l. Calculate the combined retirement and other benefits expense over the past three years. (See page 61).

i. What general trend do you notice? Do you consider this trend persistent? That is, do you expect it to continue?

ii. Retirement and other benefits expense includes an operating component and a nonoperating component. Calculate both components for each of the three years. What trends do you notice in the components? Do you consider these trends persistent?

Net periodic benefit costs for the Company's defined benefit retirement plans and other benefit plans tor 2007 2006 and 2005 include the following components: 122 Retement Ofher Benefits Dollars) 2007 2006 2005 2001 2006 2005 Service cost $597 552 462 $140 56 Interest.cost 656 570 488 149 136 87 Expected return onplan assets (809) (701) (579) (2) (3) (3) Amortization of pror service ast 10 10 12 (7) (7) (7) Amortizationof net transition asset 1 (1) (2) Recognized actuarial losses 186 251 219 66 74 25 Curtainments and settlements 5 4 2 Net periodic benefitcast $ 646 685 602 $346 322 158 The net periodic benefit cost attributable to U.S. retirement plans was $379 million in 2007 $423 million in 2006 and $370 million in 2005. Amounts expected to be recognized in net periodic benefit cost Odlasia Millions) in the coming year for the Company's defined benefit retirement Amortization of net transition obligation $ 2 plans and other postretirement plans Amortization of net actuarial losses 132 Amortization of prior service cost 5 The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. Rahman 2007 2006 2005 Oferbemitas 2007 2006 2005 6.5096 6.00 5.75 6.5096 6.00 5.75 9.00 9.00 Dallashim) US. Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels International Benefit Plans Discount rate Expected long term rate of return on plan assets Rate of increase in compensation levels 9.00 4.50 9.00 4.50 9.00 4.50 9.00 4.50 4.50 4.50 5.5096 5.00 4.75 6.50% 6.00 5.00 8.25 4.00 8.00 3.75 8.25 3.75 4.50 4.50 4.25 2006 9.00 The Company's discount rates are determined by considering current yield Curves representing high quality, long-term fixed income instru- ments. The resulting discountrates are consistent with the duration of plan liabilities. The expeded long-term rate of return on plan assets assumption is determined using a building block approach, con sidering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns. The following table displays the assumed health care cost trend rates for all individuals: Health Care Plans 2003 Healthcare cast tend rate assumed fornext year 9.00% Rate to which the most trend rate is assumed to decline (utimate trend) 5.00% 4.50 Year the rate reaches the ultimate trend rate 2014 A one percentage-point change in assumed health care cost trend rates would have the following effect: 2012 Permanent Police Paint Denise lilasin Mix) Health Care Plans Total interest and service cost Postretrement benefit obligation $ 35 320 $(27) (259) Net periodic benefit costs for the Company's defined benefit retirement plans and other benefit plans tor 2007 2006 and 2005 include the following components: 122 Retement Ofher Benefits Dollars) 2007 2006 2005 2001 2006 2005 Service cost $597 552 462 $140 56 Interest.cost 656 570 488 149 136 87 Expected return onplan assets (809) (701) (579) (2) (3) (3) Amortization of pror service ast 10 10 12 (7) (7) (7) Amortizationof net transition asset 1 (1) (2) Recognized actuarial losses 186 251 219 66 74 25 Curtainments and settlements 5 4 2 Net periodic benefitcast $ 646 685 602 $346 322 158 The net periodic benefit cost attributable to U.S. retirement plans was $379 million in 2007 $423 million in 2006 and $370 million in 2005. Amounts expected to be recognized in net periodic benefit cost Odlasia Millions) in the coming year for the Company's defined benefit retirement Amortization of net transition obligation $ 2 plans and other postretirement plans Amortization of net actuarial losses 132 Amortization of prior service cost 5 The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. Rahman 2007 2006 2005 Oferbemitas 2007 2006 2005 6.5096 6.00 5.75 6.5096 6.00 5.75 9.00 9.00 Dallashim) US. Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels International Benefit Plans Discount rate Expected long term rate of return on plan assets Rate of increase in compensation levels 9.00 4.50 9.00 4.50 9.00 4.50 9.00 4.50 4.50 4.50 5.5096 5.00 4.75 6.50% 6.00 5.00 8.25 4.00 8.00 3.75 8.25 3.75 4.50 4.50 4.25 2006 9.00 The Company's discount rates are determined by considering current yield Curves representing high quality, long-term fixed income instru- ments. The resulting discountrates are consistent with the duration of plan liabilities. The expeded long-term rate of return on plan assets assumption is determined using a building block approach, con sidering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns. The following table displays the assumed health care cost trend rates for all individuals: Health Care Plans 2003 Healthcare cast tend rate assumed fornext year 9.00% Rate to which the most trend rate is assumed to decline (utimate trend) 5.00% 4.50 Year the rate reaches the ultimate trend rate 2014 A one percentage-point change in assumed health care cost trend rates would have the following effect: 2012 Permanent Police Paint Denise lilasin Mix) Health Care Plans Total interest and service cost Postretrement benefit obligation $ 35 320 $(27) (259)