Transcript No Slide Title

The Reed Elsevier
US Salary Investment Plan (SIP)
SIP Plan Highlights
• Eligible after 3 months
• Before-Tax and After-Tax Savings
• Maximum contribution 20%*
• 50% Company Match on the first 6% of Before-Tax and After-Tax
Contributions taken from your pay.
• One year vesting on company matching contributions
• Eligible employees will be automatically enrolled in plan at a 2%
Before-tax contribution rate which will be invested in the YES
fund.
• Loans/Withdrawals (3 loans available)
* HCEs are limited to 10% before tax; 2% after tax
Investment Allocations
• Invest in 13 SIP Core Funds, 3 Core Asset Allocation Funds,
the Advice Account and a Self-Managed Brokerage Account
• Invest in 1% increments (for a total of 100%)
• Change investment increments at any time by calling the
Reed Elsevier Information Line:
(1-800-448-5189)
or through the web site at:
http://resip.csplans.com
Automated Phone System and
Internet Website
• Access daily information on accounts
• Transfer money among funds; change contribution percentages and
investment elections
• Initiate and model a loan or distribution
• Review fund performance
• Review interactive calculators
• Use the educational resource center
• Speak to a Participant Services Representative (Mon – Fri 9 – 5 ET)
Phone:1-800-448-5189
http://resip.csplans.com (new address)
SIP Website
http://resip.csplans.com
Which of the following could be considered 401(k)
investment mistakes?
a) Failure to contribute enough to receive the
maximum match
b) Borrowing from your 401(k)
c)Trying to time the market
d) all of the above
EGTRRA Related Changes
The Economic Growth and Tax Relief Reconciliation Act of 2001
(EGTRRA) is great news for 401(k) plans since it allows for more
flexibility in SIP.
Effective January 1, 2002, here are some of the EGTRRA related
changes to SIP:
• The before-tax contribution limit will increase to $11,000 per year.
• If you are age 50 or older by the calendar year end, you may
defer additional savings ($1,000 for 2002)
• Annual compensation recognized under SIP will increase to
$200,000 in 2002
EGTRRA Related Changes
• When you file your federal tax return, you may be able to take a
tax credit for a portion of the SIP contributions you make to the
plan.
• Hardship withdrawals taken after January 1, 2002 will result in a 6
month suspension from contributions, down from a 1 year
suspension.
• More restrictive loan regulations for loans taken after January 1,
2002.
Company Initiated Changes
• Automatic True up of matching Company Contributions – the
Company will deposit any missed Company-matching
contributions due to IRS limits on contributions
• If you are taking your PIP benefit as an annuity, you can roll
over your SIP distribution to PIP, where it will be combined with
your PIP annuity
Preserve Your Investments
With Cash Equivalents
• Savings vehicle that typically earns a fixed interest rate:
• Money market funds
• Treasury bills
• Savings account
• Commercial papers
• Certificates of deposit (CD)
• What’s the biggest risk?
• Inflation risk
Generate Income With Bonds
• Loan agreement between an investor
and issuer in which the issuer repays
the principal plus interest:
• Government bonds
• Corporate bonds
• Municipal bonds
• International bonds
• What are the biggest risks?
• Interest rate risk and credit risk
Grow Your Investment With Stocks
• Represents ownership in a company:
• Large company stocks
• Mid-sized company stocks
• Small company stocks
• International stocks
• What’s the biggest risk?
• Market risk
Best Performing Equity Markets in
the Past 10 Years
* In U.S. Dollars
2000
Denmark
1996
Spain
1999
Finland
1995
Switzerland
1998
Finland
1994
Finland
1997
Italy
1993-91
Hong Kong
Stocks, Bonds, Bills, and Inflation
1925-2000
$10,000
Small Company Stocks
$6,402
$2,587
Large Company Stocks
$1,000
Government Bonds
Treasury Bills
12.4%
11.0%
Ending Average
Wealth Return
Inflation
$100
$49
$17
$10
$10
$1
$0
1925
1935
1945
1955
1965
1975
1985
2000
Hypothetical value of $1 invested at year-end 1925. Assumes reinvestment of income and no transaction costs or taxes.
