Annual Report to Shareholders Deutsche Capital Growth Fund

Transcription

1 September 30, 2017 Annual Report to Shareholders Deutsche Capital Growth Fund

2 Contents 3 Letter to Shareholders 4 Portfolio Management Review 9 Performance Summary 12 Portfolio Summary 14 Investment Portfolio 19 Statement of Assets and Liabilities 21 Statement of Operations 22 Statements of Changes in Net Assets 23 Financial Highlights 29 Notes to Financial Statements 39 Report of Independent Registered Public Accounting Firm 40 Information About Your Fund s Expenses 42 Tax Information 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 may lend securities to approved institutions. Stocks may decline in value. See the prospectus for details. Deutsche Asset Management represents the asset management activities conducted by Deutsche Bank AG or any of its subsidiaries. NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY 2 Deutsche Capital Growth Fund

3 Letter to Shareholders Dear Shareholder: With the economy in its third-longest expansion on record, signals such as overheating or inflation pressures traditional signals for the potential of a sharp slowdown or recession are still notably absent. Our economists tell us that financial conditions remain generally supportive, and households and businesses overall are in good financial condition. However, a shift into higher gear appears unlikely. While fiscal stimulus and tax/regulatory reform may come to pass, the scope is likely to be somewhat less than originally anticipated. Against this backdrop, the financial markets remain generally upbeat, encouraged by a more positive global cycle with fewer downside risks. Even a shift in monetary policy, with some central banks raising short-term interest rates and others expected to do so before long, has been taken in stride. People seem to view the policy change as a healthy response to an improved outlook. Of course, there are any number of potential risks that can alter this benevolent outlook and positive market sentiment. Our CIO Office and investment specialists continually monitor the issues and events that influence the markets in order to identify emerging risks as well as opportunities. Their views are updated regularly and available on our Web site deutschefunds.com. Thank you for your continued investment. We appreciate the opportunity to help you address your investment needs. Best regards, Brian Binder President, Deutsche Funds Assumptions, estimates and opinions contained in this document constitute our judgment as of the date of the document and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results. Deutsche Capital Growth Fund 3

4 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 9 through 11 for more complete performance information. Management Process Portfolio management aims to add value through stock selection. In choosing securities, portfolio management employs a risk-balanced bottom-up selection process to identify companies it believes are wellpositioned and that have above average and sustainable growth potential. Deutsche Capital Growth Fund produced a total return of 20.13% during the 12-month period ended September 30, 2017, underperforming the 21.94% gain for its benchmark, the Russell 1000 Growth Index, but outperforming the 19.75% average return for the funds in its Morningstar peer group, Large Growth. The fund has also outpaced its peers in the five- and 10-year intervals ended on the same date. Multiple factors combined to fuel the robust 12-month performance for stocks. The U.S. economy remained in the midst of a healthy expansion, boosting both top-line revenues and bottom-line earnings for corporations. Overseas growth also continued to show signs of improvement, particularly in Europe and the emerging markets, which acted as a tailwind for larger companies that generate a substantial portion of their sales outside of the United States. The U.S. Federal Reserve, although continuing to signal its intent to tighten policy through additional interestrate increases and a reduction in its balance sheet, maintained its commitment to enact the shift in a gradual fashion a development that was viewed very favorably by market participants. Not least, the prospect of more stimulative fiscal policy provided a boost to the markets. Growth stocks performed particularly well in this environment, as investors gravitated to the opportunities in sectors such as information 4 Deutsche Capital Growth Fund

5 technology over the slower-growing, more interest-rate sensitive areas of the market. The 12-month gain of 21.94% for the Russell 1000 Growth Index was nearly seven percentage points above the 15.12% return for the Russell 1000 Value Index. Fund Performance The fund s cash weighting, though small on an absolute basis, was a key detractor from relative performance. We typically maintain a modest cash position to provide liquidity, and it usually has a minimal impact on results. However, cash proved to be a slight headwind at a time of unusually strong returns for the broader market. Our individual stock selection was also a small detractor in the aggregate. While we generated robust results in the information technology and financial sectors, this was offset by our weaker showing in consumer discretionary and health care. This year has been characterized by enormous performance spreads, with large cap growth stocks led mostly by the technology sector outpacing the overall market. The consumer discretionary space was home to a number of our leading detractors for the period. Foremost among these was L Brands, Inc., which owns retail brands including Bath & Body Works and Victoria s Secret. The stock came under heavy selling pressure due to the combination of slower-than-expected sales and falling profit margins, and it was the largest individual detractor in both the consumer discretionary group and the fund as a whole. O Reilly Automotive, Inc.* also experienced weak returns, as Amazon.com s possible entry into the autoparts space raised the specter of declining profit margins for the related retailers. Newell Brands, Inc., a maker of container products including those sold under the Rubbermaid name, lost ground after Hurricane Harvey impacted its ability to procure resin. In addition, the company experienced modestly softer organic growth trends. Shares of Rite Aid Corp.* also weakened after Walgreens Boots Alliance* was compelled to alter the terms of its takeover bid for the company due to antitrust issues. Deutsche Capital Growth Fund 5

