Human Resources A GUIDE TO SHELL CANADA S DEFINED CONTRIBUTION INVESTMENT OPTIONS

Transcription

1 Human Resources A GUIDE TO SHELL CANADA S DEFINED CONTRIBUTION INVESTMENT OPTIONS May

2 Introduction This guide gives you information on the funds offered to members of the Shell Canada Pension Plan (the Plan) who have a Defined Contribution account balance with. It also provides step-by-step instructions on how to build and maintain an investment strategy, as well as update your investment choices. As a member of the Plan, you are responsible for choosing the investments that best meet your individual financial goals. Shell Canada Limited (Shell) encourages you to take full advantage of the information in this guide, along with all other resources available to you, when making your investment selections. You should also decide if seeking investment advice from a qualified individual makes sense for you. Shell does not provide investment advice. The fund information provided in this guide is accurate as of the date of printing. For more complete and current details refer to the Morningstar fund sheets, available through s Plan Member Services website, mysunlife.ca. You will receive a welcome letter from within four weeks of your hire date. This letter will provide your account number along with instructions on how to obtain your personal access ID and password. In the meantime, you can temporarily sign in to the site using the following generic access ID and password: Access ID: Password: If you have any questions, call toll-free at or if you re outside Canada and the U.S. (6 a.m. to 6 p.m. Mountain Time) any business day. 2 Shell

3 Investment basics The foundation of investing is an understanding of the various types of investments available to you. The Plan offers fund selections in the following asset classes: Money market Bond Canadian equity U.S. equity International equity Global equity Every asset class has risk. Generally, the more risk you are willing to take, the higher the potential for returns over the long term. This chart helps you visualize where each type of fund lands on the investment risk spectrum. Understanding risk versus return To help you balance your exposure to risk, you can choose from a range of investments. This is known as diversification. By diversifying, you offset poor performance in some funds with the better performance experienced by others. 3 Shell

4 Building your portfolio Under the Plan, you can build your portfolio by investing in Pre-built (retirement target date) portfolios, where the investment mix is already pre-determined, or Build your own by selecting a mix of individual funds yourself. Pre-built The Pre-built series of Retirement Target Date Portfolios consists of a variety of funds from different asset classes. The Retirement Target Date Portfolios are structured to coincide with your anticipated retirement date. You simply identify the date closest to when you ll need access to your money, then select the portfolio that is closest to this date. The portfolios are made up of a mixture of investments from the various asset classes. One of the main advantages of selecting a Retirement Target Date Portfolio is that it gradually and automatically reduces the equity exposure as the target retirement date grows closer. Here is an example of the changes to a 2040 portfolio as it grows closer to its maturity date (the year 2040). Asset Mix for Retirement Target Date 2040 Portfolio In the year In the year 2025 In the year 2040 This hands-off approach to investing takes care of fund selection and the proportion of holdings in the different asset classes right up until the target date. 4 Shell

5 Build your own You may build your own investment portfolio from a variety of asset classes. The Plan offers you ten investment funds. Money market: Bond: Canadian equity: U.S. equity: International equity: Global equity: Aurion Money Market Segregated Aurion Multi-Manager Active Bond Segregated BlackRock Universe Bond Segregated Aurion Multi-Manager Active Canadian Equity Segregated BlackRock S&P/TSX Composite Segregated BlackRock U.S. Equity Segregated (Registered) BlackRock EAFE Equity Segregated Pyramis Select International Segregated Aurion Multi-Manager Active Global Equity Segregated BlackRock Global Equity Segregated The 2% Short-Term Trading Fee Short-term trading is the practice of making multiple buying and selling transactions in an attempt to time market trends and increase returns. Short-term trading within a defined contribution pension plan affects all investors in the fund and can lead to a negative impact on performance. charges a Short-term trading fee of 2% if a DC participant transfers money into a fund and then transfers money out of the same fund within 30 days. The fee is 2% of the lesser of: The amount transferred out, or The amount transferred within 30 calendar days. The fee does not apply to transfers in and out of the money market fund or to contributions or withdrawals. Complete the Investment risk profiler at the back of this guide to determine the asset mix that s right for you (also see Update your investment options at the back of this guide for details). By building your own portfolio, you need to look at your investment mix regularly to make sure it corresponds with the level of risk you are comfortable with over time. Pre-built or build your own... which approach is right for you? To help you determine which approach works best for you, consider these statements and how they apply to you. You can transfer in and out of any of the funds offered at any time, subject to short-term trading restrictions. Which approach is right for you? Consider these statements and what s important to you: My priority is ease of decision making I m looking for an approach that is 100% maintenance-free I want asset-allocation and re-balancing issues taken care of I am interested in selecting my own funds I will take the time to read the fund pages and understand the risks involved I want an approach that fits with my personal risk profile Pre-built (target date) Build your own 5 Shell

