e11vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 11-K
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Annual Report pursuant to Section 15(d) of The Securities Exchange Act of 1934.
For the fiscal year ended December 31, 2005. |
or
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Transition Report pursuant to Section 15(d) of The Securities Exchange Act of 1934.
For the transition period from ______________ to _________. |
Commission file number 1-02658
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Full title of the plan and the address of the plan, if different from that of the issuer named below: |
Stewart Salary Deferral Plan
1980 Post Oak Blvd
Houston, TX 77056-3899
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Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
Stewart Information Services Corporation
(a Delaware Corporation)
74-1677330
1980 Post Oak Blvd
Houston, Texas 77056-3899
Telephone Number — Area Code (713) 625-8100
Required Information
The following financial statements prepared in accordance with the financial reporting
requirements of the Employee Retirement Income Security Act of 1974, signature and exhibits are
filed for the Stewart Salary Deferral Plan:
Financial Statements and Supplemental Schedule
Report of Independent Registered Public Accounting Firm
Statements of Net Assets Available for Benefits — December 31, 2005 and 2004
Statement of Changes in Net Assets Available for Benefits — Year ended December 31, 2005
Notes to Financial Statements — December 31, 2005 and 2004
Supplemental Schedule H, Line 4i — Schedule of Assets (Held at End of Year) — December 31, 2005
Signature
Exhibit
Consent of Mir•Fox & Rodriguez, P.C. (Exhibit 23.1)
STEWART SALARY DEFERRAL PLAN
Table of Contents
Schedules not listed above are omitted because of the absence of conditions under which they are
required under the Department of Labor’s Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974.
Report of Independent Registered Public Accounting Firm
To the Administrative Committee
Stewart Salary Deferral Plan:
We have audited the accompanying statements of net assets available for benefits of the
Stewart Salary Deferral Plan (the “Plan”) as of December 31, 2005 and 2004, and the related
statement of changes in net assets available for benefits for the year ended December 31, 2005.
These financial statements are the responsibility of the Plan’s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s
internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31, 2005 and 2004, and
the changes in its net assets available for benefits for the year ended December 31, 2005, in
conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule H, line 4i — schedule of assets (held at end
of year) as of December 31, 2005, is presented for the purpose
of additional analysis and is not a
required part of the basic financial statements but is supplementary information required by the
Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the
Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a whole.
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/s/ Mir•Fox & Rodríguez, P.C.
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Houston, Texas
June 23, 2006
1
STEWART SALARY DEFERRAL PLAN
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
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2005 |
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2004 |
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ASSETS: |
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Investments, at fair value |
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$ |
197,124,526 |
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$ |
161,802,619 |
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Noninterest-bearing cash |
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47,732 |
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Receivables - |
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Company contributions, net of forfeitures |
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119,880 |
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— |
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Plan participants’ contributions |
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752,246 |
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— |
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Plan participants’ loan repayments |
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78,420 |
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— |
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Accrued income on investments |
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680,500 |
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— |
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Total receivables |
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1,631,046 |
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— |
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Total assets |
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198,803,304 |
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161,802,619 |
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LIABILITIES: |
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Securities purchases payable |
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944,293 |
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Excess contribution refunds |
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300,488 |
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100,058 |
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Total liabilities |
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1,244,781 |
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100,058 |
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Total net assets available for benefits |
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$ |
197,558,523 |
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$ |
161,692,561 |
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See accompanying notes to financial statements.
2
STEWART SALARY DEFERRAL PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2005
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ADDITIONS TO NET ASSETS: |
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Contributions- |
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Company, net of forfeitures |
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$ |
7,582,394 |
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Plan participants |
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22,109,384 |
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Rollovers |
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4,001,339 |
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Total contributions |
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33,693,117 |
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Net investment income- |
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Dividends and capital gains |
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4,457,934 |
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Interest |
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1,099,906 |
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Net appreciation of investments |
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6,991,502 |
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Total net investment income |
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12,549,342 |
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Total additions to net assets |
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46,242,459 |
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DEDUCTIONS FROM NET ASSETS: |
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Benefits paid to participants |
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9,567,126 |
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Excess contribution refunds |
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300,488 |
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Transfers from the Plan |
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461,896 |
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Administrative expenses |
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46,987 |
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Total deductions from net assets |
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10,376,497 |
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Net increase in net assets available for benefits |
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35,865,962 |
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NET ASSETS AVAILABLE FOR BENEFITS: |
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Beginning of year |
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161,692,561 |
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End of year |
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$ |
197,558,523 |
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See accompanying notes to financial statements.
