WP Stewart Holdings Fund Semi Annual Report

W.P. Stewart Holdings Fund
Semi Annual Report &
Audited Financial Statements
As at June 30, 2011
2011
2011
WPSTEWART
R.C.S. Luxembourg B117524
Registered Office
W.P. Stewart Holdings Fund
2-8, Avenue Charles de Gaulle
L-1653 Luxembourg
Board of Directors
Mr. M.B. Bolle, The Netherlands, Chairman
Mrs. S.G. Leber, USA (until 25 March, 2011)
Mr. M.D. Bergen, USA (since 25 March, 2011)
Mr. P.J.P. Rubingh, The Netherlands
Mr. W.P. Stewart, Bermuda
Mr. A.A.M. Wijsman, The Netherlands
Management Company, Administrator
W.P. Stewart Fund Management S.A.
2-8, Avenue Charles de Gaulle
L-1653 Luxembourg
Legal Advisors Luxembourg
Arendt & Medernach
14, rue Erasme
P.O. Box 39
L-2010 Luxembourg
Tax Advisors Luxembourg
Loyens Winandy
1, allée Scheffer
L-2520 Luxembourg
Fund Agent
Eurolist by Euronext Amsterdam
Theodoor Gilissen Bankiers N.V.
Keizersgracht 617
P.O. Box 3325
1001 AC Amsterdam
The Netherlands
Principal Distributor
W.P. Stewart Asset Management (Europe) N.V.
WTC Amsterdam Airport
Schiphol Boulevard 189
1118 BG Luchthaven Schiphol
The Netherlands
Tel: + 31 20 201 4985
Fax: + 31 20 201 4988
E-mail: [email protected]
Custodian, Sub-Administrator, Registrar and
Transfer Agent, and Domiciliary Agent
Brown Brothers Harriman (Luxembourg) S.C.A.
2-8, Avenue Charles de Gaulle
L-1653 Luxembourg
Independent Auditor
Ernst & Young S.A.
7, rue Gabriel Lippmann
Parc d’Activité Syrdall 2
L-5365 Munsbach
Luxembourg
For more information please read the Prospectus or visit the Company’s website: www.wpstewart.nl
Imprima bv - 983115
Investment Manager
W.P. Stewart Asset Management Ltd.
527 Madison Avenue
New York, NY 10022
USA
CONTENTS
Page
Key Data
2
Performance Data
3
Corporate Profile
4
Report of the Investment Manager
5
Statement of Net Assets
7
Statement of Operations & Changes in Net Assets
8
Statistical Information
9
Investment Portfolio- as at June 30, 2011 - as at December 31, 2010 10
11
Notes to the Financial Statements
12
Independent Auditor’s Report 18
Other Information • Disclosure of Interests
• Shareholders with Substantial Interest
• Supervision
20
Description of Portfolio Companies
21
Corporate Organization 24
1
KEY DATA
As at June 30, 2011 and for the years 2010, 2009, 2008 and 2007
(amounts in thousands of US Dollars, except for amounts per share)
June 30, 2011
2010
2009
2008
2007
Net asset value
Number of portfolio holdings
Market value of investment portfolio
$ 308,420
17
$ 350,417
$ 306,575
18
$ 343,021
$ 262,290
19
$ 268,880
$ 176,259
20
$ 206,010
$ 485,653
21
$ 580,318
Net asset value per share
Indexed performance since change in
investment policy1
Number of shares issued
$
$
$
$
$
Investment income
Investment management expenses
Other operating expenses
Net realized and unrealized gain/(loss)
from investments
Increase/(decrease) in net assets as a
result of operations
$
$
$
1,033
948
757
$
$
$
2,324
669
1,216
$
$
$
2,512
505
866
$
6,978
$
29,570
$
$
6,306
$
30,009
$
178.50
948
1,727,882
174.69
928
1,754,984
154.54
821
1,697,258
111.53
593
1,580,377
$
$
$
175.59
933
2,765,793
4,615
744
2,760
$
$
$
10,666
2,115
9,429
67,952
$ (126,171)
$
14,674
69,093
$ (125,060)
$
13,796
The traditional (“quality growth”) investment discipline of W.P. Stewart Asset Management Ltd. and its affiliates was adopted by
shareholders on March 31, 1989 and has been consistently applied since.
1
2
PERFORMANCE DATA
For the period March 31, 19891 – June 30, 2011. Net of management fees and fund expenses.
(net asset value per share expressed in US Dollars)
Year-end
Net Asset Value Indexed performance
Annual return
per share
WPSH2
WPSH S&P 5003
WPSH
S&P 5003
2011 (6 months)
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Start1
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
178.50
174.69
154.54
111.53
175.59
174.23
160.89
152.30
128.69
107.26
125.98
132.61
125.95
117.82
96.84
75.46
56.32
44.59
44.47
44.15
41.37
28.43
25.87
18.82
948
928
821
593
933
926
855
809
684
570
669
705
669
626
515
401
299
237
236
235
220
151
137
100
727
686
596
471
748
709
612
584
525
408
524
595
655
541
421
316
257
187
184
167
155
119
123
100
+2.2%
+13.0%
+38.6%
-36.5%
+0.8%
+ 8.3%
+5.6%
+18.3%
+20.0%
-14.9%
-5.0%
+5.3%
+6.9%
+21.7%
+28.3%
+34.0%
+26.3%
+0.3%
+0.7%
+6.7%
+45.5%
+9.9%
+37.5%
n/a
+6.0%
+15.1%
+26.5%
-37.0%
+5.5%
+15.8%
+4.9%
+10.9%
+28.7%
-22.1%
-11.9%
-9.1%
+21.0%
+28.6%
+33.4%
+23.0%
+37.6%
+1.3%
+10.1%
+7.6%
+30.5%
-3.1%
+23.0%
n/a
Average compounded
annual return
WPSH
S&P 5003
+10.6%
+10.8%
+10.7%
+9.4%
+12.6%
+13.3%
+13.7%
+14.2%
+13.9%
+13.5%
+16.1%
+18.1%
+19.3%
+20.7%
+20.6%
+19.6%
+17.6%
+16.1%
+19.8%
+25.4%
+32.8%
+26.2%
n/a
n/a
+9.3%
+9.2%
+9.0%
+8.2%
+11.3%
+11.7%
+11.4%
+11.8%
+11.9%
+10.8%
+13.9%
+16.4%
+19.1%
+18.9%
+17.9%
+16.0%
+15.0%
+11.4%
+13.7%
+14.7%
+17.3%
+10.5%
n/a
n/a
The traditional (“quality growth”) investment discipline of W.P. Stewart Asset Management Ltd. and its affiliates was adopted by
shareholders on March 31, 1989 and has been consistently applied since.
