(Société d'investissement à Capital Variable) Annual Report and Audited Financial Statements For the year ended December 31, 2012 R.C.S. Luxembourg: B-75 761 No subscription can be received on the basis of financial reports. Subscriptions are only valid if made on the basis of the current prospectus accompanied by the latest annual report and the most recent semi-annual report, if published thereafter.
Table of contents Page Management, Administration and Independent Auditor 3 General Information 4 Market Synopsis 6 Review of the Sub-Funds 7 Independent Auditor s Report 13 Statement of Net Assets 14 Statement of Operations and Changes in Net Assets 16 Changes in the Number of Shares 18 Statistics 18 Schedule of Investments Multi-Manager Equity 19 Multi-Manager Balanced 21 Multi-Manager Defensive Balanced 23 Notes to the Financial Statements 25 2
Management, Administration and Independent Auditor INSINGER DE BEAUFORT MANAGER SELECTION SICAV CHAIRMAN Mr Peter George SIERADZKI Director Bank N.V. Amsterdam DIRECTORS Mr Jacobus Johannes HUMAN (Until September 30, 2012) Director Asset Management N.V. (Until September 30, 2012) Amsterdam Mr Steve GEORGALA Managing Director Maitland Advisory LLP. London Mr Marcel ERNZER Independent Director 54, rue de Cessange L-1320 Luxembourg REGISTERED OFFICE 69 route d'esch, L-1470 Luxembourg R.C.S. Luxembourg B-75.761 INVESTMENT MANAGER Asset Management N.V. Herengracht 537 1017 BV Amsterdam, The Netherlands SUB-INVESTMENT MANAGER Bank N.V. Herengracht 537 1017 BV Amsterdam, The Netherlands DISTRIBUTOR Bank N.V. Herengracht 537 1017 BV Amsterdam, The Netherlands DEPOSITARY AND CENTRAL ADMINISTRATION RBC Investor Services Bank S.A.* 14, Porte de France L-4360 Esch-sur-Alzette REGISTRAR AND TRANSFER AGENT RBC Investor Services Bank S.A.* 14, Porte de France L-4360 Esch-sur-Alzette, Luxembourg INDEPENDENT AUDITOR Ernst & Young S.A. 7, rue Gabriel Lippmann Parc d'activité Syrdall 2 L-5365 Munsbach, Luxembourg * Formerly RBC Dexia Investor Services Bank S.A. 3
General Information The annual general meeting of shareholders of INSINGER DE BEAUFORT MANAGER SELECTION SICAV (the SICAV or the "Company") is held at the registered office of the Company or at such other place in Luxembourg on the last Wednesday of the month of April of each year at 11.30 a.m. If this is not a bank business day in Luxembourg, it will be held on the next bank business day. Notifications of all general meetings will be published in the Mémorial, Recueil des Sociétés et Associations of Luxembourg (the Mémorial ) and in at least one Luxembourg newspaper as far as this is required by Luxembourg law. The notification shall be sent to the holders of registered shares by mail, in accordance with Luxembourg Law, at least eight days prior to the meeting at their addresses in the register of shareholders. The Board of Directors may decide at its sole discretion to publish the notification in any other newspaper. Such notices will include the agenda and specify the time and place of the meeting, the conditions of admission and will refer to the requirements of Luxembourg law with regard to the necessary quorum and majorities required for the meeting. The requirements as to attendance, quorum and majorities at all general meetings will be those laid down in Articles 67 and 67-1 of the law of 10th August, 1915 (as amended) of the Grand Duchy of Luxembourg and in the Company's Articles of Incorporation. Each entire share is entitled to one vote. Fractions of shares however participate in the distribution of dividends (if any) or in the distribution of the liquidation proceeds. The Annual Report and Audited Financial Statements will be published within four months after the end of the financial year and the unaudited semi-annual reports shall be published within two months after the end of the relevant period. The reports include separate information on each of the Sub-Funds as well as combined information on all of the Sub-Funds. The reports are available at the registered office of the Company during normal business hours. The financial year-end of the Company is December 31 of each year. A detailed schedule of portfolio movements for each Sub-Fund is available free of charge upon request at the registered office of the SICAV. The Net Asset Values and the issue, conversion and redemption prices of the shares in any Sub-Fund shall be made public and available at the registered office of the Company. Shares of all the Sub-Funds, as and when issued, shall be listed on the Luxembourg Stock Exchange. Under current legislation and practice, shareholders are not subject to any capital gains, income, withholding, inheritance or other taxes in Luxembourg (except for shareholders domiciled, resident or having a permanent establishment in Luxembourg and for certain former residents of Luxembourg owning more than 10% of the share capital of the Company). Potential investors should consult their professional advisers on the possible tax or other consequences of buying, holding, converting, transferring or selling any of the shares under the laws of their countries of citizenship, residence or domicile. The Company is out of the scope of the EU Savings Directive. The annual and semi-annual accounts can be obtained, free of charge, at the offices of the Investment Manager or can be downloaded, free of charge, from the website of the Investment Manager under the following link: http://www.insinger.com 4
General Information (continued) Ongoing Charges (Expense Ratio) The ongoing charges of each Sub-Fund is calculated by dividing the total expenses by the average Net Asset Value of each Sub-Fund. The average Net Asset Value as at December 31, 2012 is calculated by averaging the Net Asset Value of each Valuation of each Sub-Fund during 2012. The calculation of the ongoing charges of the underlying funds is based on available information of the underlying funds. Multi-Manager Equity The average Net Asset Value for the year ended December 31, 2012 is EUR 32,506,862. The ongoing charges at December 31, 2012 are as follows (percentages are expressed per annum): - excluding ongoing charges of the underlying funds: 1.43% - including ongoing charges of the underlying funds: 2.84% All above ongoing charges exclude the performance fees in the underlying funds as these are not yet known and difficult to estimate. Multi-Manager Balanced The average Net Asset Value for the year ended December 31, 2012 is EUR 47,218,147. The ongoing charges as at December 31, 2012 are as follows (percentages are expressed per annum): - excluding ongoing charges of the underlying funds: 1.43% - including ongoing charges of the underlying funds: 2.74% All above ongoing charges exclude the performance fees in the underlying funds as these are not yet known and difficult to