6 Your investment lineup details The details of the funds offered by the Plan are shown in the charts on pages 6 to 17. The first chart, from pages 6 to 11, lists the Retirement Target Date Portfolios, while the chart on pages 12 to 17 lists the funds you can use to build your own portfolio. Pre-built Retirement Target Date Portfolios You may want to invest in a Retirement Target Date Portfolio if you do not want to select your own funds and re-balance your asset mix periodically. These portfolios are pre-built using the Plan s existing funds. Here are the details of the asset allocations for each portfolio. Retirement Date Portfolios: Asset Allocations Asset Class Retiree Money market Bond Canadian equity Global equity Aurion Money Market Segregated BlackRock Universe Bond Segregated Aurion Multi-Manager Active Canadian Equity Segregated Aurion Multi-Manager Active Global Equity Segregated Note: Asset Allocations as of January 1,. 25% 25% 25% 20% 15% 10% 0% 0% 0% 0% 60% 60% 60% 50% 45% 40% 40% 30% 20% 10% 7% 7% 7% 15% 18% 20% 25% 25% 30% 34% 8% 8% 8% 15% 22% 30% 35% 45% 50% 56% The portfolios (and the percentage invested in each fund) are automatically adjusted as time passes so that the portfolios evolve from a higher-risk asset mix to a lower-risk one as the target date approaches. Investment Objective and Strategy One-year Returns Retiree Portfolio Low 25% FTSE TMX Canada Treasury Bill 30 Day 60% FTSE TMX Canada Universe Bond 7% Capped S&P/TSX Composite 8% MSCI ACWI IMI Please see footnotes at bottom of page 17 Objective: To provide investors with a single fund that is diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is conservative (85% fixed income, 15% equities) providing investors with conservative asset growth potential and income generation. Strategy: The fund is a diversified fund with emphasis on fixed income and cash investments (85%) to lower risk. Each of the underlying equity funds (15%) is actively managed using a core or multi-manager investment style. The fund invests in units of the following funds: BlackRock Universe Bond, Aurion Money Market, Aurion Multi-Manager Active Canadian Equity and Aurion Multi- Manager Active Global Equity. 6 Shell Rates of Return (%) Year 4 5 Year 4 10 Year 4 Annualized Returns FMFs %

7 Investment Objective and Strategy One-year Returns Portfolio Low 25% FTSE TMX Canada Treasury Bill 30 Day 60% FTSE TMX Canada Universe Bond 7% Capped S&P/TSX Composite 8% MSCI ACWI IMI 2020 Portfolio Moderate 25% FTSE TMX Canada Treasury Bill 30 Day 60% FTSE TMX Canada Universe Bond 7% Capped S&P/TSX Composite 8% MSCI ACWI IMI Objective: To provide investors with a single fund that is diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is conservative (85% fixed income, 15% equities) and remains the same until the fund s maturity year of ; providing investors with conservative asset growth potential and income generation. Strategy: The fund invests in units of the following funds: BlackRock Universe Bond, Aurion Money Market, Aurion Multi-Manager Active Canadian Equity and Aurion Multi- Manager Active Global Equity. Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2020; providing investors with conservative asset growth potential and income generation Rates of Return (%) Year 4 5 Year 4 10 Year 4 4 Year 4 5 Year 4 10 Year 4 Annualized Returns FMFs % 0.17% Please see footnotes at bottom of page 17 Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity, BlackRock Universe Bond and Aurion Money Market. 7 Shell

