Q. What are my investment choices?
A. The Savings Plan offers the following investment options:
- Common assets
- Equity units
- Extended market units
- International equity units
- Bond units
- Balanced fund units
- ExxonMobil stock
It is important to read the information in this section as well as the section on Investment considerations, so that you can understand the potential risks of all the investment options.
A description of each investment option in the Savings Plan is provided over the next several pages.
The Common Assets fund is a short- to medium-term fixed income fund managed by an ExxonMobil subsidiary in accordance with standards set by the Trustee. The subsidiary targets a weighted average portfolio maturity of approximately one year. This average maturity is longer than that of money market funds, which are restricted to weighted average maturities of 60 days or less, but shorter than Bond Units, which have an average maturity of approximately seven years.
Investments in the fund are made in high quality fixed income securities, primarily consisting of U.S. government issued Series I (inflation adjusted) and Series EE (fixed rate) Savings Bonds. Other holdings include U.S. government agency securities, corporate /bank securities, and other high quality obligations. A portion of the Common Assets fund is invested in loans to participants.
U.S. Savings Bonds are backed by the full faith and credit of the U.S. government. Series I Savings Bonds pay a rate of interest based on the rate of inflation in the United States. A decline in the rate of inflation would reduce the portfolio yield. U.S. Savings Bonds have stated maturities of 30 years but can be redeemed after a 1 year holding period. They are considered as 1-year investments by the fund.
The fund also invests in securities issued by a variety of U.S. government agencies which are not backed by the full faith and credit of the U.S. Government, but have credit risk that is considered to be low. These securities include, among others, the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Federal Home Loan Banks (FHLBs).
The Common Assets fund is managed with a target of maintaining a constant $1.00 per unit price. Although the Common Assets fund has maintained a constant unit price since its inception (and is thus considered a relatively conservative investment choice), there can be no assurance that it will always be able to do so (meaning you could lose money). The underlying assets in participants’ accounts are valued on the basis of cost rather than market value, which means the asset value does not include unrealized gains and losses.
Any investment earnings on Common Assets are posted to participants’ Savings Plan Accounts as of the end of each quarter and are reinvested in Common Assets. Earnings on Common Assets include accrued income and realized gains and losses. These earnings are shared proportionally by participants based on the average daily Common Assets balance in their Savings Plan Accounts during that quarter. Common Assets investments are made as soon as practical after funds are available. All expenses of managing Common Assets are borne by the company except for certain investment management fees of approximately 0.01% that are borne by the fund. By writing to the Savings Plan administrator, you may request a list of the assets that make up the Common Assets fund.
General information about indexed funds
About Northern Trust Investments (NT) and the Savings Plan
Northern Trust Investments has responsibility for managing five of the Savings Plan's seven investment options – Equity Units, Extended Market Units, International Equity Units, Bond Units and Balanced Fund Units. Northern Trust Investments is a wholly owned subsidiary of Northern Trust Company.
Determining unit values
The value of the units in each fund varies with changes in the market value of the underlying net assets. The investment manager determines the value of each unit daily by dividing the market value of the net assets in the portfolio by the number of outstanding units. Any earnings, dividends, other income, investment management fees, or changes in the market value of each asset are reflected in the daily unit value.
Equity Units, Extended Market Units, International Equity Units, Bond Units and Balanced Fund Units are all "indexed" investments. Indexing is a commonly used investment strategy in which the investment manager seeks to closely approximate the performance of a market index, such as the Standard & Poor's 500 Index (S&P 500). Indexed investments have advantages such as clear investment strategy, automatic diversification and low fees.
When a fund is indexed, the investment manager generally exercises little subjective judgment in choosing securities since, in order to mirror the performance of the index, the manager must invest in the securities that constitute the index largely in proportion to their weight. Indexing provides automatic diversification because your money is spread over a large number of individual securities, so it is not as impacted by the performance of any one security. For funds based on indices with thousands of securities, the manager may choose to use a sampling or an optimization process to design a portfolio that has similar characteristics to the index but not holding every security as a means of controlling transaction costs. This practice is used for Extended Market Units, International Equity Units, Bond Units and Balanced Fund Units.
In contrast, funds that are not indexed usually are managed actively. In an actively managed fund, the investment manager has wide discretion as to which securities to purchase and sell and may follow any number of investment strategies in an effort to "beat the market." However, studies have shown that, on average, actively managed funds do not outperform indexed funds. Fees tend to be lower for indexed funds because they have lower research and transactions costs.
Investments by the indexed funds are made as soon as practical after monies are available. Although each of the underlying funds seeks to remain fully invested consistent with their target index, part of the funds may be kept in cash to provide necessary liquidity for next-day settlements. The funds may hold futures contracts to approximate movements of the funds' target indices, but the funds will not engage in speculative futures transactions. The funds also participate in securities lending in order to reduce fund expenses.
Fund fees and expenses
NT selects brokers on the basis of best net execution. Any fees, associated charges or brokerage commissions in connection with the administration of the funds are charged against the assets of the funds. In addition, NT receives a monthly investment management fee which is computed as a percentage of fund net assets. A summary of the fee and expense information for the indexed funds is provided below:
Effective January 1, 2013, fees for the Bond and International Equity Units will be as follows:
*Percentages are rounded to the nearest 1/100 of a percent.
You have the right to know of any operating expenses that reduce the rate of return and the total amount of these expenses, expressed as a percentage of average net assets. These have been described in this SPD. If any additional expenses occur, you will be advised.