estimate. Multi-Manager Defensive Balanced The average Net Asset Value for the year ended December 31, 2012 is EUR 28,382,927. The ongoing charges as at December 31, 2012 are as follows (percentages are expressed per annum): - excluding ongoing charges of the underlying funds: 1.43% - including ongoing charges of the underlying funds: 2.54% All above ongoing charges exclude the performance fees in the underlying funds as these are not yet known and difficult to estimate. Other The Board of Directors confirms adherence to the Association of the Luxembourg Fund Industry (ALFI) Code of Conduct in the governance of Manager Selection SICAV. Mr J.J. Human resigned as a Director of Manager Selection SICAV and as the Chief Investment Officer (CIO) of Group with effect from September 30, 2012. Mr Human will not be replaced on the Board of the SICAV. Mr Gerwin S. Wijnia has replaced Mr Human as CIO. Profile of Mr Gerwin S. Wijnia, Chief Investment Officer Mr Wijnia holds a B. Bus. Sc. in Finance and Economics from the University of Groningen, the Netherlands and is a RBA (CEFA) charterholder. He joined Insinger Group in 2009 and was responsible for the portfolio construction and stock selection of two NYSE Amsterdam listed Funds. Mr Wijnia replaced Mr J.J. Human as Chief Investment Officer which includes the responsibility of the investment management of all Investment Funds. In addition Mr Wijnia was appointed as Director of Asset Management N.V. in November 2012. 5
Market Synopsis Market Developments 2012 2012 was dominated by the policies of central banks, with the ECB and the Fed leading the way. Aided by highlyexpansionary monetary policies, investors rediscovered the confidence they had lost in 2011 and both bond and equity markets performed very well. Global government bonds earned a return of about 9%, while corporate bonds rose in value by about 13% (expressed in euros). The riskiest corporate bonds, high yield or junk bonds, even earned a total return of about 23%, far outstripping the average return on the global equity markets (about 13% in euros). In December 2011 and February 2012, the ECB attracted the most attention when it made available over EUR1,000 billion in three-year loans to European banks. Banks in Italy and Spain in particular took advantage of this credit facility, partly to buy up government bonds issued by their own countries in order to bring down the yields that had risen so perilously in 2011. The enormous sums of money made available to the financial system by central banks are a reflection of the scale of the global debt crisis. Only if very low yields persist will the enormous mountain of debt remain at all affordable, fostering hopes that it could be brought under control at some point. This could be achieved either by economic growth picking up or by a longterm period of negative real interest rates, which would lead to a decrease in the value of the debt. Aided by the actions of the ECB, but also by better-than-expected US job figures, markets around the world earned surprisingly high returns in the first quarter of 2012. Banks advanced the furthest, having been under the greatest pressure in 2011. In the second quarter, the equity markets in particular suffered a relapse in April and May, cancelling out almost all the profit made in the first quarter. Although the disappointing economic growth in the US and China also prompted some unease, the Eurozone was again the greatest source of concern in the second quarter. Attention mostly focused on Spanish banks, which threatened to go under in the wake of the collapse of the Spanish housing market. In June, Spanish banks were promised EUR100 billion in aid, but the positive market reaction only lasted a few hours. Expectations were so low prior to the Euro Summit in June that the outcome was in fact better than expected. Led by Germany, Northern European countries ultimately agreed to the new ESM bail-out fund actively providing capital directly to (Spanish) banks without the state being involved; this means that the aid does not count as sovereign debt. This severs the link between the required recapitalisation of the banking sector and higher sovereign debt. Another positive element is that the ESM will not be given preference over sovereign debt, which will improve the position of investors in government bonds. The markets responded positively, resulting in yields on Spanish and Italian government bonds in particular declining and equities rallying (especially banking equities). In the third quarter, equity markets succeeded in prolonging the rally of early June. These sound performances were not driven by the prospect of an economic recovery, but once again by the actions of central banks. It was initially ECB President Draghi who was most active. On 26 July, he announced that he would do whatever it takes to safeguard the future of the euro. On 6 September, he made good that promise by announcing that the ECB is prepared to buy up an unlimited number of government bonds on the secondary market (i.e. not on initial issue, the ECB is prohibited from doing that). It has to be said that Draghi s actions proved successful. Yields on bonds issued by Spain, the country most at risk, fell by two whole percentage in the following months. This drop in yields occurred without Draghi even being able to buy up the bonds in question. In order for this to happen, Spain and Italy were required to submit an official request for a bail-out to the ESM emergency fund, but they have not yet done so. Towards the end of the third quarter, the US Fed announced a fresh, third round of quantitative easing, or QE3, aimed at bringing down mortgage rates further by purchasing mortgage-backed securities. The Fed has left the scale and duration of this programme open, allowing it to maximise the flow of money. Following initial hesitation early in the fourth quarter, most equity markets resumed their upward trend in November and December, allowing them to finish the year close to their 2012 peaks. It was noticeable that it was chiefly the US which boosted markets in the first half of 2012. The European markets took the lead in the second half, however, while many emerging markets also started to rise towards the end of the year when the Chinese economy showed signs of recovery. Once again, rising equity markets (risk-on) generally went hand-in-hand with a rising euro- US dollar exchange rate, resulting in lower returns in euros than in US dollars. However, across 2012 as a whole, the euro barely rose against the US dollar (from 1.30 to 1.32). Luxembourg, March 2013 6