8 Investment Objective and Strategy One-year Returns 2025 Portfolio Moderate 20% FTSE TMX Canada Treasury Bill 30 Day 50% FTSE TMX Canada Universe Bond 15% Capped S&P/TSX Composite 15% MSCI ACWI IMI Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2025; providing investors with conservative asset growth potential and income generation Rates of Return (%) Year 4 5 Year 4 10 Year 4 Annualized Returns FMFs % Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity, BlackRock Universe Bond and Aurion Money Market Portfolio 15% FTSE TMX Canada Treasury Bill 30 Day 45% FTSE TMX Canada Universe Bond 18% Capped S&P/TSX Composite 22% MSCI ACWI IMI Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2030; providing investors with conservative asset growth potential and income generation Year 4 5 Year 4 10 Year % Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity, BlackRock Universe Bond and Aurion Money Market. Please see footnotes at bottom of page 17 8 Shell

9 Investment Objective and Strategy One-year Returns 2035 Portfolio 10% FTSE TMX Canada Treasury Bill 30 Day 40% FTSE TMX Canada Universe Bond 20% Capped S&P/TSX Composite 30% MSCI ACWI IMI Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2035; providing investors with conservative asset growth potential and income generation Rates of Return (%) Year 4 5 Year 4 10 Year 4 Annualized Returns FMFs % Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity, BlackRock Universe Bond and Aurion Money Market Portfolio 40% FTSE TMX Canada Universe Bond 25% Capped S&P/TSX Composite 35% MSCI ACWI IMI Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2040; providing investors with conservative asset growth potential and income generation Year 4 5 Year 4 10 Year % Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity and BlackRock Universe Bond. Please see footnotes at bottom of page 17 9 Shell

10 Investment Objective and Strategy One-year Returns 2045 Portfolio 30% FTSE TMX Canada Universe Bond 25% Capped S&P/TSX Composite 45% MSCI ACWI IMI Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2045; providing investors with conservative asset growth potential and income generation Rates of Return (%) Year 4 5 Year 4 10 Year 4 Annualized Returns FMFs % Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity and BlackRock Universe Bond Portfolio 20% FTSE TMX Canada Universe Bond 30% Capped S&P/TSX Composite 50% MSCI ACWI IMI Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2050; providing investors with conservative asset growth potential and income generation Year 4 5 Year 4 10 Year % Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity and BlackRock Universe Bond. Please see footnotes at bottom of page Shell

11 Investment Objective and Strategy One-year Returns 2055 Portfolio 10% FTSE TMX Canada Universe Bond 34% Capped S&P/TSX Composite 56% MSCI ACWI IMI Objective: To provide investors with a single fund that is broadly diversified among Canadian and Global stocks and Canadian fixed income. The fund s asset mix is adjusted annually to progressively evolve to a conservative asset mix (85% fixed income, 15% equities) at the fund s maturity year of 2055; providing investors with conservative asset growth potential and income generation Rates of Return (%) Year 4 5 Year 4 10 Year 4 Annualized Returns FMFs % Please see footnotes at bottom of page 17 Strategy: The fund invests in units of the following funds: Aurion Multi- Manager Active Canadian Equity, Aurion Multi-Manager Active Global Equity and BlackRock Universe Bond. 11 Shell