6 In health care, we lost some relative performance through a position in Shire PLC. after the stock came under pressure from rising competition and concerns about a weaker pipeline of new products. The pharmaceutical company Allergan PLC, which was affected by heightened generic competition for a medication used to treat dry eyes, was another driver of our underperformance in the sector. On the positive side, the semiconductor producer NVIDIA Corp. one of the top-performing stocks in the index for the 12-month period was the top contributor in both the technology sector and the fund as a whole. The company s exposure to fast-growing market segments such as gaming, machine learning, and advanced driver-assistance systems fueled accelerated earnings growth and a significant rally in its stock price. Broadcom Ltd., which also reported strong quarterly results and expanded its content in Apple s iphone, was another semiconductor stock represented among our top contributors for the year. Progressive Corp., the country s fourth-largest provider of auto insurance, was our leading contributor in financials. In addition to reporting healthy growth in its core auto insurance business, the company has moved into new markets such as home insurance. We believe this strategy has created the potential for bundling, increased Progressive s addressable market and formed the basis for an improving earnings outlook. SVB Financial Group, a lender focused on the technology industry that benefited from analysts rising earnings estimates, was another top contributor, as was Charles Schwab Corp. Outside of technology and financials, Boeing Co. was the largest contributor to performance. The company reported robust earnings and solid trends in its 787 line, as well as better-than-expected free cash flow and positive guidance with regard to its earnings outlook. Other top performers included Albermarle Corp.,* which rallied on the prospect of rising demand for lithium stemming from the increased popularity of electric cars, and Celgene Corp., a biotechnology stock that was boosted by the Food and Drug Administration s approval of treatment for acute myeloid leukemia in adult patients. Outlook and Positioning The past year has been characterized by enormous performance spreads, with large-cap growth stocks led mostly by the technology sector 6 Deutsche Capital Growth Fund

7 outpacing the broader market. The U.S. economy remains in an extended cycle of slow growth with contained inflation and low interest rates. Believing the foundation is in place for these trends to continue, we retain a positive view on growth stocks. It s true that valuations of the overall growth category look rich, but the numbers appear biased to the upside given the strength in a few specific areas of the market. Although valuation isn t the key driver of our investment decisions, we are mindful of its role in performance. As a result, we have found our most recent opportunities in companies that feature strong and improving fundamentals, but that are also trading at attractive prices. We are still identifying the most compelling ideas in technology and health care, and given the outlook for rising interest rates in select financial stocks. Additionally, we think companies with differentiated competitive advantages that are poised to benefit from long-term secular trends can continue to work in this environment. * Not held in the portfolio as of September 30, Portfolio Manager Sebastian P. Werner, PhD, Director Portfolio Manager of the fund. Began managing the fund in Joined Deutsche Asset Management in 2008; previously, he served as a Research Assistant for the Endowed Chair of Asset Management at the European Business School, Oestrich -Winkel while earning his PhD. Portfolio Manager for Global and US Growth Equities: New York. MBA in International Management from the Thunderbird School of Global Management; Masters Degree ( Diplom-Kaufmann ) and PhD in Finance ( Dr.rer.pol. ) from the European Business School, Oestrich-Winkel. 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. Deutsche Capital Growth Fund 7

8 Terms to Know The Russell 1000 Growth Index tracks those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted-growth values. The Russell 1000 Value Index is an unmanaged index that consists of those stocks in the Russell 1000 Index with less-than-average growth orientation. Index returns do not reflect fees or expenses and it is not possible to invest directly into an index. Morningstar Large-Growth Funds category invest in big U.S. companies that are projected to grow faster than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large-cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields). Most of these portfolios focus on companies in rapidly expanding industries. The average category returns for the one-, five- and 10-year periods ended 9/30/17 were 19.75%, 13.70% and 7.55%, respectively. Consumer discretionary represents industries that produce goods and services that are not necessities in everyday life. Contribution incorporates both a stock s total return and its weighting in the fund. 8 Deutsche Capital Growth Fund