2
Historical NAVs have been adjusted for the 10-for-1 stock split which took effect on July 1, 2006.
3
The numbers shown for the S&P 500 Index include reinvested dividends.
1
3
CORPORATE PROFILE
W.P. Stewart Holdings Fund (the “Company” or “WPSH”) was incorporated as an open-ended investment company
on January 28, 1982 in Curaçao, Netherlands Antilles.
On July 1, 2006 WPSH re-domiciled from Curaçao to the Grand-Duchy of Luxembourg. WPSH is now governed
by the laws of the Grand-Duchy of Luxembourg and has taken the form of a société anonyme (S.A.), organized as a
société d’investissement à capital variable (SICAV) and qualifies as an undertaking for collective investment (“UCI”)
under Part II of the Luxembourg Law of December 17, 2010.
WPSH is incorporated for an unlimited duration.
The overall objective of WPSH is to achieve above-average investment returns over a long period of time, while
accepting below-average risk to do so. To attain this objective, WPSH invests in an equity portfolio of some of the
world’s finest, growing companies which are primarily located in the US – large enterprises that are leaders in their
respective fields and operate businesses with superior economics and business models.
WPSH is managed according to the investment philosophy of W.P. Stewart & Co., Ltd., its subsidiaries, affiliates
and predecessors (hereinafter referred to as “W.P. Stewart”), which is based on the conviction that consistent
earnings growth drives long-term investment returns. History has shown that long-term earnings growth, through
economic cycles, eventually lifts a company’s share price, while cyclical or slow-growth holdings may remain
depressed indefinitely if the expected positive catalyst doesn’t materialize. More precisely, W.P. Stewart’s investment
philosophy is based on three pillars: quality – looking to own high quality businesses; growth – creating a portfolio
with an earnings stream that grows each and every year and faster than average in most; and valuation – estimating
future earnings power and worth to discount back to present value. This is the heart of W.P. Stewart’s investment
philosophy.
WPSH’s investment strategy is executed by W.P. Stewart Asset Management Ltd., an investment advisor registered
with the US Securities and Exchange Commission. W.P. Stewart Asset Management is a wholly owned subsidiary of
W.P. Stewart & Co., Ltd. Since the launch of WPSH in 1982, either W.P. Stewart Asset Management Ltd. or another
company or individual within W.P. Stewart has acted as investment advisor and/or investment manager to WPSH.
WPSH is an open-end investment company, meaning that within the limits of the articles of incorporation, registered
shares can be issued and repurchased on a daily basis. The management company may decide to suspend the openend character under certain circumstances as has been described in the Prospectus. Shares can be subscribed and
redeemed directly with the Company or are traded on the Eurolist by Euronext Amsterdam.
WPSH has no intention to distribute dividends on shares in WPSH, but to reinvest the revenues, after deduction of
costs, thus realizing maximum capital growth.
Fund codes
Euronext Amsterdam: WPSH or 29033
ISIN-code
: LU 0237485098
Bloomberg
: WPS NA
Reuters
: WPSTu.AS
For more information please read the Prospectus or visit the Company’s website: www.wpstewart.nl
4
REPORT OF THE INVESTMENT MANAGER
Review of the Quarter
Our Company’s net asset value per share rose by 1.0% to $178.50 in the quarter ending June 30, 2011 and was up just
2.2% for the year-to-date. Look through earning power behind our portfolio continued to power ahead at an annual
rate of about 20%. I expect the businesses we’ve invested in to grow earning power for the full year by 19%. Keeping in
mind that, as a group, the businesses we’ve owned have never shown a decline in earning power, these results are very
encouraging.
The S&P 500 Index advanced by 0.1% in the quarter and was up 6.0% for the year-to-date. We expect earning power
behind our portfolio to grow about twice as fast as S&P 500 earnings over the next half decade, with considerably
less cyclicality. As these faster growing, mostly global, businesses presently sell at a discount to the projected S&P 500
price earnings multiple five years out, I remain confident in our approach and expect our portfolio of high-quality,
faster growing companies to significantly outperform that average over time.
As our appraisal indicates that the Company’s portfolio remains undervalued, I retained our 14% leveraged position.
Portfolio Changes
During the quarter we sold our positions in Becton Dickinson, PepsiCo and Staples. With the proceeds we took new
positions in NetApp and Oracle while also adding to our holdings in Google, Target and Yum! Brands. On balance,
these changes should lift the portfolio’s look through earnings growth rate while slightly increasing volatility.
Overview
ur portfolio consists of 17 leading businesses – a broad enough list to provide diversification while retaining our
• Ofocus
on a real “best in class” standard.
• Most of our holdings are global, with about 40% of profits made outside the US today and a projected 50% by the
terminal year of our five year investment horizon.
• These companies have demonstrated that they can grow considerably faster than most and our analysis leads us to
believe that growth can be maintained at a weighted average of about 14% a year over the next several years, a rate
double that expected of most leading firms.
Our five year model, or “business plan” uses what we feel are reasonably conservative earnings and price/
earnings projections. Long-term earning power forecasts developed by our analysts are regularly discussed with
management of each business and have to stand up to diligent peer review. Projected P/E multiples are toward the
lower end of their historical range and provide an earnings yield well above present fixed income returns.