Equity units represent an interest in a fund managed to closely approximate the total rate of return and characteristics of the Standard & Poor's 500 Index (S&P 500). This index is composed of 500 mostly large-capitalization stocks weighted by market value. The index currently represents about 80% of the market value of all publicly traded U.S. common stocks. To pursue its goal of closely approximating the performance of the S&P 500, NT invests the fund's assets in a broadly diversified portfolio consisting largely of the 500 stocks represented in the actual S&P 500. The S&P 500 excludes non-U.S. stocks.
Extended market units
Extended market units represent an interest in a fund managed to closely approximate the total rate of return and characteristics of the Dow Jones U.S. Completion Total Stock Market Index. This index is composed of approximately 3000 U.S. stocks not included in the S&P 500, weighted by market value. The index currently represents about 20% of the market value of all publicly traded U.S. common stocks and is commonly used to represent the small cap segment of the U.S. market. To pursue its goal of closely approximating the performance of the index, NT invests the fund's assets in a broadly diversified portfolio consisting largely of the stocks represented in the actual index.
International equity units
International equity units represent an interest in an index fund that invests in approximately 3,500 international equity securities composing approximately the top 99% of the market capitalization in 23 developed countries outside North America. The fund is managed to closely approximate the total rate of return and characteristics of the MSCI World Excluding U.S. Investable Market Index. The index is commonly used to represent the non-U.S. equity developed markets and includes all traded stocks that are available to be owned by foreign investors in these countries. To pursue its goal of closely approximating the performance of the index, NT invests the fund's assets in a broadly diversified portfolio consisting largely of the stocks represented in the actual index.
Bond units represent an interest in an index fund based on a broad range of publicly traded, investment grade U.S. bonds. This fund is composed of a portfolio of bonds representative of the overall U.S. bond and debt market and managed to closely approximate the total rate of return and characteristics of the Barclays U.S. Aggregate Bond Index. This broad index tracks approximately 8,000 publicly traded, investment grade, U.S. fixed income securities covering the Treasury, Agency, Mortgage-backed, Asset-backed, Commercial Mortgage-backed and Corporate sectors of the U.S. Bond Market. Since this index represents short, medium and long-term bonds, the average maturity is longer than that of investments held in the Common Assets fund. For comparison purposes, the average maturity of bonds in this fund is approximately seven years, while in Common Assets, it is approximately one year. To pursue its goal of closely approximating the performance of the index, NT invests the fund's assets in a broadly diversified portfolio consisting largely of the bonds represented in the actual index.
Balanced fund units
Balanced fund units are designed to generate returns from both income and growth for the investor through a broadly diversified investment in domestic and international stocks and U.S. bonds. Specifically, each Balanced Fund Unit represents an interest in a portfolio (the "Balanced Fund Portfolio") invested in the following proportions in the four indexed funds indicated in the chart below:
Each of the underlying investments making up the Balanced Fund Portfolio is separately available as an investment option in the Savings Plan. In order to maintain the fund's proportion in the four indexed funds, NT reviews the value of the four funds that make up the Balanced Fund Portfolio on a monthly basis and, if needed, adjusts their allocation back to the approximate proportions indicated above.
Your investment in Balanced Fund Units is actually an investment in the other four index funds in the Savings Plan, which together represent a broadly diversified investment.
When you buy Exxon Mobil Corporation Common Stock (ExxonMobil stock), you become an ExxonMobil shareholder and an owner of the company. Any dividends on shares of stock in your Savings Plan Account are credited as of the dividend payment date. These dividends are reinvested automatically in ExxonMobil stock unless you elect to have the dividends paid to you directly in cash. Please see more in the section on Direct dividend payments. Remember, investing in a single security typically carries higher potential risk than investing in a variety of securities (e.g., stocks and bonds). Be sure to consider balancing your portfolio with the other investments in the Savings Plan.
Participants’ purchase and sell orders may be offset against each other and the net number of shares may be purchased or sold in separate transactions or as a pooled transaction. This results in lower transaction costs for trades involving ExxonMobil stock. Such purchases and sales may be made in the open market, in privately negotiated transactions, or from/to Exxon Mobil Corporation to the extent it elects to sell or purchase such shares. Prices for open market or private transactions reflect market pricing. Prices for purchases cannot exceed, and prices for sales cannot be below, the then-current market value of the shares. The price of any purchase from or sale to Exxon Mobil Corporation is the volume-weighted average price per share of ExxonMobil stock on the New York Stock Exchange (NYSE) composite tape on the transaction day.
Brokerage commissions or other fees incurred on purchases or sales of ExxonMobil stock made in the open market are included as a part of the cost of the purchase or sale transaction. Brokers are selected on the basis of execution ability. No brokerage commissions are paid on shares purchased from or sold to ExxonMobil Corporation.
While investment instructions are executed promptly, purchases and sales may be executed over a period of days depending on market conditions and any legal restrictions.
As an owner of ExxonMobil stock, you may direct how your shares are voted. You will receive copies of all reports, proxy statements and other materials distributed to ExxonMobil shareholders. Information regarding your Savings Plan Account assets, including shares of stock and how you vote them, is subject to confidentiality requirements for those who provide services to the Savings Plan.
Participants receive periodic reports on the performance of the Savings Plan's investment options. See the section on Annual Returns of Savings Plan Investment Options for historical performance information for the three years through year-end 2011. To help you keep track of changes in your Savings Plan Account, you will automatically receive:
- Savings Plan confirmation statements after you make a transaction; and
- Periodic Savings Plan Account statements.
You also will be notified of any significant changes to the Savings Plan.