Presentation - DWS Investments

Deutsche Asset 

& Wealth Management 

The DWS Investments global, small-, and 

mid-cap growth strategies 

Strategy presentation 

Investment products: No bank guarantee I Not FDIC insured I May lose value

Agenda 

01 Why small- and mid-cap stocks 

02 Investment philosophy and process 

03 DWS small- and mid-cap suite and investment team 

Important risk information 

Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency 

fluctuations, political and economic changes, and market risks. Stocks of smaller and mid-size companies involve 

greater risk than securities of larger, more-established companies. Stocks may decline in value. See the 

prospectus for details. 

Please visit ww.dws-investments.com for the most recent performance of the DWS funds. 

Index definitions: 

— The FTSE Nareit All REIT Index tracks the performance of REITs. 

— The Ibbotson Associates SBBI (IA SBBI) U.S. Inflation Index tracks U.S. inflation. 

— The Ibbotson Associates SBBI (IA SBBI) U.S. Intermediate Government Bond Index tracks the performance of five-year U.S. Treasury bonds. 

— The Ibbotson Associates SBBI (IA SBBI) U.S. Small Cap Stock Index tracks the performance of small-capitalization stocks in 22 countries. 

— The MSCI EAFE Index tracks the performance of stocks in select developed markets outside of the United States. 

— The MSCI World Index tracks the performance of stocks in select developed markets around the world, including the United States. 

— The Russell 1000 Index tracks the performance of the 1,000 largest stocks in the Russell 3000 Index, which consists of the 3,000 largest U.S. 

companies as measured by market capitalization. 

— The S&P 500 Index tracks the performance of 500 leading U.S. stocks and is widely considered representative of the U.S. equity market. 

— The S&P Developed SmallCap Index tracks the performance of small-capitalization stocks in 22 countries. 

— The S&P Goldman Sachs Commodity Index (GSCI) is a composite index of commodity sector returns representing an unleveraged, long-term 

investment in commodity futures. 


01 

Why small- and mid-cap stocks 


Potential benefits of small- and mid-cap stocks 

— Access to overlooked opportunities 

— The potential for higher long-term, risk-adjusted returns than large cap stocks 

— Ability to spot trends early 

— Ability to invest throughout the global supply chain 

— Historical outperformance during inflationary periods 

— Ability to benefit from mergers and acquisitions activity 

— Opportunity to focus on the world’s most compelling ideas 

— Instant deployment of capital around the world to invest in the most compelling ideas 



Investment products: No bank guarantee I Not FDIC insured I May lose value 

3

Seeking overlooked opportunities 

Average analyst coverage per stock by market capitalization 

Lack of analyst coverage leaves the 

potential for small-cap alpha. 

25 

20 

16 

9 

11 

12 

13 

4 

5 

6 

Less than 

$250 million 

$250 million 

to $500 

million 

$500 million 

to $1 billion 

$1 to 

$2 billion 

$2 to 

$3 billion 

$3 to 

$4 billion 

$4 to 

$5 billion 

$5 to 

$10 billion 

$10 to 

$50 billion 

More than 

$50 billion 

Source: FactSet as of 12/31/12. Analyst coverage is estimated. Alpha refers to return in excess of a benchmark’s return. 




4

Redefining risk: 70 years of positive rolling 

10-year returns 

Rolling 10-year average annual return, small-cap stocks (12/31/42–12/31/12), percent 

35 

While large-cap stocks have had the “lost decade,” small-cap stocks haven't had a 

negative rolling 10-year period going back to the post-WWII era. 

30 

25 

20 

15 

10 

5 

0 

12/31/42 12/31/47 12/31/52 12/31/57 12/31/62 12/31/67 12/31/72 12/31/77 12/31/82 12/31/87 12/31/92 12/31/97 12/31/02 12/31/07 12/31/12 

Source: Morningstar and Deutsche Asset & Wealth Management as of 12/31/12. Performance is historical and does not guarantee future results. This data does not represent 

performance of any DWS fund. Small-cap stocks are represented by the IA SBBI U.S. Small Cap Stock Index. Index returns assume reinvestment of all distributions and do not 

reflect any fees or expenses. It is not possible to invest directly in an index. See slide 2 for index definitions. 