Review of the Sub-funds Multi-Manager Equity The NAV of Multi-Manager Equity - EUR Class increased from EUR 68.39 to EUR 77.61. This translated in a return of 13.48%. 2012 was a strong year for equities, with all regions ending the year with positive results. Asia Pacific ex-japan was the strongest performing region, followed by Europe and Global Emerging Markets. Japan contributed the least to the world equity markets. In terms of total attribution, the relative large position in European managers was the strongest contributor to the portfolio, followed by the Emerging Markets managers. The US equity managers were able to more or less keep up with the US market, with Wellington US Equity Research being the biggest contributor to this result followed by AXA Rosenberg US Equity Alpha. The concentrated Cambrian Fund, managed by Alex Roepers, had a weak year, partly caused by important positions within the Industrials sector which lagged performance. The fund turned positive in the last quarter, but was unable to make up for the loss earlier in the year. Janus Perkins US Strategic Value Fund disappointed again in 2012. The value orientated strategy, focussed on high quality stocks was unable to compete with the benchmark, the Russell 3000 Value Index. The manager is no longer convinced that this fund could continue to add value to the portfolio going forward; the position was sold towards the end of 2012. Within the European region, the combination of managers outperformed the market. JO Hambro Continental Europe, a pragmatic managed portfolio, performed very strongly, both in absolute and relative terms. Within the European basket, the IdB Equity Income Fund, a relatively large position, contributed strongly to the result, but due to its structural defensive positioning the fund underperformed the index. Crispin Odey, manager of the Odey Pan European Fund outperformed most of his competitors and delivered the highest return to the Fund in absolute terms. This outperformance was mainly generated by the high conviction stocks within the fund. Within the Asia Pacific ex-japan region, First State Asia Pacific Leaders stayed well ahead of the benchmark. The Aberdeen Asia Pacific Equity Fund, added in January, also outperformed the market. The fund invests in quality companies and leverages its know-how from local in-house resources throughout the region. Within broader Emerging Markets, Aberdeen Global Emerging Markets provided the most alpha to the portfolio and again has proved to be stronger than the market. First State Global Emerging Markets Leaders was added by the manager in the beginning of the third quarter. The First State Global Emerging Markets Leaders Fund has a structural defensive strategy and therefore tends to generate most of its outperformance in negative years. This year however, despite being a strong year for Global Emerging Markets, the fund substantially outperformed. The Comgest Global Emerging Markets Fund has lost the confidence of the manager partially due to the fact that the fund repeatedly has proven to fail its objective to provide protection on the downside. The position was sold in the third quarter. To diversify the Emerging Markets portfolio, the manager added a quant strategy to the Fund: Acadian Emerging Markets. Acadian s investment philosophy is that fundamental insight about mispricing can be best captured employing quantitative methods. Their model is highly adaptive to changing market dynamics and is based on 4 pillars: Value, Growth, Quality and Technical all equipped with different parameters. In 2012 the Japanese stock market was not able to provide investors with a good fundamental outlook, or a positive catalyst for the medium term. The manager sold the positions in Cambrian Japan and Schroder Tokyo managed by Andrew Rose in the beginning of the year. This in no way related to the results of the managers, which during the investment period provided a positive impact on the performance of the Fund. The position in Sanlam Global Best Ideas Fund is managed by Kokkie Kooyman, an opportunistic manager who contributed positively to the Fund. Although the fund invests in equities globally, its Emerging Markets weighting has been very high throughout the holding period. The manager decided to redeem the position in this fund and focus on specialist managers. Outlook & Strategy We will continue to actively manage the regional equity allocation. We will monitor the markets closely and allocate our assets to a combination of managers that in our opinion is well suited given the market circumstances. 7
Review of the Sub-funds (continued) Multi-Manager Balanced The NAV of Multi-Manager Balanced USD Class increased from USD 104.89 to USD 115.33. This translates in a return of 9.95% for the year 2012. The price of the GBP Class rose from GBP 98.05 to GBP 105.41 resulting in a return of 7.51% and the EUR Class increased from EUR 84.04 to EUR 91.54 as at 31 December 2012, returning 8.92 % for the year 2012. In 2012, we made active changes on overall asset allocation for the Fund. The Fund started the year with an underweight in equities. In the beginning of February, we increased the equity exposure, leaving it still under the neutral weight. The main drivers for this increase were the successive quantitative easing program of the ECB, positive economic indicators from the US and monetary easing from China. In the beginning of the second half of 2012 the turmoil under investors regarding Greece and the Euro combined with a new low in German Bund yields resulted in a temporary decrease in the equity exposure by the manager. By the end of the third quarter there were signs of a liquidity driven rally: ECB president Draghi supressed the risk premium on peripheral government bond by active policy, the German Supreme court ratified the stability pact and FED president Bernanke engaged the third quantitative easing program in September. Supported by these developments the manager increased the equity exposure to an overweight level. Equity Funds 2012 was a strong year for equities, with all regions ending the year with positive results. Asia Pacific ex-japan was the strongest performing region, followed by Europe and Global Emerging Markets. Japan contributed the least to the world equity markets. In term of total attribution, the relative large position in European managers was the strongest contributor to the portfolio, followed by the Emerging Markets managers. The US equity managers were able to more or less keep up with the US market, with Wellington US Equity Research being the biggest contributor to this result followed by AXA Rosenberg US Equity Alpha. The concentrated Cambrian Fund, managed by Alex Roepers, had a weak year, partly caused by important positions within the Industrials sector which lagged performance. The fund turned positive in the last quarter, but was unable to make up for the loss earlier in the year. Janus Perkins US Strategic Value Fund disappointed again in 2012. The