9 Performance Summary September 30, 2017 (Unaudited) Class A 1-Year 5-Year 10-Year Average Annual Total Returns as of 9/30/17 Unadjusted for Sales Charge 20.13% 14.38% 7.90% Adjusted for the Maximum Sales Charge (max 5.75% load) 13.22% 13.03% 7.26% Russell 1000 Growth Index 21.94% 15.26% 9.08% Class C 1-Year 5-Year 10-Year Average Annual Total Returns as of 9/30/17 Unadjusted for Sales Charge 19.09% 13.45% 7.04% Adjusted for the Maximum Sales Charge (max 1.00% CDSC) 19.09% 13.45% 7.04% Russell 1000 Growth Index 21.94% 15.26% 9.08% Class R 1-Year 5-Year 10-Year Average Annual Total Returns as of 9/30/17 No Sales Charges 19.66% 13.93% 7.54% Russell 1000 Growth Index 21.94% 15.26% 9.08% Class R6 1-Year Life of Class* Average Annual Total Returns as of 9/30/17 No Sales Charges 20.51% 11.48% Russell 1000 Growth Index 21.94% 9.93% Class S 1-Year 5-Year 10-Year Average Annual Total Returns as of 9/30/17 No Sales Charges 20.43% 14.69% 8.18% Russell 1000 Growth Index 21.94% 15.26% 9.08% Institutional Class 1-Year 5-Year 10-Year Average Annual Total Returns as of 9/30/17 No Sales Charges 20.40% 14.69% 8.23% Russell 1000 Growth Index 21.94% 15.26% 9.08% Performance in the Average Annual Total Returns table 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 Deutsche Capital Growth Fund 9

10 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 February 1, 2017 are 0.97%, 1.79%, 1.37%, 0.67%, 0.71% and 0.70% for Class A, Class C, Class R, Class R6, 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. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge) Deutsche Capital Growth Fund Class A Russell 1000 Growth Index $25,000 $20,000 $23,855 $20,154 $15,000 $10,000 $5,000 $0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Yearly periods ended September 30 '17 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 R6 shares commenced operations on August 25, The Russell 1000 Growth Index is an unmanaged index that consists of those stocks in the Russell 1000 Index that have higher price-to-book ratios and higher forecasted growth values. 10 Deutsche Capital Growth Fund

11 Class A Class C Class R Class R6 Class S Institutional Class Net Asset Value 9/30/17 $79.22 $69.19 $78.07 $79.77 $80.05 $ /30/16 $71.34 $63.34 $70.48 $71.80 $72.05 $71.99 Distribution Information as of 9/30/17 Income Dividends, Twelve Months $.17 $ $ $.38 $.36 $.36 Capital Gain Distributions, Twelve Months $ 5.34 $ 5.34 $ 5.34 $ 5.34 $ 5.34 $ 5.34 Deutsche Capital Growth Fund 11

12 Portfolio Summary (Unaudited) Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) 9/30/17 9/30/16 Common Stocks 100% 99% Cash Equivalents 0% 1% Convertible Preferred Stocks 0% 0% 100% 100% Sector Diversification (As a % of Common Stocks and Convertible Preferred Stocks) 9/30/17 9/30/16 Information Technology 37% 31% Health Care 17% 17% Consumer Discretionary 17% 20% Industrials 10% 10% Consumer Staples 6% 10% Financials 5% 3% Materials 3% 4% Real Estate 2% 2% Telecommunication Services 2% 2% Energy 1% 1% Utilities % 0% 100% 100% 12 Deutsche Capital Growth Fund

13 Ten Largest Equity Holdings at September 30, 2017 (36.1% of Net Assets) 1. Apple, Inc. 7.1% Designs, manufactures and markets personal computing and mobile communication devices 2. Microsoft Corp. 4.9% Develops, manufactures, licenses, sells and supports software products 3. Alphabet, Inc. 4.8% Holding company with subsidiaries that provide Web-based search, maps, hardware products and various software applications 4. Amazon.com, Inc. 3.3% Online retailer that offers a wide range of products, including books, music, videotapes, computers, electronics and home and garden 5. Visa, Inc. 3.2% Operates a retail electronic payments network and manages global financial services 6. Celgene Corp. 2.8% A global biopharmaceutical company 7. Boeing Co. 2.7% Manufacturer of jet aircraft 8. Home Depot, Inc. 2.7% Home improvement retailer that sells tools, construction products and services 9. Facebook, Inc. 2.4% Operates a social networking Web site 10. Becton, Dickinson & Co. 2.2% Provider of medical supplies and devices 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. Deutsche Capital Growth Fund 13

