Deutsche Floating Rate Fund

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1 Taxable Fixed-Income 2 nd quarter 2014 Deutsche Floating Rate Fund

2 Access a world of opportunities through the global resources of Deutsche Bank Canada United States Netherlands Belgium United Kingdom Luxembourg France Spain Germany Poland Austria Italy Switzerland Bahrain UAE Saudi Arabia India Russia China Japan South Korea Taiwan Philippines Singapore Australia With $1.3 trillion of assets under management globally as of 12/31/13, Deutsche Asset & Wealth Management is one of the world s largest investment organizations. We help individuals and institutions worldwide grow and protect their wealth, by offering traditional and alternative investments across all major asset classes. We also provide customized wealth management solutions and private banking services to high-net-worth individuals and families. Key facts: the Deutsche Floating Rate Fund story Floating rate loans in today s market: Now may be an attractive time to consider floating-rate loans, given their potential to help combat today s unique market challenges, including potentially rising interest rates and higher inflation (see pages 3 5 for details). Long-term benefits of floating-rate loan investing: Several key attributes floating coupons, seniority in capital structure and how assets are secured differentiate floating-rate loans from other fixedincome securities and help make them good overall diversifiers in a fixed-income portfolio (see page 4 for details). Deutsche Floating Rate Fund: Deutsche Floating Rate Fund stands out from the crowd with a diversified value investment approach, an experienced investment team and a strong track record, including compelling Morningstar ratings and rankings (see page 7 for details). 2 Deutsche Floating Rate Fund

3 The current environment for fixed-income investors Last 50+ years of interest rates (4/54 6/14) 16% Time period 7/54 4/70 Time period 11/93 10/94 10-year treasury yield (%) 12% 8% 4% Rise in interest rates 5.01% Bond cumulative principal return 20.32% Time period 12/76 9/81 Rise in interest rates 8.03% Rise in interest rates 2.41% Bond cumulative principal return 11.18% 0% Bond cumulative principal return 28.89% 1950s 1960s 1970s 1980s 1990s 2000s 2010s Bond cumulative principal returns by decade 12.67% 6.99% 24.22% 12.06% 10.46% 3.71% 1950s 1960s 1970s 1980s 1990s 2000s Is now the time to consider other fixed-income options? Investors continue to face new potential threats to successful asset allocation, namely higher interest rates and rising inflation. The 10-year U.S. Treasury yield is well below its historical average, making interest rates likely to move higher in the future. Inflation remains a persistent threat: What cost $34.87 in 1980 would require $100 today (Consumer Price Index, as of 6/30/14). At the same time, most fixed-income assets are invested in intermediate-term, which carry more interest-rate risk than shorter-term.* If rates rise, are investors setting themselves up to fail? * 37% of fixed-income mutual fund assets are invested in the Intermediate-Term Bond category, according to Morningstar as of 6/30/14. Morningstar Intermediate-Term Bond portfolios invest primarily in corporate and other investment-grade U.S. fixed-income issues and typically have durations of 3.5 to 6.0 years. Source for chart: Federal Reserve, as of 6/30/14. Past performance is historical and does not guarantee future results. Interest rates represented by the 10-year U.S. Treasury. Bonds are represented by the Barclays U.S. Aggregate Index. This data is for illustrative purposes and does not represent any Deutsche Asset & Wealth Management product. Index returns do not reflect fees or expenses. It is not possible to invest directly in an index or category. Deutsche Floating Rate Fund 3

4 Floating-rate loans offer the potential for a measure of protection against rising interest rates Floating-rate loans outperformed when interest rates have risen by 1% or more (total percentage returns asset classes, 5/1/93 6/30/14) 10.08% 8.17% 1.89% 1.79% 1.45% 4.66% Floatingrate loans High-yield Short-term Ultra-short Intermediateterm Long-term Source: Morningstar as of 6/30/14. Past performance is historical and does not guarantee future results. Asset class representation: floating-rate notes, Credit Suisse Leveraged Loan Index; high-yield, Credit Suisse High Yield Index; ultra-short, Morningstar/Ibbotson SBBI U.S. 1-Year Treasury Constant Maturity Yield Index; short-term, Barclays 1 3 Year U.S. Aggregate Index; intermediate-term, Barclays 7-10 Year U.S. Aggregate Index; long-term, Barclays 10+ Year U.S. Aggregate Index. This data is for illustrative purposes and does not represent any Deutsche Asset & Wealth Management product. Index returns do not reflect fees or expenses. It is not possible to invest directly in an index. Performance for other time periods may not be as favorable. See next page for category definitions and last page for index definitions. Compared to other fixed-income asset classes, floating-rate loans are typically more vulnerable to and are more sensitive to credit and default risks. Floating-rate loans are debt instruments with a variable rate that generally resets every 30 to 90 days. Because of their shorter maturities, short-term are typically less vulnerable to rising interest rates than longer-term. Short-term offer a shorter length of time (about one to three years) until principal must be repaid. Short-term typically have the least fluctuation of principal, followed by floating-rate loans and finally by intermediate-term and long-term, which typically have the most. Corporate are subject to taxation; municipal are generally free from federal income tax. 4 Deutsche Floating Rate Fund