value orientated strategy, focussed on high quality stocks was unable to compete with the benchmark, the Russell 3000 Value Index. As we are no longer convinced that this fund could continue to add value to the portfolio going forward; the position was sold towards the end of 2012. Within the European region, the combination of managers outperformed the market. JO Hambro Continental Europe, a pragmatic managed portfolio, performed very strongly, both in absolute and relative terms. Within the European basket, the IdB Equity Income Fund, a relatively large position, contributed strongly to the result, but due to its structural defensive positioning the fund underperformed the index. Crispin Odey, manager of the Odey Pan European Fund outperformed most of his competitors and delivered the highest return to the Fund in absolute terms. This outperformance was mainly generated by the high conviction stocks within the fund. Within the Asia Pacific ex-japan region, First State Asia Pacific Leaders stayed well ahead of the benchmark. The Aberdeen Asia Pacific Equity Fund, added in January, also outperformed the market. The fund invests in quality companies and leverages its know-how from local in-house resources throughout the region. Within broader Emerging Markets, Aberdeen Global Emerging Markets provided the most alpha to the portfolio and again has proved to be stronger than the market. First State Global Emerging Markets Leaders was added by the manager in the beginning of the third quarter. The First State Global Emerging Markets Leaders Fund has a structural defensive strategy and therefore tends to generate most of its outperformance in negative years. This year however, despite being a strong year for Global Emerging Markets, the fund substantially outperformed. The Comgest Global Emerging Markets Fund has lost the confidence of the manager partially due to the fact that the fund repeatedly has proven to fail its objective to provide protection on the downside. The position was sold in the third quarter. To diversify the Emerging Markets portfolio, the manager added a quant strategy to the Fund: Acadian Emerging Markets. Acadian s investment philosophy is that fundamental insight about mispricing can be best captured employing quantitative methods. Their model is highly adaptive to changing market dynamics and is based on 4 pillars: Value, Growth, Quality and Technical all equipped with different parameters. In 2012 the Japanese stock market was not able to provide investors with a good fundamental outlook, or a positive catalyst for the medium term. The manager sold the position Schroder Tokyo managed by Andrew Rose in the beginning of the year. This in no way related to the results of the manager, who during the investment period provided a positive impact on the performance of the Fund. We sold the position in Sanlam Global Best Ideas Fund managed by Kokkie Kooyman, an opportunistic manager who contributed positively to the Fund. Although the fund invests in equities globally, its Emerging Markets weighting has been very high throughout the holding period. We decided to redeem the position in this fund and focus on specialist managers. Fixed Income Funds One of the changes at the end of the first quarter within the fixed income portfolio was to enter an active US Dollar exposure, to offer protection in case of a possible risk averse movement in the market combined with on-going uncertainty in the Eurozone. This view was translated by taking a new position in the PIMCO Global Low Average Duration Fund. The fund, managed by Bill Gross, invests primarily in high quality investment-grade short maturity fixed income USD securities and aims to preserve capital. To decrease the EUR exposure even more, the position in BlueBay High Yield Bond Fund was sold at the end 8
Review of the Sub-funds (continued) of the second half of the year. In the beginning of the year the Fund took a position in the PIMCO High Yield Bond Fund managed by Andrew Jessop, which invests in the USD High Yield market. The fund employs PIMCO s fundamental research process, including top-down economic views, bottom-up security selection and extensive global resources. The fund outperformed the Merrill Lunch US High Yield Index in 2012. At the end of March the manager began to increase the corporate bond exposure at the cost of government bonds. Main drivers were a possible overbought government bonds market and on the other side healthy cash positions with corporations. Positions in Parvest Euro Bond Government and Petercam Bonds EUR were sold during the year as a result of this market view. Another redemption was the Aberdeen Local Currency Short Duration Bond Fund. On the long term, the manager is positive on emerging market currencies, but at the time the recent depreciation of the yen could have a spillover effect towards the EM currencies. On the short term, the sector could be vulnerable for increasing volatility. The position was closed per the end of the first quarter. Toward the end of the year, the manager sold the Robeco Investment Grade Corporate Bond Fund, a portfolio which excludes financials. The rationale for this was related to signs in favour of declining risks in the financial sector during 2012. The proceeds were mainly reinvested in Henderson Europe Corporate Bond Fund, a very actively managed portfolio which can invest in all sectors including Financials. In terms of euro performance the best performers within the fixed income portfolio were the BlueBay Investment Grade Bond Fund and the Henderson Europe Corporate Bond Fund which both outperformed their benchmarks. On the government bond side it was Robeco Euro Government Bond Fund that provided the best performance. Alternative Funds Within the Absolute Return portfolio a large portion is invested in the two sub-funds of the Absolute Return Strategy SICAV, which invests in specialist absolute return investment managers. The policy and regulatory driven environment with a lot of tail risk has led to a high risk on/risk off reversal frequency and this has been challenging for hedge fund managers. Hedge funds managers have globally been again, say even more, cautious than in 2011. They have addressed the problems by using very tight risk guidelines. Reflecting the cautious stance, hedge funds as an asset class had a positive return with a low volatility, but lagged equities and credit. These effects were no different for the Absolute Return Strategy SICAV. Rodinia Fund Limited, the international long/short fund managed by Atlantic Investments had a disappointing 2011 and was converted into the Cambrian Global Fund in the first quarter of 2012. A combination of historic performance and this strategy change made the investment manager sell out of the position. IdB Real Estate Equity generated a solid return in a very strong European Real Estate Market. This was the result of an unique combination of declining corporate bond yields and improved economic indicators. Notably the fund captured approximately two thirds of the market upside with an average 50% net long exposure. The IdB Global Convertible Fund produced a solid return. Given the equity component in the convertible bonds, the strong equity markets in 2012 contributed to the convertible market as a whole. Outlook & Strategy We will continue to actively manage our asset allocation, the allocation between government and other bond funds as well as the regional equity allocation. We will monitor the markets closely and allocate our assets to a combination of managers that in our opinion is well suited given the market circumstances. 9