12 Build your own Complete the Investment risk profiler at the back of this guide to determine the investment mix that s right for you (also see Update your investment options at the back of this guide for details). Investment Objective and Strategy One-year Returns Money market Aurion Money Market Segregated Low FTSE TMX Canada Treasury Bill 30 Day Objective: To provide high current interest income based on prevailing short-term interest rates, as well as safety of principal in that the initial principal or capital invested is preserved. Strategy: Invests in high quality, short-term Canadian money market securities. Investments are restricted to Government of Canada Treasury Bills, Provincial Treasury Bills, Bankers Acceptances, short-term government bonds, short-term notes and deposits issued by chartered banks and high quality commercial paper Rates of Return (%) Year 5 Year 10 Year Annualized Returns FMFs % The maximum term of any single holding in the fund is generally less than one year, and the average term of the portfolio normally does not exceed six months. Bond Aurion Multi-Manager Active Bond Segregated Low Moderate FTSE TMX Canada Universe Bond Objective: To provide a total return (interest income and modest capital appreciation) that is compatible with prevailing bond market conditions. This can be achieved by using bond management strategies that take advantage of changes in nominal and inflation-adjusted (real) interest rates, shifts in the yield curve and the interest rate spreads between various issuers from different sectors Year 5 Year 10 Year % Please see footnotes at bottom of page Shell

13 Investment Objective and Strategy One-year Returns Strategy: The fund invests in Government of Canada bonds (including Real Return bonds), provincial bonds, high quality corporate debt securities issued by companies with a credit rating that is generally A or higher, foreign currency denominated bonds (global bonds) and high yielding debt securities issued by companies with a credit rating that is generally BB or lower. Rates of Return (%) 1 Annualized Returns FMFs 2 The maximum term of any single holding in the fund is usually less than 30 years and the average term of the portfolio normally ranges between five and 15 years. Bonds held in the fund are frequently traded before their maturity date. As a result, the traded price will result in a gain or loss from the initial purchase price. BlackRock Universe Bond Segregated Low Moderate FTSE TMX Canada Universe Bond Objective: To provide steady income and moderate growth over the long term. Strategy: The objective of the fund is to track the returns and risk of the FTSE TMX Canada Universe Bond (FTSE TMX). The FTSE TMX is a basket of Canadian government and corporate bonds and provides a good benchmark for the entire Canadian bond market. Since the DEX includes bonds issued by different governments (federal, provincial, municipal) and different companies, the fund provides broad diversification Year 5 Year 10 Year % Please see footnotes at bottom of page Shell

14 Investment Objective and Strategy One-year Returns Canadian equity Aurion Multi-Manager Active Canadian Equity Segregated S&P/TSX Capped Composite BlackRock S&P/TSX Composite Segregated Capped S&P/TSX Composite Please see footnotes at bottom of page 17 Objective: To provide long-term capital appreciation and higher total returns (dividend income and capital appreciation) than fixed income securities over longer time periods. Strategy: Invests primarily in Canadian common stocks and similar equity-type securities that are expected to provide superior longterm growth. The fund emphasizes medium and large capitalized companies but may also hold shares of smaller companies. The fund is broadly diversified in terms of the number of holdings and industry groups and includes both dividend and non-dividend paying companies. Objective: To closely track the returns of the Capped S&P/TSX Composite. Strategy: In order to track the performance of the Capped S&P/ TSX Composite the fund invests in all stocks in the same relative weights as they are in the capped index. For example, if a company represents 3% of the index, the fund will invest 3% of its assets in that company s stock. BlackRock monitors the fund daily to ensure the fund is tracking the index as closely as possible. Currently the capped and uncapped S&P/TSX Composite indexes are identical as no one stock exceeds a 10% weight in the uncapped index. However if a stock should exceed 10% of the uncapped index, the weight of the stock in the fund will be capped at 10% Rates of Return (%) Year 5 Year 10 Year 4 Year 5 Year 10 Year Annualized Returns FMFs % 0.14% 14 Shell

