The unfunded liability represents the difference between the plan assets and the projected benefit obligation
(“PBO”). The PBO represents the actuarial present value of benefits based on employee service and compensation and
includes an assumption about future compensation levels. The accumulated benefit obligation represents the actuarial
present value of benefits based on employee service and compensation, but does not include an assumption about
future compensation levels.
The weighted-average allocation of plan assets and the target allocation by asset category are as follows:
US
International
Target 2012 2011 Target 2012 2011
Equity securities
45 – 55% 47%
47%
50 – 70% 56%
51%
Debt securities
33 – 45 42
39
25 – 40 35
38
Cash and cash equivalents
0 – 3 2
6
0 – 3 3
4
Alternative investments
0 – 10 9
8
0 – 20 6
7
100% 100%
100%
100% 100%
100%
Schlumberger’s investment policy includes various guidelines and procedures designed to ensure that assets are
prudently invested in a manner necessary to meet the future benefit obligation of the pension plans. The policy does
not permit the direct investment of plan assets in any Schlumberger security. Schlumberger’s investment horizon is
long-term and accordingly the target asset allocations encompass a strategic, long-term perspective of capital markets,
expected risk and return behavior and perceived future economic conditions. The key investment principles of
diversification, assessment of risk and targeting the optimal expected returns for given levels of risk are applied. The
target asset allocation is reviewed periodically and is determined based on a long-term projection of capital market
outcomes, inflation rates, fixed income yields, returns, volatilities and correlation relationships. The inclusion of any
given asset class in the target asset allocation is considered in relation to its impact on the overall risk/return
characteristics as well as its impact on the overall investment return. As part of its strategy, Schlumberger may utilize
certain derivative instruments, such as options, futures, swaps and forwards, within the plans to manage risks
(currency, interest rate, etc.), as a substitute for physical securities or to obtain exposure to different markets.
Asset performance is monitored frequently with an overall expectation that plan assets will meet or exceed the
weighted index of its target asset allocation and component benchmark over rolling five-year periods.
The expected long-term rate of return on assets assumptions reflect the average rate of earnings expected on funds
invested or to be invested. The assumptions have been determined by reflecting expectations regarding future rates of
return for the portfolio considering the asset allocation and related historical rates of return. The appropriateness of
the assumptions is reviewed annually.
The fair value of Schlumberger’s pension plan assets at December 31, 2012 and 2011, by asset category, are
presented below and were determined based on valuation techniques categorized as follows:
Š
Level One: The use of quoted prices in active markets for identical instruments.
Š
Level Two: The use of quoted prices for similar instruments in active markets or quoted prices for identical or
similar instruments in markets that are not active or other inputs that are observable in the market or can be
corroborated by observable market data.
Š
Level Three: The use of significantly unobservable inputs that typically require the use of management’s
estimates of assumptions that market participants would use in pricing.
60