Review of the Sub-funds (continued) Multi-Manager Defensive Balanced Multi-Manager Defensive Balanced Fund - EUR Class returned 7.65 % in 2012. The share price was EUR 99.49 at the start of the year and increased to EUR 107.10 as per 31 December 2012. In 2012, we made active changes on overall asset allocation for the Fund. The Fund started the year with an underweight in equities. In the beginning of February, we increased the equity exposure, leaving it still under the neutral weight. The main drivers for this increase were the successive quantitative easing program of the ECB, positive economic indicators from the US and monetary easing from China. In the beginning of the second half of 2012 the turmoil under investors regarding Greece and the Euro combined with a new low in German Bund yields resulted in a temporary decrease in the equity exposure by the manager. By the end of the third quarter there were signs of a liquidity driven rally: ECB president Draghi supressed the risk premium on peripheral government bond by active policy, the German Supreme court ratified the stability pact and FED president Bernanke engaged the third quantitative easing program in September. Supported by these developments the manager increased the equity exposure to an overweight level. Equity Funds 2012 was a strong year for equities, with all regions ending the year with positive results. Asia Pacific ex-japan was the strongest performing region, followed by Europe and Global Emerging Markets. Japan contributed the least to the world equity markets. In term of total attribution, the relative large position in European managers was the strongest contributor to the portfolio, followed by the Emerging Markets managers. The US equity managers were able to more or less keep up with the US market, with Wellington US Equity Research being the biggest contributor to this result followed by AXA Rosenberg US Equity Alpha. The concentrated Cambrian Fund, managed by Alex Roepers, had a weak year, partly caused by important positions within the Industrials sector which lagged performance. The fund turned positive in the last quarter, but was unable to make up for the loss earlier in the year. Janus Perkins US Strategic Value Fund disappointed again in 2012. The value orientated strategy, focussed on high quality stocks was unable to compete with the benchmark, the Russell 3000 Value Index. The manager is no longer convinced that this fund could continue to add value to the portfolio going forward; the position was sold towards the end of 2012. Within the European region, the combination of managers outperformed the market. JO Hambro Continental Europe, a pragmatic managed portfolio, performed very strongly, both in absolute and relative terms. Within the European basket, the IdB Equity Income Fund, a relatively large position, contributed strongly to the result, but due to its structural defensive positioning the fund underperformed the index. Crispin Odey, manager of the Odey Pan European Fund outperformed most of his competitors and delivered the highest return to the Fund in absolute terms. This outperformance was mainly generated by the high conviction stocks within the fund. 10
Review of the Sub-funds (continued) Within the Asia Pacific ex-japan region, First State Asia Pacific Leaders stayed well ahead of the benchmark. The Aberdeen Asia Pacific Equity Fund, added in January, also outperformed the market. The fund invests in quality companies and leverages its know-how from local in-house resources throughout the region. Within broader Emerging Markets, Aberdeen Global Emerging Markets provided the most alpha to the portfolio and again has proved to be stronger than the market. First State Global Emerging Markets Leaders was added by the manager in the beginning of the third quarter. The First State Global Emerging Markets Leaders Fund has a structural defensive strategy and therefore tends to generate most of its outperformance in negative years. This year however, despite being a strong year for Global Emerging Markets, the fund substantially outperformed. The Comgest Global Emerging Markets Fund has lost the confidence of the manager partially due to the fact that the fund repeatedly has proven to fail its objective to provide protection on the downside. The position was sold in the third quarter. To diversify the Emerging Markets portfolio, the manager added a quant strategy to the Fund: Acadian Emerging Markets. Acadian s investment philosophy is that fundamental insight about mispricing can be best captured employing quantitative methods. Their model is highly adaptive to changing market dynamics and is based on 4 pillars: Value, Growth, Quality and Technical all equipped with different parameters. In 2012 the Japanese stock market was not able to provide investors with a good fundamental outlook, or a positive catalyst for the medium term. The manager sold the position Schroder Tokyo managed by Andrew Rose in the beginning of the year. This in no way related to the results of the manager, who during the investment period provided a positive impact on the performance of the Fund. We sold the position in Sanlam Global Best Ideas Fund managed by Kokkie Kooyman, an opportunistic manager who contributed positively to the Fund. Although the fund invests in equities globally, its Emerging Markets weighting has been very high throughout the holding period. We decided to redeem the position in this fund and focus on specialist managers. Fixed Income Funds One of the changes at the end of the first quarter within the fixed income portfolio was to enter an active US Dollar exposure, to offer protection in case of a possible risk averse movement in the market combined with on-going uncertainty in the Eurozone. This view was translated by taking a new position in the PIMCO Global Low Average Duration Fund. The fund, managed by Bill Gross, invests primarily in high quality investment-grade short maturity fixed income USD securities