3
STEWART SALARY DEFERRAL PLAN
Notes to Financial Statements
December 31, 2005 and 2004
(1) DESCRIPTION OF THE PLAN
The Stewart Salary Deferral Plan (the “Plan”) is a defined contribution plan adopted effective
January 1, 1986 and sponsored by Stewart Title Guaranty Company (“STG”). STG is a wholly owned
subsidiary of Stewart Information Services Corporation (“SISCO”). The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”) .
The Plan is administered by STG (the “Plan Administrator”) and Wells Fargo Bank of Texas,
N.A., the Plan’s trustee and record keeper (“Wells Fargo”). An administrative committee of
executives (the “Administrative Committee”) has been appointed by the Board of Directors of STG to
assist with the responsibility for overseeing the operation of the Plan, including the monitoring
of Wells Fargo.
The summary of significant provisions of the Plan presented below provides general information.
Participants should refer to the Plan agreement for a more complete description of the Plan’s
provisions.
(a) Employee Participation
The Plan is made available to eligible employees of STG and its affiliates (collectively the
“Company”). All employees who have completed ninety days (90) of service and work a minimum
number of hours, as defined by the Plan, are eligible to participate in the Plan.
(b) Contributions
Plan participants may defer up to fifty percent (50%) of considered compensation into the
Plan, subject to certain limitations under the Internal Revenue Code (the “IRC”). Highly
compensated participants may be required to reduce the amount of “pretax” contributions in order to
permit the Plan to satisfy the nondiscrimination requirements of Section 401(k) of the IRC. As of
December 31, 2005 and 2004, excess contribution refunds were due to Plan participants in the amount
of $300,488 and $100,058, respectively.
Participants who are age 50 or older before the close of the Plan year may elect to make a
catch-up contribution, subject to certain limitations under the IRC.
The Company’s matching contribution is currently equal to fifty cents for each one dollar of
considered compensation contributed (other than catch-up contributions) up to a maximum of six
percent (6%) of each participant’s considered compensation, subject to a maximum defined by the
Plan. The Company may utilize available forfeitures to offset matching contributions to the Plan.
The Plan recorded $5,730,559 for matching contributions, net of forfeitures of $330,608, during
2005.
The Plan allows for a Company discretionary contribution as determined annually by STG’s Board of
Directors. The discretionary contribution, if any, is determined quarterly and allocated equally
to all eligible participants quarterly, in accordance with the Plan’s provisions.
STEWART SALARY AND DEFERRAL PLAN
Notes to Financial Statements
December 31, 2005 and 2004
The Company may utilize available forfeitures to offset discretionary contributions to the Plan.
The Plan recorded $1,851,835 for discretionary contributions, net of forfeitures of $22,152 during
2005.
Employees are permitted to rollover pre-tax amounts with earnings held in other qualified plans or
conduit individual retirement accounts (IRAs) into the Plan, as specified in the Plan document.
(c) Participant Accounts
Each participant’s account is credited with the elected deferral amount, the Company’s
employer matching contribution, a Company discretionary contribution, if any, and an allocation of
Plan earnings. Net investment income (loss) is allocated to participants’ accounts daily based on
the proportion that each participant’s account balance bears to the participant account balances in
each investment fund.
(d) Investment Options
Employees may elect to have their contributions allocated among various investment options
offered by the Plan. The Plan currently offers fourteen mutual funds, one common collective trust
fund, and the SISCO Stock Fund as investment options for participants. Certain limitations apply
under the Plan.
The SISCO Stock Fund is invested primarily in SISCO common stock. The remaining portion of the fund
is invested in the Wells Fargo Short Term Investment Fund G, a common collective trust fund, which
is not available for investment allocation. Wells Fargo is entitled to exercise voting rights
attributable to SISCO common stock allocated to accounts of participants and beneficiaries in
accordance with the Plan.
(e) Vesting and Payment of Benefits
Participants in the Plan prior to January 1, 1989, are eligible to receive payment of the total
account balance upon normal retirement at age sixty-five (65), death, disability or other
termination of employment.
Participants in the Plan on or after January 1, 1989 are eligible to receive payment of the total
account balance upon normal retirement at age sixty-five (65), death or disability. Upon other
termination of employment, participants are eligible to receive payment of the total account
balance if they have completed three (3) years of service. Participants who have completed less
than three (3) years of service are eligible to receive payment of all employee contributions, but
forfeit Company matching and discretionary contributions and related earnings on such
contributions.