5 Floating-rate loans may potentially offer a measure of protection against higher inflation Floating-rate loans offer the highest correlation to inflation (10-year correlation as of 6/30/14) Inflation Bank loan Ultrashort bond Commodities High yield muni Equity energy Inflation protected (TIPs) 0.08 Intermediate-term bond 0.08 Long-term bond 0.20 Short government 0.22 Intermediate government 0.24 Long government Top 5 Bottom As inflation has risen, so have floating-rate loan returns Floating-rate loans have historically offered a measure of potential protection from higher inflation. Over the past 10 years, floating-rate loans have had the highest correlation to inflation of any asset class, according to Morningstar as of 6/30/14. This means that as inflation moves higher, so have the returns on floating-rate loans. Source: Morningstar as of 6/30/14. Performance is historical and does not guarantee future results. Data is for illustrative purposes and does not represent any Deutsche Asset & Wealth Management product. Correlation is a measure of how closely two variables move together over time. A 1.0 equals perfect correlation, where variables more in the same direction. A 1.0 equals total negative correlation, where variables move in opposite directions. All asset classes are represented by Morningstar categories, except inflation, which is represented by the Morningstar/Ibbotson SBBI U.S. Inflation Index (tracks U.S. inflation); and commodities, which are represented by the Bloomberg Commodity Index (see last page for definition). Morningstar Bank Loan portfolios primarily invest in floating-rate bank loans instead of. Morningstar High Yield Muni portfolios invest at least 50% of assets in high-income municipal securities that are not rated or that are rated by a major agency at the level of BBB and below. Morningstar Inflation Protected Bond portfolios invest primarily in debt securities that adjust their principal values in line with the rate of inflation. Morningstar Intermediate-term bond portfolios invest primarily in corporate and other investment-grade U.S. fixed-income issues and typically have durations of 3.5 to 6.0 years. Morningstar Intermediate Government portfolios have at least 90% in backed by the U.S. government or by government-linked agencies and have durations of 3.5 to 6.0 years. Morningstar Long Bond portfolios invest primarily in corporate and other investmentgrade U.S. fixed-income issues and typically have durations of more than 6.0 years. Morningstar Long Government portfolios have at least 90% in backed by the U.S. government or by government-linked agencies and have durations of more than 6.0 years. Morningstar Equity Energy portfolios invest primarily in equity securities of U.S. or non-u.s. companies who conduct business primarily in energy-related industries. Morningstar Short Government portfolios have at least 90% in backed by the U.S. government or by government-linked agencies and have durations between 1.0 to 3.5 years. Morningstar Ultrashort Bond portfolios invest primarily in investment-grade U.S. fixed-income issues and have durations typically of less than one year. Index and category returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses and it is not possible to invest directly in an index. Deutsche Floating Rate Fund 5

6 Floating-rate loan s key characteristics may help combat today s market challenges Key attributes of floating-rate loans vs. other fixed-income options Characteristic Explanation Potential benefits Floating rate Senior 1 Secured Loan coupons float based on a variable interest rate such as LIBOR. Loan is issued with coupon that pays a predetermined rate above the variable rate. Loans are the most senior debt in the capital structure, meaning floating-rate loan investors receive principal and income before equity and other debt holders. Loans are secured by assets, such as property, equipment, intellectual property, accounts receivable and inventories. When loan coupon s variable rate increases, the loan s interest payment rises accordingly. As rates rise, loan coupons reset and provide investors with higher income payments. Floating-rate loan investors typically recover an average of 80% of what was owed to them in cases of default. 2 Assets can be transferred to loan holder in cases of default, which also helps mitigate downside risks. How a coupon floats Loan coupon The most senior of loans Floating-rate loan investors will receive principal and income before equity and other debt holders. Floating-rate loans Initial pricing LIBOR moves from 50 bps to 100 bps LIBOR rate Loan spread Data is for illustrative purposes only and is shown in basis points (bps). A basis point is one hundredth of a percentage point. The loan spread is the predetermined excess rate above that of the variable interest rate. Subordinated debt Unsecured debt Preferred stock Common stock 1 While floating-rate loans are senior to equity and income securities, there is no guarantee of return of principal in cases of default. 2 Source: Moody s Investor Services, as of 12/31/13. Most recent data available. 6 Deutsche Floating Rate Fund

