Picture Your Future
Join the SABIC U.S. Employee Retirement Savings Plan today! You've received this booklet because you're eligible to join the SABIC U.S. Employee Retirement Savings Plan (the "Plan"). The Plan can be an important part of your financial security. It gives you an easy and convenient way to save, as well as the choice and flexibility that you need to achieve your savings goals. Joining the Plan is easy. Inside, you'll find an overview of the Plan and its many benefits, as well as information about how to enroll. You'll also find examples of how the Plan can help you to build a more secure future. So, take a few minutes to review the pages that follow to see how to get started. Note that, due to the Plan s automatic enrollment feature, you will be automatically enrolled to contribute 8% of your pay to the Plan unless you either opt out or enroll on your own within a specified time. For details on the automatic enrollment feature, please consult the notice that has been mailed to you under separate cover from the Benefits Service Center. Employees who are automatically enrolled in the Plan may change their contribution and investment elections prospectively at any time. Inside, you'll find an overview of the Plan and its many benefits. You'll also find examples of how the Plan can help you to build a more secure future. So, take a few minutes to review the pages that follow to make sure you're making the most of the Plan. SABIC U.S. Employee Retirement Savings Plan For more detailed information, just visit the Your SABIC Total Rewards website at website from any computer with internet access. The website is available 24 hours a day, seven days a week. You can use it anytime to access and manage your account. You can also call the SABIC Benefits Service Center at 1 877 SABIC US (1 877 722 4287) to complete many of the same transactions that you can complete online. SN-CV 185208
What's Inside Accessing the Plan How the Plan Works Your Investment Choices The Basics of Investing Accessing the Plan Online:, click on 401(k) Savings Plan Link under Other Resources. The Your SABIC Total Rewards website is your best source for detailed, personalized information about the Plan and your account, and it's the easiest and fastest way to make Plan transactions. Beneficiary designations should also be made on the website. You can access the website 24 hours a day, seven days a week, from any computer with internet access log on at work, home, or anywhere. By Telephone: 1 877 SABIC US (1 877 722 4287), then follow the prompts to speak to a 401(k) Benefits Service Representative. You can call the SABIC Benefits Service Center toll free for answers to your questions or if you are experiencing difficulty online. Simply follow the prompts, and the system will guide you to a 401(k) Benefits Service Representative. Representatives are available between 8 a.m. and 8 p.m. Eastern Time, Monday through Friday, except Federal holidays. Need Saving and Investing Help? Turn to experts in the Hewitt Personal Finance Center for help with investment planning, college savings, and other decisions that affect your financial future. To access the Personal Finance Center: Log on to the Your SABIC Total Rewards website at From the Home Page, Click on 401(k) Savings Plan (Your Savings Resources) under Other Resources (located on the bottom right) Click on Savings and Retirement Click on Financial Solutions and Education link under the same subhead Read the disclaimer, then once you agree to the terms, you can access all of the content on the website
How the Plan Works WHY SAVE? You may spend up to a third of your life in retirement. Experts say that you'll need at least 80% of your preretirement income to maintain your lifestyle in retirement. Social Security generally replaces less than half of what most retirees think they need. So your personal savings, including your SABIC U.S. Employee Retirement Savings Plan account, may have to make up a significant portion of that 80%. If you don't select a savings rate, you will be automatically enrolled in the Plan at a pre tax contribution rate of 8%. This amount will be deducted from your pay. Your account is automatically invested in the Alliance Bernstein Target Retirement Fund (based on age) unless you make a different election. You may change how your money is invested at any time. MORE GOOD REASONS TO SAVE Company matching contributions For every $1.00 of your pre tax, Roth 401(k), and after tax savings, the Company adds 50 cents up to 8% of your pay on a per pay basis; the Company's contribution can be as much as 4% of pay on a per pay basis. Employer Retirement Contribution Account The Company will contribute 5% of your eligible pay on your behalf. This will occur automatically on a per pay period basis. You are not required to be contributing to the Plan in order to receive this benefit. If you are not participating and have not