15 Investment Objective and Strategy One-year Returns U.S. equity BlackRock U.S. Equity Segregated (Registered) S&P 500 Equity (Cdn $) International equity BlackRock EAFE Equity Segregated MSCI EAFE Equity (Cdn $) Net Objective: To provide capital growth over the long term by tracking the returns of the S&P 500. The S&P 500 includes 500 of the largest public companies in the U.S. Strategy: In order to track the performance of the S&P 500 Equity, the fund invests in all stocks in the same relative weights as they are in the index. For example, if a company represents 3% of the index, the fund will invest 3% of its assets in that company s stock. BlackRock monitors the fund daily to ensure the fund is tracking the index as closely as possible. Objective: To provide capital growth over the long term by tracking the returns of the MSCI EAFE. The MSCI EAFE represents the performance of about 1,000 stocks from different stock markets in Europe and Asia including countries such as Britain, Germany, France, Hong Kong, Japan and Australia Rates of Return (%) Year 5 Year 10 Year 4 Year 5 Year 10 Year Annualized Returns FMFs % 0.24% Please see footnotes at bottom of page 17 Strategy: In order to track the performance of the MSCI EAFE, the fund invests in all of the stocks that make up the index in the same relative weights as they are in the index. For example, if a company represents 3% of the MSCI EAFE, the fund will invest 3% of its assets in that company s stock. BlackRock monitors the fund daily to ensure the fund is tracking the index as closely as possible. 15 Shell

16 Investment Objective and Strategy One-year Returns Pyramis Select International Equity Segregated MSCI EAFE Equity (Cdn$) Net Global equity Aurion Multi-Manager Active Global Equity Segregated MSCI ACWI IMI (C$) Objective: To provide long-term growth of capital primarily through investments in foreign securities. Strategy: The Select International Equity discipline is an innovative investment approach that capitalizes on Fidelity s fundamental research by combining qualitative stock selection with quantitative risk control. The approach diversifies specific risk, reduces tracking error and factor risk and controls transaction costs. Objective: To provide long-term growth by investing in common shares of companies that are listed on exchanges throughout the world that offer the best potential for superior total returns through capital gains and dividends Rates of Return (%) Year 5 Year 10 Year 4 Year 5 Year 10 Year Annualized Returns FMFs % 0.51% Please see footnotes at bottom of page 17 Strategy: The fund invests through a number of investment managers that use a variety of differing investment processes (value, growth, small cap) in order to construct a portfolio of stocks that will exceed the return of the Morgan Stanley All Country World Investable Markets. 16 Shell

17 Investment Objective and Strategy One-year Returns BlackRock Global Equity Segregated MSCI ACWI ex-canada Objective: To provide capital growth over the long term by tracking the returns of the MSCI All-Country World (ACWI) ex-canada. The MSCI ACWI ex-canada is a broad based index that is designed to measure equity market performance in the global developed and emerging markets. The MSCI ACWI ex-canada consists of approximately 47 developed and emerging market countries Rates of Return (%) Year 5 Year 10 Year Annualized Returns FMFs % Strategy: In order to track the performance of the MSCI ACWI ex-canada, the fund primarily invests in pooled funds and exchange traded funds which help achieve the objective of tracking the return and risk profile of the benchmark. 1 Rates of return are before Investment Management Fees (IMFs). 2 Estimated Management Fees (FMFs). FMFs include, but are not limited to, investment management fees as well as operating expenses for both the segregated fund and the underlying fund. FMFs are subject to applicable sales tax. 3 Benchmark. 4 The fund inception date was September Returns before this date are blended returns based on the current weights of the managers in the fund. Therefore, any returns before September 2010 are only a proxy and are not part of the official results. NOTE: Historical rates of return are provided for information purposes only and are not an indication of anticipated future performance. 17 Shell