Forfeited amounts may be used to reduce future Company matching or discretionary contributions, to
pay administrative expenses of the Plan, or to reinstate former participant balances. During 2005,
available forfeitures in the amount of $352,760 were utilized to reduce Company contributions.
Distributions may be paid in a lump sum or in installments subject to the provisions of the Plan.
Direct rollovers from the Plan to an IRA or other qualified plan are permitted.
STEWART SALARY DEFERRAL PLAN
Notes to Financial Statements
December 31, 2005 and 2004
There were no amounts allocated to withdrawing participants for amounts that have been processed
and approved for payment prior to December 31, 2005 and 2004, but not yet paid as of that date.
(f) Participant Loans
A participant may borrow a minimum of $1,000 up to a maximum amount equal to the lessor of $50,000
or fifty percent (50%) of the vested account balance, subject to the Plan’s provisions. The terms
of the loan include interest at a commercially reasonable rate similar to the prime interest rate,
as set quarterly by the Administrative Committee.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Accounting
The accompanying financial statements are prepared using the accrual basis of accounting,
except for the cash basis recording of benefits paid to participants. Loan administration fees and
redemption fees are paid from Plan assets. Plan expenses not paid from Plan assets are paid by the
Company.
(b) Investment Valuation and Income
Investments in mutual funds and common stock are stated at fair value as determined by quoted
market price. Common collective trust funds are stated at the fair value of the underlying
securities. Participant loans are valued at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest is recorded as
earned and dividend and capital gain income is recorded on the ex-dividend date.
Realized gains (losses) on investments sold during the year and unrealized appreciation
(depreciation) of investments held at year end are calculated using the historical cost method and
are combined and presented as net appreciation of investments in the statement of changes in net
assets available for Plan benefits.
(c) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from those estimates.
STEWART SALARY DEFERRAL PLAN
Notes to Financial Statements
December 31, 2005 and 2004
(d) Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to
various risks, such as interest rate, credit and overall market volatility. Due to the level of
risk associated with certain investment securities, it is at least reasonably possible that changes
in the value of investment securities will occur in the near term.
(3) INVESTMENTS
At December 31, 2005 and 2004, all investments of the Plan were participant-directed. The following
table presents the Plan investments which exceed 5% of the Plan’s net assets at year end:
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2005 |
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2004 |
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Wells Fargo Bond Index Fund N |
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$ |
15,242,311 |
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$ |
13,950,542 |
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Wells Fargo Advantage Treasury Plus Money Market Fund — Service Class |
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20,931,946 |
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18,027,704 |
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Wells Fargo Advantage Asset Allocation Fund — Admin Class |
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23,145,107 |
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21,147,093 |
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Wells Fargo Advantage Index Fund — Admin Class |
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42,794,859 |
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40,351,314 |
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Dodge & Cox Stock Fund |
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19,361,278 |
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12,467,605 |
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Dreyfus Small Cap Stock Index Fund |
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11,589,445 |
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9,587,189 |
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Fidelity Advisor Diversified International Fund — Class A |
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15,738,193 |
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10,727,546 |
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Stewart Information Services Corporation Common Stock |
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11,800,139 |
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8,549,488 |
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The following table presents net appreciation of investments for the year ended December 31, 2005
by investment type:
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Mutual funds |
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$ |
5,355,700 |
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Common collective trust funds |
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6,741 |
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Common stock |
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1,629,061 |
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Total net appreciation of investments |
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$ |
6,991,502 |
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STEWART SALARY DEFERRAL PLAN
Notes to Financial Statements
December 31, 2005 and 2004
(4) RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds and common collective trust funds managed
by Wells Fargo. Wells Fargo is the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions. Fees paid by the Plan to Wells Fargo for
loan administration services and redemption fees totaled $46,987 for the year ended December 31,
2005.
Certain Plan investments are shares of SISCO common stock, and therefore, these transactions
qualify as party-in-interest transactions.
These transactions are covered by an exemption from the prohibited transaction provisions of ERISA
and the IRC.
(5) PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan Administrator has the right under the
Plan to discontinue contributions at any time and to terminate the Plan subject to the provisions
of ERISA. In the event of Plan termination, the net assets would be allocated among the
participants and beneficiaries of the Plan in accordance with the provisions of the Plan.