14 Investment Portfolio as of September 30, 2017 Common Stocks 99.6% Consumer Discretionary 16.5% Shares Value ($) Hotels, Restaurants & Leisure 0.7% Las Vegas Sands Corp. 160,176 10,276,892 Household Durables 1.3% Newell Brands, Inc. 432,292 18,445,900 Internet & Direct Marketing Retail 4.5% Amazon.com, Inc.* 49,928 47,998,283 The Priceline Group, Inc.* 9,888 18,103,148 66,101,431 Media 5.0% Comcast Corp. A 661,796 25,465,910 Time Warner, Inc. 196,046 20,084,913 Walt Disney Co. 278,086 27,410,937 72,961,760 Multiline Retail 0.5% Dollar General Corp. 97,141 7,873,278 Specialty Retail 4.1% Burlington Stores, Inc.* 125,229 11,954,360 Home Depot, Inc. 239,469 39,167,550 L Brands, Inc. 217,098 9,033,448 60,155,358 Textiles, Apparel & Luxury Goods 0.4% NIKE, Inc. B 125,664 6,515,678 Consumer Staples 6.3% Beverages 1.6% PepsiCo., Inc. 213,956 23,841,117 Food & Staples Retailing 2.4% Costco Wholesale Corp. 84,967 13,959,228 CVS Health Corp. 268,899 21,866,867 35,826,095 Food Products 1.2% Pinnacle Foods, Inc. 300,736 17,193,077 Personal Products 1.1% Estee Lauder Companies, Inc. A 149,664 16,139,766 Energy 0.8% Oil, Gas & Consumable Fuels Concho Resources, Inc.* 87,988 11,589,779 The accompanying notes are an integral part of the financial statements. 14 Deutsche Capital Growth Fund

15 Financials 4.9% Shares Value ($) Banks 1.0% SVB Financial Group* 77,371 14,475,340 Capital Markets 2.2% Charles Schwab Corp. 365,900 16,004,466 Intercontinental Exchange, Inc. 232,801 15,993,429 31,997,895 Insurance 1.7% Progressive Corp. 524,570 25,399,680 Health Care 16.8% Biotechnology 7.3% Alexion Pharmaceuticals, Inc.* 54,114 7,591,653 Biogen, Inc.* 42,442 13,289,439 BioMarin Pharmaceutical, Inc.* 103,493 9,632,094 Celgene Corp.* 284,185 41,439,857 Gilead Sciences, Inc. 303,163 24,562,266 Shire PLC (ADR) 75,031 11,490, ,005,556 Health Care Equipment & Supplies 4.0% Becton, Dickinson & Co. 162,773 31,895,370 Danaher Corp. 212,254 18,207,148 The Cooper Companies, Inc. 34,492 8,178,398 58,280,916 Health Care Providers & Services 1.9% Cigna Corp. 146,629 27,410,825 Life Sciences Tools & Services 1.9% Thermo Fisher Scientific, Inc. 147,757 27,955,624 Pharmaceuticals 1.7% Allergan PLC 81,671 16,738,472 Bristol-Myers Squibb Co. 128,442 8,186,893 24,925,365 Industrials 10.1% Aerospace & Defense 3.6% Boeing Co. 157,971 40,157,808 TransDigm Group, Inc. (a) 49,092 12,550,370 52,708,178 Electrical Equipment 2.0% Acuity Brands, Inc. 37,900 6,491,512 AMETEK, Inc. 346,774 22,900,955 29,392,467 Industrial Conglomerates 1.4% Roper Technologies, Inc. 80,963 19,706,394 The accompanying notes are an integral part of the financial statements. Deutsche Capital Growth Fund 15