18 Update your investment options Matching the asset mix (e.g. equities, bonds, money market) in your investment portfolio to the appropriate level of risk for your investment goals is a cornerstone of good investing. In general, the more time you have before your intended retirement date, the more risk you may want to take as you have time to recover from adverse events and time to profit from the historically higher average returns from equity investments. A disciplined investor will evaluate his or her portfolio at least once a year and perhaps re-balance the asset mix to better match his or her objectives. You may want to periodically review your investment portfolio and determine whether or not to update it based on your tolerance to risk and personal preferences at any given point in time. You can access s Plan Member Services website to do this, but first, follow these steps to ensure your investment strategy is right for you. Step 1 Getting started Sign in to mysunlife.ca using your access ID and password. From the Home page, under my financial future, select my financial centre for your applicable account. Until you receive your account number and obtain your personal access ID and password, you can sign in to mysunlife.ca using the generic access ID (03759) and password (259664). Step 2 How comfortable are you with investment risk? The best way to determine your comfort level with investment risk is to complete the Investment risk profiler. From the Resource Centre drop-down menu, select my money tools. Select Continue to begin. Step 3 Review your investment options To access detailed fund information through Morningstar, a leading provider of investment news and analysis, select Investment performance from the Accounts drop-down menu. Next, select: Rates of Return and Unit Values to see the performance of funds available in your Plan; Report to access tools and information about your funds. 18 Shell

19 Step 4 Select your investments To select your investments, access s Plan Member Services website. Simply sign in to mysunlife.ca using your access ID and password. From the Requests drop-down menu, select Change investments. Until you provide your personal asset allocation instructions, your contributions will be invested in the Retirement Target Date Portfolio with the target date (maturity date) closest to but not later than your 65 th birthday. Step 5 What s your vision of retirement? Planning can be easy with the Retirement planner. The planner lets you determine how much you need to save now to provide you with your desired income level in retirement. You can adjust a number of variables, and as they change over time, use the planner to update your calculations to see if any changes to your plan are necessary. From the Resource Centre drop-down menu, select my money tools. Select Retirement planner. Your access ID and password You ll need an access ID and password to access your account online or by phone. Don t have an access ID or password? Sign in to mysunlife.ca using your account number (see your welcome letter or your statement for this number) and select Register now. Forgot your access ID? Select I forgot my Access ID Forgot your password? Select I forgot my password 19 Shell

20 Glossary of Terms Asset class A grouping of similar investments. For example, all of the following are different asset classes: stocks (also called equities), bonds and cash. Asset allocation Describes the proportion of an investment that is currently invested in each of the asset classes. Benchmark A standard against which the performance of a particular fund can be measured. For example, the S&P 500 is often a benchmark for U.S. Equity funds. Diversification Diversification is a strategy that helps reduce the risks associated with investing. When you diversify your holdings, you spread them over a range of investments by choosing different funds or different types of investments to balance your risk exposure. types Money market Money market funds are primarily short-term under one year and take the form of government treasury bills and corporate notes. Because they are short-term and issued mostly by the government or high-quality businesses, they are deemed liquid and earn a low rate of return. Bond Bond funds invest in bonds issued by governments and corporations. While they have the potential of earning higher returns than money market funds, they are also more volatile because of the potential for capital gains and losses. A capital gain or loss is the difference between what a fund pays for an investment (book value) and what it receives when it sells that investment (market value). They are considered a less risky investment than equity funds. Canadian equity Canadian equity funds invest primarily in stocks of Canadian companies that are sold on a Canadian exchange such as the Toronto Stock Exchange. These differ from bonds since stocks represent ownership in the companies in which you invest. Thus, the performance of an equity fund is directly related to the success of the company and its market value. Generally, stocks are expected to outperform other types of investments as they offer the greatest potential for long-term growth, however they also fluctuate more than other investments and thus are at a high level of risk. Foreign equity Foreign equity funds are those primarily invested in stocks of companies incorporated outside of Canada. One of the important roles a foreign equity fund plays is to diversify a portfolio. Canada s share of the world equity market is only about 3%. By expanding your equity investments globally, you can spread your portfolio over a greater percentage of the world market and reduce overall risk. In addition to equity fund risks, foreign funds are also exposed to currency fluctuation. There are various types of foreign equities including U.S. equity funds, international equity funds and global equity funds. 20 Shell