•
Our detailed projection clearly represents a hypothesis. Furthermore, we will certainly change some holdings over the
years as values and prices fluctuate. But it is a clear and dynamic plan around which we manage our portfolio. It’s a
great decision tree.
5
REPORT OF THE INVESTMENT MANAGER (continued)
Longer-Term Prospects
I am fairly confident that we can continue to maintain consistent, relatively non-cyclical growth in the earning
power behind our portfolio, as we’ve done since the Company’s inception, 22 years ago. I believe we can keep that
“look through” earning power growing at a rate at least approaching 14% in the next half decade, not far from what
we’ve done historically. The greatest opportunity and risk is likely to be in the portfolio’s P/E ratio. This changes
dramatically, reflecting global investors’ level of confidence over time. As I’ve pointed out before, that ratio ranged
from 13.5 times at the bottom of the market a few years ago to 34 times at the top in 2000. Our forecast of 17 times
in the terminal year of the five year model we are currently using seems reasonable to me, as it is at the lower end of
the historical range and slightly below its present level of 17.5.
If “look through” earning power grows as we expect and the portfolio’s P/E ratio slips just a bit lower than it is today
we should considerably more than double our present investment over five to six years. If the earning power is there
but the P/E drops to its lowest level in memory, 13.5X, we would still make about 80% over the years, excluding
leverage. To lose money in a portfolio of leading growth businesses like ours, their earning power would have to
stagnate. While not impossible, this is very unlikely.
All told, I think investing in a group of fine growing businesses like those we hold makes sense and offers the
opportunity to make something like 15% a year over the next several years and possibly more if equity investing
returns to favor. There is certainly down side risk but, at today’s relatively depressed prices, I feel we are well
compensated for that risk.
The global financial system faces significant challenges today. People are worried, and to a great extent, rightfully
so. But, because they are worried, shares are remarkably cheap, particularly those of long-term growth businesses
where a modicum of future confidence historically supported a wide evaluation premium to the general market.
Simply put, good growth shares are cheap and bonds and other seemingly “safe” investments seem expensive.
Should the financial world more or less endure the current cycle and the outlook brighten, shares of the highquality businesses we hold should do very well indeed. Our holdings’ leading market positions, global exposure,
innovative managements and very sound balance sheets should continue to keep them at the head of the pack in any
environment. In due course this should be reflected in much better prices. As a long-term investor, I am pleased that
we have been able to assemble the range of holdings we’ve invested in and remain confident in our portfolio’s longterm prospects.
I look forward to reporting to you again in October.
William P. Stewart for:
W.P. Stewart Asset Management Ltd.
Investment Manager
New York, USA
July 12, 2011
The value of your investments will fluctuate. Past performance is no guarantee of future results.
6
STATEMENT OF NET ASSETS
As at June 30, 2011 and December 31, 2010
(amounts in thousands of US Dollars, except for the number of shares and per share data)
June 30, 2011
Investments
Securities at market value
December 31, 2010
350,417
Receivables
Dividends receivable
Other receivables
Receivables on subscriptions
Receivables arising from securities transactions
Reorganization expenses
34
13
7
0
0
343,021
183
1
3,680
11,775
41
54
15,680
Other assets
Cash at bank
5,624
1,231
Total assets
356,095
359,932
Liabilities
Bank loan and overdrafts
Payables for redemptions
Accounts payable and accrued expenses
Performance fee
Taxe d’abonnement
Payables arising from securities transactions
45,631
829
583
558
74
0
49,367
101
430
0
51
3,408
47,675
53,357
Net assets
308,420
306,575
Net asset value
308,420
306,575
1,727,882
1,754,984
178.50
174.69
Number of shares outstanding
Net asset value per share
The accompanying notes form an integral part of these financial statements
7
STATEMENT OF OPERATIONS & CHANGES IN NET ASSETS
For the six months ended June 30, 2011 and for the year 2010
(amounts in thousands of US Dollars)
June 30, 2011
(6 months)
Investment income
Dividends (net)
Redemption fees
Other income
997
36
0
Total investment income
Investment management expenses
Performance fee
Investment manager’s fee
558
390
2,324
0
669
948
318
156
109
78
41
40
15
Total other operating expenses
Total expenses
Net investment (loss)/gain
The accompanying notes form an integral part of these financial statements
8
2,166
153
5
1,033
Total investment management expenses
Other operating expenses
Interest
Management fee
Other expenses
Taxe d’abonnement
Reorganization expenses
Depository and Custodian fees
Directors’ fees
December 31, 2010
(12 months)
669
406
267
221
139
82
71
30
757
1,216
1,705
1,885
(672)
439
STATEMENT OF OPERATIONS & CHANGES IN NET ASSETS (continued)
For the six months ended June 30, 2011 and for the year 2010
(amounts in thousands of US Dollars)
June 30, 2011
(6 months)
Realized and unrealized gain from investments
Net realized gain on sale of investments
Net change in unrealized appreciation on investments
December 31, 2010
(12 months)
5,888
1,090
12,345
17,225
Net realized and unrealized gain from
investments
6,978
29,570
Increase in net assets as a result of operations
6,306
30,009
Shareholders’ activity during the period
Subscriptions received
Redemptions paid
13,887
(18,348)
(Decrease)/Increase in net assets from
shareholders’ activity
91,009
(76,733)
(4,461)
14,276
1,845
44,285
Net assets at the beginning of the period
306,575