16 Shares Value ($) Machinery 0.7% Parker Hannifin Corp. 60,666 10,617,763 Professional Services 1.2% Verisk Analytics, Inc.* 209,202 17,403,514 Road & Rail 1.2% Norfolk Southern Corp. 137,232 18,147,560 Information Technology 36.8% Communications Equipment 1.0% Palo Alto Networks, Inc.* 105,275 15,170,128 Internet Software & Services 7.3% Alphabet, Inc. A * 38,258 37,252,580 Alphabet, Inc. C * 35,232 33,791,363 Facebook, Inc. A * 207,162 35,397, ,441,714 IT Services 7.8% Cognizant Technology Solutions Corp. A 314,777 22,833,924 Fidelity National Information Services, Inc. 197,611 18,454,891 Fiserv, Inc.* 123,893 15,977,241 Global Payments, Inc. 118,954 11,304,199 Visa, Inc. A 440,880 46,398, ,968,466 Semiconductors & Semiconductor Equipment 5.0% Analog Devices, Inc. 178,683 15,397,114 Broadcom Ltd. 127,943 31,031,296 NVIDIA Corp. 99,717 17,826,408 NXP Semiconductors NV* 86,423 9,773,577 74,028,395 Software 8.6% Adobe Systems, Inc.* 138,959 20,729,904 Intuit, Inc. 102,839 14,617,535 Microsoft Corp. 970,353 72,281,595 Oracle Corp. 381,763 18,458, ,087,275 Technology Hardware, Storage & Peripherals 7.1% Apple, Inc. 671, ,499,748 Materials 2.9% Chemicals 1.3% Albemarle Corp. 145,015 19,766,995 Construction Materials 0.8% Vulcan Materials Co. 101,358 12,122,417 Containers & Packaging 0.8% Sealed Air Corp. 264,687 11,307,428 The accompanying notes are an integral part of the financial statements. 16 Deutsche Capital Growth Fund

17 Real Estate 2.4% Shares Value ($) Equity Real Estate Investment Trusts (REITs) Digital Realty Trust, Inc. 163,455 19,341,630 Prologis, Inc. 246,050 15,614,333 34,955,963 Telecommunication Services 2.1% Diversified Telecommunication Services 1.2% Zayo Group Holdings, Inc.* 489,360 16,843,771 Wireless Telecommunication Services 0.9% T-Mobile U.S., Inc.* 223,080 13,755,113 Total Common Stocks (Cost $824,635,541) 1,462,294,621 Convertible Preferred Stocks 0.1% Health Care 0.1% Allergan PLC, Series A, 5.5% 1,823 1,345,046 Industrials 0.0% Stericycle, Inc., Series A, 5.25% 4, ,255 Total Convertible Preferred Stocks (Cost $2,302,700) 1,627,301 Securities Lending Collateral 0.9% Deutsche Government & Agency Securities Portfolio Deutsche Government Cash Institutional Shares, 0.93% (b) (c) (Cost $12,678,750) 12,678,750 12,678,750 Cash Equivalents 0.4% Deutsche Central Cash Management Government Fund, 1.06% (b) (Cost $5,311,227) 5,311,227 5,311,227 % of Net Assets Value ($) Total Investment Portfolio (Cost $844,928,218) ,481,911,899 Other Assets and Liabilities, Net (1.0) (14,623,514) Net Assets ,467,288,385 * Non-income producing security. (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 September 30, 2017 amounted to $12,526,850, which is 0.9% 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. ADR: American Depositary Receipt The accompanying notes are an integral part of the financial statements. Deutsche Capital Growth Fund 17

18 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 September 30, 2017 in valuing the Fund s investments. For information on the Fund s policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements. Assets Level 1 Level 2 Level 3 Total Common Stocks (d) $1,462,294,621 $ $ $1,462,294,621 Convertible Preferred Stocks (d) 1,627,301 1,627,301 Short-Term Investments (d) 17,989,977 17,989,977 Total $1,481,911,899 $ $ $1,481,911,899 There have been no transfers between fair value measurement levels during the year ended September 30, (d) See Investment Portfolio for additional detailed categorizations. The accompanying notes are an integral part of the financial statements. 18 Deutsche Capital Growth Fund

19 Statement of Assets and Liabilities as of September 30, 2017 Assets Investments in non-affiliated securities, at value (cost $826,938,241) including $12,526,850 of securities loaned $ 1,463,921,922 Investment in Deutsche Government & Agency Securities Portfolio (cost $12,678,750)* 12,678,750 Investment in Deutsche Central Cash Management Government Fund (cost $5,311,227) 5,311,227 Cash 10,000 Receivable for Fund shares sold 247,524 Dividends receivable 282,469 Interest receivable 19,201 Other assets 37,244 Total assets 1,482,508,337 Liabilities Payable upon return of securities loaned 12,678,750 Payable for Fund shares redeemed 568,724 Accrued management fee 557,116 Accrued Trustees fees 3,361 Other accrued expenses and payables 1,412,001 Total liabilities 15,219,952 Net assets, at value $ 1,467,288,385 Net Assets Consist of Undistributed net investment income 7,738,978 Net unrealized appreciation (depreciation) on investments 636,983,681 Accumulated net realized gain (loss) 116,375,328 Paid-in capital 706,190,398 Net assets, at value $ 1,467,288,385 * Represents collateral on securities loaned. The accompanying notes are an integral part of the financial statements. Deutsche Capital Growth Fund 19

