Inc.
November 30, 2014
Annual Report
to Shareholders
Deutsche Equity Dividend Fund
(formerly DWS Equity Dividend Fund)
Contents
4 Portfolio Management Review 18 Statement of Assets and Liabilities 20 Statement of Operations 21 Statement of Changes in Net Assets 28 Notes to Financial Statements 40 Report of Independent Registered Public Accounting Firm 41 Information About Your Fund's Expenses 43 Advisory Agreement Board Considerations and Fee Evaluation 48 Board Members and Officers 53 Account Management Resources |
This report must be preceded or accompanied by a prospectus. To obtain a summary prospectus, if available, or prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the fund. Please read the prospectus carefully before you invest.
The fund will be managed on the premise that stocks with lower CROCI® Economic P/E Ratios may outperform stocks with higher CROCI® Economic P/E Ratios over time. This premise may not always be correct and prospective investors should evaluate this assumption prior to investing in the fund. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Dividends are not guaranteed. If the dividend-paying stocks held by the fund reduce or stop paying dividends, the fund’s ability to generate income may be adversely affected. Preferred stocks, a type of dividend-paying stock, present certain additional risks. The fund may lend securities to approved institutions. Stocks may decline in value. See the prospectus for details.
Deutsche Asset & Wealth Management represents the asset management and wealth management activities conducted by Deutsche Bank AG or any of its subsidiaries, including the Advisor and DeAWM Distributors, Inc.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Dear Shareholder:
I am very pleased to tell you that the DWS funds have been renamed Deutsche funds, aligning more closely with the Deutsche Asset & Wealth Management brand. We are proud to adopt the Deutsche name — a brand that fully represents the global access, discipline and intelligence that support all of our products and services.
Deutsche Asset & Wealth Management combines the asset management and wealth management divisions of Deutsche Bank to deliver a comprehensive suite of active, passive and alternative investment capabilities. Your investment in the Deutsche funds means you have access to the thought leadership and resources of one of the world’s largest and most influential financial institutions.
In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.
In addition, key service providers have been renamed as follows:
| Former Name | New name, effective August 11, 2014 |
| DWS Investments Distributors, Inc. | DeAWM Distributors, Inc. |
| DWS Trust Company | DeAWM Trust Company |
| DWS Investments Service Company | DeAWM Service Company |
These changes have no effect on the day-to-day management of your investment, and there is no action required on your part. You will continue to experience the benefits that come from our decades of experience, in-depth research and worldwide network of investment professionals.
Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.
Best regards,
Brian Binder
President, Deutsche Funds
Portfolio Management Review (Unaudited)
Market Overview and Fund Performance
All performance information below is historical and does not guarantee future results. Returns shown are for Class A shares, unadjusted for sales charges. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit deutschefunds.com for the most recent month-end performance of all share classes. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had. Please refer to pages 11 through 13 for more complete performance information.
Deutsche Equity Dividend Fund returned 12.94% during the 12-month period ended November 30, 2014, underperforming the 16.86% return of the Standard & Poor's 500® (S&P 500) Index.
Investment Process Portfolio management intends to select approximately forty stocks with the lowest positive Cash Return on Capital Invested (CROCI®) Economic Price Earnings Ratio while seeking above average dividend yield. The CROCI® Economic Price Earnings Ratio (CROCI® Economic P/E Ratio) is a proprietary measure of company valuation using the same relationship between valuation and return as an accounting P/E ratio (i.e., price/book value divided by return on equity). It is a U.S.-specific strategy seeking to select approximately the forty best value companies from the S&P 500® Index (excluding financial companies) with additional screening on high dividend yield, dividend sustainability and price volatility. The fund is reconstituted on a quarterly basis in accordance with the strategy’s rules (reselecting approximately 40 stocks that will make up the fund). The strategy targets low valuation combined with higher dividends and excludes stocks with the highest financial leverage, lowest cash returns and highest volatility. By excluding the stocks with the highest financial leverage, lowest cash returns and highest volatility, the selection methodology aims to reduce the impact to performance from owning stocks with high dividends where the dividend is potentially at risk while still targeting a strong tilt towards value and an above-average dividend yield. The strategy also utilizes two systematic turnover control buffers to minimize turnover impact from transaction costs. Portfolio management will take additional measures to attempt to reduce portfolio turnover, market impact and transaction costs in connection with implementation of the strategy, by applying liquidity controls and managing the portfolio with tax efficiency in mind. |
Despite periodic concerns about uneven economic data and geopolitical disruptions, the past year brought a robust return for the U.S. equity market. U.S. economic growth, while modest, was nonetheless faster than that of its developed-market global peers. This above-average growth attracted capital from global investors, and the resulting inflows boosted performance for the types of large, liquid companies found in the S&P 500 Index. Investors were also encouraged by the supportive nature of U.S. Federal Reserve Board (the Fed) policy. Although the Fed wound down the stimulative bond-buying program known as "quantitative easing," investors remained confident that interest rates would stay near zero well into 2015. Together with the continued gains in corporate earnings, these factors helped drive the S&P 500 Index to a series of new all-time highs throughout the year — the most recent of which occurred during the final week of the reporting period.
Dividend stocks, while also providing healthy returns during the past year, nonetheless lagged the performance of the broader markets by a wide margin. Generally speaking, investors’ hearty appetite for risk fueled higher demand for faster-growing companies relative to the types of conservative, steady growers that populate the universe of dividend stocks.
Fund Performance
Our team took over the fund’s management duties on April 1, 2014. As a result, the fund’s 12-month performance reflects the strategies of two separate management teams.
Prior to April 1, 2014, the fund finished in line with the S&P 500 Index. Performance was helped by the outperformance of the fund’s holdings in the health care sector, where Eli Lilly & Co. and Merck & Co. Inc. both made meaningful contributions. Management’s stock selection in the consumer staples and industrials sectors also aided performance. However, these positives were offset by the underperformance of the fund’s holdings in the materials and consumer discretionary sectors.
After our team took over the fund’s management duties, the fund underperformed its benchmark. The primary reason for this shortfall was our emphasis on higher-quality, large-cap stocks with above-average dividends at a time when smaller, lower-quality companies outperformed. Higher-dividend stocks tend to lag when investor sentiment is robust, and that indeed proved to be the case during the past eight months.
During this interval, the fund was hurt by the underperformance of its investments in the consumer discretionary sector. The largest detractor in the sector was Coach, Inc., which was pressured by slowing sales in both China and North America. We maintained the fund’s position in the stock, believing it has a sophisticated marketing strategy and is attractively valued based on its CROCI® P/E ratio. Our performance in the consumer discretionary sector was also hurt by weakness in the shares of Mattel, Inc. Shares of the toymaker declined after the company lost some key licenses to its rival Hasbro, Inc., but we believe the stock continues to offer a compelling valuation. Health care also proved to be an area of weakness for the fund in this time, due largely to the underperformance of Baxter International Inc. The fund also holds a zero weighting in the biotechnology industry due to its lack of dividend-paying stocks, which caused us to miss out on the sector’s strong performance. Additionally, the fund’s stock selection fell short in industrials, where positions in Eaton Corp. PLC and Emerson Electric Co. both lost ground, and in energy, where Transocean Ltd.,* Occidental Petroleum Corp. and National Oilwell Varco, Inc. all posted declines larger than that of the sector as a whole.
* Not held in the portfolio as of November 30, 2014.
On the plus side, the fund’s investments in the consumer staples sector made a positive contribution to performance. The largest contributors in the sector were the tobacco companies Altria Group, Inc.* and Reynolds American, Inc. Outside of consumer staples, the most significant positive contributions came from the fund’s positions in the semiconductor companies Intel Corp. and KLA-Tencor Corp., as well as the health care company AbbVie, Inc.
* Not held in the portfolio as of November 30, 2014.
"We believe that focusing on fundamentals and valuations — and not simply investing in the highest-yielding market segments — is the optimal way to seek long-term outperformance."
As part of its investment mandate, the fund holds a zero-weighting in financial stocks. This aspect of our strategy reflects our belief that financials use so much balance sheet leverage as to make them incomparable with other companies under our unique methodology. Financials underperformed the broader index by a small margin from April 1, 2014 onward, so this positioning had a modest, positive impact on the fund’s return.
Outlook and Positioning
The fund closed the period with overweight positions in the consumer staples, industrials and health care sectors. The fund held no weighting in the financial and utilities sectors. While utilities are the highest-yielding segment of the market, the fund’s holdings are determined by the CROCI® methodology. Currently, this approach is showing more attractive value opportunities elsewhere in the market. The fund’s underweight in utilities underscores our belief that focusing on fundamentals and valuations — and not simply investing in the highest-yielding market — is the optimal way to seek long-term outperformance.