7 An experienced, deep-resourced team drives success from a diversified approach Morningstar rankings (as of 6/30/14; based on total returns) Morningstar Bank Loan category Oneyear Threeyear Fiveyear 2008 (Bear market) 2009 (Bull market) Percentile rank (Class S shares; other share classes may vary) 62% 56% 39% 35% 24% Absolute rank # of funds in category A diversified value approach Deutsche Floating Rate Fund uses a diversified value approach to floating-rate loan investing. The deeply resourced investment team led by Eric Meyer and Ty Anderson: Focuses on loans the managers believe, with a high degree of conviction, will be repaid at face value Offers diversified and balanced portfolio weightings designed to avoid negative surprises and minimize defaults that may lead to excess volatility and downside risks Considers the entire credit spectrum with emphasis on higher-quality issues (B and BB) from companies with strong cash flows and hard assets 1 Offers 34 years of industry experience, on average, and is supported by a team of 17 senior analysts with 17 years of industry experience, on average Manages $5.4 billion in floating-rate loan assets, as of 6/30/14 Morningstar Rating (as of 6/30/14) Overall 5-year Morningstar bank loan category Class S shares Source: Morningstar, as of 6/30/14. Ratings and rankings are historical and do not guarantee future results. Rating is three stars for three-year period. There were 168, 168, 111 funds in the category during the overall, three- and five-year periods. Ratings are based on risk-adjusted and, unless load-waived, load-adjusted performance. The overall rating for a fund is a weighted average of the ratings for the time periods indicated. Ratings and rankings for other share classes may vary. 1 Credit quality measures a bond issuer s ability to repay interest and principal in a timely manner. Rating agencies assign letter designations such as AAA, AA and so forth. The lower the rating, the higher the probability of default. Credit quality does not remove market risk and is subject to change. Nasdaq symbols A C S INST Deutsche Floating Rate Fund DFRAX DFRCX DFRPX DFRTX Deutsche Floating Rate Fund 7

8 Index definitions Barclays 1-3 Year U.S. Aggregate Index tracks the performance of domestic, taxable investment-grade with average maturities of one to three years. Barclays 7-10 Year U.S. Aggregate Index tracks the performance of domestic, taxable investment-grade with average maturities of seven to 10 years. Barclays 10+ Year U.S. Aggregate Index tracks the performance of domestic, taxable investment-grade with average maturities of more than 10 years. Barclays U.S. Aggregate Index tracks the performance of the broad U.S. investment-grade, fixed-rate bond market, including both government and corporate. Credit Suisse High Yield Index reflects a trader-priced portfolio constructed to mirror the global high-yield debt market. Credit Suisse Leveraged Loan Index tracks the balance and current spread over LIBOR for fully funded term loans. Bloomberg Commodity Index tracks a diversified group of commodities and commodities futures contacts traded on both U.S. and London exchanges. Morningstar/Ibbotson SBBI U.S. 1-Year Treasury Constant Maturity Yield Index is a custom index set to measure the performance of U.S. Treasuries with maturities of one year. Index returns do not reflect expenses or fees, and it is not possible to invest directly in an index or category Morningstar, Inc. All rights reserved. Morningstar, Inc., shall not be responsible for investment decisions, damages or other losses resulting from use of this rating. For each fund with at least a 3-year history, Morningstar calculates a Morningstar Rating based on a Morningstar risk-adjusted return measure that accounts for variation in a fund s monthly performance (including, unless load-waived, the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in a category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) Important risk information Bond and loan investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investments in lower-quality ( junk ) and non-rated securities present greater risk of loss than investments in higher-quality securities. Floating rate loans tend to be rated below investment grade. The fund may use derivatives, investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. In certain situations, it may be difficult or impossible to sell an investment at an acceptable price. This fund is non-diversified and can take larger positions in fewer issues, increasing its potential risk. The fund may lend securities to approved institutions. See the prospectus for details. Obtain a prospectus To obtain a summary prospectus, if available, or prospectus, download one from talk to your financial representative or call (800) We advise you to carefully consider the product s objectives, risks, charges and expenses before investing. The summary prospectus and prospectus contain this and other important information about the investment product. Please read the prospectus carefully before you invest. Investment products: No bank guarantee Not FDIC insured May lose value Investment products offered through DeAWM Distributors, Inc. Advisory services offered through Deutsche Investment Management Americas, Inc. Deutsche Asset & Wealth Management represents the asset management and wealth management activities conducted by Deutsche Bank AG or any of its subsidiaries. Clients will be provided Deutsche Asset & Wealth Management products or services by one or more legal entities that will be identified to clients pursuant to the contracts, agreements, offering materials or other documentation relevant to such products or services. DeAWM Distributors, Inc. 222 South Riverside Plaza Chicago, IL Tel (800) Deutsche Bank AG. All rights reserved. PM (8/14) R DFRF-600

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