21 Investment management style Within one asset class, different managers use different strategies to manage their funds. The main distinction is between an active and an index/passive manager. /passive fund managers use a passive investment style by simply buying and selling assets to match the characteristics of an index (e.g. S&P/TSX). The performance of an index fund should be similar to the performance of the index. Because of their passive style, these funds tend to have lower management fees. Active fund managers rely on analytical research, forecasts and their own judgment and expertise in making investment decisions on what securities to buy, hold and sell. As a result, they tend to hold significantly fewer securities than the index and exhibit results that can be different than the index over time. Investment performance The return on an investment, usually expressed as a percentage of invested capital. Investment risk The potential for negative outcome from expectations. Rate of return This is the amount of money that you earn on your investment. Normally, it is expressed as a percentage of your original investment. Segregated fund A fund offered by insurance companies for defined contribution pension arrangements such as Initial DC and DC II. It is like a mutual fund in that both mutual funds and segregated funds hold the same types of investments and provide the same professional and investment expertise. However, all assets of the segregated fund are separate from the underlying fund. Segregated funds are classified as insurance contracts and are exempt from the prospectus requirements of securities laws. 21 Shell

22 Investment risk profiler This tool will help you determine what kind of investor you are and how much risk you are comfortable with as you save. Answer each of the following questions, keeping your objective in mind. 1. Which statement best describes your comfort level with fluctuations in the value of your investments? a) b) c) d) I d be very upset if my investments dropped in value over any period of time. (1 point) I m willing to accept a lower, more predictable rate of return as long as fluctuations in the value of my investments are small. (10 points) I m willing to accept some fluctuations in the value of my investments as I m seeking a higher rate of return. (20 points) I want the highest rate of return possible, and understand the value of my investments can fluctuate significantly. (30 points) 2. How long will you leave this money invested before you ll need a significant portion of it for your stated objective? a) b) c) d) Less than 5 years (1 point) 5-10 years (10 points) years (20 points) More than 20 years (30 points) 5. How would you invest $10,000 based on the following results? a) b) c) d) A guaranteed return of $500. (1 point) The potential of earning $800 but the risk of earning only $300. (10 points) The potential of earning $1,200 but the risk of earning nothing. (20 points) The potential of earning $2,500 but the risk of losing $1,000. (30 points) 6. If your investment dropped in value by 20% in one month, how would you react? a) b) c) d) I d cash in my investment immediately. (1 point) I d make no changes until the value recovers and then re-evaluate. (10 points) I d do nothing. I understand my investments will fluctuate from day to day, but believe they will grow over the long term. (20 points) I d invest more while the prices are low. (30 points) 3. How likely is it that you ll need access to a large portion of this money earlier than expected? (E.g. taking early retirement)** a) b) c) d) Very likely (1 point) Somewhat likely (10 points) Unlikely (20 points) I won t need access to any of the money in this plan early. (30 points) ** Early retirement is defined by pension legislation and can vary by jurisdiction. 4. Which of the following pattern of returns would you be most comfortable with? Assume an initial amount of $5,000 invested for 10 years. a) Your investment grows without losses to $8,100. However, in one of the years the value of your portfolio does not increase. (1 point) 7. How would you describe your investing personality? a) b) c) I don t like risk and can only tolerate moderate losses. (1 point) I m willing to take some risk and can tolerate one year of poor returns. (10 points) I can tolerate more than one year of poor returns. (20 points) 8. Which of the following statements best describes your investment knowledge? a) b) c) d) I m a novice investor. (1 point) I have some knowledge. (10 points) I have good working knowledge. (20 points) I consider myself an investment pro. (30 points) b) c) Your investment grows to $10,100 in year 10, but slightly declines in value in two of the years. (10 points) Your investment grows to $12,400, but significantly declines in value in three of the years and was worth only $3,500 after the first year. (20 points) Add up your points for your total score: My total score is 22 Shell