262,290
Net assets at the end of the period
308,420
306,575
Net increase in net assets
STATISTICAL INFORMATION
As at June 30, 2011 and as at December 31, 2010, 2009 and 2008
(amounts in US Dollars)
Date
Total net assets
June 30, 2011
December 31, 2010
December 31, 2009
December 31, 2008
308,419,612
306,575,096
262,289,627
176,258,599
Net asset value
per share
178.50
174.69
154.54
111.53
The accompanying notes form an integral part of these financial statements
9
INVESTMENT PORTFOLIO
As at June 30, 2011
Transferable securities listed on an Official Stock Exchange
(price per share and market value in US Dollars)
Company
Name
Share
Symbol
Number of
Shares
Amphenol
ANSYS
Apple
Charles Schwab
Google
IntercontinentalExchange
MasterCard
NetApp
Oracle
Polo Ralph Lauren
Praxair
Procter & Gamble
Target
United Technologies
Urban Outfitters
Verisk Analytics
Yum! Brands
APH
ANSS
AAPL
SCHW
GOOG
ICE
MA
NTAP
ORCL
RL
PX
PG
TGT
UTX
URBN
VRSK
YUM
549,000
530,000
93,000
400,000
40,000
139,000
85,000
300,000
460,000
205,000
245,000
305,000
450,000
120,000
585,000
410,000
440,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
53.99
54.67
335.67
16.45
506.38
124.71
301.34
52.78
32.91
132.61
108.39
63.57
46.91
88.51
28.15
34.62
55.24
Market
Value
% of
Net
Assets
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
29,640,510
28,975,100
31,217,310
6,580,000
20,255,200
17,334,690
25,613,900
15,834,000
15,138,600
27,185,050
26,555,550
19,388,850
21,109,500
10,621,200
16,467,750
14,194,200
24,305,600
9.6%
9.4%
10.1%
2.1%
6.6%
5.6%
8.3%
5.1%
4.9%
8.8%
8.6%
6.3%
6.9%
3.5%
5.3%
4.6%
7.9%
Total investments in transferable securities listed on an Official Stock Exchange $
350,417,010
113.6%
Other net liabilities
$
(41,997,398)
(13.6%)
Total net assets
$
308,419,612
The accompanying notes form an integral part of these financial statements
10
Price
per
Share
100.0%
INVESTMENT PORTFOLIO
As at December 31, 2010
Transferable securities listed on an Official Stock Exchange
(price per share and market value in US Dollars)
Company
Name
Share
Symbol
Number of
Shares
Amphenol
ANSYS
Apple
Becton, Dickinson
Charles Schwab
Google
IntercontinentalExchange
MasterCard
PepsiCo
Polo Ralph Lauren
Praxair
Procter & Gamble
Staples
Target
United Technologies
Urban Outfitters
Verisk Analytics
Yum! Brands
APH
ANSS
AAPL
BDX
SCHW
GOOG
ICE
MA
PEP
RL
PX
PG
SPLS
TGT
UTX
URBN
VRSK
YUM
536,700
506,300
91,575
213,700
628,000
42,990
93,400
102,200
278,000
232,800
250,800
314,200
438,300
169,500
124,650
532,800
459,600
357,800
Price
per
Share
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
52.78
52.07
322.56
84.52
17.11
593.97
119.15
224.11
65.33
110.92
95.47
64.33
22.77
60.13
78.72
35.81
34.08
49.05
Market
Value
% of
Net
Assets
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
28,327,026
26,363,041
29,538,432
18,061,924
10,745,080
25,534,770
11,128,610
22,904,042
18,161,740
25,822,176
23,943,876
20,212,486
9,980,091
10,192,035
9,812,448
19,079,568
15,663,168
17,550,090
9.3%
8.6%
9.7%
5.9%
3.5%
8.3%
3.6%
7.5%
5.9%
8.4%
7.8%
6.6%
3.3%
3.3%
3.2%
6.2%
5.1%
5.7%
Total investments in transferable securities listed on an Official Stock Exchange $
343,020,603
111.9%
Other net liabilities
$
(36,445,507)
(11.9%)
Total net assets
$
306,575,096
100.0%
The accompanying notes form an integral part of these financial statements
11
NOTES TO THE FINANCIAL STATEMENTS
For the period ended June 30, 2011
1. General
Organization and purpose
W.P. Stewart Holdings Fund SICAV (the “Company” or “WPSH”) is a Luxembourg corporation formed in order to
enable investors to participate in a professionally managed investment portfolio. The primary objective of WPSH is
capital appreciation, which WPSH’s shareholders may realize upon the sale or redemption of their shares. It is not
anticipated that WPSH will make current distributions of its earnings to shareholders.
2. Summary of significant accounting policies
Principles
The financial statements are presented in accordance with generally accepted investment fund accounting principles
in Luxembourg and require management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ from estimates.
Security valuation
Investments in securities which are quoted or dealt in on a Stock Exchange are valued based on the last available
closing price on the exchange which is normally the principal market for such security.
Security transactions
Security transactions are accounted for on the date the securities are purchased or sold. Cost of securities consist of
the amounts paid by WPSH on purchase (incl. brokerage commissions) or the fair value of securities accepted from
investors in exchange for shares issued.
Gains and losses on the sale of securities are recognized using the average cost method and these gains or losses are
presented in the Statement of Operations & Changes in Net Assets as net realized gain/(loss) on sale of investments.
The net movement in the balance of the unrealized appreciation of investments at the beginning and at the end
of the period is recorded in the Statement of Operations & Changes in Net Assets as net change in unrealized
appreciation on investments.
Income
Dividend income is recorded on the ex-dividend date. Interest income is accrued daily.
12
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period ended June 30, 2011
3. Securities
The portfolio movements for the six months to June 30, 2011 were as follows (in thousands of US Dollars):
Total market value as at December 31, 2010
Purchases
Sales
Realized gain on sale of investments
Net change in unrealized appreciation on investments
Total market value as at June 30, 2011
$
$
$
$
$
343,021
$
7,396
$
350,417
86,905
(86,487)
5,888
1,090
The historical cost of the portfolio securities as at June 30, 2011 was US$ 295,994,429 (December 31, 2010:
US$ 289,688,334).
4. Transactions with related parties
The Company pays purchases and sales commissions incurred through transactions within the investment portfolio.