5

Historical returns: 

Large-cap vs. small- and mid-cap stocks 

Percentage of rolling periods that large-cap, mid-cap, and small-cap stocks produced a negative return 

(12/31/45–12/31/12) 

31.30% 

34.58% 

35.53% 

27.70% 

31.30% 

30.68% 

22.73% 

27.95% 

25.71% 

Over longer time periods, small- and 

mid-cap stocks have produced fewer 

periods of negative returns. 

12.67% 

11.93% 12.67% 

7.45% 

3.98% 

5.96% 

2.98% 

3.35% 

0.00% 

3-month 6-month 1-year 3-year 5--year 10-year 

Large-cap stocks Mid-cap stocks Small-cap stocks 


performance of any DWS fund. Large-cap stocks are represented by the S&P 500 Index. Small-cap stocks are represented by the IA SBBI U.S. Small Cap Stock Index. Mid-cap 

stocks are represented by the Morningstar Mid-Cap Growth category. Index returns assume reinvestment of all distributions and do not reflect any fees or expenses. It is not 

possible to invest directly in an index. See slide 2 for index definitions. The first year-end period for which mid-cap data was available was 12/31/45; thus the start date. 




6

Average performance of small-cap stocks 

vs. large-cap stocks during rolling periods 

(12/31/45–12/31/12) 

Large-cap stocks Mid-cap stocks Small-cap stocks 

3-month 2.86% 3.01% 3.70% 

6-month 5.89% 6.16% 7.56% 

1-year 12.23% 12.84% 15.69% 

3-year 11.43% 11.53% 14.40% 

5-year 11.43% 11.52% 14.67% 

10-year 11.38% 11.28% 14.75% 


performance of any DWS fund. Large-cap stocks are represented by the S&P 500 Index. Small-cap stocks are represented by the IA SBBI U.S. Small Cap Stock Index. Mid-cap 

stocks are represented by the Morningstar Mid-Cap Growth category. Index returns assume reinvestment of all distributions and do not reflect any fees or expenses. It is not 

possible to invest directly in an index. See slide 2 for index definitions. The first year-end period for which mid-cap data was available was 12/31/45; thus the start date. 




7

Small-cap stocks: the surprise inflation fighter 

Asset class annualized performance, 1974–1981 

During a period of heavy U.S. 

inflation (1974 through 1981), 

small-cap stocks outperformed 

many other asset classes. 

27.1% 

12.1% 

9.3% 

6.8% 

8.0% 

9.7% 

6.0% 

IA SBBI U.S. 

Inflation Index 

FTSE NAREIT 

All REIT Index 

S&P GSCI S&P 500 Index MSCI 

EAFE Index 

IA SBBI U.S. 

Small Stock 

Index 

IA SBBI U.S. 

Intermediate- 

Term Government 

Bond Index 

Source: Morningstar as of 12/31/12. Performance is historical and does not guarantee future results. The values of equity investments are more volatile than those of other 

securities. Fixed-income investments are subject to interest-rate risk, and their values will decline as interest rates rise. The data does not represent the performance of any 

DWS fund. Index returns assume reinvestment of all distributions and do not reflect any fees or expenses. It is not possible to invest directly in an index. 

See slide 2 for index definitions. 




8

Small-cap stocks: the surprise inflation fighter 

Asset class cumulative performance, 1974–1981 

During a period of heavy U.S. 

inflation (1974 through 1981), 

small-cap stocks outperformed 

many other asset classes. 

581.0% 

103.2% 

149.3% 

69.1% 

84.9% 

109.6% 

59.8% 

IA SBBI U.S. 

Inflation Index 

FTSE NAREIT 

All REIT Index 

S&P GSCI S&P 500 Index MSCI 

EAFE Index 

IA SBBI U.S. 

Small Stock 

Index 

IA SBBI U.S. 