chosen how your contributions will be invested in the Plan's investment fund options, this contribution will automatically be invested in the Alliance Bernstein Target Retirement Fund (based on age). Control You decide how much to save. For 2017, you may save up to the lesser of $53,000 or 80% of your eligible pay each year. An annually adjusted Internal Revenue Service (IRS) dollar limit also applies. The dollar limit on your total combined regular pre tax 401(k) contributions and Roth 401(k) contributions is $18,000 for 2017. Please note, once you reach this limit and unless you elect to stop your contributions, deductions will continue to be taken, but will be made on an after tax basis. Participation in the Plan is "shut off" once your annual compensation reaches $270,000. To make saving even easier, you can choose to have your contribution automatically increased by 1% each year, up to the target level you specify. And if you're age 50 or older within the calendar year, you may be eligible to make additional catch up contributions up to the 2017 limit of $6,000. Please note when making your election for catch up contributions, that the election is a per pay period amount. You can change your contribution rate at any time. If you had a tax qualified retirement savings account with a former employer, you may roll it over into this Plan. SN-PH 1
Choice You choose how to invest your savings in the Plan's investment funds. You can change your choices and move your savings to different investment funds at any time. Automatic saving Your contributions are automatically deducted from your pay, deposited into your account, and invested according to your instructions. Tax deferred savings By saving on a pre tax basis, your savings come out of your paycheck before taxes are calculated. So, you end up paying less income tax now. What's more, you won't owe taxes on your savings, the company match, or your investment earnings until you take money out of your account. The benefit of saving via Roth 401(k) contributions is the fact that your Roth 401(k) contributions, and earnings on those contributions, are distributed from the Plan tax free when you receive the money through a qualified distribution!* Roth 401(k) contributions are made on an after tax basis only. It's easier than you think! Pre tax contributions may lower your current taxable income. The chart below is an example of how the net reduction to your paycheck is less than what goes into your account. Your Percentageof Pay Contribution Annual Amount You Contribute Annual Actual Reduction to Your Paycheck 3% $900.00 $720.00 7% $2,100.00 $1,680.00 9% $2,700.00 $2,160.00 Note: The numbers above are based on an annual base pay of $30,000 and assume a combined federal and state income tax rate of 20%. Your tax situation may be different. Growth You don't pay taxes on company contributions or investment earnings while they are in your account. This means that all your investment earnings are reinvested in the Plan so that they'll continue to grow tax deferred (or tax free if you made Roth 401(k) contributions). These earnings on your earnings are called "compounding," and it's what makes the Plan such a powerful savings tool. Time really is money! Here's an example showing how a participant's investment could grow at different contribution levels and how waiting can dramatically impact possibilities. This assumes a $30,000 salary and an average return of 6%. These numbers also assume that you are 30 years old, your pay remains the same as it is now, and that you contribute the indicated percentages of pay and receive matching contributions each year. Your actual results may vary depending on your pay, contribution level, and investment strategy Balance at Age 65 $463,031 $373,986 $160,280 $326,467 $263,685 $113,008 9% Contribution 7% Contribution 3% Contribution $225,223 Starting Waiting Waiting Now Five Years Ten Years $181,911 $77,962 *Roth contributions must generally remain in a Roth account (including a Roth IRA rollover account) for a minimum of five years and at least until the date you reach age 59½ to receive this tax free advantage. 2
Ownership Match on Pre tax, Roth 401(k), and After tax Contributions You vest or earn ownership of company matching contributions immediately. You're always 100% vested in your own contributions and their earnings. Employer Retirement Contribution Account You vest in or earn ownership of 100% of the Employer Retirement Contribution Account following 3 years of service. Access You can borrow money from your account and pay yourself back with interest (subject to certain dollar limits and excluding your Employer Contribution Account). You may also be able to withdraw money if you're facing a financial hardship. Plus, if you leave the company, you can take your vested balance with you and keep it growing by rolling it over into an individual retirement account (IRA). Education and guidance Visit the Your SABIC Total Rewards website to get information about how the Plan works, learn about the basics of saving and investing, and research the Plan's investment funds. Use the website at any time, at your own pace. Plus, use the site to: Access tools that can help you plan your savings and investment strategy. SN-PH 3
