Schlumberger UK Pension Scheme

Chair’s Annual Governance Statement (period 1 January 2018 – 31 December 2018)

This statement has been prepared by the Trustee of the Schlumberger UK Pension Scheme (‘the

Scheme’) in order to demonstrate how the Scheme has complied with the governance standards

introduced under The Occupational Pension Schemes (Charges and Governance) Regulations 20151.

This Statement applies to both the Personal Money Fund (PMF) element of Final Salary Benefit (FSB)

section (‘Blue Section’) and the Defined Contribution (DC) section (‘Orange Section’) of the Scheme.

General Investment principles

The Trustee’s general investment principles are as follows:

To offer a suitable default strategy appropriate for the profile of the defaulting members that takes into account their expected risk tolerances while optimising investment returns; and

To ensure that the range of self-select investment options (including alternative self-select lifestyle strategies) are appropriate for the profile of most members.

Investment strategy – relating to the Scheme’s default investment option

Although members have the choice of where to invest, the Trustee must also make available a default

investment strategy.

At time of writing, a formal strategic review of the Scheme’s default strategy is ongoing, having been

initiated in Q4 2018. The review is being conducted by the Trustee in conjunction with its investment

advisers and is expected to conclude during 2019.

Provisionally, the Trustee is satisfied that the demographic and risk profile of the membership remains

consistent with the analysis last carried out in 2015 and it also continues to believe that a strategy

matching a drawdown retirement target remains appropriate. Accordingly, it is expected that the

broad objective of the default strategy will continue to be to provide a reasonable level of capital

growth through exposure to equities and diversified assets in the growth phase, whilst reducing

growth and increasing protection in the years preceding retirement. The Trustee is currently

focussing on a review of the underlying funds within the default strategy and the optimal duration for

the risk/reward transition as retirement approaches.

Additional alternative lifestyle strategies are also made available for members that wish to target

conversion to an annuity, or payment of a lump sum and it is expected that these will also continue to

be offered to members following the review.

A copy of the Scheme’s Statement of Investment Principles, including those relating to the default

strategy is appended to this statement.

Investment Monitoring

The Trustee delegates detailed investment oversight to Schlumberger Common Investment Fund

Limited (SCIFL) but also maintains an investment sub-committee to carry out appropriate strategic

investment monitoring. SCIFL takes advice from professional investment advisers to ensure that it

has the appropriate knowledge, competency and experience to manage the Scheme’s assets.

1 Inserted into Regulation 23 of The Occupational Pension Schemes (Scheme Administration) Regulations 1996

The Trustee reviews the underlying performance of the funds within the default strategy, the alternate

lifestyle strategies and the self-select funds.

Each quarter, SCIFL monitors and prepares detailed reports for the Trustee on the performance of the

investment managers against the agreed performance benchmarks. At the end of the reporting

period, the Trustee noted that returns on all return seeking funds, barring the UK equity fund, had

outperformed their benchmark over the three and five year periods. The UK equity fund had slightly

underperformed against its benchmark. The fixed income funds had all performed close to their

benchmark over the last quarter, one, three and five year periods.

Both the Diversified Growth Fund and the Consolidation Fund were behind their respective

benchmarks for the year (although it was noted that the DGF had provided some volatility

management when compared to equities). The Trustee plans to review the existing DGF during

2019.

Financial transactions

The Trustee has an agreed Service Level Agreement (SLA) in place with its administrator, Willis

Towers Watson, which defines the agreed targets for core financial transactions such as contribution

investments, switches that are processed manually (i.e. outside of the automated online process),

transfers and benefits payments and all other Scheme administration tasks. The administrator has a

dedicated team in place to service the Scheme. All administration tasks are logged and automatically

monitored by a workflow system that is managed by a senior member of the dedicated team. Time

critical financial transactions are flagged and prioritised.

As part of this process, a weekly call takes place between Schlumberger’s Pension team and the

administrator. Here, individual cases can be discussed and any issues raised by both parties. These

cases are then logged and monitored on a weekly basis until resolved.