and aims to preserve capital. To decrease the EUR exposure even more, the position in BlueBay High Yield Bond Fund was sold at the end of the second half of the year. In the beginning of the year the Fund took a position in the PIMCO High Yield Bond Fund managed by Andrew Jessop, which invests in the USD High Yield market. The fund employs PIMCO s fundamental research process, including top-down economic views, bottom-up security selection and extensive global resources. The fund outperformed the Merrill Lunch US High Yield Index in 2012. At the end of March the manager began to increase the corporate bond exposure at the cost of government bonds. Main drivers were a possible overbought government bonds market and on the other side healthy cash positions with corporations. Positions in Parvest Euro Bond Government and Petercam Bonds EUR were sold during the year as a result of this market view. Another redemption was the Aberdeen Local Currency Short Duration Bond Fund. On the long term, the manager is positive on emerging market currencies, but at the time the recent depreciation of the yen could have a spillover effect towards the EM currencies. On the short term, the sector could be vulnerable for increasing volatility. The position was closed per the end of the first quarter. Toward the end of the year, the manager sold the Robeco Investment Grade Corporate Bond Fund, a portfolio which excludes financials. The rationale for this was related to signs in favour of declining risks in the financial sector during 2012. The proceeds were mainly reinvested in Henderson Europe Corporate Bond Fund, a very actively managed portfolio which can invest in all sectors including Financials. In terms of euro performance the best performers within the fixed income portfolio were the BlueBay Investment Grade Bond Fund and the Henderson Europe Corporate Bond Fund which both outperformed their benchmarks. On the government bond side it was Robeco Euro Government Bond Fund that provided the best performance. Alternative Funds Within the Absolute Return portfolio a large portion is invested in the two sub-funds of the Absolute Return Strategy SICAV, which invests in specialist absolute return investment managers. The policy and regulatory driven environment with a lot of tail risk has led to a high risk on/risk off reversal frequency and this has been challenging for hedge fund managers. Hedge funds managers have globally been again, say even more, cautious than in 2011. They have addressed the problems by using very tight risk guidelines. Reflecting the cautious stance, hedge funds as asset class had a positive return with a low volatility, but lagged equities and credit. These effects were no different for the Absolute Return Strategy SICAV. IdB Real Estate Equity generated a solid return in a very strong European Real Estate Market. This was the result of an unique combination of declining corporate bond yields and improved economic indicators. Notably the fund captured approximately two thirds of the market upside with an average 50% net long exposure. The IdB Global Convertible Fund produced a solid return. Given the equity component in the convertible bonds, the strong equity markets in 2012 contributed to the convertible market as a whole. 11
Review of the Sub-funds (continued) Outlook & Strategy We will continue to actively manage our asset allocation, the allocation between government and other bond funds as well as the regional equity allocation. We will monitor the markets closely and allocate our assets to a combination of managers that in our opinion is well suited given the market circumstances. Luxembourg, April 19, 2013 The Board of Directors 12
Independent Auditor s Report To the Shareholders of Manager Selection SICAV 69 route d'esch, L-1470 Luxembourg Following our appointment by the Annual General Meeting of the Shareholders on April 25, 2012 we have audited the accompanying financial statements of Manager Selection SICAV (the SICAV ) and of each of its Sub- Funds, which comprise the statement of net assets and the schedule of investments as at December 31, 2012 and the statement of operations and changes in net assets for the year then ended and a summary of significant accounting policies and other explanatory notes. Responsibility of the Board of Directors of the SICAV for the financial statements The Board of Directors of the SICAV 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 SICAV 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 judgement 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 SICAV 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. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Manager Selection SICAV and of each of its Sub-Funds as at December 31, 2012 and of the results of their operations and changes in their net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements. Other Matter Supplementary information included in the 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 S.A. Société Anonyme Cabinet de révision agréé Kerry NICHOL Luxembourg, April 19, 2013 13
Statement of Net Assets as at December 31, 2012 Multi-Manager Equity Multi-Manager Balanced Multi-Manager Defensive Balanced Note EUR EUR EUR ASSETS Investments in securities at market value (2) 31,482,459 43,053,723 25,287,328 Cash at bank 803,836 548,219 258,030 Amounts receivable on subscriptions 4,186 52,872 196 TOTAL ASSETS 32,290,481 43,654,814 25,545,554 LIABILITIES Amounts payable on redemptions 50,474 19,840 65,645 Unrealised loss on forward foreign exchange contracts (7) - 17,726 - Management fee payable (5) 80,539 110,602 65,557 Taxes and expenses payable (3) 41,965 58,843 33,640 TOTAL LIABILITIES 172,978 207,011 164,842 TOTAL NET ASSETS 32,117,503 43,447,803 25,380,712 Net Asset Value per share USD Share Class - 115.33 - GBP Share Class - 105.41 - EUR Share Class 77.61 91.54 107.10 Number of shares outstanding USD Share Class - 29,773.21 - GBP Share Class - 5,771.47 - EUR Share Class 413,821.88 438,069.02 236,990.19 The accompanying notes form an integral part of these financial statements. 14
Statement of Net Assets as at December 31, 2012 (continued) Total Note USD ASSETS Investments in securities at market value (2) 131,677,192 Cash at bank 2,123,863 Amounts receivable on subscriptions 75,524 TOTAL ASSETS 133,876,579 LIABILITIES Amounts payable on redemptions 179,344 Unrealised loss on forward foreign exchange contracts (7) 23,382 Management fee payable (5) 338,610 Taxes and expenses payable (3) 177,350 TOTAL LIABILITIES 718,686 TOTAL NET ASSETS 133,157,893 Net Asset Value per share USD Share Class GBP Share Class EUR Share Class Number of shares outstanding USD Share Class GBP Share Class EUR Share Class 15 The accompanying notes form an integral part of these financial statements.