We hold a favorable outlook regarding the U.S. stock market. We believe corporations’ high profit margins and declining debt should support continued gains in profitability, and we expect that highly accommodative central-bank policies will boost confidence and provide ongoing support for the markets. At the same time, we believe the ultra-low interest-rate policies being pursued by the world’s major central banks will continue to depress bond yields, which in turn should boost the relative attractiveness of income-producing equities. Having said this, it’s also important to keep in mind that the stock market’s valuation stood above its historical average at the close of the period. In our view, this indicates that strength in the broader market can no longer be counted on to fuel investment returns. In this environment, we believe investors will be compelled to place an increased emphasis on the fundamentals, dividend yields and valuations of individual companies — a trend we think is favorable for the types of stocks we hold in the fund.
Ten Largest Equity Holdings at November 30, 2014 (26.4% of Net Assets) |
1. Cisco Systems, Inc. Designs, manufactures and sells computer networking products and related services | 2.7% |
2. Wal-Mart Stores, Inc. Operator of discount stores, supercenters and neighborhood markets | 2.7% |
3. AbbVie, Inc. Researches and develops pharmaceutical products | 2.7% |
4. Intel Corp. Designer, manufacturer and seller of computer components and related products | 2.7% |
5. Apple, Inc. Designs, manufactures and markets personal computers and related computing and mobile communication devices | 2.6% |
6. Corning, Inc. Produces components and parts for the telecommunications and information display industries | 2.6% |
7. Macy's, Inc. Operates department stores, a direct mail catalogue and electronic commerce subsidiaries | 2.6% |
8. CA, Inc. Designs, develops, markets, licenses and supports computer software products | 2.6% |
9. Coca-Cola Co. Manufactures, markets and distributes soft drink concentrates and syrups and markets juice and juice-drink products | 2.6% |
10. Northrop Grumman Corp. A global security company | 2.6% |
Portfolio holdings and characteristics are subject to change. For more complete details about the fund's investment portfolio, see page 14. A quarterly Fact Sheet is available on deutschefunds.com or upon request. Please see the Account Management Resources section on page 53 for contact information. |
Portfolio Management Team
Di Kumble, CFA, Managing Director
Portfolio Manager of the fund. Began managing the fund in 2014.
— Senior Portfolio Manager, Head of Tax Managed Equities: New York.
— Joined Deutsche Asset & Wealth Management in 2003 with seven years of industry experience. Prior to joining, she served as a Portfolio Manager at Graham Capital Management. Previously, she worked as a Quantitative Strategist at ITG Inc. and Morgan Stanley.
— PhD in Chemistry, Princeton University; CFA Charterholder.
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
Terms to Know
The Standard & Poor’s 500 (S&P 500) Index is an unmanaged, capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Index returns do not reflect fees or expenses and it is not possible to invest directly into an index.
The price-to-earnings (P/E) ratio (or accounting P/E ratio) compares a company’s current share price to its per-share earnings. The CROCI® economic P/E ratio is a measure of valuation that incorporates all of the assets and liabilities of a company which are adjusted systematically by the CROCI® team.
Quantitative easing entails the Fed’s purchase of government and other securities from the market in an effort to increase money supply.
The consumer staples sector represents companies that produce essential items such as food, beverages and household products.
Overweight means the fund holds a higher weighting in a given sector or security than the benchmark. Underweight means the fund holds a lower weighting.
Performance Summary November 30, 2014 (Unaudited) | Class A | 1-Year | 5-Year | 10-Year |
Average Annual Total Returns as of 11/30/14 |
| Unadjusted for Sales Charge | 12.94% | 11.87% | 4.20% |
| Adjusted for the Maximum Sales Charge (max 5.75% load) | 6.45% | 10.56% | 3.58% |
S&P 500® Index† | 16.86% | 15.96% | 8.06% |
CROCI® US Dividends Index†† | 12.80% | N/A | N/A |
| Class B | 1-Year | 5-Year | 10-Year |
Average Annual Total Returns as of 11/30/14 |
| Unadjusted for Sales Charge | 12.08% | 10.98% | 3.35% |
| Adjusted for the Maximum Sales Charge (max 4.00% CDSC) | 9.08% | 10.85% | 3.35% |
S&P 500® Index† | 16.86% | 15.96% | 8.06% |
CROCI® US Dividends Index†† | 12.80% | N/A | N/A |
| Class C | 1-Year | 5-Year | 10-Year |
Average Annual Total Returns as of 11/30/14 |
| Unadjusted for Sales Charge | 12.10% | 11.03% | 3.42% |
| Adjusted for the Maximum Sales Charge (max 1.00% CDSC) | 12.10% | 11.03% | 3.42% |
S&P 500® Index† | 16.86% | 15.96% | 8.06% |
CROCI® US Dividends Index†† | 12.80% | N/A | N/A |
| Class R | 1-Year | 5-Year | 10-Year |
Average Annual Total Returns as of 11/30/14 |
| No Sales Charges | 12.67% | 11.54% | 3.91% |
S&P 500® Index† | 16.86% | 15.96% | 8.06% |
CROCI® US Dividends Index†† | 12.80% | N/A | N/A |
| Class S | 1-Year | 5-Year | Life of Class* |
Average Annual Total Returns as of 11/30/14 |
| No Sales Charges | 13.21% | 12.12% | 3.85% |
S&P 500® Index† | 16.86% | 15.96% | 7.95% |
CROCI® US Dividends Index†† | 12.80% | N/A | N/A |
| Institutional Class | 1-Year | 5-Year | 10-Year |
Average Annual Total Returns as of 11/30/14 |
| No Sales Charges | 13.20% | 12.24% | 4.54% |
S&P 500® Index† | 16.86% | 15.96% | 8.06% |
CROCI® US Dividends Index†† | 12.80% | N/A | N/A |
Performance in the Average Annual Total Returns table(s) above and the Growth of an Assumed $10,000 Investment line graph that follows is historical and does not guarantee future results. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit deutschefunds.com for the Fund's most recent month-end performance. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated April 1, 2014 are 1.18%, 2.14%, 1.96%, 1.53%, 0.95% and 0.86% for Class A, Class B, Class C, Class R, Class S and Institutional Class shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
Prior to April 1, 2014, the Fund had a different investment management team that operated with a different investment strategy. Performance prior to April 1, 2014 would have been different if the Fund's current strategy had been in effect.
Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge) |
|
|
| Yearly periods ended November 30 |
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net initial investment of $9,425.
The growth of $10,000 is cumulative.
Performance of other share classes will vary based on the sales charges and the fee structure of those classes.
* Class S shares commenced operations on February 28, 2005. The performance shown for the index is for the time period of February 28, 2005 through November 30, 2014, which is based on the performance period of the life of Class S.
† The Standard & Poor's 500 (S&P 500) Index is an unmanaged, capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
†† The CROCI® US Dividends Index reflects the total return of a basket of 40 stocks selected on a quarterly basis from the S&P 500 Index (excluding financial stocks) based on a proprietary methodology developed by the CROCI® Investment Strategy and Valuation Group which have above-average dividend yields while focusing on sustainable dividends. The index is sponsored by Deutsche Bank AG London, an affiliate of the Advisor. Performance information for the index is not calculated by an independent calculation agent. The index commenced on March 13, 2012.