20 Statement of Assets and Liabilities as of September 30, 2017 (continued) Net Asset Value Class A Net Asset Value and redemption price per share ($606,624,835 7,657,433 shares of capital stock outstanding, $.01 par value, unlimited shares authorized) $ Maximum offering price per share ( of $79.22) $ Class C Net Asset Value offering and redemption price per share ($22,587, ,455 shares of capital stock outstanding, $.01 par value, unlimited shares authorized) $ Class R Net Asset Value offering and redemption price per share ($8,684, ,244 shares of capital stock outstanding, $.01 par value, unlimited shares authorized) $ Class R6 Net Asset Value offering and redemption price per share ($953,506 11,953 shares of capital stock outstanding, $.01 par value, unlimited shares authorized) $ Class S Net Asset Value offering and redemption price per share ($771,277,575 9,634,437 shares of capital stock outstanding, $.01 par value, unlimited shares authorized) $ Institutional Class Net Asset Value offering and redemption price per share ($57,160, ,928 shares of capital stock outstanding, $.01 par value, unlimited shares authorized) $ The accompanying notes are an integral part of the financial statements. 20 Deutsche Capital Growth Fund

21 Statement of Operations for the year ended September 30, 2017 Investment Income Income: Dividends (net of foreign taxes withheld of $4,680) $ 19,823,197 Income distributions Deutsche Central Cash Management Government Fund 126,783 Securities lending income, net of borrower rebates 9,349 Other income 43,856 Total income 20,003,185 Expenses: Management fee 6,807,056 Administration fee 1,467,878 Services to shareholders 1,837,402 Distribution and service fees 1,613,918 Custodian fee 18,026 Professional fees 119,114 Reports to shareholders 123,865 Registration fees 103,179 Trustees fees and expenses 68,214 Other 83,902 Total expenses 12,242,554 Net investment income (loss) 7,760,631 Realized and Unrealized Gain (Loss) Net realized gain (loss) from: Investments 117,727,011 Payments by affiliates (see Note F) 67, ,794,051 Change in net unrealized appreciation (depreciation) on investments 144,890,842 Net gain (loss) 262,684,893 Net increase (decrease) in net assets resulting from operations $ 270,445,524 The accompanying notes are an integral part of the financial statements. Deutsche Capital Growth Fund 21

22 Statements of Changes in Net Assets Years Ended September 30, Increase (Decrease) in Net Assets Operations: Net investment income (loss) $ 7,760,631 $ 5,782,796 Net realized gain (loss) 117,794, ,584,210 Change in net unrealized appreciation (depreciation) 144,890,842 48,309,568 Net increase (decrease) in net assets resulting from operations 270,445, ,676,574 Distributions to shareholders from: Net investment income: Class A (1,295,345) (1,552,965) Class R6 (1,505) (84) Class S (3,349,032) (3,791,295) Institutional Class (1,038,670) (1,248,644) Net realized gains: Class A (41,881,532) (61,457,802) Class B (14,014)* Class C (2,120,984) (3,577,214) Class R (508,480) (751,090) Class R6 (20,902) (1,847) Class S (50,345,141) (72,990,251) Institutional Class (15,259,142) (23,585,290) Total distributions (115,820,733) (168,970,496) Fund share transactions: Proceeds from shares sold 109,382, ,333,239 Reinvestment of distributions 110,153, ,938,062 Payments for shares redeemed (423,375,716) (283,182,746) Net increase (decrease) in net assets from Fund share transactions (203,839,824) (911,445) Increase (decrease) in net assets (49,215,033) (6,205,367) Net assets at beginning of year 1,516,503,418 1,522,708,785 Net assets at end of period (including undistributed net investment income of $7,738,978 and $5,689,632, respectively) $ 1,467,288,385 $ 1,516,503,418 * For the period from October 1, 2015 to February 10, 2016 (see Note A). The accompanying notes are an integral part of the financial statements. 22 Deutsche Capital Growth Fund