The administrator has a separate contribution processing team which ensures investment and

banking transactions are checked and fully reconciled.

Over the reporting period, this combined oversight process identified an issue relating to maternity

pay pension contributions not being correctly calculated. The root cause was attributed to a payroll

anomaly. To ensure this was fully corrected, the Company appointed a specialist third-party to

calculate rectification payments and assist with correcting payroll process to avoid any future

occurrence. Affected individuals’ accounts will be fully reconciled to ensure they suffer no detriment.

The administrator prepares detailed reports of performance against SLAs which are evaluated by the

Trustee on a quarterly basis at each main Board meeting. These reports include full asset

reconciliations and commentary on any member complaints. During the reporting period, the

administration reporting was updated to include more granularity of data and specific performance

against Key Performance Indicators. This includes more detail of when contributions are received

from the Company, data is reconciled and contributions are invested into members’ accounts.

Over the reporting period, overall quarterly performance against SLAs ranged from 89% to 97% (with

three of the four quarters recording performance above 93%). 100% of DC investment transactions

relating to members’ investment and contribution decisions were achieved within SLA target for three

of the four quarters.

In addition to the above oversight, the Trustee’s Risk & Compliance subcommittee meet with the

administration team to undertake its annual evaluation of process and risk controls. This review

confirmed that the majority of performance indicators were good. The Scheme’s financial statements

are also audited annually by the Scheme’s appointed auditors, PwC.

At the close of the reporting period, with the support of Willis Towers Watson, the Trustee revisited its review of the Scheme’s governance processes and internal controls and was satisfied that these remain compliant with the legal requirements as set out in the Pensions Regulator’s updated DC

Code of Practice No. 13 in the sections covering ‘Scheme management skills’ and ‘Administration’.

Based on the results of its process evaluation, the Trustee is satisfied that the Scheme’s core

financial transactions have been processed promptly and accurately during the scheme year.

Charges and transaction costs

Except in relation to some legacy Additional Voluntary Contributions (AVCs, see below), Schlumberger, the Scheme sponsor, absorbs all investment and administration charges on behalf of members of the Scheme. The Trustee regularly monitors the fund charges to ensure they remain reasonable and consistent.

Since members do not pay any charges and enjoy gross returns on their investments, the Trustee

has not included a ‘pounds and pence’ illustration (designed to show the compounding effect of

charges deducted) within this Statement. Furthermore, it has also not sought to disclose transaction

costs.

The legacy AVCs are with-profits polices with Equitable Life and Aviva. The charges applying for these types of investments are wrapped up within the annual bonus declaration and not typically explicitly disclosed.

Equitable Life advises that its With-Profit Fund allows for a 1% p.a. administration charge and reports underlying transaction costs (not considering stock lending) of 0.04% for the Annualised Reporting period to 31 December 2018.

Aviva advises that for its With-Profits Fund, the annual administration cost was 0.6% and reports underlying transaction costs for the period of 0.041%. The transaction cost figure disclosed by Aviva

includes buying and selling investments as well as stock lending/borrowing costs.

The Trustee continues to monitor each provider’s annual bonus declaration as part of its ongoing

investment policy.

Value for Members (VFM)

The Trustee is committed to ensuring that members receive ‘value’ from the Scheme. The Trustee continues to keep this under review as part of its ongoing adherence with the Regulator’s DC Code of

Practice.

Except as mentioned above, Schlumberger pays all of the administration and investment managers’ costs of the Scheme, resulting in no costs being borne by members. This is a defining feature of the Scheme which the Trustee believes is a key factor in providing good VFM.

During Q1 of the reporting period, the Trustee completed its bulk AVC exercise to transfer all unit- linked external legacy assets to within the main Scheme. This will result in affected members’ AVCs being invested in better governed investment options, with future costs being met by Schlumberger.

In addition, due to the complexity and the many options for Blue Section members, IFA support has also been introduced to assist those members at retirement. The cost of which is again borne by Schlumberger.

The Trustee considers its robust governance approach, sophisticated investment design and dedicated communication and engagement strategy as key factors which provide additional value for members of the Scheme.