| | | Class A | | | Class B | | | Class C | | | Class R | | | Class S | | | Institutional Class | |
| Net Asset Value | |
| 11/30/14 | | $ | 46.79 | | | $ | 46.55 | | | $ | 46.61 | | | $ | 46.67 | | | $ | 46.80 | | | $ | 46.81 | |
| 11/30/13 | | $ | 42.20 | | | $ | 41.97 | | | $ | 42.03 | | | $ | 42.09 | | | $ | 42.21 | | | $ | 42.25 | |
Distribution Information as of 11/30/14 | |
| Income Dividends, Twelve Months | | $ | .81 | | | $ | .46 | | | $ | .47 | | | $ | .70 | | | $ | .91 | | | $ | .95 | |
Investment Portfolio as of November 30, 2014 | | | Shares | | | Value ($) | |
| | | | |
| Common Stocks 99.1% | |
| Consumer Discretionary 12.4% | |
| Hotels, Restaurants & Leisure 2.5% | |
| McDonald's Corp. | | | 318,196 | | | | 30,804,555 | |
| Leisure Products 2.4% | |
| Mattel, Inc. | | | 956,961 | | | | 30,192,119 | |
| Multiline Retail 5.0% | |
| Kohl's Corp. (a) | | | 502,714 | | | | 29,971,809 | |
| Macy's, Inc. | | | 501,300 | | | | 32,539,383 | |
| | | | | | | | 62,511,192 | |
| Textiles, Apparel & Luxury Goods 2.5% | |
| Coach, Inc. | | | 817,944 | | | | 30,362,081 | |
| Consumer Staples 15.0% | |
| Beverages 5.0% | |
| Coca-Cola Co. | | | 714,542 | | | | 32,032,918 | |
| PepsiCo, Inc. | | | 307,143 | | | | 30,745,014 | |
| | | | | | | | 62,777,932 | |
| Food & Staples Retailing 2.7% | |
| Wal-Mart Stores, Inc. | | | 380,199 | | | | 33,282,620 | |
| Household Products 2.5% | |
| Procter & Gamble Co. | | | 339,718 | | | | 30,720,699 | |
| Tobacco 4.8% | |
| Philip Morris International, Inc. | | | 330,252 | | | | 28,708,807 | |
| Reynolds American, Inc. | | | 470,132 | | | | 30,986,400 | |
| | | | | | | | 59,695,207 | |
| Energy 6.7% | |
| Energy Equipment & Services 2.2% | |
| National Oilwell Varco, Inc. | | | 410,800 | | | | 27,540,032 | |
| Oil, Gas & Consumable Fuels 4.5% | |
| ConocoPhillips | | | 423,392 | | | | 27,973,509 | |
| Occidental Petroleum Corp. | | | 338,184 | | | | 26,976,938 | |
| | | | | | | | 54,950,447 | |
| Health Care 15.1% | |
| Health Care Equipment & Supplies 2.5% | |
| Baxter International, Inc. | | | 417,012 | | | | 30,441,876 | |
| Pharmaceuticals 12.6% | |
| AbbVie, Inc. | | | 479,778 | | | | 33,200,638 | |
| Eli Lilly & Co. | | | 443,146 | | | | 30,187,106 | |
| Johnson & Johnson | | | 280,664 | | | | 30,381,878 | |
| Merck & Co., Inc. | | | 515,316 | | | | 31,125,086 | |
| Pfizer, Inc. | | | 1,005,669 | | | | 31,326,589 | |
| | | | | | | | 156,221,297 | |
| Industrials 20.0% | |
| Aerospace & Defense 7.6% | |
| Northrop Grumman Corp. | | | 225,336 | | | | 31,756,602 | |
| Raytheon Co. | | | 296,900 | | | | 31,679,230 | |
| United Technologies Corp. | | | 280,936 | | | | 30,925,435 | |
| | | | | | | | 94,361,267 | |
| Electrical Equipment 5.0% | |
| Eaton Corp. PLC | | | 466,249 | | | | 31,625,670 | |
| Emerson Electric Co. | | | 470,293 | | | | 29,981,179 | |
| | | | | | | | 61,606,849 | |
| Industrial Conglomerates 2.5% | |
| General Electric Co. | | | 1,144,335 | | | | 30,313,434 | |
| Machinery 4.9% | |
| Caterpillar, Inc. | | | 296,851 | | | | 29,863,211 | |
| Illinois Tool Works, Inc. | | | 331,013 | | | | 31,423,064 | |
| | | | | | | | 61,286,275 | |
| Information Technology 20.3% | |
| Communications Equipment 2.7% | |
| Cisco Systems, Inc. | | | 1,229,063 | | | | 33,971,301 | |
| Electronic Equipment, Instruments & Components 2.6% | |
| Corning, Inc. | | | 1,562,500 | | | | 32,843,750 | |
| IT Services 2.4% | |
| International Business Machines Corp. | | | 180,091 | | | | 29,205,357 | |
| Semiconductors & Semiconductor Equipment 4.9% | |
| Intel Corp. | | | 885,687 | | | | 32,991,841 | |
| KLA-Tencor Corp. | | | 392,066 | | | | 27,225,063 | |
| | | | | | | | 60,216,904 | |
| Software 5.0% | |
| CA, Inc. | | | 1,028,770 | | | | 32,046,186 | |
| Microsoft Corp. | | | 637,337 | | | | 30,471,082 | |
| | | | | | | | 62,517,268 | |
| Technology Hardware, Storage & Peripherals 2.7% | |
| Apple, Inc. | | | 277,283 | | | | 32,977,267 | |
| Materials 7.2% | |
| Chemicals | |
| E.I. du Pont de Nemours & Co. | | | 428,351 | | | | 30,584,261 | |
| LyondellBasell Industries NV "A" | | | 337,700 | | | | 26,631,022 | |
| The Mosaic Co. | | | 685,700 | | | | 31,384,489 | |
| | | | | | | | 88,599,772 | |
| Telecommunication Services 2.4% | |
| Diversified Telecommunication Services | |
| Verizon Communications, Inc. | | | 592,571 | | | | 29,978,167 | |
Total Common Stocks (Cost $1,146,052,284) | | | | 1,227,377,668 | |
| | |
| Securities Lending Collateral 0.6% | |
| Daily Assets Fund Institutional, 0.09% (b) (c) (Cost $8,022,000) | | | 8,022,000 | | | | 8,022,000 | |
| | |
| Cash Equivalents 0.3% | |
| Central Cash Management Fund, 0.06% (b) (Cost $4,342,099) | | | 4,342,099 | | | | 4,342,099 | |
| | | % of Net Assets | | | Value ($) | |
| | | | |
Total Investment Portfolio (Cost $1,158,416,383)† | | | 100.0 | | | | 1,239,741,767 | |
| Other Assets and Liabilities, Net | | | 0.0 | | | | (603,857 | ) |
| Net Assets | | | 100.0 | | | | 1,239,137,910 | |
† The cost for federal income tax purposes was $1,158,658,974. At November 30, 2014, net unrealized appreciation for all securities based on tax cost was $81,082,793. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $115,512,728 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $34,429,935.
(a) All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at November 30, 2014 amounted to $7,971,194, which is 0.6% of net assets.
(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.
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 November 30, 2014 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | |
| Common Stocks (d) | | $ | 1,227,377,668 | | | $ | — | | | $ | — | | | $ | 1,227,377,668 | |
| Short-Term Investments (d) | | | 12,364,099 | | | | — | | | | — | | | | 12,364,099 | |
| Total | | $ | 1,239,741,767 | | | $ | — | | | $ | — | | | $ | 1,239,741,767 | |
There have been no transfers between fair value measurement levels during the year ended November 30, 2014.
(d) 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 November 30, 2014 | |
| Assets | |
Investments: Investments in non-affiliated securities, at value (cost $1,146,052,284) — including $7,971,194 of securities loaned | | $ | 1,227,377,668 | |
| Investment in Daily Assets Fund Institutional (cost $8,022,000)* | | | 8,022,000 | |
| Investment in Central Cash Management Fund (cost $4,342,099) | | | 4,342,099 | |
| Total investments in securities, at value (cost $1,158,416,383) | | | 1,239,741,767 | |
| Cash | | | 228,462 | |
| Foreign currency, at value (cost $62) | | | 60 | |
| Receivable for Fund shares sold | | | 245,280 | |
| Dividends receivable | | | 10,442,945 | |
| Interest receivable | | | 936 | |
| Other assets | | | 50,106 | |
| Total assets | | | 1,250,709,556 | |
| Liabilities | |
| Payable upon return of securities loaned | | | 8,022,000 | |
| Payable for Fund shares redeemed | | | 1,284,960 | |
| Accrued services to shareholders | | | 615,680 | |
| Accrued management fee | | | 646,279 | |
| Accrued Directors' fees | | | 16,333 | |
| Other accrued expenses and payables | | | 986,394 | |
| Total liabilities | | | 11,571,646 | |
| Net assets, at value | | $ | 1,239,137,910 | |
| Net Assets Consist of | |
| Undistributed net investment income | | | 18,244,628 | |
Net unrealized appreciation (depreciation) on: Investments | | | 81,325,384 | |
| Foreign currency | | | (2 | ) |
| Accumulated net realized gain (loss) | | | (841,847,548 | ) |
| Paid-in capital | | | 1,981,415,448 | |
| Net assets, at value | | $ | 1,239,137,910 | |
* Represents collateral on securities loaned.
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of November 30, 2014 (continued) | |
| Net Asset Value | |
Class A Net Asset Value and redemption price per share ($1,006,618,387 ÷ 21,515,708 shares of capital stock outstanding, $.01 par value, 560,000,000 shares authorized) | | $ | 46.79 | |
| Maximum offering price per share (100 ÷ 94.25 of $46.79) | | $ | 49.64 | |
Class B Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($4,831,765 ÷ 103,801 shares of capital stock outstanding, $.01 par value, 560,000,000 shares authorized) | | $ | 46.55 | |
Class C Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($158,435,864 ÷ 3,399,216 shares of capital stock outstanding, $.01 par value, 140,000,000 shares authorized) | | $ | 46.61 | |
Class R Net Asset Value, offering and redemption price per share ($4,000,185 ÷ 85,714 shares of capital stock outstanding, $.01 par value, 100,000,000 shares authorized) | | $ | 46.67 | |
Class S Net Asset Value, offering and redemption price per share ($43,614,725 ÷ 931,876 shares of capital stock outstanding, $.01 par value, 150,000,000 shares authorized) | | $ | 46.80 | |
Institutional Class Net Asset Value, offering and redemption price per share ($21,636,984 ÷ 462,185 shares of capital stock outstanding, $.01 par value, 240,000,000 shares authorized) | | $ | 46.81 | |
The accompanying notes are an integral part of the financial statements.