These purchases and sales commissions are incorporated in the purchase and sale prices of the portfolio shares. For
the period from January 1, 2011 through June 30, 2011, all transactions were effected through third-party unrelated
brokers at rates negotiated with such parties. Through November 30, 2010, trading of the investment portfolio
was primarily conducted through W.P. Stewart Securities LLC (“WPSSL”), a subsidiary of W.P. Stewart & Co., Ltd.
and an affiliate of W.P. Stewart Asset Management Ltd., who charged the Company a fixed ‘brokerage commission’
of US$ 0.05 per share. For the period January 1, 2011 through June 30, 2011, WPSSL earned US$ nil (year 2010:
US$ 315,800) in commissions as broker on trades of portfolio securities.
5. Reorganization expenses
The reorganization expenses are capitalized and amortized over a period not exceeding 5 years. As at June 30, 2011,
the reorganization expenses have been written off in full.
6. Cash at bank
This represents the balances of the accounts with Brown Brothers Harriman (Luxembourg) S.C.A. in Luxembourg,
Deutsche Bank in New York and Theodoor Gilissen Bankiers N.V. in Amsterdam.
13
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period ended June 30, 2011
7. Bank loan and overdrafts
This represents the balance of the loan payable to Deutsche Bank. The Company has entered into a Borrower
Security and Pledge Agreement (the “Agreement”) with Deutsche Bank in connection with a revolving line of credit
and as collateral has pledged cash, securities, shares, certificates, receivables and all other property of the Company
which is in the custody control of Brown Brothers Harriman (Luxembourg) S.C.A. The maximum availability under
the revolving line of credit is US$ 70 million. The total amount of the loan under this revolving line of credit shall
be no higher than 30% of the total market value of the collateral. If at any time the loan is greater than the required
percentage, then the Company will, within 5 business days, pledge to Deutsche Bank such additional collateral or
repay the loan. The Company agrees to pay interest at an annual rate (calculated on the basis of a 360-day year)
equal to the LIBOR (London Inter-Bank Offered Rate) for one month interest periods plus 1.25% LIBO Spread
Percentage. The average interest rate charged during the first six months of 2011 was 1.52% (year ended December 31,
2010: 1.52%).
8. Taxation
The Company is registered under Luxembourg law as an investment company (société d’investissement à capital
variable - SICAV). Accordingly, no Luxembourg income or capital gains tax are at present payable. The Company is
however subject to an annual “taxe d’abonnement” calculated at the annual rate of 0.05% of the net asset value at
the end of each quarter. This tax is payable quarterly. Dividends, interest and capital gains on securities held by the
Company may be subject to non-recoverable withholding tax or capital gains tax in the country of origin.
9. Accounts payable and accrued expenses
The accounts payable and the accrued expenses can be specified as follows (in thousands of US Dollars):
June 30,
2011
December 31,
2010
Loan interest
Investment advisory fees
Other payables
$
$
$
56
196
331
$
$
$
2
174
254
Total accounts payable and accrued expenses
$
583
$
430
10. Sales and repurchases of shares
Sales and repurchases of shares are accounted for on the date the shares are sold or purchased at the net asset value
per share. A redemption charge equal to 0.2% of the net asset value of the shares repurchased is assessed upon such
repurchase and is credited to the Statement of Operations & Changes in Net Assets.
14
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period ended June 30, 2011
A subscription fee of 1% of the net asset value of the shares is charged to shareholders upon each issuance of shares.
This is payable as compensation to persons or entities (mainly W.P. Stewart Asset Management (Europe) N.V. and
W.P. Stewart Asset Management Ltd.) for arranging the subscription of shares. This compensation is not an expense
to WPSH.
11. Expenses
Investment Manager’s fee
The calculation of the Investment Manager’s fee is as follows:
An annual fixed fee of 0.25% of the average net assets of WPSH, which is accrued daily and paid quarterly in arrears.
The Investment Manager is responsible for the remuneration of the Sub-Investment Manager for its sub-investment
services to the Company. In addition, the Investment Manager may pay a portion of its fee to Sub-Distributors who
introduce investors to the Company.
Performance fee
The calculation of the performance fee is based on 10% of the increase in the Net Asset Value per Share on December
31 of each financial year compared to December 31 of the previous year. The performance fee is calculated on each
Valuation Day by first calculating the Net Asset Value per Share prior to the performance fee accrual for that day
(“Base Net Asset Value per Share”), and then allocating 10% of the increase (or the decrease) in the Base Net Asset
Value per Share compared to the higher of (i) the Net Asset Value per Share (after accrual of performance fee) on the
preceding Valuation Day, or (ii) the highest Net Asset Value per Share previously attained as at any prior December
31 or the day of the seat transfer of the Company to Luxembourg (“High Water Mark”), multiplied by the number of
Shares of the Class in issue on the current Valuation Day. If on any Valuation Day the Net Asset Value per Share shall
fall below the High Water Mark, then no performance fee shall be accrued until such time as the Net Asset Value per
Share exceeds the High Water Mark. The total performance fee payable shall be the sum of the amounts so allocated
in the relevant year. As of June 30, 2011, the High Water Mark is US$ 175.59, which is the Net Asset Value per Share
on December 31, 2007, the last Valuation Day on which a performance fee was paid. For the period from January 1,
2011 through June 30, 2011, the performance fee accrual was US$ 557,861 (year 2010: US$ nil). The performance
fee, if any, will be realized on December 31 and is payable in US Dollars within 14 days of the approval of the annual
accounts by the Auditors.
The Investment Manager is responsible for the remuneration of the Sub-Investment Manager for its sub-investment
services to the Company. In addition, the Investment Manager may pay a portion of its fee to Sub-Distributors who
introduce investors to the Company.
Management fee
The Management Company receives a fee payable out of the assets of the Company of 0.10% per annum of the total
net assets of the Company. The fee is payable quarterly in arrears and is calculated on the basis of the average daily
net assets of the Company.