Intermediate- 

Term Government 

Bond Index 

Source: Morningstar as of 12/31/12. Performance is historical and does not guarantee future results. The values of equity investments are more volatile than those of other 

securities. Fixed-income investments are subject to interest-rate risk, and their values will decline as interest rates rise. The data does not represent the performance of any DWS 

fund. Index returns assume reinvestment of all distributions and do not reflect any fees or expenses. It is not possible to invest directly in an index. 




9

Investors are underallocated to global small-cap stocks 

Despite the compelling investment opportunities, investors have 

only a minor allocation to global small- and mid-cap stocks. 

Capitalization allocation (as of 12/31/12) 

Geographic Allocation (as of 12/31/12) 

Global small- and 

mid-cap, 2.33%. 

Large-cap 

Small- and mid-cap 

Multi-cap 

Global small- and mid-cap 


mid-cap, 4.48%. 

Domestic 

Global 

International 

Global small- and mid-cap 

Source: Lipper as of 12/31/12. Domestic is represented by the Lipper Large-Cap Core, Large-Cap Growth, Large-Cap Value, Mid-Cap Core, Mid-Cap Growth, Mid-Cap Value, 

Small-Cap Core, Small-Cap Growth, Small-Cap Value, Multi-Cap Core, Multi-Cap Growth, and Multi-Cap Value categories. International is represented by the Lipper International 

Large-Cap Core, International Large-Cap Growth, International Large-Cap Value, International Small/Mid-Cap Core, International Small/Mid-Cap Growth, International Small/Mid- 

Cap Value, International Multi-Cap Core, International Multi-Cap Growth and International Multi-Cap Value categories. Global is represented by the Lipper Global Large-Cap 

Core, Global Large-Cap Growth, Global Large-Cap Value, Global Small/Mid-Cap, Global Multi-Cap Core, Global Multi-Cap Growth and Global Multi-Cap Value categories. Largecap 

is represented by the Lipper Large-Cap Core, Large-Cap Growth. Large-Cap Value, International Large-Cap Core, International Large-Cap Growth, International Large-Cap 

Value, Global Large-Cap Core, Global Large-Cap Growth and Global Large-Cap Value categories. Multi-cap is represented by the Lipper Multi-Cap Core, Multi-Cap Growth, 

Multi-Cap Value, International Multi-Cap Core, International Multi-Cap Growth, International Multi-Cap Value, Global Multi-Cap Core, Global Multi-Cap Growth and Global Multi- 

Cap Value categories. Small- and mid-cap is represented by the Lipper Mid-Cap Core, Mid-Cap Growth, Mid-Cap Value, Small-Cap Core, Small-Cap Growth, Small-Cap Value, 

International Small/Mid-Cap Core, International Small/Mid-Cap Growth, International Small/Mid-Cap Value and Global Small/Mid-Cap categories. Global small- and mid-cap is 

represented by the Lipper Global Small/Mid-Cap category. 




10

02 

Investment philosophy and process 


Philosophy and approach 

— We seek to add value through our information advantage—dedicated global small-cap 

analysts who help us discover new and innovative growth companies 

— Our philosophy 

— We believe that bottom-up research and strategic allocation across four building blocks of 

growth (stable growth, growth at value prices, explosive growth and contingent growth) can 

lead to attractive risk-adjusted returns 

— Our approach 

— Seek to enhance alpha potential while managing risk: We strategically allocate the portfolio’s 

assets across the four building blocks of growth 

— Expand our investment universe: With the flexibility to invest in a wide range of styles and 

market capitalizations, we have a larger universe of potential alpha-generating opportunities 

— Participate in any long-term success of our holdings: Our long-term investment horizon may 

give us the opportunity to participate in any success of quality growth stocks as they move 

from the small- to mid- to large-cap categories 

Alpha refers to return in excess of a benchmark’s return. 