| for the year ended November 30, 2014 | |
| Investment Income | |
Income: Dividends (net of foreign taxes withheld of $16,638) | | $ | 38,073,483 | |
| Income distributions — Central Cash Management Fund | | | 6,347 | |
| Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates | | | 107,887 | |
| Total income | | | 38,187,717 | |
Expenses: Management fee | | | 8,803,113 | |
| Services to shareholders | | | 2,069,836 | |
| Distribution and service fees | | | 4,074,647 | |
| Custodian fee | | | 20,281 | |
| Professional fees | | | 112,504 | |
| Reports to shareholders | | | 149,638 | |
| Registration fees | | | 82,888 | |
| Directors' fees and expenses | | | 55,723 | |
| Other | | | 47,418 | |
| Total expenses before expense reductions | | | 15,416,048 | |
| Expense reductions | | | (975,391 | ) |
| Total expenses after expense reductions | | | 14,440,657 | |
| Net investment income (loss) | | | 23,747,060 | |
| Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) from: Investments | | | 199,472,627 | |
| Futures | | | 1,476,189 | |
| Foreign currency | | | (88,206 | ) |
| | | | 200,860,610 | |
Change in net unrealized appreciation (depreciation) on: Investments | | | (76,344,333 | ) |
| Futures | | | (1,257,000 | ) |
| Foreign currency | | | 18,788 | |
| | | | (77,582,545 | ) |
| Net gain (loss) | | | 123,278,065 | |
| Net increase (decrease) in net assets resulting from operations | | $ | 147,025,125 | |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | | | Years Ended November 30, | |
| Increase (Decrease) in Net Assets | | 2014 | | | 2013 | |
Operations: Net investment income (loss) | | $ | 23,747,060 | | | $ | 22,429,543 | |
| Net realized gain (loss) | | | 200,860,610 | | | | 135,381,036 | |
| Change in net unrealized appreciation (depreciation) | | | (77,582,545 | ) | | | 103,231,138 | |
| Net increase (decrease) in net assets resulting from operations | | | 147,025,125 | | | | 261,041,717 | |
Distributions to shareholders from: Net investment income: Class A | | | (18,517,182 | ) | | | (25,093,704 | ) |
| Class B | | | (77,951 | ) | | | (225,117 | ) |
| Class C | | | (1,703,072 | ) | | | (2,789,688 | ) |
| Class R | | | (79,480 | ) | | | (113,998 | ) |
| Class S | | | (623,891 | ) | | | (717,015 | ) |
| Institutional Class | | | (383,163 | ) | | | (778,591 | ) |
| Total distributions | | | (21,384,739 | ) | | | (29,718,113 | ) |
Fund share transactions: Proceeds from shares sold | | | 84,570,351 | | | | 56,571,333 | |
| Reinvestment of distributions | | | 20,094,284 | | | | 27,499,528 | |
| Payments for shares redeemed | | | (221,050,838 | ) | | | (275,559,705 | ) |
| Net increase (decrease) in net assets from Fund share transactions | | | (116,386,203 | ) | | | (191,488,844 | ) |
| Increase (decrease) in net assets | | | 9,254,183 | | | | 39,834,760 | |
| Net assets at beginning of period | | | 1,229,883,727 | | | | 1,190,048,967 | |
| Net assets at end of period (including undistributed net investment income of $18,244,628 and $16,060,244, respectively) | | $ | 1,239,137,910 | | | $ | 1,229,883,727 | |
The accompanying notes are an integral part of the financial statements.
| | | Years Ended November 30, | |
| Class A | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
| Selected Per Share Data | |
| Net asset value, beginning of period | | $ | 42.20 | | | $ | 34.83 | | | $ | 31.54 | | | $ | 30.59 | | | $ | 29.04 | |
Income (loss) from investment operations: Net investment incomea | | | .90 | | | | .75 | | | | .89 | | | | .49 | | | | .34 | |
| Net realized and unrealized gain (loss) | | | 4.50 | | | | 7.59 | | | | 3.09 | | | | .73 | | | | 1.52 | |
| Total from investment operations | | | 5.40 | | | | 8.34 | | | | 3.98 | | | | 1.22 | | | | 1.86 | |
Less distributions from: Net investment income | | | (.81 | ) | | | (.97 | ) | | | (.69 | ) | | | (.27 | ) | | | (.31 | ) |
| Net asset value, end of period | | $ | 46.79 | | | $ | 42.20 | | | $ | 34.83 | | | $ | 31.54 | | | $ | 30.59 | |
Total Return (%)b | | | 12.94 | c | | | 24.36 | c | | | 12.72 | | | | 4.01 | | | | 6.42 | c |
| Ratios to Average Net Assets and Supplemental Data | |
| Net assets, end of period ($ millions) | | | 1,007 | | | | 1,013 | | | | 958 | | | | 1,055 | | | | 1,297 | |
| Ratio of expenses before expense reductions (%) | | | 1.17 | | | | 1.18 | | | | 1.20 | | | | 1.19 | | | | 1.21 | |
| Ratio of expenses after expense reductions (%) | | | 1.09 | | | | 1.17 | | | | 1.20 | | | | 1.19 | | | | 1.16 | |
| Ratio of net investment income (%) | | | 2.03 | | | | 1.96 | | | | 2.62 | | | | 1.51 | | | | 1.13 | |
| Portfolio turnover rate (%) | | | 132 | | | | 75 | | | | 58 | | | | 140 | | | | 66 | |
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c Total return would have been lower had certain expenses not been reduced. | |
| | | Years Ended November 30, | |
| Class B | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
| Selected Per Share Data | |
| Net asset value, beginning of period | | $ | 41.97 | | | $ | 34.65 | | | $ | 31.36 | | | $ | 30.46 | | | $ | 28.92 | |
Income (loss) from investment operations: Net investment incomea | | | .45 | | | | .44 | | | | .60 | | | | .18 | | | | .09 | |
| Net realized and unrealized gain (loss) | | | 4.59 | | | | 7.55 | | | | 3.10 | | | | .77 | | | | 1.52 | |
| Total from investment operations | | | 5.04 | | | | 7.99 | | | | 3.70 | | | | .95 | | | | 1.61 | |
Less distributions from: Net investment income | | | (.46 | ) | | | (.67 | ) | | | (.41 | ) | | | (.05 | ) | | | (.07 | ) |
| Net asset value, end of period | | $ | 46.55 | | | $ | 41.97 | | | $ | 34.65 | | | $ | 31.36 | | | $ | 30.46 | |
Total Return (%)b,c | | | 12.08 | | | | 23.34 | | | | 11.86 | | | | 3.12 | | | | 5.57 | |
| Ratios to Average Net Assets and Supplemental Data | |
| Net assets, end of period ($ millions) | | | 5 | | | | 10 | | | | 16 | | | | 31 | | | | 57 | |
| Ratio of expenses before expense reductions (%) | | | 2.15 | | | | 2.14 | | | | 2.10 | | | | 2.04 | | | | 2.08 | |
| Ratio of expenses after expense reductions (%) | | | 1.84 | | | | 1.98 | | | | 1.99 | | | | 2.03 | | | | 1.98 | |
| Ratio of net investment income (%) | | | 1.02 | | | | 1.16 | | | | 1.77 | | | | .56 | | | | .31 | |
| Portfolio turnover rate (%) | | | 132 | | | | 75 | | | | 58 | | | | 140 | | | | 66 | |
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c Total return would have been lower had certain expenses not been reduced. | |
| | | Years Ended November 30, | |
| Class C | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
| Selected Per Share Data | |
| Net asset value, beginning of period | | $ | 42.03 | | | $ | 34.70 | | | $ | 31.42 | | | $ | 30.51 | | | $ | 28.96 | |
Income (loss) from investment operations: Net investment incomea | | | .56 | | | | .46 | | | | .63 | | | | .24 | | | | .12 | |
| Net realized and unrealized gain (loss) | | | 4.49 | | | | 7.56 | | | | 3.08 | | | | .73 | | | | 1.52 | |
| Total from investment operations | | | 5.05 | | | | 8.02 | | | | 3.71 | | | | .97 | | | | 1.64 | |
Less distributions from: Net investment income | | | (.47 | ) | | | (.69 | ) | | | (.43 | ) | | | (.06 | ) | | | (.09 | ) |
| Net asset value, end of period | | $ | 46.61 | | | $ | 42.03 | | | $ | 34.70 | | | $ | 31.42 | | | $ | 30.51 | |
Total Return (%)b | | | 12.10 | c | | | 23.39 | c | | | 11.87 | | | | 3.19 | | | | 5.64 | c |
| Ratios to Average Net Assets and Supplemental Data | |
| Net assets, end of period ($ millions) | | | 158 | | | | 158 | | | | 151 | | | | 175 | | | | 233 | |
| Ratio of expenses before expense reductions (%) | | | 1.93 | | | | 1.96 | | | | 1.95 | | | | 1.96 | | | | 1.95 | |
| Ratio of expenses after expense reductions (%) | | | 1.84 | | | | 1.94 | | | | 1.95 | | | | 1.96 | | | | 1.90 | |
| Ratio of net investment income (%) | | | 1.29 | | | | 1.19 | | | | 1.86 | | | | .72 | | | | .39 | |
| Portfolio turnover rate (%) | | | 132 | | | | 75 | | | | 58 | | | | 140 | | | | 66 | |
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c Total return would have been lower had certain expenses not been reduced. | |
| | | Years Ended November 30, | |
| Class R | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | �� | 2010 | |
| Selected Per Share Data | |
| Net asset value, beginning of period | | $ | 42.09 | | | $ | 34.73 | | | $ | 31.45 | | | $ | 30.47 | | | $ | 28.97 | |
Income (loss) from investment operations: Net investment incomea | | | .73 | | | | .66 | | | | .79 | | | | .38 | | | | .21 | |
| Net realized and unrealized gain (loss) | | | 4.55 | | | | 7.57 | | | | 3.08 | | | | .75 | | | | 1.51 | |
| Total from investment operations | | | 5.28 | | | | 8.23 | | | | 3.87 | | | | 1.13 | | | | 1.72 | |
Less distributions from: Net investment income | | | (.70 | ) | | | (.87 | ) | | | (.59 | ) | | | (.15 | ) | | | (.22 | ) |