23 Financial Highlights Years Ended September 30, Class A Selected Per Share Data Net asset value, beginning of period $71.34 $71.63 $79.28 $70.56 $60.83 Income (loss) from investment operations: Net investment income (loss) a Net realized and unrealized gain (loss) Total from investment operations Less distributions from: Net investment income (.17) (.19) (.10) (.21) (.50) Net realized gains (5.34) (7.72) (11.04) (4.48) Total distributions (5.51) (7.91) (11.14) (4.69) (.50) Net asset value, end of period $79.22 $71.34 $71.63 $79.28 $70.56 Total Return (%) b Ratios to Average Net Assets and Supplemental Data Net assets, end of period ($ millions) Ratio of expenses (%) Ratio of net investment income (loss) (%) Portfolio turnover rate (%) a b Based on average shares outstanding during the period. Total return does not reflect the effect of any sales charges. Deutsche Capital Growth Fund 23

24 Years Ended September 30, Class C Selected Per Share Data Net asset value, beginning of period $63.34 $64.74 $73.12 $65.72 $56.65 Income (loss) from investment operations: Net investment income (loss) a (.31) (.36) (.37) (.46).10 Net realized and unrealized gain (loss) Total from investment operations Less distributions from: Net investment income (.04) Net realized gains (5.34) (7.72) (11.04) (4.48) Total distributions (5.34) (7.72) (11.04) (4.48) (.04) Net asset value, end of period $69.19 $63.34 $64.74 $73.12 $65.72 Total Return (%) b Ratios to Average Net Assets and Supplemental Data Net assets, end of period ($ millions) Ratio of expenses (%) Ratio of net investment income (loss) (%) (.48) (.58) (.53) (.66).17 Portfolio turnover rate (%) a b Based on average shares outstanding during the period. Total return does not reflect the effect of any sales charges. 24 Deutsche Capital Growth Fund

25 Years Ended September 30, Class R Selected Per Share Data Net asset value, beginning of period $70.48 $70.94 $78.80 $70.24 $60.62 Income (loss) from investment operations: Net investment income (loss) a (.00)* (.11) (.10) (.20).34 Net realized and unrealized gain (loss) Total from investment operations Less distributions from: Net investment income (.34) Net realized gains (5.34) (7.72) (11.04) (4.48) Total distributions (5.34) (7.72) (11.04) (4.48) (.34) Net asset value, end of period $78.07 $70.48 $70.94 $78.80 $70.24 Total Return (%) Ratios to Average Net Assets and Supplemental Data Net assets, end of period ($ millions) Ratio of expenses (%) Ratio of net investment income (loss) (%) (.01) (.16) (.13) (.26).54 Portfolio turnover rate (%) a Based on average shares outstanding during the period. * Amount is less than $.005 Deutsche Capital Growth Fund 25

26 Years Ended September 30, Class R Period Ended 9/30/14 a Selected Per Share Data Net asset value, beginning of period $71.80 $72.01 $79.89 $80.34 Income (loss) from investment operations: Net investment income (loss) b Net realized and unrealized gain (loss) (.53) Total from investment operations (.45) Less distributions from: Net investment income (.38) (.35) (.42) Net realized gains (5.34) (7.72) (11.04) Total distributions (5.72) (8.07) (11.46) Net asset value, end of period $79.77 $71.80 $72.01 $79.89 Total Return (%) (.56) ** Ratios to Average Net Assets and Supplemental Data Net assets, end of period ($ millions) Ratio of expenses (%) * Ratio of net investment income (loss) (%) * Portfolio turnover rate (%) c a For the period from August 25, 2014 (commencement of operations) to September 30, b Based on average shares outstanding during the period. c Represents the Fund s portfolio turnover rate for the year ended September 30, * Annualized ** Not annualized 26 Deutsche Capital Growth Fund

27 Years Ended September 30, Class S Selected Per Share Data Net asset value, beginning of period $72.05 $72.29 $79.94 $71.12 $61.32 Income (loss) from investment operations: Net investment income (loss) a Net realized and unrealized gain (loss) Total from investment operations Less distributions from: Net investment income (.36) (.40) (.32) (.41) (.66) Net realized gains (5.34) (7.72) (11.04) (4.48) Total distributions (5.70) (8.12) (11.36) (4.89) (.66) Net asset value, end of period $80.05 $72.05 $72.29 $79.94 $71.12 Total Return (%) Ratios to Average Net Assets and Supplemental Data Net assets, end of period ($ millions) Ratio of expenses (%) Ratio of net investment income (loss) (%) Portfolio turnover rate (%) a Based on average shares outstanding during the period. Deutsche Capital Growth Fund 27