12

Adhere to a disciplined, consistent process 

We seek to identify compelling growth opportunities and conduct 

rigorous research to construct a well-diversified portfolio 


mid-cap universe 

Sourcing opportunities 

— Internal global network of 

portfolio managers and 

analysts 

— Meetings with company 

management 

— Meetings with sell-side 

analysts 

— Quantitative screens 

Fundamental analysis 

— Qualitative scoring 

— Analyze company 

fundamentals 

— Develop investment thesis 

— Determine 

upside/downside potential 

— Classify company by 

growth category (building 

blocks of growth) 

Portfolio construction 

— Diversify strategically 

according to conviction 

levels and risk assessment 

— Maintain a balance and 

diversity of growth 

characteristics 

— Manage for long-term 

growth 

Risk management 




13

Identify high-conviction candidates 

with qualitative scoring 

We use a scoring system to rank fundamental attributes of 

candidates under review 

Worst 

Best 

1 2 3 

4 

5 

— Management quality 

— Competitive positioning 

— Earnings stability 

— Innovation 

— Industry dynamics 

— Financial strength 




14

Construct portfolio: balancing growth against risk 

By strategically adjusting exposure across our “four building blocks of 

growth” categories, we seek to manage risk and outperform over time 

Typical range 

Stable growth 

— Repeatable revenue earnings visibility 40%–60% 

Growth at value prices 

— Market perception change possible 

15%–35% 

High/explosive growth 

— High risk and return potential 

10%–20% 

Contingent growth 

— Catalyst required 

10%–20% 




15

Positioning: DWS Global Small Cap Growth Fund 

Strategically allocates across growth 

DWS Global Small-Cap Growth Fund building blocks allocation 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 

Stable growth Growth at value prices High/explosive growth Contingent growth 

Source: Deutsche Asset & Wealth Management, as of 3/31/13. The data does not represent the performance of any Deutsche Asset & Wealth Management product. 

Composition subject to change. 




16

Construct the portfolio 

Stock selection drives overweights and underweights 

Buy criteria 

— Stocks meet market-capitalization criteria 

— Stocks satisfy business analysis and growth criteria 

— Stocks’ potential value is far greater than that reflected 

in current share price 

— Growth and risk are balanced with the four building 

blocks of growth 

Sell discipline 

— Valuation meets price targets 

— Thesis violation or fundamentals deteriorate 

— Market-capitalization growth potential is fulfilled 

— Stocks can be replaced with higher-growthpotential 

candidate 

Goal is to capture growth potential 

Research dictates when we sell 

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. 




17

03 

Investment team

DWS small- and mid-cap suite 

Employs the same disciplined balanced 

growth approach 

Small- and mid-cap investment strategies and key characteristics 

DWS Global small cap growth fund DWS Small cap growth fund DWS Mid cap growth fund 

A I KGDAX 

INST I KGDIX 

S I SGSCX 

A I SSDAX 

INST I SSDIX 

S I SSDSX 

A I SMCAX 

INST I BTEAX 

S I SMCSX 

Lead PM inception Joined the fund 11/02 Joined the fund 12/08 Joined the fund 12/08 

Number of holdings Approximately 100 to 125 90 to 110 90 to 110 

Market capitalization at purchase $300 million to $5 billion $300 million to $2.5 billion $2 billion to $15 billion 

Median market capitalization $2.2 billion $1.6 billion $5.5 billion 

Return on equity ex-negative 16.41 17.26 20.33 

Benchmark S&P Developed Small Cap Index Russell 2000 Growth Index Russell Midcap Growth Index 

Source: FactSet as of 3/31/13. Portfolio composition is subject to change. 