| Net asset value, end of period | | $ | 46.67 | | | $ | 42.09 | | | $ | 34.73 | | | $ | 31.45 | | | $ | 30.47 | |
Total Return (%)b | | | 12.67 | | | | 24.06 | | | | 12.39 | | | | 3.68 | | | | 6.00 | |
| Ratios to Average Net Assets and Supplemental Data | |
| Net assets, end of period ($ millions) | | | 4 | | | | 5 | | | | 5 | | | | 5 | | | | 9 | |
| Ratio of expenses before expense reductions (%) | | | 1.54 | | | | 1.53 | | | | 1.53 | | | | 1.52 | | | | 1.63 | |
| Ratio of expenses after expense reductions (%) | | | 1.34 | | | | 1.42 | | | | 1.49 | | | | 1.48 | | | | 1.58 | |
| Ratio of net investment income (%) | | | 1.66 | | | | 1.71 | | | | 2.32 | | | | 1.16 | | | | .71 | |
| Portfolio turnover rate (%) | | | 132 | | | | 75 | | | | 58 | | | | 140 | | | | 66 | |
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. | |
| | | Years Ended November 30, | |
| Class S | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
| Selected Per Share Data | |
| Net asset value, beginning of period | | $ | 42.21 | | | $ | 34.84 | | | $ | 31.54 | | | $ | 30.57 | | | $ | 29.02 | |
Income (loss) from investment operations: Net investment incomea | | | 1.12 | | | | .84 | | | | .97 | | | | .53 | | | | .38 | |
| Net realized and unrealized gain (loss) | | | 4.38 | | | | 7.59 | | | | 3.10 | | | | .76 | | | | 1.52 | |
| Total from investment operations | | | 5.50 | | | | 8.43 | | | | 4.07 | | | | 1.29 | | | | 1.90 | |
Less distributions from: Net investment income | | | (.91 | ) | | | (1.06 | ) | | | (.77 | ) | | | (.32 | ) | | | (.35 | ) |
| Net asset value, end of period | | $ | 46.80 | | | $ | 42.21 | | | $ | 34.84 | | | $ | 31.54 | | | $ | 30.57 | |
| Total Return (%) | | | 13.21 | b | | | 24.65 | b | | | 13.01 | | | | 4.23 | | | | 6.60 | b |
| Ratios to Average Net Assets and Supplemental Data | |
| Net assets, end of period ($ millions) | | | 44 | | | | 27 | | | | 25 | | | | 32 | | | | 61 | |
| Ratio of expenses before expense reductions (%) | | | .92 | | | | .95 | | | | .96 | | | | .96 | | | | 1.02 | |
| Ratio of expenses after expense reductions (%) | | | .84 | | | | .94 | | | | .96 | | | | .96 | | | | 1.02 | |
| Ratio of net investment income (%) | | | 2.55 | | | | 2.19 | | | | 2.84 | | | | 1.62 | | | | 1.27 | |
| Portfolio turnover rate (%) | | | 132 | | | | 75 | | | | 58 | | | | 140 | | | | 66 | |
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. | |
| | | Years Ended November 30, | |
| Institutional Class | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
| Selected Per Share Data | |
| Net asset value, beginning of period | | $ | 42.25 | | | $ | 34.89 | | | $ | 31.60 | | | $ | 30.63 | | | $ | 29.08 | |
Income (loss) from investment operations: Net investment incomea | | | 1.06 | | | | .88 | | | | 1.00 | | | | .62 | | | | .43 | |
| Net realized and unrealized gain (loss) | | | 4.45 | | | | 7.59 | | | | 3.11 | | | | .72 | | | | 1.53 | |
| Total from investment operations | | | 5.51 | | | | 8.47 | | | | 4.11 | | | | 1.34 | | | | 1.96 | |
Less distributions from: Net investment income | | | (.95 | ) | | | (1.11 | ) | | | (.82 | ) | | | (.37 | ) | | | (.41 | ) |
| Net asset value, end of period | | $ | 46.81 | | | $ | 42.25 | | | $ | 34.89 | | | $ | 31.60 | | | $ | 30.63 | |
| Total Return (%) | | | 13.20 | b | | | 24.76 | b | | | 13.13 | | | | 4.40 | | | | 6.80 | |
| Ratios to Average Net Assets and Supplemental Data | |
| Net assets, end of period ($ millions) | | | 22 | | | | 17 | | | | 36 | | | | 54 | | | | 63 | |
| Ratio of expenses before expense reductions (%) | | | .89 | | | | .86 | | | | .83 | | | | .82 | | | | .82 | |
| Ratio of expenses after expense reductions (%) | | | .84 | | | | .86 | | | | .83 | | | | .82 | | | | .82 | |
| Ratio of net investment income (%) | | | 2.41 | | | | 2.30 | | | | 2.94 | | | | 1.89 | | | | 1.47 | |
| Portfolio turnover rate (%) | | | 132 | | | | 75 | | | | 58 | | | | 140 | | | | 66 | |
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. | |
Notes to Financial Statements
A. Organization and Significant Accounting Policies
Deutsche Equity Dividend Fund (formerly DWS Equity Dividend Fund) (the "Fund") is a diversified series of Deutsche Value Series, Inc. (formerly DWS Value Series, Inc.) (the "Corporation"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company and is organized as a Maryland corporation.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares of the Fund are closed to new purchases, except exchanges or the reinvestment of dividends or other distributions. Class B shares were offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Class C shares do not automatically convert into another class. Institutional Class shares are generally available only to qualified institutions, are not subject to initial or contingent deferred sales charges and generally have lower ongoing expenses than other classes. Class R shares are only available to participants in certain retirement plans and are offered to investors without an initial or contingent deferred sales charge. Class S shares are not subject to initial or contingent deferred sales charges and are only available to a limited group of investors.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution and service fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are categorized as Level 1. For certain international equity securities, in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security's disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company's or issuer's financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains the benefits of owning the securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of November 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.
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.
Under the Regulated Investment Company Modernization Act of 2010, net capital losses incurred post-enactment may be carried forward indefinitely, and their character is retained as short-term and/or long-term. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At November 30, 2014, the Fund had a net tax basis capital loss carryforward of approximately $841,605,000 of pre-enactment losses, which may be applied against any realized net taxable capital gain of each succeeding year until fully utilized or until November 30, 2017, the expiration date, whichever occurs first.
The Fund has reviewed the tax positions for the open tax years as of November 30, 2014 and has determined that no provision for income tax and/or uncertain tax provisions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund are declared and distributed to shareholders quarterly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in futures contracts and certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At November 30, 2014, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
| Undistributed ordinary income* | | $ | 18,244,628 | |
| Capital loss carryforwards | | $ | (841,605,000 | ) |
| Net unrealized appreciation (depreciation) on investments | | $ | 81,082,793 | |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| | Years Ended November 30, |
| | 2014 | 2013 |
| Distributions from ordinary income* | | $ | 21,384,739 | | | $ | 29,718,113 | |
* For tax purposes, short-term capital gain distributions are considered ordinary income distributions.
Expenses. Expenses of the Corporation arising in connection with a specific fund are allocated to that fund. Other Corporation expenses which cannot be directly attributed to a fund are apportioned among the funds in the Corporation based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. 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.
B. Derivative Instruments
Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). For the year ended November 30, 2014, the Fund used futures contracts as a means of gaining exposure to a particular asset class or to keep cash on hand to meet shareholder redemptions or other needs, while maintaining exposure to the stock market.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary cash or securities ("initial margin") in an amount equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. Gains or losses are realized when the contract expires or is closed. Since all futures contracts are exchange traded, counterparty risk is minimized as the exchange's clearinghouse acts as the counterparty, and guarantees the futures against default.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid market will limit the Fund's ability to close out a futures contract prior to the settlement date and the risk that the futures contract is not well correlated with the security, index or currency to which it relates. Risk of loss may exceed amounts disclosed in the Statement of Assets and Liabilities.