Past performance is no guarantee of future results. 3/1/2001. © 2001 Ibbotson Associates, Inc.
5.3%
3.8%
3.1%
Types of Strategies
Passive / Index Investing
• Attempts to mirror a broad-based index
• Generally low transaction and management
costs
VERSUS
Active Investing
• Managers actively pick securities
• Attempts to outperform an index / benchmark
• Usually subject to higher investment
management fees
Passive Investing
INDICES
An indicator of market performance
91- day T- bills
Money loaned for the short-term (91 days)
Lehman Brothers
Aggregate Bond Index (LBAG)
5,000 high quality bonds
Dow Jones Industrial Average (DJIA)
30 ‘bluechip’ stocks
Passive Investing
INDICES
An indicator of market performance
S&P 500 Index
500 large U.S. companies
Russell 2000 Index
2,000 small U.S. companies
Morgan Stanley Capital International
-Europe, Australia, Far East (MSCI-EAFE)
1,000 international companies
Active Investing
Value stock investing
Uses research models in an attempt to select
stocks that are currently undervalued with regard
to their market price and/or earnings potential.
Active Investing
Growth stock investing
Is not as focused on the price of the stock
today, but rather what the company is doing in
terms of new product development, cost
cutting measures, new divisions or expansion,
industry leadership, etc.
Types of Funds
Mutual Funds
• Participant recognition
• Listed in the newspaper
• Available to the general public
VERSUS
Institutional Funds
• Available to institutional clients
• Not listed in the newspaper
• Typically lower fees
Reed Elsevier SIP Fund Line-Up
More Investment Assistance
The Advice Account (5 Investment Funds)
3 Core Asset Allocation Funds
Core Investment Options
Self Managed
Brokerage Account
Less Investment Assistance
Core Investment Options
More Risk/Higher Potential Return
Reed International P.L.C. Stock Fund
Elsevier NV Stock Fund
Putnam OTC & Emerging Growth
SSgA Emerging Markets Fund
Putnam Voyager Fund
Janus Worldwide Fund
SSgA Russell 2000 Index
Dresdner RCM Large Cap Growth Fund
Templeton Foreign Fund
SSgA S&P 500 Index Fund
American Funds Fundamental Investors Fund
SSgA Aggressive Asset Allocation Fund
SSgA Moderate Asset Allocation Fund
SSgA Conservative Asset Allocation Fund
SSgA Bond Market Index Fund
SSgA Yield-Enhanced Short-Term Investment Fund (YES)
Less Risk/Lower Potential Return
SSgA Yield Enhanced Short-Term
Investment Fund (YES)
Objective:
Seeks to match or exceed returns of the Money Fund
Report for money market fund mutual funds characterized
as “Tier One.”
Strategy:
Invests in high-quality money market securities and other
short-term debt instruments such as corporate and
government securities.
Performance (as of 12/31/01):
YTD
1 Year 3 Years* 5 Years*
SSgA Yield-Enhanced
4.20
4.20
5.19
5.22
Money Market Tier I
3.55
3.55
4.64
4.78
SSgA Bond Market Index Fund
Objective:
Seeks to match the returns of the Lehman Brothers
Aggregate Bond Index.
Strategy:
Invests primarily in government, corporate, mortgagebacked and asset-backed securities.
Performance (as of 12/31/01):
YTD
SSgA Bond Market
Index Fund
Lehman Brothers
Aggregate Bond Index
1 Year 3 Years* 5 Years*
8.29
8.29
6.17
7.35
8.44
8.44
6.28
7.43
SSgA Conservative Asset Allocation
Fund
Objective:
Provide income from fixed income securities
and some growth of principal from stock funds.