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Your Investment Choices Here's an overview of the Plan's investment funds. If you need help to decide how to invest your savings, see "The Basics of Investing" section to learn more about fund types, asset classes, risk and return, diversification, and time horizon. The Plan offers Target Retirement Date Funds for those who wish to leave the asset allocation decision to investment professionals and Core Funds for those who wish to create and monitor their own investment portfolio. Target Retirement Date Funds These portfolios are designed to make investing easier. They're made for you to put 100% of your contributions and savings in the professionally designed portfolio that most closely matches your target retirement date. This portfolio automatically adapts as you move toward and through your retirement. The objective of each target retirement date fund is to achieve the highest total return over time consistent with its investment mix. The target retirement date portfolios balance risk and return against the length of time your money will be invested. Over time, your money shifts from more aggressive investments focused on growth (primarily stocks and other equity securities) to more conservative investments focused on income (primarily bonds and other fixed income securities) to ensure that your money is put into investments that have less risk as you get older. However, there is no guarantee that any of these funds will provide adequate retirement income, and investments in these funds may still experience losses near or following retirement. The investment mix will continue to change with an increasing exposure to investments in bonds and fixed income securities and a corresponding decrease in equity exposure until 15 years after the target retirement date. Thereafter, the investment allocation will generally be fixed. Based on the current design of these funds, the equity allocation ranges from 95% (at 25+ years before the target retirement date) to 35% (at 15+ years after the target retirement date). The underlying investment portfolios within the target retirement date funds may include both actively managed and passively managed portfolios. These underlying index funds may participate in securities lending. More information about the composition of the investments in the AB Target Retirement Date Funds is available online at the SABIC Benefits Portal website address listed below. Target Retirement Date Fund AB Target Retirement 2010 AB Target Retirement 2015 AB Target Retirement 2020 AB Target Retirement 2025 AB Target Retirement 2030 Strategies and Asset Allocation The AllianceBernstein Target Retirement 2010 Fund is a diversified premixed portfolio designed for individuals who previously retired in or around the year 2010. The AllianceBernstein Target Retirement 2015 Fund is a diversified premixed portfolio designed for individuals intending to retire in or around the year 2015. The AllianceBernstein Target Retirement 2020 Fund is a diversified premixed portfolio designed for individuals intending to retire in or around the year 2020. The AllianceBernstein Target Retirement 2025 Fund is a diversified premixed portfolio designed for individuals intending to retire in or around the year 2025. The AllianceBernstein Target Retirement 2030 Fund is a diversified premixed portfolio designed for individuals intending to retire in or around the year 2030. SN-PH 5
Target Retirement Date Fund AB Target Retirement 2040 AB Target Retirement 2050 AB Target Retirement 2060 Strategies and Asset Allocation The AllianceBernstein Target Retirement 2040 Fund is a diversified premixed portfolio designed for individuals intending to retire in or around the year 2040. The AllianceBernstein Target Retirement 2050 Fund is a diversified premixed portfolio designed for individuals intending to retire in or around the year 2050. The AllianceBernstein Target Retirement 2060 Fund is a diversified premixed portfolio designed for individuals intending to retire in or around the year 2060. 6