Out of this fee the Management Company pays a fee to the Sub-Administrator for its administration services, its
registrar and transfer agency services, and its domiciliary agency services related to the Company, to the Principal
Distributor for its marketing and distribution services, and to the Fund Agent for the provision of its services.
15
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period ended June 30, 2011
Directors’ fees
The Company pays out of its assets remuneration to the Board of Directors, the amount of which is determined
at the Annual General Meeting of Shareholders. This remuneration has been fixed at US$ 10,000 per year for
each board member, with the exception of the Chairman who will receive US$ 20,000 per year. Directors who are
employees or Directors of W.P. Stewart have waived their entitlement to Directors’ remuneration. All Directors will
be entitled to reimbursement by the Company of reasonable expenses.
Depository and Custodian fees
The depository and custodian fees charged ranges from 0.0175% to 0.02% per annum of the net assets of the
Company. Such fee is accrued daily and paid monthly in arrears. The current depository and custodian fee is in
accordance with normal practice in Luxembourg and is calculated on the basis of a percentage of the average net
assets of the Company together with a fixed amount per transaction.
Other expenses
The other expenses can be specified as follows (in thousands of US Dollars):
June 30,
2011
December 31,
2010
Auditors’ expenses
Printing reports and mailing
Shareholders’ communications and meetings
“CSSF” and Euronext Fees
Other professional fees
Miscellaneous
$
$
$
$
$
$
38
30
13
11
10
7
$
$
$
$
$
$
77
60
24
21
20
19
Total other expenses
$
109
$
221
Total expenses
Actual expenses incurred during the period were in line with the costs and remuneration as detailed in the Company’s
prospectus.
12. Expense ratio
The expense ratio as at June 30, 2011 amounted to 0.90% (annualized) (year 2010: 0.55%). The performance fee
represents 0.36% of the ratio (year 2010: 0.00%).
The expense ratio reflects the total costs of the Company during the first six months of 2011 (excluding interest
expense), expressed as a percentage of the average net assets. The average net assets are calculated by taking the
weighted average of the net assets at the end of the most recent three quarter-ends.
16
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period ended June 30, 2011
13. Turnover ratio
The portfolio turnover ratio for the first six months of 2011 amounted to 92% (annualized) (year 2010: 81%). The
portfolio turnover ratio reflects the turnover ratio of the Company’s assets during the first six months of 2011,
expressed as a ratio on an annual basis of the average net assets. The Company’s assets are calculated as the total of
securities purchases and sales, minus issued and redeemed shares. The average net assets are calculated by taking the
weighted average of the net assets at the end of the most recent three quarter-ends.
14. Statement of portfolio changes
A statement giving the changes in the portfolio of investments is available to shareholders, free of charge, on request
from the Company’s registered office, and also from the registered office of the Principal Distributor.
17
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of W.P. Stewart Holdings Fund
Luxembourg
We have audited the accompanying financial statements of W.P. Stewart Holdings Fund (the “Company”), which
comprise the statement of net assets and the investment portfolio as at June 30, 2011, the statement of operations
and changes in net assets for the period from January 1, 2011 to June 30, 2011 and a summary of significant
accounting policies and other explanatory information.
Responsibility of the Board of Directors of the Company for the financial statements
The Board of Directors of the Company is responsible for the preparation and fair presentation of these financial
statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation and
presentation of the financial statements and for such internal control as the Board of Directors of the Company
determines is necessary to enable the preparation and presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Responsibility of the “Réviseur d’Entreprises Agréé”
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with International Standards on Auditing as adopted for Luxembourg by the “Commission
de Surveillance du Secteur Financier”. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the judgment of the “Réviseur d’Entreprises Agréé”, including
the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In
making those risk assessments, the “Réviseur d’Entreprises Agréé” considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Board of Directors of the Company, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
18
INDEPENDENT AUDITOR’S REPORT (continued)
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of W.P. Stewart Holdings
Fund as at June 30, 2011, and of the results of its operations and changes in its net assets for the period then ended
in accordance with the Luxembourg legal and regulatory requirements relating to the preparation and presentation
of the financial statements.
Other matter
Supplementary information included in the semi-annual report has been reviewed in the context of our mandate
but has not been subject to specific audit procedures carried out in accordance with the standards described above.
Consequently, we express no opinion on such information. However, we have no observation to make concerning
such information in the context of the financial statements taken as a whole.
ERNST & YOUNG
Société Anonyme
Cabinet de Révision Agréé
M. Ferguson
Luxembourg, August 17, 2011
19
OTHER INFORMATION
Disclosure of Interests
The ‘Autoriteit Financiële Markten’ (‘AFM’) has granted dispensation from the obligation to publish changes during
the financial year in interests of the Board of Directors which are held under a discretionary agreement.
Shareholders with Substantial Interest
With regard to the presence of shareholders holding a substantial interest in WPSH as mentioned in article 21 of
the Decree on the Supervision of Investment Institutions, the Management Company is not aware of the presence of
such a shareholder.
Supervision
WPSH is under the supervision of the ‘Commission de Surveillance du Secteur Financier’ (‘CSSF’) in Luxembourg.
In addition, WPSH is registered by the ‘Autoriteit Financiële Markten’ (‘AFM’) for sales in The Netherlands since
July 19, 2006.
20
DESCRIPTION OF PORTFOLIO COMPANIES
As at June 30, 2011
Amphenol is one of the largest suppliers of electronic interconnectors globally. Its products are critical for a range
of electronic devices spanning advanced industrial, military/aerospace, wireless, and enterprise IT infrastructure
product markets. The company was founded in 1932 and is headquartered in Wallingford, Connecticut.
ANSYS engages in the development and marketing of engineering simulation software and services used by engineers
and designers in aerospace, automotive, manufacturing, electronics, biomedical, and defense industries. The
company was founded in 1970 and is headquartered in Canonsburg, Pennsylvania.
Apple designs, manufactures, and markets personal computers, mobile communication devices, and portable digital
music and video players, as well as sells various related software, services, peripherals, and networking solutions.