There were no open futures contracts at November 30, 2014. For the year ended November 30, 2014, the investment in futures contracts purchased had a total notional value generally indicative of a range from $0 to approximately $36,082,000.
The amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the year ended November 30, 2014 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
| Realized Gain (Loss) | | Futures Contracts | |
| Equity Contracts (a) | | $ | 1,476,189 | |
The above derivative is located in the following Statement of Operations account: (a) Net realized gain (loss) from futures | |
| Change in Net Unrealized Appreciation (Depreciation) | | Futures Contracts | |
| Equity Contracts (a) | | $ | (1,257,000 | ) |
The above derivative is located in the following Statement of Operations account: (a) Change in net unrealized appreciation (depreciation) on futures | |
C. Purchases and Sales of Securities
During the year ended November 30, 2014, purchases and sales of investment securities (excluding short-term investments) aggregated $1,592,826,892 and $1,681,025,963, respectively.
D. Related Parties
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. In addition to portfolio management services, the Advisor provides certain administrative services in accordance with the Investment Management Agreement.
Pursuant to the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:
| First $250 million of the Fund's average daily net assets | | | .75 | % |
| Next $750 million of such net assets | | | .72 | % |
| Next $1.5 billion of such net assets | | | .70 | % |
| Next $2.5 billion of such net assets | | | .68 | % |
| Next $2.5 billion of such net assets | | | .65 | % |
| Next $2.5 billion of such net assets | | | .64 | % |
| Next $2.5 billion of such net assets | | | .63 | % |
| Over $12.5 billion of such net assets | | | .62 | % |
Accordingly, for the year ended November 30, 2014, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.72% of the Fund's average daily net assets.
For the period from December 1, 2013 through September 30, 2014, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
| Class A | 1.09% |
| Class B | 1.84% |
| Class C | 1.84% |
| Class R | 1.34% |
| Class S | .84% |
| Institutional Class | .84% |
Effective October 1, 2014 through September 30, 2015, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
| Class A | 1.11% |
| Class B | 1.86% |
| Class C | 1.86% |
| Class R | 1.36% |
| Class S | .86% |
| Institutional Class | .86% |
For the year ended November 30, 2014, fees waived and/or expenses reimbursed for each class are as follows:
| Class A | | $ | 772,208 | |
| Class B | | | 21,373 | |
| Class C | | | 142,022 | |
| Class R | | | 9,574 | |
| Class S | | | 22,309 | |
| Institutional Class | | | 7,905 | |
| | | $ | 975,391 | |
Service Provider Fees. DeAWM Service Company ("DSC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. ("DST"), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended November 30, 2014, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | | Total Aggregated | | | Unpaid at November 30, 2014 | |
| Class A | | $ | 757,797 | | | $ | 186,284 | |
| Class B | | | 22,424 | | | | 4,969 | |
| Class C | | | 73,274 | | | | 17,163 | |
| Class R | | | 1,641 | | | | 390 | |
| Class S | | | 14,170 | | | | 3,698 | |
| Institutional Class | | | 2,962 | | | | 710 | |
| | | $ | 872,268 | | | $ | 213,214 | |
Pursuant to a fund accounting agreement, DIMA is responsible for computing the daily net asset value per share and maintaining the portfolio and general accounting records of the Fund. DIMA has delegated certain fund accounting and record-keeping services to State Street Bank and Trust Company. The costs and expenses of such delegation are paid by DIMA. The Fund paid no fee to DIMA for fund accounting and record-keeping services provided under the fund accounting agreement during the period.
Distribution and Service Fees. Under the Fund's Class B, Class C and Class R 12b-1 Plans, DeAWM Distributors, Inc. ("DDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of each of Class B and C shares and 0.25% of average daily net assets of Class R shares. In accordance with the Fund's Underwriting and Distribution Service Agreement, DDI enters into related selling group agreements with various firms at various rates for sales of Class B, C and R shares, respectively. For the year ended November 30, 2014, the Distribution Fee was as follows:
| Distribution Fee | | Total Aggregated | | | Unpaid at November 30, 2014 | |
| Class B | | $ | 52,657 | | | $ | 3,035 | |
| Class C | | | 1,177,301 | | | | 96,897 | |
| Class R | | | 11,958 | | | | 851 | |
| | | $ | 1,241,916 | | | $ | 100,783 | |
In addition, DDI provides information and administrative services for a fee ("Service Fee") to Class A, B, C and R shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the year ended November 30, 2014, the Service Fee was as follows:
| Service Fee | | Total Aggregated | | | Unpaid at November 30, 2014 | | | Annual Rate | |
| Class A | | $ | 2,416,165 | | | $ | 604,732 | | | | .24 | % |
| Class B | | | 17,108 | | | | 3,414 | | | | .24 | % |
| Class C | | | 387,915 | | | | 97,145 | | | | .25 | % |
| Class R | | | 11,543 | | | | 2,597 | | | | .24 | % |
| | | $ | 2,832,731 | | | $ | 707,888 | | | | | |
Underwriting and Contingent Deferred Sales Charge. DDI is the principal underwriter for the Fund. Underwriting commissions paid by shareholders in connection with the distribution of Class A shares for the year ended November 30, 2014 aggregated $42,441.
In addition, DDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the year ended November 30, 2014, the CDSC for Class B and C shares aggregated $8,400 and $27,123, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the year ended November 30, 2014, DDI received $1,330 for Class A shares.
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended November 30, 2014, the amount charged to the Fund by DIMA included in the Statement of Operations under "Reports to shareholders" aggregated $20,223, of which $7,900 is unpaid.
Directors' Fees and Expenses. The Fund paid retainer fees to each Director not affiliated with the Advisor, plus specified amounts to the Board Chairperson and Vice Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in Central Cash Management Fund and Deutsche Variable NAV Money Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund seeks to provide a high level of current income consistent with liquidity and the preservation of capital. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the Investment Company Act of 1940, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. Central Cash Management Fund seeks to maintain a stable net asset value, and Deutsche Variable NAV Money Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. Central Cash Management Fund does not pay the Advisor an investment management fee. To the extent that Deutsche Variable NAV Money Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund's assets invested in Deutsche Variable NAV Money Fund.
Securities Lending Agent Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the year ended November 30, 2014, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $9,863.
E. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $400 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at November 30, 2014.
F. Share Transactions
The following table summarizes share and dollar activity in the Fund:
| | | Year Ended November 30, 2014 | | | Year Ended November 30, 2013 | |
| | | Shares | | | Dollars | | | Shares | | | Dollars | |
| Shares sold | |
| Class A | | | 1,104,437 | | | $ | 48,884,571 | | | | 1,055,908 | | | $ | 40,645,437 | |
| Class B | | | 1,011 | | | | 44,242 | | | | 7,315 | | | | 284,430 | |
| Class C | | | 161,233 | | | | 7,106,309 | | | | 209,112 | | | | 8,077,859 | |
| Class R | | | 14,695 | | | | 648,576 | | | | 25,052 | | | | 939,503 | |
| Class S | | | 460,832 | | | | 20,688,148 | | | | 90,850 | | | | 3,541,150 | |
| Institutional Class | | | 160,593 | | | | 7,198,505 | | | | 80,111 | | | | 3,082,954 | |
| | | | | | | $ | 84,570,351 | | | | | | | $ | 56,571,333 | |
| Shares issued to shareholders in reinvestment of distributions | |
| Class A | | | 403,222 | | | $ | 17,645,672 | | | | 634,845 | | | $ | 23,561,897 | |
| Class B | | | 1,728 | | | | 74,729 | | | | 5,788 | | | | 211,837 | |
| Class C | | | 34,186 | | | | 1,490,393 | | | | 64,575 | | | | 2,386,647 | |
| Class R | | | 1,814 | | | | 78,958 | | | | 3,057 | | | | 113,324 | |
| Class S | | | 13,966 | | | | 613,747 | | | | 18,790 | | | | 697,914 | |
| Institutional Class | | | 4,354 | | | | 190,785 | | | | 14,482 | | | | 527,909 | |
| | | | | | | $ | 20,094,284 | | | | | | | $ | 27,499,528 | |
| Shares redeemed | |
| Class A | | | (3,998,935 | ) | | $ | (175,983,549 | ) | | | (5,175,808 | ) | | $ | (197,424,950 | ) |
| Class B | | | (129,032 | ) | | | (5,626,512 | ) | | | (239,908 | ) | | | (9,085,707 | ) |
| Class C | | | (560,643 | ) | | | (24,573,722 | ) | | | (849,303 | ) | | | (32,237,155 | ) |
| Class R | | | (57,280 | ) | | | (2,531,771 | ) | | | (36,549 | ) | | | (1,371,903 | ) |
| Class S | | | (170,871 | ) | | | (7,517,539 | ) | | | (201,426 | ) | | | (7,759,266 | ) |
| Institutional Class | | | (109,478 | ) | | | (4,817,745 | ) | | | (727,904 | ) | | | (27,680,724 | ) |
| | | | | | | $ | (221,050,838 | ) | | | | | | $ | (275,559,705 | ) |
| Net increase (decrease) | |
| Class A | | | (2,491,276 | ) | | $ | (109,453,306 | ) | | | (3,485,055 | ) | | $ | (133,217,616 | ) |
| Class B | | | (126,293 | ) | | | (5,507,541 | ) | | | (226,805 | ) | | | (8,589,440 | ) |
| Class C | | | (365,224 | ) | | | (15,977,020 | ) | | | (575,616 | ) | | | (21,772,649 | ) |
| Class R | | | (40,771 | ) | | | (1,804,237 | ) | | | (8,440 | ) | | | (319,076 | ) |
| Class S | | | 303,927 | | | | 13,784,356 | | | | (91,786 | ) | | | (3,520,202 | ) |
| Institutional Class | | | 55,469 | | | | 2,571,545 | | | | (633,311 | ) | | | (24,069,861 | ) |
| | | | | | | $ | (116,386,203 | ) | | | | | | $ | (191,488,844 | ) |
G. Change in Investment Strategy and Fund Name Change
Effective April 1, 2014 the Fund changed its management process and investment team. Portfolio management intends to select approximately forty stocks with the lowest positive Cash Return on Capital Invested (CROCI®) Economic Price Earnings Ratio from the S&P 500 universe, while seeking an above average dividend yield. The CROCI® Economic Price Earnings Ratio is a proprietary measure of company valuation using the same relationships between valuation and return as an accounting P/E ratio (i.e., price/book value divided by return on equity). For a full description of the Fund's investment strategy, please see the Fund's current prospectus dated April 1, 2014.