Core Funds The Core Funds let you create your own investment mix. It's important to balance the funds' risk and return profiles with the amount of time that your money will be invested between now and retirement. You should review your investment choices and asset allocation at least once a year and rebalance as appropriate to maintain your asset allocation strategy. Here are sample allocations for someone between the ages of 40 and 49, with either a Conservative, Moderate, or Aggressive portfolio: Conservative Moderate Aggressive Note: Depending on your personal situation, other asset allocations may be better suited for you. You should consider your other assets, income and investments (e.g. equity in a home, IRA investments, and savings accounts) in addition to your interests in the Plan. This chart lists the available funds, from most conservative to most aggressive. More conservative funds generally have lower risk of investment loss, and returns are likely to be lower in the long term. More aggressive funds generally have higher risk of investment loss in the short term, but returns are more likely to outpace inflation in the long run. Fund Name Strategy Asset Class Federated U.S. Treasury Cash Reserves NT Aggregate Bond Index BlackRock Inflation Protected Bond Fund T. Rowe Price U.S. Value Equity Trust This fund seeks to provide conservative investors with stability of principal and liquidity. The fund pursues its objective by investing in a portfolio of short term U.S. Treasury securities. Portfolio of short term U.S. Treasury securities provides a high degree of quality and safety because direct obligations of the U.S. Treasury are guaranteed as to the payment of principal and interest. This fund seeks to hold a portfolio representative of the overall United States bond and debt market, as characterized by the Barclays Capital Aggregate Bond Index. This fund may participate in securities lending. The investment seeks to maximize real return, consistent with preservation of real capital and prudent investment management. The fund invests at least 80% of assets in inflation indexed bonds of varying maturities issues by the U.S. and non U.S. governments, their agencies or instrumentalities, and U.S. and non U.S. corporations. It invests up to 20% of assets in non investment grade bonds or securities of emerging market issuers. The fund maintains an average portfolio duration that is within plus/minus 20% of the duration of the Barclays Capital Global Real: U.S. TIPS Index. It is non diversified. (This information is from the fund prospectus.) This fund seeks to provide long term capital appreciation by investing in common stocks believed to be undervalued. Income is a secondary objective. Cash/Stable Bond Bond Large Cap Value SN-PH 7
Fund Name Strategy Asset Class NT S&P 500 Index Fund Nuveen Winslow Large Cap Growth NT Extended Equity Market Index Fund FIAM Small Mid Cap Core Fund Dodge & Cox International Stock Fund This fund approximates the risk and return characteristics of the S&P 500 Index. This Index is commonly used to represent the large cap segment of the U.S. equity market. This fund may participate in securities lending. This fund seeks long term growth of capital. The fund normally invests at least 80% of its assets in companies with market capitalizations in excess of $4 billion at the time of purchase. The primary objective of the NT Extended Equity Market Index Fund is to approximate the risk and return characteristics of the Dow Jones U.S. Completion Total Stock Market Index. The fund provides primary exposure to the small to mid cap sector of the U.S. equity market. Under normal market conditions, the portfolio will be fully invested in small and mid capitalization companies that are domiciled or have their principal place of business in the U.S. The portfolio will invest in companies with market capitalizations similar to that of the Russell 2500 Index. This investment option is a collective investment trust. This fund seeks long term growth of principal and income by investing primarily in a diversified portfolio of equity securities issued by non U.S. companies from at least three different foreign countries, including emerging markets. Large Cap Large Cap Growth Mid Cap Mid/Small Cap International Self Directed Brokerage Window The Plan also offers a self directed brokerage window (SDBW) account for those who desire more investment diversity when tailoring a portfolio to their individual goals. This option allows you to invest a portion of your account in a variety of options outside of the Plan's target date retirement fund and core fund investment lineup. You can invest in the SDBW after you enroll in the Plan. You will be responsible for monitoring investments and expenses in the SDBW. An SDBW application can be found within the Plan section on the Your SABIC Total Rewards website. Before completing an SDBW application, please carefully review the SDBW informational brochure available on the Brokerage Account website for important information about how these accounts work and the associated fees. You can also access this site from the Your SABIC Total Rewards website. NEED MORE INFORMATION? The Your SABIC Total Rewards website is your best source for detailed Plan information and tools that will help you make the saving and investing decisions that are right for you. Make sure you're taking advantage of everything that the site and the Plan have to offer. To access this website, please use the Your SABIC Total Rewards website,. If you have difficulties logging onto the website, please call 1 877 SABIC US (1 877 722 4287), then follow the prompts to speak to a 401(k) Customer Service Representative. This booklet provides a brief overview of the Plan's features. Please refer to your SABIC Benefits Handbook for more details. 8