28 Years Ended September 30, Institutional Class Selected Per Share Data Net asset value, beginning of period $71.99 $72.24 $79.89 $71.11 $61.32 Income (loss) from investment operations: Net investment income (loss) a Net realized and unrealized gain (loss) Total from investment operations Less distributions from: Net investment income (.36) (.41) (.32) (.45) (.70) Net realized gains (5.34) (7.72) (11.04) (4.48) Total distributions (5.70) (8.13) (11.36) (4.93) (.70) Net asset value, end of period $79.95 $71.99 $72.24 $79.89 $71.11 Total Return (%) Ratios to Average Net Assets and Supplemental Data Net assets, end of period ($ millions) Ratio of expenses (%) Ratio of net investment income (loss) (%) Portfolio turnover rate (%) a Based on average shares outstanding during the period. 28 Deutsche Capital Growth Fund

29 Notes to Financial Statements A. Organization and Significant Accounting Policies Deutsche Capital Growth Fund (the Fund ) is a diversified series of Deutsche Investment Trust (the Trust ), which is registered under the Investment Company Act of 1940, as amended (the 1940 Act ), as an open-end management investment company organized as a Massachusetts business trust. The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are subject to an initial sales charge. Class B shares automatically converted to Class A shares on February 10, 2016 and are no longer offered. Class B shares were not subject to an initial sales charge and were subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class C shares are not subject to 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. Class R shares and Class R6 shares are not subject to initial or contingent deferred sales charges and are generally available only to certain retirement plans. Class S shares are not subject to initial or contingent deferred sales charges and are only available to a limited group of investors. Institutional Class shares are not subject to initial or contingent deferred sales charges and are generally available only to qualified institutions. 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 ( U.S. GAAP ) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements. Deutsche Capital Growth Fund 29

30 Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Various inputs are used in determining the value of the Fund s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are generally categorized as Level 1. Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1. Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer; analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company s or issuer s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities. Disclosure about the classification of fair value measurements is included in a table following the Fund s Investment Portfolio. 30 Deutsche Capital Growth Fund

31 Securities Lending. Deutsche Bank AG as lending agent lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund 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 securities lending agreement. As of period end, any securities on loan were collateralized by cash. During the year ended September 30, 2017, the Fund invested the cash collateral into a joint trading account in affiliated money market funds managed by Deutsche Investment Management Americas Inc. As of September 30, 2017, the Fund invested the cash collateral in Deutsche Government & Agency Securities Portfolio. Deutsche Investment Management Americas Inc. receives a management/administration fee (0.13% annualized effective rate as of September 30, 2017) on the cash collateral invested in Deutsche Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. 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 September 30, 2017, the Fund had securities on loan, which were classified as common stock in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements was overnight and continuous. Federal Income Taxes. The Fund s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. The Fund has reviewed the tax positions for the open tax years as of September 30, 2017 and has determined that no provision for income tax Deutsche Capital Growth Fund 31

32 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, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary. The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. 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 September 30, 2017, the Fund s components of distributable earnings (accumulated losses) on a tax basis were as follows: Undistributed ordinary income* $19,711,753 Undistributed long-term capital gains $105,516,239 Net unrealized appreciation (depreciation) on investments $635,869,994 At September 30, 2017, the aggregate cost of investments for federal income tax purposes was $846,041,905. The net unrealized appreciation for all investments based on tax cost was $635,869,994. This consisted of aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost of $657,832,566 and aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value of $21,962,572. In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows: Years Ended September 30, Distributions from ordinary income* $13,854,767 $ 19,893,015 Distributions from long-term capital gains $101,965,966 $ 149,077,481 * For tax purposes, short-term capital gain distributions are considered ordinary income distributions. Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly 32 Deutsche Capital Growth Fund

33 attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures. Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote. Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. 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. Purchases and Sales of Securities During the year ended September 30, 2017, purchases and sales of investment securities (excluding short-term investments) aggregated $242,382,735 and $518,575,221, respectively. C. Related Parties Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ( DIMA or the Advisor ), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. Under 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.495% Next $750 million of such net assets.465% Next $1.5 billion of such net assets.445% Next $2.5 billion of such net assets.425% Next $2.5 billion of such net assets.395% Next $2.5 billion of such net assets.375% Next $2.5 billion of such net assets.355% Over $12.5 billion of such net assets.335% Deutsche Capital Growth Fund 33