In addition, effective March 1, 2015, the Fund will change its name to Deutsche CROCI® Equity Dividend Fund.
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Deutsche Value Series, Inc. and Shareholders of Deutsche Equity Dividend Fund:
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Deutsche Equity Dividend Fund (formerly DWS Equity Dividend Fund) (the "Fund") (one of the series constituting Deutsche Value Series, Inc. (formerly DWS Value Series, Inc.)), as of November 30, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Deutsche Equity Dividend Fund at November 30, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
| | | |
Boston, Massachusetts January 23, 2015 | | |
Information About Your Fund's Expenses
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads) and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (June 1, 2014 to November 30, 2014).
The tables illustrate your Fund's expenses in two ways:
—Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
—Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. Subject to certain exceptions, an account maintenance fee of $20.00 assessed once per calendar year for Classes A, B, C and S shares may apply for accounts with balances less than $10,000. This fee is not included in these tables. If it was, the estimate of expenses paid for Classes A, B, C and S shares during the period would be higher, and account value during the period would be lower, by this amount.
Expenses and Value of a $1,000 Investment for the six months ended November 30, 2014 (Unaudited) | |
| Actual Fund Return | | Class A | | | Class B | | | Class C | | | Class R | | | Class S | | | Institutional Class | |
| Beginning Account Value 6/1/14 | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | |
| Ending Account Value 11/30/14 | | $ | 1,054.30 | | | $ | 1,050.50 | | | $ | 1,050.50 | | | $ | 1,053.10 | | | $ | 1,055.60 | | | $ | 1,055.60 | |
| Expenses Paid per $1,000* | | $ | 5.66 | | | $ | 9.51 | | | $ | 9.51 | | | $ | 6.95 | | | $ | 4.38 | | | $ | 4.38 | |
| Hypothetical 5% Fund Return | | Class A | | | Class B | | | Class C | | | Class R | | | Class S | | | Institutional Class | |
| Beginning Account Value 6/1/14 | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | | | $ | 1,000.00 | |
| Ending Account Value 11/30/14 | | $ | 1,019.55 | | | $ | 1,015.79 | | | $ | 1,015.79 | | | $ | 1,018.30 | | | $ | 1,020.81 | | | $ | 1,020.81 | |
| Expenses Paid per $1,000* | | $ | 5.57 | | | $ | 9.35 | | | $ | 9.35 | | | $ | 6.83 | | | $ | 4.31 | | | $ | 4.31 | |
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 183 (the number of days in the most recent six-month period), then divided by 365.
| Annualized Expense Ratios | Class A | Class B | Class C | Class R | Class S | Institutional Class |
| Deutsche Equity Dividend Fund | 1.10% | 1.85% | 1.85% | 1.35% | .85% | .85% |
For more information, please refer to the Fund's prospectus.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to http://apps.finra.org/fundanalyzer/1/fa.aspx.
Tax Information (Unaudited)
For corporate shareholders, 100% of the income dividends paid during the Fund's fiscal year ended November 30, 2014, qualified for the dividends received deduction.
For federal income tax purposes, the Fund designates approximately $41,512,000, or the maximum amount allowable under tax law, as qualified dividend income.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call (800) 728-3337.
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Directors approved the renewal of Deutsche Equity Dividend Fund’s investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2014.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
— In September 2014, all of the Fund’s Directors were independent of DIMA and its affiliates.
— The Directors met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board’s Contract Committee, in coordination with the Board’s Equity Oversight Committee, reviewed comprehensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability compiled by a fee consultant retained by the Fund’s Independent Directors (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.
— The Independent Directors regularly meet privately with counsel to discuss contract review and other matters. In addition, the Independent Directors were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations.
— In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund’s Rule 12b-1 plan, distribution agreement, transfer agency agreement and other material service agreements.
— Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee’s findings and recommendations.
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of Deutsche Bank AG ("DB"), a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.
As part of the contract review process, the Board carefully considered the fees and expenses of each Deutsche fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
In 2012, DB combined its Asset Management (of which DIMA was a part) and Wealth Management divisions into a new Asset and Wealth Management ("AWM") division. DB has advised the Independent Directors that the U.S. asset management business is a critical and integral part of DB, and that DB will continue to invest in AWM a significant portion of the savings it has realized by combining its Asset and Wealth Management divisions, including ongoing enhancements to AWM’s investment capabilities. DB also has confirmed its commitment to maintaining strong legal and compliance groups within the AWM division.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management and administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to a peer universe), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2013, the Fund’s performance (Class A shares) was in the 4th quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2013. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board recognized the efforts by DIMA in recent years to enhance its investment platform and improve long-term performance across the Deutsche fund complex.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund were lower than the median (2nd quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2013). The Board noted that the Fund’s Class A shares total (net) operating expenses (excluding 12b-1 fees) were expected to be lower than the median (2nd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2013, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class’s total (net) operating expenses to the applicable Lipper Universe Expenses. The Board also considered how the Fund’s total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board noted that the expense limitations agreed to by DIMA helped to ensure that the Fund’s total (net) operating expenses would remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts and funds offered primarily to European investors ("Deutsche Europe funds") managed by DIMA and its affiliates. The Board noted that DIMA indicated that it does not manage any institutional accounts or Deutsche Europe funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs and pre-tax profits realized by DIMA from advising the Deutsche U.S. mutual funds ("Deutsche Funds"), as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental benefits received by DIMA and its affiliates, including any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities, along with the incidental public relations benefits to DIMA related to Deutsche Funds advertising and cross-selling opportunities among DIMA products and services. The Board concluded that management fees were reasonable in light of these fallout benefits.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of DIMA’s and the Fund’s chief compliance officer; (ii) the large number of DIMA compliance personnel; and (iii) the substantial commitment of resources by DIMA and its affiliates to compliance matters.
Based on all of the information considered and the conclusions reached, the Board unanimously determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Directors and counsel present. It is possible that individual Directors may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the fund. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Kenneth C. Froewiss, Chairman, Deutsche Mutual Funds, P.O. Box 390601, Cambridge, MA 02139. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period. The Board Members may also serve in similar capacities with other funds in the fund complex.