Strategy:
This fund has an asset allocation target of 75% fixed
income securities, 15% large cap stock, 5% small/mid
cap stock, and 5% international stock.
You may want to consider this fund if:
You are comfortable with some market risk
You want stable income with controlled risk and some
long term growth
You have a medium term investment time frame
SSgA Moderate Asset Allocation
Fund
Objective:
Provide income from fixed income securities and
growth of principal from stock funds.
Strategy:
This fund has an asset allocation target of 45% fixed
income securities, 35% large cap stock, 10% small/mid
cap stock, and 10% international stock.
You may want to consider this fund if:
You are comfortable with moderate market risk
You want to achieve long-term growth and stable income
You have a medium to longer term investment time frame
SSgA Aggressive Asset Allocation
Fund
Objective:
The fund seeks to provide growth of principal from
stock funds and some income from fixed income
securities.
Strategy:
This fund has an asset allocation target of 15% fixed
income securities, 55% large cap stock, 15% small/mid
cap stock, and 15% international stock.
You may want to consider this fund if:
You are comfortable with more risk and greater
short term changes in market value
You want maximum growth potential
You have a longer term investment time frame
American Funds Fundamental
Investors Fund
Objective:
Seeks long-term growth of capital and income.
Strategy:
Invests in common stocks that appear to offer solid growth
potential at reasonable prices. The fund may also invest
significantly in non-U.S. securities.
Performance (as of 12/31/01):
American Funds
Fundamental Investors
Fund
Russell 1000 Value Index
YTD 1 Year 3 Years* 5 Years*
-9.55 -9.55
5.52
11.68
-5.59
-5.59
2.74
11.13
SSgA S&P 500 Index Fund
Objective:
Seeks to match the performance of the Standard & Poor’s
500 Index.
Strategy:
Invests in all 500 stocks in the S&P 500 Index in proportion
to their weighting in the Index.
Performance (as of 12/31/01):
YTD 1 Year 3 Years* 5 Years*
SSgA S&P 500
Index Fund
-11.93 -11.93
-1.08
10.67
S&P 500 Index
-11.89 -11.89
-1.03
10.70
Templeton Foreign Fund
Objective:
Seeks long-term capital growth.
Strategy:
Invests primarily in stocks issued outside the U.S.,
including the emerging markets.
Performance (as of12/31/01):
YTD 1 Year 3 Years* 5 Years*
Templeton Foreign Fund
-7.92
-7.92
MSCI-EAFE Index
-21.44 -21.44
7.28
4.61
-5.05
0.89
Dresdner RCM Large Cap Growth
Fund
Objective:
Seeks long-term capital appreciation.
Strategy:
The fund invests in equity securities of U.S. companies
with at least 3 billion in market capitalization and focuses
on companies that it expects to have higher than average
rates of growth and strong potential for capital
appreciation.
Performance (as of 12/31/01):
YTD 1 Year 3 Years* 5 Years*
Dresdner RCM Large Cap -22.24 -22.24
0.83
14.21
Russell 1000 Growth Index -20.43 -20.43
-6.33
8.27
SSgA Russell 2000 Index Fund
Objective:
Seeks to match the performance of the Russell 2000 Index.
Strategy:
Invests in all 2,000 stocks in the Russell 2000 Index in
proportion to their weighting in the index.
Performance (as of 12/31/01):
YTD 1 Year 3 Years* 5 Years*
SSgA Russell 2000
Index Fund
2.26
2.26
6.08
7.32
Russell 2000 Index
2.49
2.49
6.42
7.52
Janus Worldwide Fund
Objective:
The fund seeks capital appreciation.
Strategy:
This fund invests primarily in a mix of foreign and
domestic companies, although it has generally invested a
majority of its assets abroad. Stocks are selected one at a
time, often with an emphasis on high-quality growth
franchises believed to be trading at reasonable prices.
Performance (as of 12/31/01):
YTD 1 Year 3 Years* 5 Years*
Janus Worldwide Fund
-22.88 -22.88
1.76
9.83
MSCI World Index
-16.82 -16.82
-3.37
5.37
Putnam Voyager Fund
Objective:
Seeks capital appreciation.