Statement of Operations and Changes in Net Assets for the year ended December 31, 2012 INSINGER DE BEAUFORT MANAGER SELECTION SICAV Multi-Manager Equity Multi-Manager Balanced Multi-Manager Defensive* Note EUR EUR EUR NET ASSETS AT THE BEGINNING OF THE YEAR 31,614,392 49,589,522 5,461,701 INCOME Dividends, net (2) 158,274 214,389 5,778 Bank interest (2) - - - TOTAL INCOME 158,274 214,389 5,778 EXPENSES Management fee (5) 322,823 471,932 11,331 Depositary bank commission (8) 27,944 39,310 1,393 Domiciliation, administration and transfer agent fees (8) 50,825 84,450 38,049 Audit fees, printing and publishing expenses 29,216 43,259 2,862 Liquidation fees - - 12,100 Taxe d'abonnement (6) 12,252 10,918 926 Bank charges 8,873 11,749 1,514 Bank interest 66 188 68 Other charges 12,049 16,458 1,577 TOTAL EXPENSES 464,048 678,264 69,820 NET LOSS FROM INVESTMENTS (305,774) (463,875) (64,042) Net realised profit / (loss) on sale of investments (2) 659,291 1,597,392 264,781 Net realised profit / (loss) on forward foreign exchange (2) - (34,418) - Net realised loss on foreign exchange (2) (70,281) (18,602) (670) NET REALISED PROFIT 283,236 1,080,497 200,069 Change in net unrealised appreciation / (depreciation) on: - investments 3,809,908 3,066,186 (32,380) - forward foreign exchange contracts - (23,094) - NET INCREASE IN NET ASSETS AS A RESULT OF OPERATIONS 4,093,144 4,123,589 167,689 EVOLUTION OF THE CAPITAL Issue of shares 1,466,884 1,563,594 63,826 Redemption of shares (5,056,917) (11,828,902) (5,693,216) Currency translation - - - NET ASSETS AT THE END OF THE YEAR 32,117,503 43,447,803 - * Liquidated on July 23, 2012. The accompanying notes form an integral part of these financial statements. 16
Statement of Operations and Changes in Net Assets for the year ended December 31, 2012 (continued) INSINGER DE BEAUFORT MANAGER SELECTION SICAV Total Multi-Manager Defensive Balanced Note EUR USD NET ASSETS AT THE BEGINNING OF THE YEAR 31,017,742 152,317,569 INCOME Dividends, net (2) 84,836 611,109 Bank interest (2) 17 22 TOTAL INCOME 84,853 611,131 EXPENSES Management fee (5) 288,288 1,443,589 Depositary bank commission (8) 17,241 113,295 Domiciliation, administration and transfer agent fees (8) 63,289 312,116 Audit fees, printing and publishing expenses 20,022 125,788 Liquidation fees - 15,961 Taxe d'abonnement (6) 4,244 37,383 Bank charges 9,148 41,267 Bank interest 867 1,568 Other charges 10,302 53,273 TOTAL EXPENSES 413,401 2,144,240 NET LOSS FROM INVESTMENTS (328,548) (1,533,109) Net realised profit / (loss) on sale of investments (2) 1,181,437 4,884,497 Net realised profit / (loss) on forward foreign exchange (2) - (45,401) Net realised loss on foreign exchange (2) (16,526) (139,929) NET REALISED PROFIT 836,363 3,166,058 Change in net unrealised appreciation / (depreciation) on: - investments 1,311,412 10,757,427 - forward foreign exchange contracts - (30,463) NET INCREASE IN NET ASSETS AS A RESULT OF OPERATIONS 2,147,775 13,893,022 EVOLUTION OF THE CAPITAL Issue of shares 1,421,047 5,956,199 Redemption of shares (9,205,852) (41,927,444) Currency translation - 2,918,547 NET ASSETS AT THE END OF THE YEAR 25,380,712 133,157,893 17 The accompanying notes form an integral part of these financial statements.