The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party
wholesalers, resellers, and value-added resellers. In addition, it sells various third-party Macintosh, iPhone, iPod
and iPad compatible products. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is
headquartered in Cupertino, California.
Charles Schwab engages, through its subsidiaries, in securities brokerage, banking and related financial services. It
offers its services to individuals, institutional clients and broker-dealers through four segments: Individual Investor,
Institutional Investor, Capital Markets and U.S. Trust. The Individual Investor segment includes the company’s
retail brokerage and banking operations. The Institutional Investor segment provides custodial, trading and
support services to investment advisors. The company was founded in 1971 and is headquartered in San Francisco,
California.
Google, a technology company, maintains an index of Websites and other online content for users, advertisers,
Google network members, and other content providers. Google became known through their internet ‘search
engine’, but has grown over the past several years into the world’s largest supplier of internet and email services.
Among its products and services are Google Earth, GMail, Picasa and You Tube for the consumer market and
Google AdWords and Google Enterprise (among others) for businesses. Google, Inc. was founded in 1998 and is
headquartered in Mountain View, California.
IntercontinentalExchange (ICE) owns and operates an Internet-based global electronic marketplace for trading in
futures and over-the-counter (OTC) commodities, and derivative financial products in the United States, the United
Kingdom, and Canada. Its products include contracts based on crude and refined oil products, natural gas, power,
coal, sugar, cotton, coffee, cocoa, canola, orange juice, credit default swaps, and foreign exchange and equity index
products. The company was founded in 2000 and is headquartered in Atlanta, Georgia.
MasterCard provides transaction processing and related services to customers principally in support of their
credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers’ cheque
programs. The company develops and markets payment solutions, processes payment transactions, and provides
consulting and information services to customers and merchants. The company manages and licenses payment card
brands, including MasterCard, MasterCard Electronic, Maestro, and Cirrus. The company serves approximately
22,000 financial institutions worldwide. It was founded in 1966 and is headquartered in Purchase, New York.
21
DESCRIPTION OF PORTFOLIO COMPANIES (continued)
As at June 30, 2011
NetApp, formerly known as Network Appliance, is a fast-growing supplier of networked storage hardware and
software into the IT datacenter market. The company provides solutions for storing, managing, protecting, and
archiving business data and is capitalizing on the growing volume of data being generated by Internet-enabled
mobile communications, emails, videos, and social networking – all of which ultimately has to be stored in
datacenters. The company has also developed a business selling into “public clouds” – third party datacenters
dedicated to storing consumer data. NetApp was founded in 1992 and is headquartered in Sunnyvale, California.
Oracle is one of the world’s largest enterprise software vendors. The company has a significant share in other
mission-critical corporate applications, including enterprise resource planning, logistics & supply chain
management, and business intelligence. Oracle is a product service organization that is constantly looking for new
technology developments. The company has more than 370,000 clients in 145 countries. Oracle was founded in 1977
and is headquartered in Redwood City, California.
Polo Ralph Lauren engages in the design, marketing, and distribution of lifestyle products primarily in the United
States, Canada, Europe, and Japan. The company offers apparel products, including a collection of men’s, women’s,
and children’s clothing; accessories, including footwear, eyewear, jewellery, and leather goods, such as handbags and
luggage; home furnishing products that include bedding and bath products, furniture, fabric and wallpaper, paints,
tabletop, and giftware; and fragrance products under Glamorous, Romance, Polo, Lauren, Safari, Ralph, and Black
Label brands. It sells its products to department stores, specialty stores, and golf and pro shops in the United States,
Europe and Asia; full-price and factory retail stores in the United States, Canada, Europe, South America, and Asia;
and online through RalphLauren.com. In addition, the company licenses its products, such as apparel, eyewear, and
fragrances to third parties. The company was founded in 1967 and is based in New York, New York.
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide.
It builds plants that produce a range of specialty gases used by the Health Care, Energy and Industrials sectors.
Capacity is dedicated to a specific facility or region and is typically associated with long-term “take or pay” contracts
that minimize sales risk. The company was founded in 1907 and is headquartered in Danbury, Connecticut.
Procter & Gamble manufactures and markets a range of consumer products in various countries throughout the
world. The company markets over 300 branded products in more than 180 countries. The company manages its
business in five product segments: Fabric and Home Care, Baby and Family Care, Beauty Care, Health Care and
Snacks and Beverages. Well known Procter & Gamble brands are (among others): Head & Shoulders, Gillette,
Pringles, Duracell, Oral-B, Oil of Olay, Pampers, Ariel and Wella. The company was founded in 1837 and is
headquartered in Cincinnati, Ohio.
Target is a growing general merchandise retailer operating Target-brand general merchandise discount stores and an
online business, Target.com. As of June 2011, the company operates a little over 1,750 stores in 49 states, including
more than 250 SuperTarget stores that include an upscale grocery shopping experience. The company was founded
in 1902 and is headquartered in Minneapolis, Minnesota.
22
DESCRIPTION OF PORTFOLIO COMPANIES (continued)
As at June 30, 2011
United Technologies provides technology products and services to the building systems and aerospace industries
worldwide. It operates through six segments: Otis, Carrier, UTC Fire and Security, Pratt and Whitney, Hamilton
Sundstrand, and Sikorsky. The Otis segment offers elevators, escalators, moving walkways, and service. The Carrier
segment offers commercial, residential, and industrial heating, ventilating, and air conditioning systems; The UTC
Fire and Security segment offers electronic security, monitoring; fire detection, protection, and suppression systems;
and firefighting equipment. The Pratt and Whitney segment offers commercial, general aviation, and military aircraft
engines; The Hamilton Sundstrand segment offers aerospace products, including power generation; management
and distribution systems; The Sikorsky segment offers commercial and military helicopters. The company was
incorporated in 1934 and is headquartered in Hartford, Connecticut.
