Seligman Time Horizon Matrix is an investment process for retirement plan participants seeking to build wealth and manage risk over time. The Matrix provides you with a strategic asset allocation plan for growing your retirement nest egg, distinguished by a focus on specific goals and time frames. Because the risk involved with different types of investments changes over different holding periods, asset allocations within the Matrix are based primarily on the amount of time you have to reach a specific financial goal, such as retirement.
MODEL PORTFOLIOS
Within Time Horizon Matrix, there are 31 Horizon Model Portfolios, each containing a mix of asset classes risk-adjusted for a specific investment time horizon, from 30 years to one year, and including a Harvester Model Portfolio for investors who need to withdraw money from accumulated assets.
To facilitate implementation of the Matrix, each Model Portfolio is composed of a mix of mutual funds. To view the fund mix in your retirement plan’s Matrix, please refer to the brochure you received at enrollment.
MIGRATION
The Matrix includes a method for adjusting your asset mix over time — a process we call migration — so that your portfolio reflects your changing investment needs as your retirement goal approaches. With each annual migration, portfolio weightings are shifted to historically less volatile asset classes. For example, a participant who is 20 years away from retirement today may select the Horizon 20 Model Portfolio. Next year, the account would be migrated to the Horizon 19 Model Portfolio, reflecting the shorter investment time horizon. The migration process continues over time, seeking to reduce portfolio volatility each year as retirement approaches.
For Seligman Growth Retirement Plans, participation in Time Horizon Matrix includes an automatic migration option. During the fall of each year, you and your financial advisor will be notified in writing of the pending migration. The notice will include the fund allocations in the next Horizon Model Portfolio. During the first week of January of the following year, the necessary exchanges among the funds in your account will be made to reflect the migration.
Each year your account will be automatically migrated unless you notify the plan administrator that you do not want to migrate that year. If you choose not to migrate but still want to remain in the Time Horizon Matrix program, your account will be rebalanced to conform to your current Model Portfolio and contributions will continue to be made according to the same Model Portfolio.
Of course, you can withdraw from Time Horizon Matrix at any time by changing your current or future investment elections, using your plan’s toll-free telephone number or website. Likewise, you can re-enter the Matrix at any time.
ONGOING RESEARCH BEHIND THE MATRIX
Seligman developed Time Horizon Matrix through extensive proprietary research, which examined the historical performance of asset classes over various time periods. In performing this research, Seligman selected certain unmanaged indices as approximations for the respective asset classes. In some cases, indices were not available for the entire period examined, so estimates were used. (See Description of Asset Classes for details) Although past performance of asset classes is not a guarantee of future results, Seligman believes that a sophisticated analysis of historical performance can provide guidelines that help investors make prudent investment decisions with the assistance of their financial advisor.
Seligman periodically analyzes the Matrix to ensure that it reflects long term market patterns and historical trends. Each new year of market data is reviewed to determine its effect on the long-term relative risk of different asset classes over different holding periods.
From time to time, this research will lead Seligman to reevaluate asset allocation strategies and, in turn, change the Horizon Model Portfolios. When Seligman changes the asset class mix of the Model Portfolios, the allocations to the individual mutual funds in your plan’s Model Portfolios will automatically change as well. Participants in the Matrix will be notified of any adjustments to the Model Portfolios prior to the exchanges being made among the funds in their plan accounts to conform to the revised Model Portfolio.
Please keep in mind that diversification does not assure a profit or protect against loss in a declining market.
DESCRIPTION OF ASSET CLASSES
US Small-Company Stocks: 1979 – 2006: Russell 2000; 1950 – 1978: Ibbotson Small Stock Index.
US Medium-Company Stocks: 1979 – 2006: Russell MidCap Index; 1950 – 1978: Estimated as the midpoint between the total return for the Ibbotson Small Stock Index and the Standard & Poor’s 500 Composite Stock Index.
US Large-Company Stocks: Standard & Poor’s 500 Composite Stock Index (S&P 500).
International Small-Company Stocks: 1990 – 2006: Citigroup EMI World ex. US; 1986 – 1989: NatWest Securities Ltd. (NWSL) global ex. U.S. Smaller Companies Index; 1970 – 1985: Estimated as the difference between the Morgan Stanley Capital International (MSCI) Europe Australasia and Far East (EAFE) Index and the S&P 500, added to the Ibbotson Small Stock Index; 1950 – 1969: Estimated as the Ibbotson Small Stock Index.
Emerging Markets: 1988 – 2006: MSCI Emerging Markets Free Index; 1985 – 1987: IFC Global Emerging Composite; 1970 – 1984: Estimated as the difference between the MSCI EAFE Index and the S&P 500, added to the Ibbotson Small Stock Index; 1950 – 1969: Estimated as the Ibbotson Small Stock Index.
International Large-Company Stocks: 1970 – 2006: MSCI EAFE Index 1950 – 1969: Estimated as the Standard & Poor’s 500 Composite Stock Index. Estimated as the S&P 500.
Real Estate: 1972-2005: FTSE-NAREIT Equity REIT Index; 1950-1971: Estimated through regression analysis.