(6) TAX STATUS
The Plan received its latest favorable determination letter dated July 24, 2002, in which the
Internal Revenue Service stated that the Plan, as then designed, was in compliance with the
applicable requirements of the IRC. Although the Plan has been amended since receiving the
determination letter, the Plan Administrator and the Plan’s tax counsel believe that the Plan is
designed and is currently being operated in compliance with the applicable requirements of the IRC.
Therefore, no provision for income taxes has been included in the Plan’s financial statements.
(7) TRANSFERS FROM THE PLAN
STG sold its controlling interest in Stewart Title of Tucson (ST of Tucson) to Stewart Title &
Trust of Phoenix, Inc. (ST of Phoenix) during 2004. In connection with the sale, the affected ST
of Tucson employees became eligible to participate in the ST of Phoenix Retirement Plan.
Accordingly, the Administrative Committee gave consent for the direct trustee-to-trustee transfer
of participant balances of $461,896 in February 2005 from the Plan to the ST of Phoenix Retirement
Plan.
STEWART SALARY DEFERRAL PLAN
Schedule H, Line 4i — Schedule of Assets (Held at End of Year)
December 31, 2005
Plan Sponsor Number: 74-0924290
Plan Number: 002
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(b) |
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(d) |
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(e) |
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Identity of issuer, |
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Description of investment including maturity |
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borrower, lessor, or |
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date, rate of interest, collateral, par or |
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Current |
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similar party |
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maturity value |
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Cost |
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value |
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Wells Fargo Bank of Texas, N.A. |
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Bond Index Fund N |
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** |
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$ |
15,242,311 |
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* |
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Wells Fargo Bank of Texas, N.A. |
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Advantage Treasury Plus Money Market Fund — Service Class |
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** |
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20,931,946 |
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* |
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Wells Fargo Bank of Texas, N.A. |
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Advantage Asset Allocation Fund — Admin Class |
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** |
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23,145,107 |
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* |
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Wells Fargo Bank of Texas, N.A. |
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Advantage Index Fund — Admin Class |
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** |
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42,794,859 |
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Wells Fargo Bank of Texas, N.A. |
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Advantage Outlook 2010 Fund — Admin Class |
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** |
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3,757,848 |
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Wells Fargo Bank of Texas, N.A. |
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Advantage Outlook 2020 Fund — Admin Class |
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** |
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4,640,640 |
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* |
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Wells Fargo Bank of Texas, N.A. |
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Advantage Outlook 2030 Fund — Admin Class |
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** |
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3,130,315 |
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Wells Fargo Bank of Texas, N.A. |
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Advantage Outlook 2040 Fund — Admin Class |
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** |
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2,643,743 |
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AIM Distributors, Inc. |
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Small Cap Growth Fund — Class A |
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** |
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3,067,496 |
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Dodge & Cox |
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Stock Fund |
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** |
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19,361,278 |
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Dreyfus Service Corp. |
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Small Cap Stock Index Fund |
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** |
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11,589,445 |
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Goldman, Sachs & Co. |
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Small Cap Value Fund |
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** |
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6,771,091 |
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Goldman, Sachs & Co. |
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Short Duration Government Fund — Class A |
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** |
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2,461,281 |
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Janus Distributors, LLC |
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Adviser Forty Fund — Class S (formerly Capital Appreciation Fund) |
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** |
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4,130,224 |
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Fidelity Management & Research Company |
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Advisor Diversified International Fund — Class A |
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** |
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15,738,193 |
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* |
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Stewart Information Services Corporation |
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Common Stock |
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** |
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11,800,139 |
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Wells Fargo Bank of Texas, N.A. |
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Short Term Investment Fund G |
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** |
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603,334 |
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* |
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Participant loans |
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Interest rates from 5.25% to 9.50% |
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— |
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5,315,276 |
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Total |
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$ |
197,124,526 |
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A party-in-interest as defined by ERISA.
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Cost information is not required as these assets are participant-directed. |
See accompanying report of independent registered public accounting firm.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Committee
of the Stewart Salary Deferral Plan has duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date:
June 23, 2006
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By:
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/s/ Nita Hanks |
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Nita Hanks, Chairperson — Administrative |
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Committee of the Stewart Salary Deferral Plan and |
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Senior Vice President — Employee Services |
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Exhibit Index
Consent of Mir•Fox & Rodríguez, P.C. (Exhibit 23.1)