Strategy:
Invest primarily in stocks of large and midsize companies
across a wide range of industries, with a focus on growth
stocks. The fund targets companies with sales and profits
that Putnam believes are likely to grow faster than the
overall economy
Performance(as of 12/31/01):YTD 1 Year 3 Years* 5 Years*
Putnam Voyager Fund
-22.46 -22.46
0.25
9.51
Russell 1000 Growth
-20.43 -20.43
-6.33
8.27
SSgA Emerging Markets Fund
Objective:
Seeks capital appreciation.
Strategy:
Invests in stocks issued in various countries that have
developing or emerging economies.
Performance (as of 12/31/01):
YTD 1 Year 3 Years* 5 Years*
SSgA Emerging
Markets Fund
0.45
0.45
5.05
-2.45
IFC Investable Index
1.76
1.76
5.08
-5.05
Putnam OTC & Emerging Growth
Fund
Objective:
The fund seeks capital appreciation.
Strategy:
Invests primarily in common stocks of small to midsize
companies believed to have exceptionally strong growth
potential. The portfolio may include stocks that trade over-thecounter (OTC) as well as stocks of emerging growth companies
listed on securities exchanges
Performance(as of 12/31/01):YTD 1 Year 3 Years* 5 Years*
Putnam OTC & Emerging -46.09 -46.09 -15.84
-6.12
Growth Fund
Russell 2500 Growth
-10.83 -10.83 5.18
6.60
Reed International P.L.C. Stock Fund
Objective:
The Fund provides participants with an opportunity to share
in the investment performance of Reed International P.L.C.
Strategy:
The Fund is structured to provide the greatest level of
investment of participants’ contributions of Reed
International P.L.C. ADR, while holding a level of short-term
investments deemed appropriate by the investment manager
to meet the daily liquidity requirements of the fund.
Performance (as of 12/31/01): YTD 1 Year 3 Years* 5 Years*
-22.19 -22.19 3.17
-0.54
*Annualized
Elsevier NV Stock Fund
Objective:
The Fund provides participants with an opportunity to share
in the investment performance of Elsevier NV .
Strategy:
The Fund is structured to provide the greatest level of
investment of participants’ contributions of Elsevier NV
ADR, while holding a level of short-term investments
deemed appropriate by the investment manager to meet the
daily liquidity requirements of the fund.
Performance (as of 12/31/01):
YTD
1 Year
3 Years*
5 Years*
-19.78
-19.78
-4.92
-5.48
*Annualized
Self-Managed Account Option
A brokerage account window that allows you to
invest in individual stocks and bonds, as well as
a wide range of mutual funds
An alternative investment option within SIP
Individual Brokerage Account designed for the
knowledgeable investor
Allows a participant the opportunity to build a broader
portfolio through a wide array of investment choices
The Self-Managed Account is managed by State Street
Brokerage Services Inc.
Is the Advice Account Right for Me?
You can benefit from personalized
investment advice when:
You want to know how much to save for your future
You are not sure what your 401(k) account should be
invested in
You do not have time to keep tabs on your
401(k) plan investments
You are concerned about planning for your
financial future
Advice Account Financial Information
When you call, an Advisor will review the following
information with you:
Investment accounts designated for retirement
401(k) plan(s) and pension plan(s)
Social Security benefits available to you
An estimate from your company’s pension plan
An estimate of any other retirement income
The Advice Account Goal-Oriented
Approach
The Advice Account Financial Advisor:
Asks you a series of questions to build a personalized
profile of your financial resources and retirement goals
Explains the probability of reaching your goals
with your current savings and investment strategy
Recommends a personalized savings and investment
plan for your 401(k) to help you improve the likelihood
of reaching your goals
Consider two SIP investors, Jane and John. Jane starts
contributing at age 28 and socks away $2,000 a year for 7
consecutive years (a total of $14,000) . John, also 28, thinks
it's silly to begin saving for retirement at age 28. He starts at
age 33 and contributes $2,000 for 30 years ($60,000). Both
Jane and John earn an average return of 10 % per year. Who
has more at age 65?
a) Jane
b) John
c) Neither
d) Who cares? How'd they get that return?