19

Investment team 

Joseph Axtell, 

CFA 

Portfolio manager 

11 27 

Rafaelina 

M. Lee 

energy, 

materials 

Portfolio manager 

13 28 

Sector teams Sector analysts Global analyst 

Leefin Lai, CFA 

Health care PM 

11 20 

Peter Barsa 

Consumer 

13 13 

Nataly 

Yackanich, 

CFA 

Financials, 

industrials 

Reid Galas, 

CFA 

Asia generalist 

7 11 4 12 

Clark Chang 

Technology PM 

Michael Sesser 

Health care 

5 12 

3 3 

Blue Years with firm 

Black Years in industry 




20

Team biographies 

Joseph Axtell, CFA, managing director 

— Portfolio manager for global small cap equity, co-manager of U.S. small- and mid-cap equity (New York) 

— Joined the company in April 2001 as a portfolio manager for several European funds 

— Prior to joining firm, had 17 years of investment experience, including five years as a senior analyst for international equities at Merrill Lynch Asset Managers, seven years 

as an international research analyst at PCM International and five years in various investment positions at Prudential Capital Corporation, Prudential-Bache Capital 

Funding (London) and Prudential Equity Management Associates 

— Received a bachelor’s degree from Carlson School of Management, University of Minnesota 

Rafaelina M. Lee, managing director 

— Portfolio manager for U.S. small- and mid-cap equity (New York) 

— Joined the company in 1999 after 15 years of experience as vice president/market strategist at J.P. Morgan Securities, equity strategist at UBS Securities and equity 

research analyst at Goldman Sachs 

— Received a bachelor’s degree in mathematical statistics from Columbia University and a master’s degree in finance and business administration from New York University, 

Stern School of Business 

Leefin Lai, CFA, CPA, managing director 

— Portfolio manager for DWS Health Care Fund and research analyst for U.S. small- and mid-cap equity (Chicago) 

— Joined the company in 2001 after nine years of experience as analyst of biotechnology for Salomon Smith Barney and Paine Webber and as a vice president/analyst of 

pharmaceuticals and biotechnology for Citigroup Global Asset Management and Scudder Kemper Investments 

— Received a bachelor’s degree and master’s degree in business administration from University of Illinois 

Clark Chang, director 

— Portfolio manager for DWS Technology Fund and research analyst for U.S. small- and mid-cap equity (New York) 

— Joined the company in June 2007 after seven years of experience as senior technology analyst for Firsthand Capital Management, Nollenberger Capital Management and 

Fulcrum Global Partners 

— Received a bachelor’s degree in computer science from the University of California, Los Angeles, and a master’s degree in business administration with a finance 

concentration from Anderson School of Management, UCLA 




21

Team biographies 

Peter Barsa, vice president 

— Research analyst for global small-cap equity (New York) 

— Joined the company in 1999, previously serving as research support for global small equity and portfolio analyst. 

— Received a bachelor’s degree from Villanova University 

Nataly Yackanich, CFA, vice president 

— Research analyst for small- and mid-cap equity (New York ) 

— Joined the company in 2005 after four years of experience as research analyst covering financials for Credit Suisse Private Bank clients and a small-cap analyst for 

Financials at Sidoti & Co, LLC 

— Received a bachelor’s degree from John Hopkins University and an MSc from London School of Economics 

Michael Sesser, assistant vice president 

— Research analyst for small- and mid-cap equity (New York ) 

— Joined the company in 2009 

— Received a bachelor’s degree from Yale University and a master’s degree in business administration from Ross School of Business, University of Michigan 

Reid Galas, vice president 

— Research analyst for global small-cap equity (New York) 

— Joined the company in 2008 after eight years of experience in supply chain consulting and analysis at Deloitte Consulting, Cheshire Technology and Numetrix 

— Received a bachelor’s degree in operations research and industrial engineering from Cornell University and a master’s degree in business administration from Ross 

School of Business, University of Michigan 




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Important information 

OBTAIN A PROSPECTUS 

To obtain a summary prospectus, if available, or prospectus, download one from www.dwsinvestments.com, 

talk to your financial representative or call (800) 728-3337. 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. All investments involve risk, including potential 

loss of principal. 

Investment products offered through DWS Investments 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. 

DWS Investments Distributors, Inc. 

222 South Riverside Plaza Chicago, IL 60606-5808 

www.dws-investments.com service@dws.com 

Tel (800) 621-1148 

©2013 DWS Investments Distributors, Inc. All rights reserved. (5/13) R-26376-4 




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Presentation - DWS Investments

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