| Independent Board Members |
Name, Year of Birth, Position with the Fund and Length of Time Served1 | | Business Experience and Directorships During the Past Five Years | Number of Funds in Deutsche Fund Complex Overseen | Other Directorships Held by Board Member |
Kenneth C. Froewiss (1945) Chairperson since 2013, and Board Member since 2001 | | Adjunct Professor of Finance, NYU Stern School of Business (September 2009–present; Clinical Professor from 1997–September 2009); Member, Finance Committee, Association for Asian Studies (2002–present); Director, Mitsui Sumitomo Insurance Group (US) (2004–present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996) | 105 | — |
William McClayton (1944) Vice Chairperson since 2013, and Board Member since 2004 | | Private equity investor (since October 2009); previously, Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Directorship: Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Trustee, Ravinia Festival | 105 | — |
John W. Ballantine (1946) Board Member since 1999 | | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); former Directorships: Director and former Chairman of the Board, Healthways, Inc.2 (provider of disease and care management services) (2003–2014); Stockwell Capital Investments PLC (private equity); First Oak Brook Bancshares, Inc. and Oak Brook Bank; Prisma Energy International | 105 | Portland General Electric2 (utility company) (2003– present) |
Henry P. Becton, Jr. (1943) Board Member since 1990 | | Vice Chair and former President, WGBH Educational Foundation. Directorships: Public Radio International; Public Radio Exchange (PRX); North Bennett Street School (Boston); former Directorships: Belo Corporation2 (media company); The PBS Foundation; Association of Public Television Stations; Boston Museum of Science; American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service; Connecticut College | 105 | Lead Director, Becton Dickinson and Company2 (medical technology company) |
Dawn-Marie Driscoll (1946) Board Member since 1987 | | Emeritus Executive Fellow, Center for Business Ethics, Bentley University; formerly: President, Driscoll Associates (consulting firm); Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene's (retail) (1978–1988). Directorships: Director of ICI Mutual Insurance Company (since 2007); Advisory Board, Center for Business Ethics, Bentley University; Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); former Directorships: Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 105 | — |
Keith R. Fox, CFA (1954) Board Member since 1996 | | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); The Kennel Shop (retailer); former Chairman, National Association of Small Business Investment Companies; former Directorships: BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) (2011–2012) | 105 | — |
Paul K. Freeman (1950) Board Member since 1993 | | Consultant, World Bank/Inter-American Development Bank; Chair, Independent Directors Council; Investment Company Institute (executive and nominating committees); formerly, Chairman of Education Committee of Independent Directors Council; Project Leader, International Institute for Applied Systems Analysis (1998–2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986–1998); Directorships: Denver Zoo Foundation (December 2012–present); former Directorships: Prisma Energy International | 105 | — |
Richard J. Herring (1946) Board Member since 1990 | | Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Co-Director, Wharton Financial Institutions Center; Co-Chair, U.S. Shadow Financial Regulatory Committee; Executive Director, Financial Economists Roundtable; formerly: Vice Dean and Director, Wharton Undergraduate Division (July 1995–June 2000); Director, Lauder Institute of International Management Studies (July 2000–June 2006) | 105 | Director, Aberdeen Singapore and Japan Funds (since 2007); Independent Director of Barclays Bank Delaware (since September 2010) |
Rebecca W. Rimel (1951) Board Member since 1995 | | President and Chief Executive Officer, The Pew Charitable Trusts (charitable organization) (1994 to present); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012) | 105 | Director, Becton Dickinson and Company2 (medical technology company) (2012– present); Director, BioTelemetry Inc.2 (health care) (2009– present) |
William N. Searcy, Jr. (1946) Board Member since 1993 | | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 105 | — |
Jean Gleason Stromberg (1943) Board Member since 1997 | | Retired. Formerly, Consultant (1997–2001); Director, Financial Markets U.S. Government Accountability Office (1996–1997); Partner, Norton Rose Fulbright, L.L.P. (law firm) (1978–1996). Directorships: The William and Flora Hewlett Foundation (charitable organization); former Directorships: Service Source, Inc. (nonprofit), Mutual Fund Directors Forum (2002–2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987–1990 and 1994–1996) | 105 | — |
Robert H. Wadsworth* (1940) Board Member since 1999 | | President, Robert H. Wadsworth & Associates, Inc. (consulting firm) (1983 to present); Director, The Phoenix Boys Choir Association | 105 | — |
Officers4 |
Name, Year of Birth, Position with the Fund and Length of Time Served5 | | Business Experience and Directorships During the Past Five Years |
Brian E. Binder8 (1972) President and Chief Executive Officer, 2013–present | | Managing Director3 and Head of Fund Administration, Deutsche Asset & Wealth Management (2013–present); formerly: Head of Business Management and Consulting at Invesco, Ltd. (2010–2012); Chief Administrative Officer, Van Kampen Funds Inc. (2008–2010); and Chief Administrative Officer, Morgan Stanley Investment Management Americas Distribution (2003–2008) |
John Millette7 (1962) Vice President and Secretary, 1999–present | | Director,3 Deutsche Asset & Wealth Management |
Melinda Morrow6 (1970) Vice President, 2012–present | | Director,3 Deutsche Asset & Wealth Management |
Paul H. Schubert6 (1963) Chief Financial Officer, 2004–present Treasurer, 2005–present | | Managing Director,3 Deutsche Asset & Wealth Management (since July 2004); formerly: Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998–2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994–1998) |
Caroline Pearson7 (1962) Chief Legal Officer, 2010–present | | Managing Director,3 Deutsche Asset & Wealth Management; formerly: Assistant Secretary for DWS family of funds (1997–2010) |
Robert Kloby6 (1962) Chief Compliance Officer, 2006–present | | Managing Director,3 Deutsche Asset & Wealth Management |
Wayne Salit6 (1967) Anti-Money Laundering Compliance Officer, 2014–present | | Director,3 Deutsche Asset & Wealth Management; formerly: Managing Director, AML Compliance Officer at BNY Mellon (2011–2014); and Director, AML Compliance Officer at Deutsche Bank (2004–2011) |
Hepsen Uzcan7 (1974) Assistant Secretary, 2013–present | | Director,3 Deutsche Asset & Wealth Management |
Paul Antosca7 (1957) Assistant Treasurer, 2007–present | | Director,3 Deutsche Asset & Wealth Management |
Jack Clark7 (1967) Assistant Treasurer, 2007–present | | Director,3 Deutsche Asset & Wealth Management |
Diane Kenneally7 (1966) Assistant Treasurer, 2007–present | | Director,3 Deutsche Asset & Wealth Management |
1 The length of time served represents the year in which the Board Member joined the board of one or more Deutsche funds currently overseen by the Board.
2 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
3 Executive title, not a board directorship.
4 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the fund.
5 The length of time served represents the year in which the officer was first elected in such capacity for one or more Deutsche funds.
6 Address: 60 Wall Street, New York, NY 10005.
7 Address: One Beacon Street, Boston, MA 02108.
8 Address: 222 South Riverside Plaza, Chicago, IL 60606.
* Robert H. Wadsworth retired from the Board effective December 31, 2014.
The fund's Statement of Additional Information ("SAI") includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
Account Management Resources | |
| For More Information | | The automated telephone system allows you to access personalized account information and obtain information on other Deutsche funds using either your voice or your telephone keypad. Certain account types within Classes A, B, C and S also have the ability to purchase, exchange or redeem shares using this system. For more information, contact your financial advisor. You may also access our automated telephone system or speak with a Shareholder Service representative by calling: (800) 728-3337 |
| Web Site | | deutschefunds.com View your account transactions and balances, trade shares, monitor your asset allocation, subscribe to fund and account updates by e-mail, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about Deutsche funds, retirement planning information, and more. |
| Written Correspondence | | Deutsche Asset & Wealth Management PO Box 219151 Kansas City, MO 64121-9151 |
| Proxy Voting | | The fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our Web site — deutschefunds.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 728-3337. |
| Portfolio Holdings | | Following the fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form will be available on the SEC's Web site at sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. The fund's portfolio holdings are also posted on deutschefunds.com from time to time. Please see the fund's current prospectus for more information. |
| Principal Underwriter | | If you have questions, comments or complaints, contact: DeAWM Distributors, Inc. 222 South Riverside Plaza Chicago, IL 60606-5808 (800) 621-1148 |
| Investment Management | | Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset & Wealth Management, is the investment advisor for the fund. DIMA and it predecessors have more than 80 years of experience managing mutual funds and DIMA provides a full range of investment advisory services to both institutional and retail clients. DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution engaged in a wide variety of financial services, including investment management, retail, private and commercial banking, investment banking and insurance. Deutsche Asset & Wealth Management is the retail brand name in the U.S. for the wealth management and asset management activities of Deutsche Bank AG and DIMA. Deutsche Asset & Wealth Management is committed to delivering the investing expertise, insight and resources of this global investment platform to American investors. |
| | | Class A | Class B | Class C | Class S | Institutional Class |
| Nasdaq Symbol | | KDHAX | KDHBX | KDHCX | KDHSX | KDHIX |
| CUSIP Number | | 25159G 811 | 25159G 738 | 25159G 746 | 25159G 761 | 25159G 779 |
| Fund Number | | 087 | 287 | 387 | 2387 | 539 |
| For shareholders of Class R |
| Automated Information Line | | DeAWM Flex Plan Access (800) 728-3337 24-hour access to your retirement plan account. |
| Web Site | | deutschefunds.com Click "Retirement Plans" to reallocate assets, process transactions, review your funds, and subscribe to fund updates by e-mail through our secure online account access. Obtain prospectuses and applications, blank forms, interactive worksheets, news about Deutsche funds, retirement planning information, and more. |
| For More Information | | (800) 728-3337 To speak with a service representative. |
| Written Correspondence | | DeAWM Service Company 222 South Riverside Plaza Chicago, IL 60606-5806 |
| Nasdaq Symbol | | KDHRX |
| CUSIP Number | | 25159G 753 |
| Fund Number | | 1506 |
Notes
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.
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.