Investing
$100/month
10% annual return*
Dollars in
thousand
s 150
$132,683
Jane
Starting now . . .
$226,049
Start Early
75
John
5 years later . . .
0
3 yrs
5 yrs
10 yrs 15 yrs 20 yrs 25 yrs 30 yrs
* Your returns may differ from the above mentioned 8%
Make the Most of Your 401(k)
EMPLOYEE A
Salary
EMPLOYEE B EMPLOYEE C
$25,000
$25,000
$25,000
Your deferral
4%
6%
8%
Company match
2%
3%
3%
Twice monthly
contribution
$42
$63
$83
10%
10%
10%
Investment return
After 30 years
$284,411
$426,617
$521,420
Add ’Em Together
Thank You!
Reed Elsevier U.S. Salary
Investment Plan
This presentation provides highlights. It does not describe many of the features,
provisions, limitations, and exclusions that are contained in the documents and
contracts that comprise the actual Plan. Although Reed Elsevier Inc. has made
every effort to ensure that this presentation is consistent with the Plan document
if there is any conflict or inconsistency between this presentation and the Plan
document, the document, as construed and interpreted by Reed Elsevier, Inc.,
will govern.
Reed Elsevier Inc. reserves the right to amend or terminate its benefit program at
any time. If the benefit program is amended or terminated, you will be contacted
by the Plan. Participation in the program does not create or imply an
employment contract with Reed Elsevier Inc. or with any of its business units.
Historical performance is not necessarily indicative of actual future performance
which could differ substantially.
Important Notes
•
•
Today’s workshop was designed to:
•
Provide you with fundamental information on your 401(k)
•
Objectively highlight your fund options
•
Outline other sources of information for your decisions
This presentation does not constitute legal, investment or financial
advice of any kind
•
•
Please consult your own advisors for such advice
Any fund performance illustrated in this presentation details historic
returns and does not guarantee future investment returns of the funds
reviewed
 1998 State Street Corporation. All rights reserved.
Important Notes
All charts/scenarios assume the following
(unless otherwise noted on slide):
•
All rates of return are annual rates of return
•
Single taxpayer
•
Tax deferred investments:
•
Assumes reinvestment of earnings
•
Income taxes will be due when you withdraw from your account at
the tax rate in effect at the time
•
Taxable investments:
•
Pays taxes on earnings every year
Important Notes
Withdraws of pre-tax money:
Please note that taxes would be due on any pre-tax savings and investment
earnings when withdrawn at the tax rate in effect at the time. You may be
subject to a 10% early withdrawal penalty if you are under age 59½.
Please keep in mind that these slides present investment models only and that
no two investors are alike. Relative risk will vary depending on actual portfolios
and market conditions. Always consult a financial professional in determining
your own risk tolerance and the allocation that best meets your personal
investment needs.
These illustrations are hypothetical and for demonstration purpose only, and
are not necessarily indicative of the performance of any investment.
This program provides only a small taste of some of the features of the Reed Elsevier US
Salary Investment Plan (SIP), and is intended to whet your appetite for more information
about the plan. For more detailed information about the plan, you should sink your teeth
into the Summary Plan Description of the SIP, which is available by logging onto
http://resip.csplans.com or by calling 1-800-448-5189. Neither these few morsels about
PIP nor the Summary Plan Description, however, takes the place of the applicable plan
documents. Should any questions ever arise about eligibility or the nature and extent of
your benefits from the SIP, the formal language of the plan documents as construed and
interpreted by Reed Elsevier Inc. will govern. Reed Elsevier Inc. reserves the right to
modify or terminate this plan at any time.