23 Your risk profile Match your total score from the Investment risk profiler to one of the risk profiles below. You can find out more about the investment options in your plan by reviewing the Sheets provided to you online or in paper. 20% Cash/Money Market/ Guaranteed 50% Fixed Income/Bond 15% Canadian Equity 10% U.S. Equity 5% International Equity 10% Cash/Money Market/ Guaranteed 40% Fixed Income/Bond 20% Canadian Equity 15% U.S. Equity 15% International Equity 40% Fixed Income/Bond 25% Canadian Equity 20% U.S. Equity 15% International Equity 30% Fixed Income/Bond 25% Canadian Equity 25% U.S. Equity 20% International Equity 20% Fixed Income/Bond 30% Canadian Equity 25% U.S. Equity 25% International Equity A score of 35 points or less Conservative You have a need for a predictable flow of income or have a relatively short investment horizon. Your tolerance for volatility is low and your primary goal is capital preservation. A score of 36 to 85 points Moderate You seek a regular flow of income and stability, while generating some capital growth over time. Your tolerance for volatility is moderate and your primary goal is capital preservation with some income. A score of 86 to 145 points Balanced You re looking for long-term capital growth and a stream of regular income. You re seeking relatively stable returns, but will accept some volatility. You understand that you can t achieve capital growth without some element of risk. A score of 146 to 190 points Growth You can tolerate relatively high volatility. You realize that over time, equity markets usually outperform other investments. However, you re not comfortable having all your investments in equities. You re looking for long-term capital growth with some income. A score of 191 points or over Aggressive You can tolerate volatility and significant fluctuations in the value of your investment because you realize that historically, equities perform better than other types of investments. You re looking for long-term capital growth and are less concerned with shorter-term volatility. HIGHER RISK LOWER RISK 23 Shell

24 Know your responsibilities It is your responsibility to use the information provided to make investment decisions that are appropriate for your circumstances. Your decisions affect the amount of money that accumulates in your DC account, and, ultimately the amount of income you will receive from the Plan at retirement. You are responsible for: Informing yourself about the provisions of the DC segments of the Plan, and the information and tools available to you, which include: Financial Seminars 1. Financial Basics: For the Beginner 2. Investment Planning: Growing Your Money 3. Retirement Planning: Tax, Pensions and Estate Planning 4. Retirement Readiness: Preparing for Life After Work Sign up for these seminars through Shell Open University (SOU). Go to Shell Online sww.shell.com Select HR Online from the horizontal navigation bar Select Learning & Development from the left navigation bar Select Shell Open University from the left navigation bar and click LOG IN HR Online contains information on all segments of the Plan. Pension Model available on the Shell Benefits Centre, it provides information on your current pension status as well as future pension and termination benefit estimates. Select the Pensionable Earnings link to see how your Final Average Earnings are calculated. Retirement Assessment offered to all employees who are approaching retirement. The session is voluntary. s Plan Member Services website provides current account information, newsletters and financial planning resources. Researching and reviewing the available investment options to help you make informed decisions. Electing your contribution amount. Obtaining independent investment advice from a qualified individual. Allocating the contributions among the available investment options (your decisions affect the amount of money that accumulates in your account). Understanding your risk tolerance and the potential volatility of your investments. Defining, monitoring and revising your investment strategy from time to time to meet your retirement needs and goals. Maintaining your beneficiary designations and personal data. Reviewing your pension options and making an election when you leave the Plan. Questions If you have any questions, please contact s Customer Care Centre at from 6 a.m. to 6 p.m. Mountain Time, any business day. Group Retirement Services are provided by Sun Life Assurance Company of Canada, a member of the group of companies. 06/15-ke-cm