Investment Grade Fixed Income: 1973 – 2006: Lehman Brothers Government/Credit Bond Index; 1969 – 1972: Estimated as the Citigroup Long-Term High Grade Corporate Bond Total Return Index; 1950 – 1968: Ibbotson Long-Term Corporate Bonds estimate.
High-Yield Corporate Bonds: 1989 – 2006: Citigroup High Yield Market Index; 1981 – 1988: Credit Suisse First Boston High Yield Index II; 1969 – 1980: Estimated as the Citigroup Long-Term High Grade Corporate Bond Total Return Index; 1950 – 1968: Ibbotson Long-Term Corporate Bonds estimate.
US Government Bonds: 1973 – 2006: Lehman Government Bond Index; 1950 – 1972: Ibbotson Long-Term Government Bond Index. (To the greatest extent possible, each year, a one-bond portfolio with a term of approximately 20 years and a reasonably current coupon, and whose returns did not reflect potential tax benefits, impaired negotiability, or special redemption or call privileges, was used by Ibbotson.)
Inflation: 1978 – 2006: Consumer Price Index for All Urban Consumers; 1950 – 1977: Consumer Price Index.
Seligman Time Horizon Matrix is an asset allocation framework developed to help investors seek their specific financial goals. The Matrix is designed to give investors an appropriate asset class mix for investment portfolios, based on their time frame for achieving specific goals. Seligman Harvester is a process designed to help investors maximize their income stream while seeking to conserve capital. The program involves determining “needs” and “wants” as a percentage of total investable assets, and guides investors through a strategy of income withdrawal and asset allocation specifically designed to lower the risk of depleting their accumulated wealth too quickly.
Seligman Time Horizon Matrix and Seligman Harvester are prepared using past performance of asset classes to construct model portfolios. Those model portfolios have inherent limitations in that they assume the future performance of the asset classes will, over the relevant periods, correlate to their past performance, and of course, past performance is no guarantee of future performance. Furthermore, with regard to using the Seligman Group of Funds or other funds of any other investment manager in seeking to follow Seligman Time Horizon Matrix or Seligman Harvester, there is no assurance that the funds selected will actually correlate to the asset allocations that the investor is seeking to track, and the performance of the funds selected may differ from the performance of those asset classes. The specific portfolio recommendations are updated annually to incorporate the latest year’s results into the analysis. Although the annual adjustments are usually modest, if the relative performance among the various asset classes in any single year significantly changes the long-term historical patterns, the revisions to Seligman Time Horizon Matrix or Seligman Harvester could be significant.
The stocks of smaller companies may be subject to above-average market price fluctuations. Portfolios with fewer holdings, such as Seligman Smaller-Cap Value Fund* and Seligman Large-Cap Value Fund, may be subject to greater volatility than a portfolio with a greater number of holdings. The products of technology companies may be subject to severe competition and rapid obsolescence, and technology stocks may be subject to greater price fluctuations, government regulation, and limited liquidity as compared to other investments. In addition, investments in one economic sector, such as technology, may result in greater price fluctuations than owning a portfolio of diversified investments. There are specific risks associated with global investing, such as currency fluctuation, foreign taxation, differences in financial reporting practices, and rapid changes in political and economic conditions. Because of the special risks involved within vesting in securities of emerging market companies, an investment in Seligman Emerging Markets Fund should be considered speculative and not appropriate for individuals who require safety of principal or stable income from their investments. Real estate investments may be subject to specific risks, such as risks to general and local economic conditions, and risks related to individual properties. Investing in one economic sector, such as real estate, may result in greater price fluctuations than owning a portfolio of diversified investments. Seligman LaSalle Monthly Dividend Real Estate Fund is a "non-diversified" mutual fund and thus may hold fewer securities than other funds. A decline in the value of those investments would cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio. Fixed-income securities are subject to interest-rate risk, credit risk, prepayment risk, and market risk. High-yield bonds are subject to greater risk of loss of principal and interest than high-rated, investment-grade fixed-income securities. Seligman U.S. Government Securities Fund may invest in securities that are not guaranteed by the US government. Such securities have increased credit risk including, but not limited to, the risk of non-payment of principal or interest. The Fund may also own US government securities that are guaranteed by the US government and, if held to maturity, such bonds offer both a fixed rate of return and fixed principal value. An investment in Seligman Investment Grade Fixed Income Fund or Seligman U.S. Government Securities Fund is not insured or guaranteed by the US Government.
The Seligman Cash Management Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although Seligman Cash Management Fund seeks to preserve its per share net asset value at $1.00, it is possible to lose money by investing in the Fund.
Shares of the Funds are not deposits or obligations of, or guaranteed or endorsed by, any bank. Shares are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. In addition, an investment in the Funds involves investment risks, including the possible loss of principal. The rate of return will vary and the principal value of an investment will fluctuate. Shares, if redeemed, may be worth more or less than their original cost.
* Effective January 1, 2005, the name of the Fund was changed from Seligman Small-Cap Value Fund to Seligman Smaller-Cap Value Fund. As of January 1, 2005, 80% of the Fund's net assets are generally invested in value companies with market capitalizations of $3 billion or less.