The Basics of Investing How do you decide which funds are right for you? By doing a little homework! After you review this section, you ll be better equipped to make investment decisions that support your long-term savings goals. SN1 rev. 1/2016 9
FUND TYPES There are many different types of investment funds, and each one has a different investment objective and risk-and-return profile. Compare the following overview with your savings plan s fund options to help you understand which funds might be right for you. Asset Class indicates a fund s investment type, and Strategy indicates the fund s desired performance. More conservative funds. Generally have lower risk of investment loss, but returns are likely to be lower over the long term. More aggressive funds. Generally have higher risk for investment loss in the short term, but returns are more likely to outpace inflation over the long term. Asset Class Stable Value/ Cash Short-Term Bond Long-Term Bond Balanced Large Cap Stock Mid Cap Stock Small Cap Stock International Stock Emerging Markets Strategy Seeks to maintain value and provide consistent returns by investing in high-quality, short-term securities. Examples include money market funds, U.S. Treasury bills, and insurance contracts. Seeks income by investing in shorter-maturity (typically up to three years) bonds. Seeks long-term growth by investing in longer-maturity (seven or more years) bonds. Invests in a mix of stocks and bonds to achieve higher returns than those of all-bond funds, but with less risk of loss than all-stock funds. Seeks long-term capital growth by investing primarily in the common stocks of companies that have large total market values and that are typically more well-established in their businesses. Seeks long-term capital growth by investing in stocks of companies that have mid-sized total market values. Seeks long-term growth by investing in stocks of smaller and/or up-and-coming companies. Seeks capital appreciation by investing primarily in the common stock of non-u.s. companies. Currency fluctuations and political developments could add risk. Seeks long-term growth by investing in companies of developing countries. Currency fluctuations and political developments could add risk. 10
Understanding Style When you research investment funds, you ll see the term style. This refers to how funds are managed and invested. Here s some background on what this means: MANAGEMENT STYLE Passive. Passively managed funds which are also called index funds attempt to mirror the performance of a particular investment index, such as the S&P 500. They typically have lower fees than actively managed funds. Active. Actively managed funds seek to perform better than competing funds and benchmarks. INVESTMENT STYLE Value. Value funds invest in underpriced companies that show signs of improvement. The stocks of these companies usually have low price/earnings ratios. Growth. Growth funds invest in companies that have strong earnings growth prospects. The stocks of these companies usually have high price/earnings ratios. GEOGRAPHIC STYLE Domestic. Domestic funds hold U.S. investments. International. International funds hold non-u.s. investments. Global. Global funds hold both U.S. and non-u.s. investments. What s in Your Funds Savings plan funds are made up of different mixes of stocks, bonds, and stable value investments. Here s a look at what these types of investments are. Stocks. Companies sell stock to raise money. The stock buyer actually buys a part of the company that issued the stock. Stocks, which are also called equities, provide value in two ways. First, some companies pay out a portion of their annual earnings to shareholders as dividends. Second, when shareholders sell stock, they can get a capital gain if the price at which they sold the stock is higher than the price they paid for it. If a stock is sold for less than its purchase price, that s a capital loss. Stocks have a higher risk of investment loss than bonds and stable value investments, but are more likely to significantly outpace inflation over time. Bonds. Buying a bond is like giving a loan to a company, bank, or government. The bond issuer promises to pay the buyer back at a specific time with interest. Bonds have a higher risk of investment loss than stable value investments, but are more likely to outpace inflation over time. Stable Value Investments. Stable value investments are designed to maintain their value and provide a consistent rate of return. Money market funds and U.S. Treasury bills are examples of stable values. So are agreements between insurance companies or banks and other organizations that guarantee a specific rate of return over a specific period of time. Stable value investments typically have less risk of investment loss, and returns are likely to be in line with inflation. SN2 rev. 1/2016 11