Changes in the Number of Shares for the year ended December 31, 2012 Multi-Manager Equity Multi-Manager Balanced Multi-Manager Defensive* Multi-Manager Defensive Balanced USD Share Class Number of shares outstanding at the beginning of the year - 33,114.95 - - Number of shares issued - 850.96 - - Number of shares redeemed - (4,192.70) - - Number of shares outstanding at the end of the year - 29,773.21 - - GBP Share Class Number of shares outstanding at the beginning of the year - 6,048.74 - - Number of shares issued - 11.75 - - Number of shares redeemed - (289.02) - - Number of shares outstanding at the end of the year - 5,771.47 - - EUR Share Class Number of shares outstanding at the beginning of the year 462,233.10 549,751.75 55,506.68 311,776.27 Number of shares issued 19,656.39 16,670.50 636.19 13,632.62 Number of shares redeemed (68,067.61) (128,353.23) (56,142.87) (88,418.70) Number of shares outstanding at the end of the year 413,821.88 438,069.02-236,990.19 Statistics Multi-Manager Equity Multi-Manager Balanced Multi-Manager Defensive* Multi-Manager Defensive Balanced EUR EUR EUR EUR Total Net Asset Value December 31, 2012 32,117,503 43,447,803-25,380,712 December 31, 2011 31,614,392 49,589,522 5,461,701 31,017,742 December 31, 2010 57,141,827 ** 91,046,998 ** 8,143,950 46,396,254 Net asset value per share at the end of the year December 31, 2012 USD Share Class - 115.33 - - GBP Share Class - 105.41 - - EUR Share Class 77.61 91.54-107.10 December 31, 2011 USD Share Class - 104.89 - - GBP Share Class - 98.05 - - EUR Share Class 68.39 84.04 98.40 99.49 December 31, 2010 USD Share Class 106.39 113.06 - - GBP Share Class - 105.29 - - EUR Share Class 74.40 88.95 99.77 102.64 * Liquidated on July 23, 2012. ** Amounts expressed in USD. On January 7, 2011, the base currency of this Sub-Fund switched from USD to EUR. 18
Multi-Manager Equity Schedule of Investments as at December 31, 2012 (Expressed in EUR) Description Quantity Currency Average Cost Fair Value % net assets Transferable securities admitted to an official stock exchange listing Investments Funds Equities - Asia Ex Japan First State Investments Icvc - Asia Pacific Fund - Class A 73,966 GBP 556,002 705,271 2.20 First State Investments Icvc - Asia Pacific Leaders Fund - Class A 252,214 GBP 985,555 1,239,428 3.86 1,541,557 1,944,699 6.06 Equities - Emerging Market Aberd.Glob./Emerg.Mark-A2-/Cap 17,563 USD 817,812 918,341 2.86 817,812 918,341 2.86 Equities - Europe Aberdeen Global Apac Eq-e2-acc 129,119 EUR 1,208,861 1,346,484 4.19 First State Emg Ldr EUR-A-AC 641,512 EUR 1,100,000 1,181,985 3.68 Insinger De Beaufort Equity Income Fund - Class D* 122,732 EUR 4,833,858 5,100,742 15.88 Insinger De Beaufort European Mid Cap /Dis * 51,283 EUR 1,402,157 1,569,260 4.89 Jo Hambro Capital Management Umbrella Fund Plc - Continental European Fund 2,431,736 EUR 4,321,774 5,216,074 16.24 Odey Investment Fund Plc - Pan European Fund 8,522 EUR 1,567,017 2,020,535 6.29 UBS(L) Eq USA Growth -P-USD/Cap 107,553 USD 1,232,664 1,397,515 4.35 15,666,331 17,832,595 55.52 Equities - US Axa Rosenberg Equity Alpha Trust - US Equity Alpha Fund - Class B 183,353 USD 1,590,630 1,670,765 5.20 Wellington Management Portfolios Luxembourg - US Equity Research B 50,986 USD 1,268,340 1,593,242 4.96 2,858,970 3,264,007 10.16 Total - Investments Funds 20,884,670 23,959,642 74.60 Total - Transferable securities admitted to an official stock exchange listing 20,884,670 23,959,642 74.60 Other transferable securities Investments Funds Equities - Europe Cambrian Europe / Eur S1 12/06 22,691 EUR 2,316,526 2,095,077 6.52 2,316,526 2,095,077 6.52 Equities - US Cambrian Fd Ltd Class -A- S.1A 1,959 USD 1,119,077 1,208,477 3.76 Cambrian Fund Ltd - Class A Series 1 4,985 USD 2,170,230 3,219,985 10.03 3,289,307 4,428,462 13.79 * Related party funds 19 The accompanying notes form an integral part of these financial statements.
Multi-Manager Equity Schedule of Investments (continued) as at December 31, 2012 (Expressed in EUR) Description Quantity Currency Average Cost Fair Value % net assets Ireland Om Acad Em USD-I-Ac 93,353 USD 962,316 999,278 3.11 962,316 999,278 3.11 Total - Investments Funds 6,568,149 7,522,817 23.42 Total - Other transferable securities 6,568,149 7,522,817 23.42 Total Investment Portfolio 27,452,819 31,482,459 98.02 The accompanying notes form an integral part of these financial statements. 20