Urban Outfitters operates lifestyle specialty retail stores under the Urban Outfitters, Anthropologie, Free People,
and Terrain brands. Its Urban Outfitters stores offer women’s and men’s fashion apparel, footwear, and accessories,
as well as gifts and apartment wares, such as rugs, pillows, shower curtains, books, candles, and novelties to
young adults. Terrain retail stores provide lifestyle home and garden products combined with antiques, live plants
and flowers. Urban Outfitters offers its products directly to consumers through its Websites, urbanoutfitters.
com, anthropologie.com, freepeople.com, urbanoutfitters.co.uk, and shopterrain.com, as well as through its
Urban Outfitters, Anthropologie, and Free People catalogues. The company was founded in 1970 and is based in
Philadelphia, Pennsylvania.
Verisk Analytics provides data, analytics, and decision-support services for professionals in property/casualty
insurance, finance, risk management, real estate, healthcare, government, and human resources fields. The company
offers the insurance marketplace amongst others statistical, actuarial, underwriting, fraud prevention and claims
data. Verisk Analytics was formerly known as Insurance Services Office, Inc. and changed its name to Verisk
Analytics, Inc. in 2008. The company was founded in 1971 and is based in Jersey City, New Jersey.
Yum! Brands operates as a quick service restaurant company. It develops, operates, franchises, and licenses a system
of restaurants which prepare, package and sell various food items. The company owns and franchises the KFC, Taco
Bell and Pizza Hut brands. The company was founded in 1997 and is headquartered in Louisville, Kentucky. Yum!
Brands operates independently of PepsiCo as of October 1997.
23
CORPORATE ORGANIZATION
Company history
WPSH started its activities in November 1982 under the name of North American Capital Corporation N.V.,
established in Curaçao, Netherlands Antilles. Since March 31, 1989, the investment focus has been solely on high
quality companies with solid, consistent earnings growth, based on the traditional investment style of W.P. Stewart.
As of May 10, 1996, the name of the Company was changed to W.P. Stewart Holdings N.V. and as of June 21, 1996
the Shares of the Company were listed on the Amsterdam stock exchange, now known as Eurolist by Euronext
Amsterdam.
As of July 1, 2006 the corporate seat of the Company was transferred to Luxembourg and the name of the Company
was changed to W.P. Stewart Holdings Fund.
Capital structure
Currently WPSH only issues shares in registered form, which have no par value. Shares can be subscribed and
redeemed on a daily basis directly with the Company or through the Principal Distributor that acts on behalf of the
Company. Subscriptions and redemptions of shares are accepted on the basis described in the Prospectus.
Alternatively, WPSH shares trade on Eurolist by Euronext Amsterdam and can be bought or sold through any bank,
money manager or stockbroker. The Company appointed a Fund Agent to maintain an orderly market in WPSH
shares on Eurolist by Euronext on those trading days that are also a valuation day. The Fund Agent can issue and
repurchase shares on behalf of WPSH to support daily liquidity. On days on which Eurolist by Euronext Amsterdam
is open and it is not a valuation day, the level of activity and price established in WPSH shares will be solely driven by
the demand in the market.
Registration
WPSH has been authorized by the CSSF in Luxembourg and is governed by the laws of the Grand-Duchy of
Luxembourg, has taken the form of a S.A., organized as a SICAV and qualifies as a UCI under Part II of the
Luxembourg Law of December 17, 2010. WPSH is registered on the official list of undertakings for collective
investments authorized in Luxembourg.
WPSH is also registered at the Luxembourg “Registre de Commerce et des Sociétés” under number RCS B117524.
In addition, WPSH is registered with the “Autoriteit Financiële Markten” in The Netherlands. This permits
WPSH to actively market and promote its shares to private and professional investors based in Luxembourg and
The Netherlands.
24
Registered Office
W.P. Stewart Holdings Fund
2-8, Avenue Charles de Gaulle
L-1653 Luxembourg
Board of Directors
Mr. M.B. Bolle, The Netherlands, Chairman
Mrs. S.G. Leber, USA (until 25 March, 2011)
Mr. M.D. Bergen, USA (since 25 March, 2011)
Mr. P.J.P. Rubingh, The Netherlands
Mr. W.P. Stewart, Bermuda
Mr. A.A.M. Wijsman, The Netherlands
Management Company, Administrator
W.P. Stewart Fund Management S.A.
2-8, Avenue Charles de Gaulle
L-1653 Luxembourg
Legal Advisors Luxembourg
Arendt & Medernach
14, rue Erasme
P.O. Box 39
L-2010 Luxembourg
Tax Advisors Luxembourg
Loyens Winandy
1, allée Scheffer
L-2520 Luxembourg
Fund Agent
Eurolist by Euronext Amsterdam
Theodoor Gilissen Bankiers N.V.
Keizersgracht 617
P.O. Box 3325
1001 AC Amsterdam
The Netherlands
Principal Distributor
W.P. Stewart Asset Management (Europe) N.V.
WTC Amsterdam Airport
Schiphol Boulevard 189
1118 BG Luchthaven Schiphol
The Netherlands
Tel: + 31 20 201 4985
Fax: + 31 20 201 4988
E-mail: [email protected]
Depository and Custodian, Sub-Administrator,
Registrar and Transfer Agent, and Domiciliary Agent
Brown Brothers Harriman (Luxembourg) S.C.A.
2-8, Avenue Charles de Gaulle
L-1653 Luxembourg
Independent Auditor
Ernst & Young S.A.
7, rue Gabriel Lippmann
Parc d’Activité Syrdall 2
L-5365 Munsbach
Luxembourg
For more information please read the Prospectus or visit the Company’s website: www.wpstewart.nl
Imprima bv - 983115
Investment Manager
W.P. Stewart Asset Management Ltd.
527 Madison Avenue
New York, NY 10022
USA
W.P. Stewart Holdings Fund
Semi Annual Report &
Audited Financial Statements
As at June 30, 2011
2011
2011
WPSTEWART
R.C.S. Luxembourg B117524