How Investments Grow Over Time This chart shows how a $1 investment in stocks, bonds, and stable value investments would have grown over a specific period of time. As you can see, despite the stock market s ups and downs, stocks would have returned the most money in the long run, followed by bonds, and then stable value investments. When you re deciding how to invest your money in the plan s funds, make sure that you understand the funds underlying investment types and what this might mean over the long term. $18.84 $7.10 $2.75 $2.16 1985 2015 Note: Past performance is no guarantee of future results. 12
RISK, RETURN, AND TIME HORIZON Part of figuring out which investments are right for you depends on your risk tolerance. If you can sleep easily at night knowing that most of your money is invested in the stock market which has a higher risk of investment loss corresponding to its greater potential for long-term investment growth you have a high risk tolerance. If you can t tolerate the potential for any short-term investment loss, you have a low risk tolerance. To determine whether lower-risk or higher-risk investments best meet your needs, you have to consider your investment goals, how long you plan to invest, and your willingness to watch your account balance go up or down over time. If you have a high risk tolerance, you might be comfortable with investments that have a higher risk of investment loss in the short term corresponding to their greater potential for long-term investment growth. These investments are more likely to significantly outpace inflation the rate at which the cost of goods and services increases over time. They may include large cap stock, small cap stock, and international stock funds. If your tolerance level is somewhere in the middle, you may want investments that have a more moderate risk of investment loss in the short term, and a corresponding moderate potential for long-term investment growth. Investments in this category may include balanced funds. If you have a low risk tolerance and don t want to risk investment loss, you might be more comfortable with stable value and money market funds, knowing that you re likely to see investment returns that are in line with inflation. That said, it s very important to balance your risk tolerance with your time horizon, or the number of years that your money will be invested. If you don t, chances are that you won t have enough money to retire. Consider this: If you have a low risk tolerance and a long time horizon, you may need to stretch a little and consider higher-risk investments. If you invest too conservatively, your money will be less likely to grow enough to provide you with an adequate retirement income especially if your returns don t outpace inflation. For example, if inflation holds steady at 4% a year, the prices of everything you need to live will double in about 18 years. At 5% inflation, prices will double in about 14 years. If you have a high risk tolerance but only a short time until you retire, you may need to invest more conservatively to guard against investment losses that could hurt your financial security in retirement. SN3 rev. 1/2016 542933 13
DIVERSIFICATION AND ASSET ALLOCATION Diversifying means putting your money in several different investments to spread out your risk. Asset allocation is how you divide your money between types of investments or asset classes. If your investments are diversified, your account is less likely to be hurt by the poor performance of a single investment. Studies have shown that asset allocation is a key factor in determining risk and return. It not only helps you to spread risk, but also may help you to meet your long-term savings goals. Ready to Get Started? When you join a savings plan, you re not just a saver you re an investor. A savings plan is a natural place for you to begin investing. And by joining the plan, you can avoid the biggest investment mistake of all doing nothing. After you get started, keep going. No one has a magic formula that can guarantee success. But one thing is certain: Nothing happens if nothing begins! 14
This booklet is educational, and its content should not be interpreted as investment advice. The booklet uses examples to illustrate concepts; these examples are based on historical information and are not intended to predict future results. The assumed rates of return do not represent the performance of any particular investment. Your Benefits Resources TM is a trademark of Hewitt Management Company LLC. Copyright 2017 Hewitt Management Company LLC. 5320 10 1 15